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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
______________
Date of Report (Date of earliest event reported): September 20, 1995
SOUTHWEST AIRLINES CO.
(Exact name of registrant as specified in its charter)
TEXAS 1-7259 74-1563240
(State or other jurisdiction (Commission (I.R.S. employee
of incorporation) file number) identification no.)
P.O. Box 36611
Love Field, Dallas, Texas 75235
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, include area code: (214) 904-4000
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Item 7. Financial Statements and Exhibits.
The following documents are being filed in connection with, and
incorporated by reference into, Southwest Airlines Co.'s Registration Statement
on Form S-3 (File No. 33-59113), as declared effective on May 9, 1995, and
Southwest Airlines Co.'s Registration Statement on Form S-3 (File No.
33-54587), as declared effective on July 21, 1994, relating to Pass Through
Certificates, Series 1995-A.
Exhibits
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Exhibit 1.3 - Form of Underwriting Agreement relating to the issuance of Pass Through Certificates,
Series 1995-A.
Exhibit 4.3 - Forms of Pass Through Trust Supplements Nos. 1995-A1, 1995-A2, 1995-A3 and 1995-A4
between Southwest and the Trustee relating to the Pass Through Certificates.
Exhibit 4.4 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee
relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration
No. N396SW.
Exhibit 4.5 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee
and the Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4
Aircraft, Registration No. N396SW.
Exhibit 4.6 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration
No. N396SW (included in Exhibit 4.5).
Exhibit 4.7 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the
Original Loan Participant and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N396SW.
Exhibit 4.8 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the
Owner Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N396SW.
Exhibit 4.9 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to
Boeing 737-3H4 Aircraft, Registration No. N396SW.
Exhibit 4.10 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee
with respect to Boeing 737-3H4 Aircraft, Registration No. N396SW.
</TABLE>
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<TABLE>
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Exhibit 4.11 * - Form of Trust Agreement between the Owner Participant and the Owner Trustee relating to the
Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration Nos. N396SW, N397SW,
N398SW, N399WN, N600WN and N601WN.
Exhibit 4.12 * - Form of Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee
relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration
Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.13 * - Form of First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and
the Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.14 * - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration Nos. N397SW,
N398SW, N399WN, N600WN and N601WN (included in Exhibit 4.13).
Exhibit 4.15 * - Form of Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the
Original Loan Participant, and the Owner Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.16 * - Form of First Amendment to Participation Agreement among Southwest, the Owner Participant, the
Owner Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.17 * - Form of Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing
737-3H4 Aircraft, Registration Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.18 * - Form of First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee
with respect to Boeing 737-3H4 Aircraft, Registration Nos. N397SW, N398SW, N399WN, N600WN and
N601WN.
Exhibit 4.19 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee relating
to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N602SW.
</TABLE>
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<TABLE>
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Exhibit 4.20 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration No. N602SW.
Exhibit 4.21 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N602SW
(included in Exhibit 4.20).
Exhibit 4.22 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the Original
Loan Participant, and the Owner Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N602SW.
Exhibit 4.23 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N602SW.
Exhibit 4.24 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N602SW.
Exhibit 4.25 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration No. N602SW.
Exhibit 4.26 * - Form of Trust Agreement between the Owner Participant and the Owner Trustee with respect to
Boeing 737-3H4 Aircraft, Registration Nos. N602SW and N603SW.
Exhibit 4.27 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee relating
to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N603SW.
Exhibit 4.28 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration No. N603SW.
Exhibit 4.29 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N603SW
(included in Exhibit 4.28).
Exhibit 4.30 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the Original
Loan Participant, and the Owner Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N603SW.
</TABLE>
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<TABLE>
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Exhibit 4.31 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N603SW.
Exhibit 4.32 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N603SW.
Exhibit 4.33 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration No. N603SW.
Exhibit 4.34 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee relating
to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N604SW.
Exhibit 4.35 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration No. N604SW.
Exhibit 4.36 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N604SW
(included in Exhibit 4.35).
Exhibit 4.37 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the Original
Loan Participant and the Owner Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N604SW.
Exhibit 4.38 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N604SW.
Exhibit 4.39 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N604SW.
Exhibit 4.40 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration No. N604SW.
Exhibit 4.41 - Trust Agreement between the Owner Participant and the Owner Trustee with respect to Boeing
737-3H4 Aircraft, Registration No. N604SW.
</TABLE>
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<TABLE>
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Exhibit 4.42 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee relating
to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N605SW.
Exhibit 4.43 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration No. N605SW.
Exhibit 4.44 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N605SW
(included in Exhibit 4.43).
Exhibit 4.45 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the Original
Loan Participant, and the Owner Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N605SW.
Exhibit 4.46 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N605SW.
Exhibit 4.47 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N605SW.
Exhibit 4.48 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration No. N605SW.
Exhibit 4.49 - Trust Agreement between the Owner Participant and the Owner Trustee with respect to Boeing
737-3H4 Aircraft, Registration No. N605SW.
Exhibit 4.50 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for Boeing
737-3H4 Aircraft, Registration No. 396SW.
Exhibit 4.51 * - Form of Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for
each of five Boeing 737-3H4 Aircraft, Registration Nos. N397SW, N398SW, N399WN, N600WN and
N601WN.
Exhibit 4.52 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee, the Original
</TABLE>
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Loan Participant and the Agent relating to the Equipment Notes for Boeing 737-3H4 Aircraft,
Registration No. N602SW.
Exhibit 4.53 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for
Boeing 737-3H4 Aircraft, Registration No. N603SW.
Exhibit 4.54 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for
Boeing 737-3H4 Aircraft, Registration No. N604SW.
Exhibit 4.55 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for
Boeing 737-3H4 Aircraft, Registration No. N605SW.
</TABLE>
_______________
* The financing of each of the identified aircraft pursuant to Pass Through
Certificates is documented separately. Pursuant to Instruction 2 to Item 601 of
Regulation S-K, the Registrant has filed the form of the indicated documents
for one of these aircraft only. The documents for the other aircraft are
identical except for the information identifying the aircraft in question, and
the name of the trust established to own such aircraft.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHWEST AIRLINES CO.
October 2, 1995 By: /s/ GARY C. KELLY
-----------------------------------
Gary C. Kelly
Vice President -- Finance
and Chief Financial Officer
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EXHIBIT INDEX
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<CAPTION>
Exhibit
No. Description
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Exhibit 1.3 - Form of Underwriting Agreement relating to the issuance of Pass Through Certificates,
Series 1995-A.
Exhibit 4.3 - Forms of Pass Through Trust Supplements Nos. 1995-A1, 1995-A2, 1995-A3, 1995-A4 and
1995-A5 between Southwest and the Trustee relating to the Pass Through Certificates.
Exhibit 4.4 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee
relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration
No. N396SW.
Exhibit 4.5 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee
and the Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4
Aircraft, Registration No. N396SW.
Exhibit 4.6 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration
No. N396SW (included in Exhibit 4.5).
Exhibit 4.7 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the
Original Loan Participant and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N396SW.
Exhibit 4.8 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the
Owner Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N396SW.
Exhibit 4.9 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to
Boeing 737-3H4 Aircraft, Registration No. N396SW.
Exhibit 4.10 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee
with respect to Boeing 737-3H4 Aircraft, Registration No. N396SW.
</TABLE>
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Exhibit 4.11 * - Form of Trust Agreement between the Owner Participant and the Owner Trustee relating to the
Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration Nos. N396SW, N397SW,
N398SW, N399WN, N600WN and N601WN.
Exhibit 4.12 * - Form of Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee
relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration
Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.13 * - Form of First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and
the Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.14 * - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration Nos. N397SW,
N398SW, N399WN, N600WN and N601WN (included in Exhibit 4.13).
Exhibit 4.15 * - Form of Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the
Original Loan Participant, and the Owner Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.16 * - Form of First Amendment to Participation Agreement among Southwest, the Owner Participant, the
Owner Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.17 * - Form of Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing
737-3H4 Aircraft, Registration Nos. N397SW, N398SW, N399WN, N600WN and N601WN.
Exhibit 4.18 * - Form of First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee
with respect to Boeing 737-3H4 Aircraft, Registration Nos. N397SW, N398SW, N399WN, N600WN and
N601WN.
Exhibit 4.19 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee relating
to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N602SW.
</TABLE>
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<TABLE>
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Exhibit 4.20 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration No. N602SW.
Exhibit 4.21 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N602SW
(included in Exhibit 4.20).
Exhibit 4.22 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the Original
Loan Participant, and the Owner Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N602SW.
Exhibit 4.23 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N602SW.
Exhibit 4.24 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N602SW.
Exhibit 4.25 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration No. N602SW.
Exhibit 4.26 * - Form of Trust Agreement between the Owner Participant and the Owner Trustee with respect to
Boeing 737-3H4 Aircraft, Registration Nos. N602SW and N603SW.
Exhibit 4.27 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee relating
to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N603SW.
Exhibit 4.28 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration No. N603SW.
Exhibit 4.29 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N603SW
(included in Exhibit 4.28).
Exhibit 4.30 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the Original
Loan Participant, and the Owner Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N603SW.
</TABLE>
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<TABLE>
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Exhibit 4.31 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N603SW.
Exhibit 4.32 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N603SW.
Exhibit 4.33 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration No. N603SW.
Exhibit 4.34 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee relating
to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N604SW.
Exhibit 4.35 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration No. N604SW.
Exhibit 4.36 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N604SW
(included in Exhibit 4.35).
Exhibit 4.37 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the Original
Loan Participant and the Owner Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N604SW.
Exhibit 4.38 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N604SW.
Exhibit 4.39 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N604SW.
Exhibit 4.40 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration No. N604SW.
Exhibit 4.41 - Trust Agreement between the Owner Participant and the Owner Trustee with respect to Boeing
737-3H4 Aircraft, Registration No. N604SW.
</TABLE>
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<TABLE>
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Exhibit 4.42 - Trust Indenture and Security Agreement between the Owner Trustee and the Loan Trustee relating
to the Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N605SW.
Exhibit 4.43 - First Amendment to Trust Indenture and Security Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration No. N605SW.
Exhibit 4.44 - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft, Registration No. N605SW
(included in Exhibit 4.43).
Exhibit 4.45 - Participation Agreement among Southwest, the Owner Participant, the Loan Trustee, the Original
Loan Participant, and the Owner Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N605SW.
Exhibit 4.46 - First Amendment to Participation Agreement among Southwest, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft, Registration
No. N605SW.
Exhibit 4.47 - Sale and Lease Agreement between Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration No. N605SW.
Exhibit 4.48 - First Amendment to Sale and Lease Agreement between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration No. N605SW.
Exhibit 4.49 - Trust Agreement between the Owner Participant and the Owner Trustee with respect to Boeing
737-3H4 Aircraft, Registration No. N605SW.
Exhibit 4.50 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for Boeing
737-3H4 Aircraft, Registration No. 396SW.
Exhibit 4.51 * - Form of Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner
Trustee, the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for
each of five Boeing 737-3H4 Aircraft, Registration Nos. N397SW, N398SW, N399WN, N600WN and
N601WN.
Exhibit 4.52 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee, the Original
</TABLE>
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<TABLE>
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Loan Participant and the Agent relating to the Equipment Notes for Boeing 737-3H4 Aircraft,
Registration No. N602SW.
Exhibit 4.53 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for
Boeing 737-3H4 Aircraft, Registration No. N603SW.
Exhibit 4.54 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for
Boeing 737-3H4 Aircraft, Registration No. N604SW.
Exhibit 4.55 - Refinancing Agreement among Southwest, the Trustee, the Owner Participant, the Owner Trustee,
the Loan Trustee and the Original Loan Participant relating to the Equipment Notes for
Boeing 737-3H4 Aircraft, Registration No. N605SW.
</TABLE>
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Exhibit 1.3
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1995-Al
Pass Through Certificates, Series 1995-A2
Pass Through Certificates, Series 1995-A3
Pass Through Certificates, Series 1995-A4
UNDERWRITING AGREEMENT
September 20, 1995
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
c/o SALOMON BROTHERS INC
7 World Trade Center
New York, New York 10048
Dear Sirs:
Southwest Airlines Co., a Texas corporation (the "Company"),
proposes that Wilmington Trust Company, acting not in its individual capacity
but solely as pass through trustee (the "Trustee") under the Pass Through Trust
Agreement dated as of February 1, 1993 (the "Basic Agreement"), as supplemented
for each series (each, a "Series") of pass through certificates (the "Pass
Through Certificates") to be purchased hereunder by a separate Trust Supplement
(each, a "Trust Supplement"), in each case between the Company and the Trustee
(for each Series, the Basic Agreement, as supplemented by the related Trust
Supplement, being referred to herein as the "Pass Through Agreement"), issue
and sell to the underwriters named in Schedule I hereto its Pass Through
Certificates in the aggregate principal amounts and with the applicable
interest rates and final distribution dates set forth on Exhibit A hereto (the
"Offered Certificates") on the terms and conditions stated herein and in
Schedule II. As used herein, unless the context otherwise requires, the term
"Underwriters" shall mean the firm or firms named as Underwriter or
Underwriters in Schedule I and the term "you" shall mean the Underwriter or
Underwriters, if no underwriting syndicate is purchasing the Offered
Certificates, or the representative or representatives of the Underwriters, if
an underwriting syndicate is purchasing the Offered Certificates, as indicated
in Schedule I.
<PAGE> 2
2
Each Series of Pass Through Certificates will represent
interests in a separate trust (each, a "Pass Through Trust") established
pursuant to the related Pass Through Agreement to fund the purchase of
equipment trust certificates ("Equipment Notes") which are to be issued as
nonrecourse obligations by certain owner trustees, each acting not in its
individual capacity but solely as owner trustee (each, an "Owner Trustee"), in
connection with separate leveraged lease transactions entered into by the
Company, in each case to refinance a portion of the payment by such Owner
Trustees of the purchase price for specified aircraft that have been leased by
the Company (the "Aircraft"). Each series of Equipment Notes will be issued
under a separate Trust Indenture and Security Agreement between Wilmington
Trust Company, as Indenture Trustee (the "Indenture Trustee") and the related
Owner Trustee (each, an "Indenture" and, collectively, the "Indentures").
The Company has filed with the Securities and Exchange
Commission (the "Commission") registration statements on Form S-3 (No. 33-54587
and No. 33-59113) for the registration of pass through certificates, including
the Offered Certificates, under the Securities Act of 1933, as amended (the
"1933 Act"), and the offering thereof from time to time in accordance with Rule
415 of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations"). Such registration statements have been declared
effective by the Commission and the Basic Agreement has been qualified under
the Trust Indenture Act of 1939, as amended (the "1939 Act"). The Company has,
pursuant to Rule 424 under the 1933 Act, filed with, or transmitted for filing
to, or shall within the required period of time hereafter file with or transmit
for filing to, the Commission a prospectus supplement (the "Prospectus
Supplement") specifically relating to the Offered Certificates. The term
"Registration Statement" means collectively the above-referenced registration
statements in the forms in which they became effective, including the exhibits
thereto and the documents incorporated by reference therein, as amended to the
date hereof. The term "Basic Prospectus" means the prospectus relating to the
pass through certificates included in the Registration Statement. The term
"Prospectus" means the Basic Prospectus supplemented by the Prospectus
Supplement, except that if any revised prospectus and/or prospectus supplement
shall be provided to you by the Company for use in connection with the offering
of the Offered Certificates which is not required to be filed by the Company
pursuant to Rule 424(b) of the 1933 Act Regulations, the term "Prospectus"
shall refer to such revised prospectus, if any, together with any such revised
prospectus supplement from and after the time it is first provided to you for
such use. The term "Preliminary Prospectus" means a preliminary prospectus
supplement specifically relating to the Offered Certificates together with the
Basic Prospectus. As used herein, the terms "Basic Prospectus," "Prospectus"
and "Preliminary Prospectus" shall include in each case the documents, if any,
incorporated by reference therein. The terms "supplement" and "amendment" or
"amend" as used herein shall include all documents deemed to be incorporated by
reference in the Prospectus that have been filed subsequent to the date of the
Basic Prospectus by the Company with the Commission pursuant to the Securities
Exchange Act of 1934, as amended (the "1934 Act").
Capitalized terms used but not otherwise defined in this
Agreement shall have the meanings specified in or pursuant to the Pass Through
Agreements or the Indenture relating
<PAGE> 3
3
to each related series of Equipment Notes, provided, however, that as used
herein the term "Operative Agreements" shall include the Operative Agreements
as amended, the Note Purchase Agreements and the Pass Through Agreements.
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to you and to
each Underwriter named in Schedule I, as of the date hereof, as follows:
(i) Due Incorporation and Qualification. The Company has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Texas and has the
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus; the
Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where those
failures to so qualify in the aggregate would not have a material
adverse effect on the business, properties, financial condition,
results of operations or prospects of the Company.
(ii) Registration Statement and Prospectus. The Company
meets the requirements for the use of Form S-3 under the 1933 Act
Regulations, and the Registration Statement has become effective under
the 1933 Act. At the time the Registration Statement became
effective, the Registration Statement complied, and as of the date
hereof does comply, in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and the 1939 Act and the
rules and regulations of the Commission promulgated thereunder. The
Registration Statement, at the time it became effective (and if an
amendment to the Registration Statement or an Annual Report on Form
10-K has been filed by the Company with the Commission subsequent to
the effectiveness of the Registration Statement, then at the time of
the most recent such filing) did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and the Prospectus, as of the date hereof, does not, and at all times
subsequent hereto up to the Closing Date referred to below will not,
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;provided, however, that the representations and warranties
in this subsection shall not apply to statements in or omissions from
the Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by an
Underwriter expressly for use in the Registration Statement or
Prospectus or to that part of the Registration Statement which
constitutes the Indenture Trustee's Statement of Eligibility and
Qualification under the 1939 Act (Form T-1). No stop order suspending
the effectiveness of the Registration Statement has been issued, and,
to the Company's knowledge, no proceedings for that purpose have been
initiated or threatened by the Commission.
<PAGE> 4
4
(iii) Incorporated Documents. The documents incorporated
by reference in the Prospectus, at the time they were or hereafter are
filed with the Commission, complied and will comply in all material
respects with the requirements of the 1934 Act and the rules and
regulations promulgated thereunder (the "1934 Act Regulations"), and,
when read together and with the other information in the Prospectus,
at the time the Registration Statement and any amendments thereto
became effective and as of the date hereof did not and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were or are made, not misleading.
(iv) Financial Statements. The consolidated financial
statements of the Company included or incorporated by reference in the
Prospectus and the Registration Statement present fairly the
consolidated financial position of the Company as of the dates
indicated and the results of operations, changes in stockholders'
equity and cash flows of the Company, for the respective periods
covered thereby, all in conformity with generally accepted accounting
principles applied, except as stated therein, on a consistent basis
throughout the entire period involved; and the financial schedules
included or incorporated by reference in the Registration Statement
meet the requirements of the 1933 Act Regulations or the 1934 Act
Regulations, as applicable, and fairly present the information
required to be shown therein. The selected consolidated financial
data included in the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited consolidated financial statements incorporated by reference in
the Registration Statement and the Prospectus.
(v) Material Changes or Material Transactions. Except as
stated in or contemplated by the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any material adverse
change in the financial condition or results of operations of the
Company and its subsidiaries, considered as one enterprise.
(vi) Status as Air Carrier. The Company is a "citizen of
the United States" within the meaning of Section 40102(a)(15)(C) of
Title 49, U.S.C. and is a holder of an "air carrier operating
certificate" (herein so-called) issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo.
(b) Additional Certifications. Any certificate signed by
any officer of the Company and delivered to you or to counsel for the
Underwriters in connection with an offering of the Offered Certificates shall
be deemed a representation and warranty by the Company to each Underwriter
participating in such offering as to the matters covered thereby on the
date of such certificate unless subsequently amended or supplemented subsequent
thereto. None of the foregoing applies to statements in or omissions from any
of the aforementioned documents based upon written information furnished to the
Company by any Underwriter specifically for use therein.
<PAGE> 5
5
SECTION 2. Purchase and Sale.
Subject to the terms and conditions and in reliance upon the
representations and warranties set forth herein and in Schedule II, if any, the
Company agrees to cause the Trustee to sell to each Underwriter, and each
Underwriter agrees, severally and not jointly, to purchase from the Trustee, at
the purchase price specified in Exhibit A hereto, the respective principal
amounts of such Offered Certificates set forth opposite the name of such
Underwriter in Schedule I hereto.
SECTION 3. Delivery and Payment.
(a) Payment of the purchase price for any Offered
Certificates to be purchased by the Underwriters shall be made at the offices
of Southwest Airlines Co., 2702 Love Field Drive, Dallas, Texas 75235, or at
such other place as shall be agreed upon by you and the Company, at 9:00 A.M.,
Dallas time, on the 10th business day (unless postponed in accordance with the
provisions of Section 10) following the date hereof or at such other date, time
or location specified in Schedule II, or as otherwise shall be agreed upon by
you and the Company (such time and date being referred to as the "Closing
Time"). Unless otherwise specified in Schedule II, delivery of the Offered
Certificates shall be made to The Depository Trust Company for your account
against payment by you of the purchase price thereof to, or upon the order of,
the Trustee (or such other person as the Company may direct) by wire transfer
of Federal funds or other immediately available funds. Such Offered
Certificates shall be registered in the name of Cede & Co. or in such other
names, and in such denominations, as you may request in writing at least two
business days prior to the Closing Time. Such Offered Certificates, which may
be in temporary form, will be made available for examination and packaging by
you in New York, New York, on or before the first business day prior to the
Closing Time, or at such other time and place specified in Schedule II.
(b) As compensation to you for your commitments and
obligations hereunder in respect of the Offered Certificates, including your
undertakings to distribute Offered Certificates, the Owner Trustees will pay
(or cause to be paid) to you an amount equal to that percentage of the
aggregate principal amount of each Series of Offered Certificates purchased by
you as set forth in Exhibit A; provided that if the Owner Trustees do not pay
such amounts when due, the Company will pay such amounts and seek reimbursement
from the Owner Trustees. Such payment shall be made simultaneously with the
payment by you to the Trustee of the purchase price of the Offered Certificates
as specified in Sections 2 and 3(a) hereof. Payment of such compensation shall
be made by wire transfer of Federal or other immediately available funds.
SECTION 4. Offering by Underwriters.
It is understood that the several Underwriters propose to
offer the Offered Certificates for sale to the public as set forth in the
Prospectus.
<PAGE> 6
6
SECTION 5. Agreements.
The Company covenants with the several Underwriters that:
(a) Prospectus Supplement. The Company has prepared a
Preliminary Prospectus containing such information as you and the Company have
deemed appropriate, and immediately following the execution of this Agreement,
the Company will prepare a Prospectus Supplement setting forth the principal
amount of the Offered Certificates covered thereby, the terms of the Offered
Certificates not otherwise specified in the Basic Prospectus, the names of the
Underwriters participating in the offering and the principal amount of the
Offered Certificates which each severally has agreed to purchase, the names of
the Underwriters acting as manager or co-managers in connection with the
offering, the price at which the Offered Certificates are to be purchased by
the Underwriters from the Trustee, the initial public offering price, the
selling concession and reallowance, if any, and such other information as you
and the Company deem appropriate in connection with the offering of the Offered
Certificates. The Company will promptly transmit copies of the Prospectus
Supplement to the Commission for filing pursuant to Rule 424 of the 1933 Act
Regulations and will furnish to the Underwriters named therein as many copies
of the Prospectus as you shall reasonably request.
(b) Notice of Certain Events. The Company will notify
you immediately (i) of the effectiveness of any amendment to the Registration
Statement, (ii) of the transmittal to the Commission for filing of any
supplement to the Prospectus or any document to be filed pursuant to the 1934
Act which will be incorporated by reference in the Prospectus, (iii) of the
receipt of any comments from the Commission with respect to the Registration
Statement, the Prospectus or the Prospectus Supplement, (iv) of any request by
the Commission for any amendment to the Registration Statement or any amendment
or supplement to the Prospectus or for additional information, and (v) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose. The Company will use its best efforts to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof as
soon as possible.
(c) Notice of Certain Proposed Filings. For so long as a
Prospectus is required to be delivered in connection with the Offered
Certificates, the Company will give you notice of its intention to file or
prepare any amendment to the Registration Statement or any amendment or
supplement to the Prospectus, whether by the filing of documents pursuant to
the 1934 Act, the 1933 Act or otherwise (except for the Current Report on Form
8-K referred to in the Prospectus Supplement under "Description of the
Certificates"), and will furnish you with copies of any such amendment or
supplement or other documents proposed to be filed or prepared a reasonable
time in advance of such proposed filing or preparation, as the case may be.
(d) Copies of the Registration Statement and the
Prospectus. The Company will deliver to you as many signed and conformed
copies of the Registration Statement (as originally filed) and of each
amendment thereto (including exhibits filed therewith or
<PAGE> 7
7
incorporated by reference therein and documents incorporated by reference in
the Prospectus) as you may reasonably request. The Company will furnish to you
as many copies of the Prospectus (as amended or supplemented) as you shall
reasonably request so long as you are required to deliver a Prospectus in
connection with sales or solicitations of offers to purchase the Offered
Certificates.
(e) Revisions of Prospectus -- Material Changes. If at
any time when the Prospectus is required by the 1933 Act to be delivered in
connection with sales of the Offered Certificates any event shall occur or
condition exist as a result of which it is necessary to further amend or
supplement the Prospectus in order that the Prospectus will not include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser, or if
it shall be necessary at any such time to amend or supplement the Registration
Statement or the Prospectus in order to comply with the requirements of the
1933 Act or the 1933 Act Regulations, the Company will promptly prepare and
file with the Commission such amendment or supplement, whether by filing
documents pursuant to the 1934 Act, the 1933 Act, or otherwise, as may be
necessary to correct such untrue statement or omission or to make the
Registration Statement and Prospectus comply with such requirements.
(f) Earnings Statements. With respect to the sale of the
Offered Certificates, the Company will make generally available to its security
holders earning statements (in form complying with the provisions of Rule 158
under the 1933 Act), which will satisfy the requirements of Section 11(a) of
the 1933 Act.
(g) Blue Sky Qualifications. The Company will endeavor,
in cooperation with you, to qualify the Offered Certificates for offering and
sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Underwriters may designate, and will
maintain such qualifications in effect for so long as may be required for the
distribution of the Offered Certificates; provided, however, that the Company
shall not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or to subject itself to taxation as doing
business in any jurisdiction in which it is not otherwise required to be so
qualified. The Company will file such statements and reports as may be
required by the laws of each jurisdiction in which the Offered Certificates
have been qualified as provided above.
(h) Stand-Off Agreement. The Company will not, between
the date of this Agreement and termination of any trading restrictions with
respect to the Offered Certificates or the Closing Time, whichever is later,
without your prior written consent, offer or sell, or enter into any agreement
to sell, any U.S. dollar denominated taxable debt securities of the Company
with a maturity of more than one year (other than the Offered Certificates
which are to be sold pursuant hereto and commercial paper in the ordinary
course of business), except as may otherwise be provided in Schedule II;
provided, however, that, during such period, the Company may enter into or
borrow under any line of credit, loan agreement or other credit facility with
one or more commercial or merchant banks, regardless of the maturity of any
borrowings thereunder.
<PAGE> 8
8
(i) Business with Cuba. If the Company agrees that the
Offered Certificates should be qualified for sale in Florida and they have been
so qualified, the Company has complied with and, until the Closing Time or such
later date as the distribution of the Offered Certificates is completed, but no
longer than the period during which the Prospectus is required to be delivered
under the 1933 Act, will comply with the provisions of Section 517.075 of the
Florida blue sky law and, if applicable, all regulations promulgated thereunder
relating to issuers doing business with Cuba.
SECTION 6. Conditions to the Obligations of Underwriters.
The several obligations of the Underwriters to purchase the
Offered Certificates pursuant to this Agreement will be subject at all times to
the accuracy of the representations and warranties on the part of the Company
herein, to the accuracy of the statements of the Company's officers made in any
certificate furnished pursuant to the provisions hereof, to the performance and
observance by the Company of all covenants and agreements contained herein, or
in Schedule II hereto, on its part to be performed and observed and to the
following additional conditions precedent:
(a) Stop Order; Ratings Change; etc. At the Closing
Time, (i) the Prospectus, and any supplement thereto, shall have been filed
within the time period required by Rule 424(b); (ii) no stop order suspending
the effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the Commission,
and (iii) the rating assigned as of the date of this Agreement by any
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g) under the 1933 Act Regulations, to any debt
securities of the Company shall not have been lowered since the execution of
this Agreement.
(b) Legal Opinions. At the Closing Time, you shall have
received the following opinions:
(1) Opinion of Company Counsel. The opinion or opinions
of the Associate General Counsel of the Company, dated as of such
date, in form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Texas, and the Company has corporate
power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus.
(ii) This Agreement has been duly authorized,
executed and delivered by the Company.
<PAGE> 9
9
(iii) The Pass Through Agreements have each been
duly authorized, executed and delivered by the Company and
each is a valid and binding obligation of the Company
enforceable against the Company in accordance with its
terms, except as may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws affecting enforcement of creditors' rights
generally and by general principles of equity.
(iv) The Pass Through Agreements each constitute
the valid and binding obligation of the Trustee, enforceable
in accordance with its terms, except as may be limited by
bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws affecting enforcement of
creditors' rights generally and by general principles of
equity.
(v) The Offered Certificates have been duly
authorized, executed, delivered and authenticated by the
Trustee pursuant to the Pass Through Agreements and
constitute valid and binding obligations of the Trustee
enforceable against the Trustee in accordance with their
terms except as may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws affecting enforcement of creditors' rights
generally and by general principles of equity; and the
holders of Offered Certificates are entitled to the benefits
of the related Pass Through Agreement.
(vi) The Offered Certificates, the Pass Through
Agreements and the other Operative Agreements conform in all
material respects as to legal matters to the descriptions
thereof, if any, contained in the Prospectus and any
supplement thereto, and such description of the Offered
Certificates conforms in all material respects to the rights
set forth in the instruments defining the same.
(vii) The Leases and the other Operative Agreements
to which the Company is or is to be a party have been duly
authorized and, at the Closing Time, such documents, upon
due execution and delivery by the Company, will each be a
valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms,
except as may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws affecting enforcement of creditors' rights
generally and by general principles of equity.
(viii) The Company is a citizen of the United States
(as defined in 49 U.S.C. Section 40102) holding an air
carrier operating certificate. The Company
<PAGE> 10
10
has such licenses and authorizations from federal aviation
and aeronautical authorities as are necessary to own its
properties and to conduct its business in the manner
described in the Prospectus, subject to such qualification
as may be set forth in the Prospectus, and for the
transactions contemplated by this Agreement and the offering
contemplated by the Prospectus.
(ix) The statements made in the Prospectus under
the heading "Description of the Equipment Notes -- Remedies
-- Section 1110 of the Bankruptcy Code," to the extent that
they constitute matters of law or legal conclusions with
respect thereto, have been reviewed by such counsel, and
fairly present the information disclosed therein in all
material respects.
(x) No authorization, approval, consent, order or
license of or filing with or notice to any regulatory body
or authority or court (other than under the 1933 Act, the
1939 Act and the securities or Blue Sky laws of the various
states) is required for the valid authorization, issuance,
sale and delivery of the Offered Certificates as herein
contemplated or the valid authorization, execution, delivery
and performance by the Company of this Agreement, the Pass
Through Agreements and the other Operative Agreements to
which the Company is a party or the consummation by the
Company of the transactions contemplated herein or therein,
or, if so required, all such authorizations, approvals,
consents and licenses, specifying the same, including
filings under the Uniform Commercial Code as is in effect in
Connecticut and Texas, have been made or obtained and are in
full force and effect, and except for any filings or
recordings with the FAA (as to which no opinion need be
given).
(xi) To the best of such counsel's knowledge, the
execution and delivery by the Company of this Agreement, the
Pass Through Agreements and the other Operative Agreements
to which the Company is a party, the consummation by the
Company of the transactions herein and therein contemplated
and compliance with the terms of this Agreement, the Pass
Through Agreements and such Operative Agreements will not
conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in
the creation or imposition of any lien (other than as
permitted under the Leases), charge or encumbrance upon any
property or assets of the Company or any subsidiary pursuant
to, any material contract, indenture, mortgage, deed of
trust, loan, credit or note agreement, lease or other
agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be
bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the
charter or by-laws of the Company.
<PAGE> 11
11
(xii) The Registration Statement has become
effective under the 1933 Act and any required filing of the
Prospectus or any supplement thereto pursuant to Rule 424(b)
has been made in the manner and within the time period
required by Rule 424(b); the Basic Agreement has been duly
qualified under the 1939 Act; and, to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated under the 1933 Act; the
Registration Statement and the Prospectus, and each
amendment or supplement thereto (except for the financial
statements, schedules and other financial or statistical
data and Form T-1 included therein, as to which such counsel
need express no opinion), comply as to form in all material
respects with the requirements of the 1933 Act and the 1933
Act Regulations and, as to documents incorporated therein,
to the requirements of the 1934 Act and the 1934 Act
Regulations in effect at the time such documents were filed
with the Commission.
(xiii) Although counsel is not aware of any judicial
authority, none of the Pass Through Trusts is required to be
registered under the Investment Company Act of 1940, as
amended.
(xiv) Such counsel does not know of any proceedings
involving United States aviation law pending against, or
affecting the properties or licenses of, the Company, or of
any United States aviation laws or regulations that would
have a material adverse effect on the financial condition or
results of operations of the Company and its subsidiaries,
considered as one enterprise, or the transactions
contemplated by this Agreement, the Note Purchase Agreements
or the Operative Agreements, that are required to be
described in the Prospectus and which are not so described.
(xv) There are no transfer taxes or similar fees
or charges under the laws of the State of Texas, or any
political subdivision thereof, required to be paid in
connection with the execution and delivery of this Agreement
or any other Operative Agreements, or the issuance and sale
of the Offered Certificates to the Underwriters.
In addition, such counsel shall confirm in such opinion that
in connection with the preparation of the Registration Statement, the
Prospectus and the documents incorporated by reference therein, such
counsel or lawyers under such counsel's supervision have participated
in conferences with officers and other representatives of the Company
and its independent accountants and with your representatives and your
counsel, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed, and
that, in the course of such preparation and during the above-mentioned
conferences, no facts have come to such counsel's attention to cause
such counsel to believe (A) that the Registration Statement (except
for
<PAGE> 12
12
the financial statements and other financial or statistical data
included therein or omitted therefrom and the Statement of Eligibility
and Qualification of the Trustee on Form T-1, as to which such counsel
need express no opinion), at the time the Registration Statement
became effective (and if an amendment to the Registration Statement or
an Annual Report on Form 10-K has been filed by the Company with the
Commission subsequent to the effectiveness of the Registration
Statement, then at the time of the most recent such filing), contained
an untrue statement of material fact or omitted to state a material
fact required to he stated therein or necessary to make the statements
therein not misleading, (B) that the Prospectus or amendment or
supplement thereto (except for the financial statements and other
financial or statistical data included therein or omitted therefrom,
as to which such counsel need express no opinion), at the time the
Prospectus was issued, at the time any such amended or supplemented
prospectus was issued or at the Closing Time, included or includes an
untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading,
or (C) that the documents incorporated by reference in the Prospectus
(except for the financial statements and other financial or
statistical data included therein or omitted therefrom, as to which
such counsel need express no opinion), as of the dates they were filed
with the Commission, included an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
In rendering such opinions, such counsel may rely, to the
extent deemed necessary for purposes of the opinion set forth in (iii)
(insofar as such opinion relates to the enforceability of the Pass
Through Agreements), (iv) and (v) above, upon the opinions of counsel
for the Trustee and Owner Trustee, as the case may be. Alternatively,
such counsel may cause the opinions set forth in (iii) (insofar as
such opinion relates to the enforceability of the Pass Through
Agreements), (iv) and (v) to be delivered directly to the Underwriters
by counsel to the Trustee or Owner Trustee, as applicable, at the
Closing Time. In addition, such counsel may cause the opinion set
forth in (vii) above to be delivered at the Closing Time directly to
the Underwriters by Vinson & Elkins L.L.P., Houston, Texas, special
counsel to the Company.
(2) Opinion of Special Counsel to the Company. The
opinion of Vinson & Elkins L.L.P., Houston, Texas, special counsel to
the Company, dated as of such date, in form and substance satisfactory
to you, to the effect that:
(i) The statements made in the Prospectus and any
supplement thereto under the headings "Federal Income Tax
Consequences" to the extent that they constitute matters of
law or legal conclusions with respect thereto, have been
reviewed by such counsel and fairly present the information
disclosed therein in all material respects.
(ii) None of the Pass Through Trusts created by
the Pass Through Agreements will be classified as an
association taxable as a corporation for
<PAGE> 13
13
federal income tax purposes, but rather, each will be
classified as a grantor trust under Subpart E, Part I of
Subchapter J of the Internal Revenue Code of 1986, as
amended, and each Certificate Owner will be treated as the
owner of a pro rata undivided interest in each of the
Equipment Notes or any other property held in the Pass
Through Trust.
(iii) Upon consummation of the transactions
contemplated by the Note Purchase Agreements at the Closing
Time, each Owner Trustee, as lessor under the related Lease,
and the Indenture Trustee, as assignee of the Owner
Trustee's rights under such Lease pursuant to the related
Indenture, are entitled to the benefits of Section 1110 of
the Bankruptcy Code with respect to the Aircraft initially
delivered and subjected to the related Indenture (provided
that such counsel need not express an opinion as to the
availability of the benefits of said Section 1110 in the
case of a replacement of such Aircraft).
(iv) Assuming the due authorization, execution and
delivery of each Indenture by the parties thereto and
subject to any limitations of New York law governing the
banking or trust powers of the related Owner Trustee, each
Indenture constitutes valid and binding obligations of such
Owner Trustee enforceable against it in accordance with its
terms, and each Indenture duly creates, for the benefit of
the related Indenture Trustee, the security interest in the
Indenture Estate (other than in respect of the Granting
Clause of such Indenture as to moneys and securities prior
to deposit thereof with such Indenture Trustee) that such
Indenture purports to create. Assuming due authorization,
execution and delivery by the related Owner Trustee and due
authentication by the related Indenture Trustee, the
Equipment Notes constitute valid and binding obligations of
such Owner Trustee enforceable against it in accordance with
their terms and the Equipment Notes are entitled to the
benefits and security afforded by the related Indenture.
(c) Opinion of Counsel to the Underwriters. The opinion
of Shearman & Sterling, counsel to the Underwriters, with respect to such
matters as you may reasonably request.
(d) Officers' Certificate. At the Closing Time, there
shall not have been, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, any change, or any
development involving a prospective change, in or affecting particularly the
business or properties of the Company or its subsidiaries, considered as one
enterprise, which, in the judgment of a majority in interest of the
Underwriters, including any Representatives, materially impairs the investment
quality of the Offered Certificates; and you shall have received a certificate
of the President or the Vice President-Finance and Chief Financial Officer of
the Company and the Treasurer or the Assistant Treasurer of the Company, dated
as of the Closing Time to the effect that:
<PAGE> 14
14
(i) the representations and warranties of the Company in
this Agreement are true and correct in all material respects on and as
of the Closing Time with the same effect as if made at the Closing
Time and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Time;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has been
no material adverse change, or any development involving a prospective
material adverse change, in or affecting particularly the business or
properties of the Company or its subsidiaries, considered as one
enterprise.
(e) Comfort Letter. At the time of the execution of this
Agreement and at the Closing Time, you shall have received a letter from Ernst
& Young LLP or their successors as the Company's independent auditors (the
"Independent Auditors"), dated as of the date hereof and of the Closing Time,
as the case may be, in form and substance satisfactory to you to the effect
that:
(i) they are independent auditors with respect to the
Company within the meaning of the 1933 Act and the 1933 Act
Regulations;
(ii) in their opinion the consolidated financial
statements and schedules audited by them and incorporated by reference
in the Company's latest Annual Report on Form 10-K and included or
incorporated by reference in the Registration Statement and Prospectus
comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1933 Act Regulations
or the 1934 Act and the 1934 Act Regulations, as the case may be;
(iii) on the basis of a reading of the unaudited condensed
consolidated financial statements and schedules of the Company
contained in the Company's Quarterly Reports on Form 10-Q filed with
the Commission since the date of the Company's latest Annual Report on
Form 10-K and included or incorporated by reference in the Prospectus
and the Registration Statement, and the latest available unaudited
interim financial statements of the Company, inquiries of certain
officials of the Company responsible for financial and accounting
matters, a reading of the minute books of the Company since the date
of the latest audited consolidated financial statements of the Company
incorporated by reference in the Registration Statement, and other
specified procedures and inquiries, nothing has come to their
attention that caused them to believe that:
<PAGE> 15
15
(A) such unaudited condensed consolidated
financial statements of the Company included or incorporated
by reference in the Prospectus and the Registration
Statement do not comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act
and the 1933 Act Regulations or the 1934 Act and the 1934
Act Regulations thereunder, as the case may be, or that,
except for any accounting changes indicated therein, such
unaudited condensed consolidated financial statements are
not presented fairly in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the latest audited consolidated
financial statements of the Company included or incorporated
by reference in the Registration Statement and Prospectus;
(B) with respect to the period subsequent to the
date of the most recent consolidated financial statements
included or incorporated by reference in the Registration
Statement and the Prospectus, as of a specified date not
more than five business days prior to the date of delivery
of such letter, there has been any change in the capital
stock or long-term debt of the Company or, as of such date,
there has been any decrease in consolidated net current
assets or net assets, in each case as compared with amounts
shown in the most recent consolidated balance sheet of the
Company included or incorporated by reference in the
Registration Statement and the Prospectus, except in all
instances for changes or decreases which the Prospectus
discloses have occurred or may occur or which are described
in such letter; or
(C) for the period from the date of the most
recent consolidated financial statements included or
incorporated by reference in the Registration Statement and
the Prospectus to such specified date, there was any
decrease in operating revenues, operating income, income
before income taxes or net income of the Company, in each
case as compared with the comparable period of the preceding
year, except in all instances for decreases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(iv) in addition to their audit referred to in their
reports included or incorporated by reference in the Registration
Statement and the Prospectus and the review, inquiries and procedures
referred to in clause (iii) above, such letter shall state that Ernst
& Young LLP has performed other specified procedures, with respect to
certain numerical data and information included or incorporated by
reference in the Registration Statement and the Prospectus, as are
reasonably requested by an Underwriter and specified in such letter
and have found such data and information to be in agreement with the
accounting records of or analysis prepared by the Company.
(f) Satisfaction of Conditions Precedent in Participation
Agreements. At the Closing Time, all conditions precedent specified in each
Note Purchase Agreement with respect to the refinancing of the Equipment Notes
shall have been satisfied at the Closing Time; the
<PAGE> 16
16
representations and warranties of the Company contained in each of the Note
Purchase Agreements shall be accurate as of the Closing Time (except to the
extent that they relate solely to an earlier date in which case they shall be
accurate as of such earlier date) and you shall have received a certificate of
the Chief Financial Officer, Treasurer or Assistant Treasurer of the Company,
dated as of the Closing Time, to such effect; and you shall have received a
copy of each opinion required to be delivered under each of the Note Purchase
Agreements, dated as of the Closing Time, and addressed to you, and of such
other documents furnished in connection with the fulfillment of such conditions
as you or your counsel may reasonably request.
(g) Other Documents. At the Closing Time, counsel for
the Underwriters shall have been furnished with such documents and opinions as
such counsel may reasonably require for the purpose of enabling such counsel to
pass upon the issuance and sale of Offered Certificates as herein contemplated
and related proceedings, or in order to evidence the accuracy and completeness
of any of the representations and warranties, or the fulfillment of any of the
conditions, herein contained.
If any of the conditions specified in this Section 6 shall
not have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to you and counsel for the Underwriters,
this Agreement and all obligations of the Underwriters hereunder may be
cancelled by you at any time at or prior to the Closing Time, and such
termination shall be without liability of any party to any other party except
as provided in Section 7 hereof. Notice of any such cancellation shall be
given to the Company in writing or by the telephone or telegraph confirmed in
writing. Notwithstanding any such termination, the provisions of Sections 8
and 11 shall remain in effect.
SECTION 7. Payment of Expenses.
The Company will pay all expenses, incident to the
performance of its obligations under this Agreement, including:
(i) the printing and filing of the Registration Statement
and all amendments thereto, the Preliminary Prospectus and the
Prospectus and any amendments or supplements thereto;
(ii) the preparation, printing, issuance and delivery of
the Offered Certificates;
(iii) the reasonable fees and disbursements of the
Company's accountants and counsel, of the Trustee, the Owner
Trustees, and the Indenture Trustee and their respective counsel, and
of any issuing and paying agent or transfer agent;
(iv) the qualification of the Offered Certificates under
securities laws in accordance with the provisions of Section 5(g),
including filing fees and the reasonable fees and disbursements of
counsel to the Underwriters in connection therewith and in
<PAGE> 17
17
connection with the preparation of any Blue Sky Survey and any Legal
Investment Survey:
(v) the printing and delivery to the Underwriters in
quantities as hereinabove stated of copies of the Registration
Statement and any amendments thereto, and of the Prospectus and any
amendments or supplements thereto, and the delivery by the
Underwriters of the Prospectus and any amendments or supplements
thereto in connection with solicitations or confirmations of sales of
the Offered Certificates;
(vi) the preparation and delivery to the Underwriters of
copies of the Pass Through Agreements and the other Operative
Agreements, including all expenses incident to the performance of the
Company's obligations under the Pass Through Agreements and Indentures
and the Leases and each of the other agreements and instruments
referred to in the Indentures and the Note Purchase Agreements;
(vii) any fees charged by rating agencies for the rating of
the Offered Certificates:
(viii) the fees and expenses, if any, incurred with respect
to any filing with the National Association of Securities Dealers,
Inc; and
(ix) certain fees and disbursements of your counsel, as
heretofore agreed.
If this Agreement is terminated by you in accordance with
the provisions of Section 6 or clause (i) of Section 10 hereof, the Company
shall reimburse the Underwriters for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the
Underwriters, or, in any other case, the Underwriters will pay all of their own
expenses, including their fees of counsel, transfer taxes on resale of any of
the Offered Certificates and any advertising expenses connected with any offers
they may make.
SECTION 8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
<PAGE> 18
18
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(iii) against any expense (including the fees and
disbursements of counsel chosen by you), as incurred, reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto), or made in
reliance upon the Trustee's Form T-1 Statement of Eligibility and Qualification
under the 1939 Act filed as an exhibit to the Registration Statement; and
provided further that the foregoing indemnity agreement, with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages or liabilities
purchased Offered Certificates, or any person controlling such Underwriter, if
a copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Offered Certificates to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such losses, claims,
damages or liabilities; and provided further that the Company will not be
liable for any loss, liability or expense of any settlement of any pending or
threatened litigation, any pending or threatened governmental agency
investigation or proceeding if such settlement is effected without the written
consent of the Company.
(b) Each Underwriter severally agrees to indemnify and
hold harmless the Company, its directors and officers and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto) or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information
<PAGE> 19
19
furnished to the Company by an Underwriter expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to
each indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability which it may
have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action. In no
event shall the indemnifying parties be liable for the fees and expenses of
more than one counsel (in addition to any local counsel hired by such counsel),
separate from such indemnifying parties' own counsel, for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances.
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 8 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and the
Underwriters of Offered Certificates shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company, and one or more of the
Underwriters in respect of such offering, as incurred, in such proportions so
that the Underwriters are responsible for that portion represented by the
percentage that the underwriting discount appearing on Exhibit A hereto in
respect of such offering bears to the initial public offering price appearing
thereon and the Company is responsible for the balance; provided, however, that
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
Section, each person, if any, who controls an Underwriter within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as such
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as the Company.
SECTION 9. Default by an Underwriter.
If one or more of the Underwriters participating in an
offering of Offered Certificates shall fail at the Closing Time to purchase the
Offered Certificates which it or they are obligated to purchase hereunder (the
"Defaulted Certificates"), then you shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the nondefaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Certificates in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, during such 24 hours you shall
not have completed such arrangements for the purchase of all of the Defaulted
Certificates then:
<PAGE> 20
20
(a) if the aggregate principal amount of Defaulted
Certificates does not exceed 10% of the aggregate principal amount of
Offered Certificates to be purchased pursuant to this Agreement, the
nondefaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations bear to the underwriting obligations of all nondefaulting
Underwriters, or
(b) if the aggregate principal amount of Defaulted
Certificates exceeds 10% of the aggregate principal amount of Offered
Certificates to be purchased pursuant to this Agreement, this
Agreement shall terminate without liability on the part of any
nondefaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability to the Company and any nondefaulting
Underwriter in respect of its default under this Agreement.
In the event of any such default by any Underwriter or
Underwriters as set forth in this Section, either you or the Company shall have
the right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
SECTION 10. Termination.
This Agreement shall be subject to termination, in the
absolute discretion of the Underwriters, immediately upon notice to the
Company, at any time prior to the Closing Time (i) if there has been, since the
date hereof or since the respective dates as of which information is given in
the Registration Statement, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company, whether or not arising in the ordinary course of
business which, in the judgment of a majority in interest of the Underwriters,
materially impairs the investment quality of the Offered Certificates, or (ii)
if there shall have occurred any outbreak or escalation of hostilities in which
the United States is involved or other national or international calamity or
crisis, the effect of which on the financial markets of the United States shall
be such as to make it, in the judgment of a majority in interest of the
Underwriters, impracticable to market the Offered Certificates or enforce
contracts for the sale of the Offered Certificates as contemplated by the
Prospectus, or (iii) if trading in the Common Stock of the Company shall have
been suspended by the Commission or a national securities exchange, or if
trading generally on the New York Stock Exchange shall have been suspended, or
minimum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required, by said exchange or by order of the
Commission or any other governmental authority, or if a banking moratorium
shall have been declared by either federal or New York authorities. In the
event of any such termination of this Agreement, the covenant set forth in
Section 5(f) hereof, the provisions of Section 7 hereof, the indemnity and
contribution agreements set forth in Section 8 hereof, and the provisions of
Sections 11 and 13 hereof shall remain in effect.
<PAGE> 21
21
SECTION 11. Representations and Indemnities to Survive.
All representations, warranties and agreements contained in
this Agreement, or contained in certificates of officers of the Company
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, and shall survive each
delivery of and payment for any of the Offered Certificates.
SECTION 12. Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed, delivered by
Federal Express service or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to them at
the address indicated on page 1 hereof, with copies thereof directed to
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022-6069,
Attention: Joel S. Klaperman. Notices to the Company shall be directed to it
at Southwest Airlines Co., 2702 Love Field Drive, Dallas, Texas 75235,
Attention of the Vice President-Finance, with copies thereof directed to the
Treasurer and Associate General Counsel.
SECTION 13. Successors.
This Agreement shall inure to the benefit of and be binding
upon you and the Company and any Underwriter who becomes a party hereto and
their respective successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any firm or corporation, other than
the parties hereto and their respective successors and the controlling persons
and officers and directors referred to in Section 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement
and all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the parties hereto, their respective successors and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Offered Certificates from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
SECTION 14. Applicable Law.
This Agreement and the rights and obligations of the parties
created hereby and thereby shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be
performed in such state.
SECTION 15. Counterparts.
This Agreement may be executed in one or more counterparts
and when a counterpart has been executed by each party, all such counterparts
taken together shall constitute
<PAGE> 22
22
one and the same agreement. A party may submit its signed counterpart of this
Agreement by telecopier and such counterpart so received by telecopier shall
for all purposes constitute an original.
<PAGE> 23
* * *
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument along with all counterparts will become a binding
agreement between you and the Company in accordance with its terms.
Very truly yours,
SOUTHWEST AIRLINES CO.
By: /s/ Laura Wright
---------------------------
Laura Wright
Assistant Treasurer
CONFIRMED AND ACCEPTED, as of
the date first above written:
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
By: Salomon Brothers Inc
By: /s/ James J. Ryan
---------------------------------
James J. Ryan, Managing Director
<PAGE> 24
Exhibit A
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1995-A
<TABLE>
<CAPTION>
Pass Through Final Underwriting
Certificates Aggregate Interest Distribution Purchase Discounts and
Designation Amount* Rate Date Price Commissions
----------- ------ ---- ---- ----- -----------
<S> <C> <C> <C> <C> <C>
Series 1995-A1 $ 3,527,781 6.16% July 1, 1997 $ 3,527,781 $ 22,930
Series 1995-A2 3,745,091 6.29 July 1, 1998 3,745,091 24,343
Series 1995-A3 181,181,821 7.22 July 1, 2013 181,181,821 1,177,682
Series 1995-A4 49,041,464 7.64 January 1, 2018 49,041,464 318,770
------------- -------------- ------------
Total $ 237,496,157 $ 237,496,157 $ 1,543,725
============= ============== ============
</TABLE>
* Each of the Underwriters severally and not jointly agrees to purchase
approximately 50% of the Aggregate Amount of each Series.
<PAGE> 25
Schedule I
to
Underwriting
Agreement
Dated: September 20, 1995
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1995-A
<TABLE>
<CAPTION>
Aggregate Amount Aggregate Amount Aggregate Amount Aggregate Amount
of Pass Through of Pass Through of Pass Through of Pass Through
Certificates, Certificates, Certificates, Certificates,
Underwriter Series 1995-A1 Series 1995-A2 Series 1995-A3 Series 1995-A4
- ----------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SALOMON BROTHERS INC $ 1,763,891 $ 1,872,546 $ 90,590,911 $ 24,520,732
MORGAN STANLEY & CO. INCORPORATED 1,763,890 1,872,545 90,590,910 24,520,732
------------ ------------ ------------- -------------
Total $ 3,527,781 $ 3,745,091 $ 181,181,821 $ 49,041,464
============ ============ ============= =============
</TABLE>
<PAGE> 26
Schedule II
to
Underwriting
Agreement
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1995-A1
Pass Through Certificates, Series 1995-A2
Pass Through Certificates, Series 1995-A3
Pass Through Certificates, Series 1995-A4
Dated: September 20, 1995
To: Southwest Airlines Co.
2702 Love Field Drive
Dallas, Texas 75235
Re: Underwriting Agreement dated September 20, 1995.
<TABLE>
<S> <C>
Title of Offered Certificates: Pass Through Certificates, Series 1995-A1, 1995-A2, 1995-A3 and 1995-
A4
Current ratings: A/A2/A by S&P, Moody's, and Duff & Phelps, respectively.
Interest rate: Series 1995-A1 . . . . . . . . . . . . 6.16%
Series 1995-A2 . . . . . . . . . . . . 6.29%
Series 1995-A3 . . . . . . . . . . . . 7.22%
Series 1995-A4 . . . . . . . . . . . . 7.64%
Interest payable: January 1 and July 1 of each year, commencing on January 1, 1996.
Public offering price: 100%, plus accrued interest, if any, from October 4, 1995.
Purchase price: 100%, plus accrued interest, if any, from October 4, 1995.
Closing date and location: October 4, 1995 at 9:00 a.m., Dallas time
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Location for checking
Offered Certificates: The Depository Trust Company
New York, New York
Listing requirement: None
Other terms and conditions: None
</TABLE>
<PAGE> 27
II-1
Exceptions, if any, to
Section 5(h) of the
Underwriting Agreement: None
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
By: Salomon Brothers Inc
By: /s/ James J. Ryan
--------------------------------
James J. Ryan, Managing Director
Accepted:
SOUTHWEST AIRLINES CO.
By: /s/ Laura Wright
------------------------------
Laura Wright
Assistant Treasurer
<PAGE> 1
EXHIBIT 4.3
TRUST SUPPLEMENT NO. 1995-A1
DATED AS OF OCTOBER 1, 1995
TO
PASS THROUGH TRUST AGREEMENT
DATED AS OF FEBRUARY 1, 1993
SOUTHWEST AIRLINES CO.
AND
WILMINGTON TRUST COMPANY, AS TRUSTEE
$3,527,781.00
<PAGE> 2
TRUST SUPPLEMENT
This Trust Supplement No. 1995-A1, dated as of October 1, 1995 (the
"Trust Supplement") between Southwest Airlines Co., a Texas corporation (the
"Company") and Wilmington Trust Company, a Delaware banking corporation (the
"Trustee"), to the Pass Through Trust Agreement dated as of February 1, 1993,
between the Company and the Trustee (the "Basic Agreement"),
WITNESSETH:
WHEREAS, the Company and the Trustee have heretofore executed and
delivered the Basic Agreement, unlimited as to the aggregate principal amount
of Certificates (unless specified herein capitalized terms used herein without
definition having the respective meanings specified heretofore in the Basic
Agreement) which may be issued thereunder;
WHEREAS, each of eight Owner Trustees, each acting on behalf of an
Owner Participant, will issue, on a non- recourse basis, Equipment Notes, among
other things, to refinance all or a portion of the outstanding debt portion of
the purchase price of the aircraft purchased by such Owner Trustee and leased
to the Company pursuant to the related Lease;
WHEREAS, pursuant to the terms and conditions of the Basic Agreement
as supplemented by this Trust Supplement (the "Agreement"), the Trustee shall
purchase such Equipment Notes issued by such Owner Trustees of the same tenor
as the Certificates issued hereunder and shall hold such Equipment Notes in
trust for the benefit of the Certificateholders;
WHEREAS, the Trustee hereby declares the creation of this Trust (the
"1995-A1 Trust") for the benefit of the Certificateholders, and the initial
Certificateholders as the grantors of the 1995-A1 Trust, by their respective
acceptances of the Certificates, join in the creation of this 1995-A1 Trust
with the Trustee;
WHEREAS, all of the conditions and requirements necessary to make this
Trust Supplement, when duly executed and delivered, a valid, binding and legal
instrument in accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and delivery of this
Trust Supplement in the form and with the terms hereof have been in all
respects duly authorized;
WHEREAS, this Trust Supplement is subject to the provisions of the
Trust Indenture Act and shall, to the extent applicable, be governed by such
provisions;
NOW, THEREFORE, in consideration of the premises herein, it is agreed
between the Company and the Trustee as follows:
TRUST SUPPLEMENT NO. 1995-A1
-1-
<PAGE> 3
ARTICLE I
THE CERTIFICATES
Section 1.01 The Certificates. Pursuant to Section 2.01 of the
Basic Agreement, there is hereby created a series of Certificates to be issued
under the Agreement to be distinguished and known as "Pass Through
Certificates, Series 1995-A1" (hereinafter defined as the "Series 1995-A1
Certificates"). Each Certificate represents a Fractional Undivided Interest in
the 1995-A1 Trust created hereby. The terms and conditions applicable to the
Series 1995-A1 Certificates are as follows:
1. The aggregate principal amount of the Series 1995-A1
Certificates that shall be authenticated under the Agreement (except for Series
1995-A1 Certificates authenticated and delivered pursuant to Section 3.03, 3.04
or 3.05 of the Basic Agreement) upon their initial issuance is $3,527,781.00.
2. The Cut-off Date is November 15, 1995.
3. The Regular Distribution Dates with respect to any
payment of Scheduled Payments are January 1 and July 1 in each year, commencing
January 1, 1996, until payment of all of the Scheduled Payments to be made
under the Equipment Notes have been made.
4. The Scheduled Payments shall be as set forth in
Exhibit C hereto.
5. The Special Distribution Dates are as follows: (i)
in the case of an early redemption of Equipment Note arising out of an Event of
Loss, a refinancing of the Equipment Notes or a purchase or early redemption by
the related Owner Participant or Owner Trustee of such Equipment Notes, an
early redemption of Equipment Notes arising out of a voluntary termination of
the related Lease pursuant to Section 9.1 thereof, or exercise by Lessee of a
purchase option, the date of the receipt of the applicable redemption or
purchase price therefor, which shall be a Business Day, and (ii) otherwise, the
earliest Business Day of a month for which it is practicable for the Trustee to
give notice pursuant to Section 4.02(c) of the Basic Agreement 20 days prior
thereto.
6. The Series 1995-A1 Certificates shall be in the form
attached hereto as Exhibit A. The Series 1995-A1 Certificates shall be
Book-Entry Certificates and shall be subject to the conditions set forth in the
Letter of Representations between the Company and the Clearing Agency attached
hereto as Exhibit B.
7. The proceeds of the Series 1995-A1 Certificates shall
be used to purchase the Equipment Notes in the principal amounts specified
below:
TRUST SUPPLEMENT NO. 1995-A1
-2-
<PAGE> 4
<TABLE>
<CAPTION>
Equipment Note Principal Amount Maturity
-------------- ---------------- --------
<S> <C> <C>
Series 1995 N396SW $425,123.00 July 1, 1997
Series 1995 N397SW $429,824.20 July 1, 1997
Series 1995 N398SW $429,824.20 July 1, 1997
Series 1995 N399WN $429,824.20 July 1, 1997
Series 1995 N600WN $429,824.20 July 1, 1997
Series 1995 N601WN $429,824.20 July 1, 1997
Series 1995 N602SW $428,307.00 July 1, 1997
Series 1995 N603SW $525,230.00 July 1, 1997
</TABLE>
8. Each of eight Owner Trustees, each acting on behalf of an
Owner Participant, will issue on a non- recourse basis, the Equipment Notes,
the proceeds of which shall be used, among other things, to refinance in part
the outstanding debt portion of the purchase price of the following Aircraft:
<TABLE>
<CAPTION>
Registration Manufacturer's
Aircraft Number Serial Number
-------- ---------- -------------
<S> <C> <C>
1 Boeing 737-3H4 N396SW 27690
1 Boeing 737-3H4 N397SW 27691
1 Boeing 737-3H4 N398SW 27692
1 Boeing 737-3H4 N399WN 27693
1 Boeing 737-3H4 N600WN 27694
1 Boeing 737-3H4 N601WN 27695
1 Boeing 737-3H4 N602SW 27953
1 Boeing 737-3H4 N603SW 27954
</TABLE>
9. The related Note Documents are as follows (with the
trust relating to each Note Document being indicated in parentheses for
purposes of identification):
(a) Each of the following Indentures:
Trust Indenture and Security Agreement (Southwest
Airlines 1995 Trust N396SW) dated as of April 1,
1995, as supplemented, as amended by First Amendment
to Trust Indenture dated as of October 1, 1995
(Southwest Airlines 1995 Trust N396SW);
Trust Indenture and Security Agreement (Southwest
Airlines 1995 Trust N397SW) dated as of April 1,
1995, as supplemented, as amended by First Amendment
to Trust Indenture dated as of October 1, 1995
(Southwest Airlines 1995 Trust N397SW);
Trust Indenture and Security Agreement (Southwest
Airlines 1995 Trust N398SW) dated as of April 1,
1995, as supplemented, as amended by
TRUST SUPPLEMENT NO. 1995-A1
-3-
<PAGE> 5
First Amendment to Trust Indenture dated as of
October 1, 1995 (Southwest Airlines 1995 Trust
N398SW);
Trust Indenture and Security Agreement (Southwest
Airlines 1995 Trust N399WN) dated as of April 1,
1995, as supplemented, as amended by First Amendment
to Trust Indenture dated as of October 1, 1995
(Southwest Airlines 1995 Trust N399WN);
Trust Indenture and Security Agreement (Southwest
Airlines 1995 Trust N600WN) dated as of April 1,
1995, as supplemented, as amended by First Amendment
to Trust Indenture dated as of October 1, 1995
(Southwest Airlines 1995 Trust N600WN);
Trust Indenture and Security Agreement (Southwest
Airlines 1995 Trust N601WN) dated as of April 1,
1995, as supplemented, as amended by First Amendment
to Trust Indenture dated as of October 1, 1995
(Southwest Airlines 1995 Trust N601WN);
Trust Indenture and Security Agreement (Southwest
Airlines 1995 Trust N602SW) dated as of July 1, 1995,
as supplemented, as amended by First Amendment to
Trust Indenture dated as of October 1, 1995
(Southwest Airlines 1995 Trust N602SW);
Trust Indenture and Security Agreement (Southwest
Airlines 1995 Trust N603SW) dated as of July 1, 1995,
as supplemented, as amended by First Amendment to
Trust Indenture dated as of October 1, 1995
(Southwest Airlines 1995 Trust N603SW).
(b) Each of the following Leases:
Sale and Lease Agreement (Southwest Airlines 1995
Trust N396SW), dated as of April 1, 1995, as
supplemented, as amended by the First Amendment to
Sale and Lease Agreement (Southwest Airlines 1995
Trust N396SW) dated as of October 1, 1995;
Sale and Lease Agreement (Southwest Airlines 1995
Trust N397SW), dated as of April 1, 1995, as
supplemented, as amended by the First Amendment to
Sale and Lease Agreement (Southwest Airlines 1995
Trust N397SW) dated as of October 1, 1995;
Sale and Lease Agreement (Southwest Airlines 1995
Trust N398SW), dated as of April 1, 1995, as
supplemented, as amended by the First Amendment to
Sale and Lease Agreement (Southwest Airlines 1995
Trust N398SW) dated as of October 1, 1995;
TRUST SUPPLEMENT NO. 1995-A1
-4-
<PAGE> 6
Sale and Lease Agreement (Southwest Airlines 1995
Trust N399WN), dated as of April 1, 1995, as
supplemented, as amended by the First Amendment to
Sale and Lease Agreement (Southwest Airlines 1995
Trust N399WN) dated as of October 1, 1995;
Sale and Lease Agreement (Southwest Airlines 1995
Trust N600WN), dated as of April 1, 1995, as
supplemented, as amended by the First Amendment to
Sale and Lease Agreement (Southwest Airlines 1995
Trust N600WN) dated as of October 1, 1995;
Sale and Lease Agreement (Southwest Airlines 1995
Trust N601WN), dated as of April 1, 1995, as
supplemented, as amended by the First Amendment to
Sale and Lease Agreement (Southwest Airlines 1995
Trust N601WN) dated as of October 1, 1995;
Sale and Lease Agreement (Southwest Airlines 1995
Trust N602SW), dated as of July 1, 1995, as
supplemented, as amended by the First Amendment to
Sale and Lease Agreement (Southwest Airlines 1995
Trust N602SW) dated as of October 1, 1995;
Sale and Lease Agreement (Southwest Airlines 1995
Trust N603SW), dated as of July 1, 1995, as
supplemented, as amended by the First Amendment to
Sale and Lease Agreement (Southwest Airlines 1995
Trust N603SW) dated as of October 1, 1995.
(c) Each of the following Participation Agreements:
Participation Agreement (Southwest Airlines 1995
Trust N396SW), dated as of April 1, 1995, as amended
by the First Amendment to Participation Agreement
(Southwest Airlines 1995 Trust N396SW) dated as of
October 1, 1995;
Participation Agreement (Southwest Airlines 1995
Trust N397SW), dated as of April 1, 1995, as amended
by the First Amendment to Participation Agreement
(Southwest Airlines 1995 Trust N397SW) dated as of
October 1, 1995;
Participation Agreement (Southwest Airlines 1995
Trust N398SW), dated as of April 1, 1995, as amended
by the First Amendment to Participation Agreement
(Southwest Airlines 1995 Trust N398SW) dated as of
October 1, 1995;
Participation Agreement (Southwest Airlines 1995
Trust N399WN), dated as of April 1, 1995, as amended
by the First Amendment to Participation
TRUST SUPPLEMENT NO. 1995-A1
-5-
<PAGE> 7
Agreement (Southwest Airlines 1995 Trust N399WN)
dated as of October 1, 1995;
Participation Agreement (Southwest Airlines 1995
Trust N600WN), dated as of April 1, 1995, as amended
by the First Amendment to Participation Agreement
(Southwest Airlines 1995 Trust N600WN) dated as of
October 1, 1995;
Participation Agreement (Southwest Airlines 1995
Trust N601WN), dated as of April 1, 1995, as amended
by the First Amendment to Participation Agreement
(Southwest Airlines 1995 Trust N601WN) dated as of
October 1, 1995;
Participation Agreement (Southwest Airlines 1995
Trust N602SW), dated as of July 1, 1995, as amended
by the First Amendment to Participation Agreement
(Southwest Airlines 1995 Trust N602SW) dated as of
October 1, 1995;
Participation Agreement (Southwest Airlines 1995
Trust N603SW), dated as of July 1, 1995, as amended
by the First Amendment to Participation Agreement
(Southwest Airlines 1995 Trust N603SW) dated as of
October 1, 1995.
(d) Each of the following Trust Agreements:
Trust Agreement (Southwest Airlines 1995 Trust
N396SW) dated as of April 1, 1995, as supplemented;
Trust Agreement (Southwest Airlines 1995 Trust
N397SW) dated as of April 1, 1995, as supplemented;
Trust Agreement (Southwest Airlines 1995 Trust
N398SW) dated as of April 1, 1995, as supplemented;
Trust Agreement (Southwest Airlines 1995 Trust
N399WN) dated as of April 1, 1995, as supplemented;
Trust Agreement (Southwest Airlines 1995 Trust
N600WN) dated as of April 1, 1995, as supplemented;
TRUST SUPPLEMENT NO. 1995-A1
-6-
<PAGE> 8
Trust Agreement (Southwest Airlines 1995 Trust
N601WN) dated as of April 1, 1995, as supplemented;
Trust Agreement (Southwest Airlines 1995 Trust
N602SW) dated as of July 1, 1995, as supplemented;
Trust Agreement (Southwest Airlines 1995 Trust
N603SW) dated as of July 1, 1995, as supplemented.
(e) Each of the following Refinancing Agreements:
Refinancing Agreement (Southwest Airlines 1995 Trust
N396SW) dated as of October 1, 1995;
Refinancing Agreement (Southwest Airlines 1995 Trust
N397SW) dated as of October 1, 1995;
Refinancing Agreement (Southwest Airlines 1995 Trust
N398SW) dated as of October 1, 1995;
Refinancing Agreement (Southwest Airlines 1995 Trust
N399WN) dated as of October 1, 1995;
Refinancing Agreement (Southwest Airlines 1995 Trust
N600WN) dated as of October 1, 1995;
Refinancing Agreement (Southwest Airlines 1995 Trust
N601WN) dated as of October 1, 1995;
Refinancing Agreement (Southwest Airlines 1995 Trust
N602SW) dated as of October 1, 1995;
Refinancing Agreement (Southwest Airlines 1995 Trust
N603SW) dated as of October 1, 1995.
ARTICLE II
THE TRUSTEE
Section 2.01. The Trustee. The Trustee shall not be responsible in
any manner whatsoever for or in respect of the validity or sufficiency of this
Trust Supplement or the due execution hereof by the Company, or for or in
respect of the recitals and statements contained herein, all of which recitals
and statements are made solely by the Company.
TRUST SUPPLEMENT NO. 1995-A1
-7-
<PAGE> 9
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed by the Trustee by
reason of this Trust Supplement other than as set forth in the Basic Agreement,
and this Trust Supplement is executed and accepted on behalf of the Trustee,
subject to all the terms and conditions set forth in the Basic Agreement, upon
the effectiveness thereof, as fully to all intents as if the same were herein
set forth at length.
ARTICLE III
MISCELLANEOUS PROVISIONS
Section 3.01. Basic Agreement Ratified. Except and so far as
herein expressly provided, all of the provisions, terms and conditions of the
Basic Agreement are in all respects ratified and confirmed; and the Basic
Agreement and this Trust Supplement shall be taken, read and construed as one
and the same instrument.
Section 3.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE SERIES
1995-A1 CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE.
Section 3.03. Execution in Counterparts. This Trust Supplement may
be executed in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one instrument.
TRUST SUPPLEMENT NO. 1995-A1
-8-
<PAGE> 10
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Supplement to be duly executed by their respective officers thereto duly
authorized, as of the day and year first above written.
SOUTHWEST AIRLINES CO.
By /s/ JOHN D. OWEN
Treasurer
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Trustee
By /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
TRUST SUPPLEMENT NO. 1995-A1
-9-
<PAGE> 11
EXHIBIT A
CUSIP NO. [FORM OF CERTIFICATE]
**Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York Corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch the registered owner hereof,
Cede & Co., has an interest herein.
SOUTHWEST AIRLINES 1995-A1 PASS THROUGH TRUST
Pass Through
Certificate, Series 1995-A1
Final Distribution Date: July 1, 1997
evidencing a fractional undivided interest in a trust, the
property of which includes certain Equipment Notes each
secured by an Aircraft leased to Southwest Airlines Co.
Certificate
No. ______ $ ________Fractional Undivided Interest representing
_________% of the Trust per $1,000 face amount.
THIS CERTIFIES THAT ___________________________________________, for
value received, is the registered owner of a $__________________________
(_____________ dollars) Fractional Undivided Interest in the Southwest Airlines
1995-A1 Pass Through Trust (the "Trust") created by Wilmington Trust Company,
as trustee (the "Trustee"), pursuant to a Pass Through Trust Agreement dated as
of February 1, 1993 (the "Basic Agreement"), as supplemented by Trust
Supplement No. 1995-A1 thereto dated as of October 1, 1995 (collectively, the
"Agreement"), between the Trustee and Southwest Airlines Co., a corporation
incorporated under Texas law (the "Company"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Agreement. This Certificate is one of the duly authorized
Certificates designated as "Pass Through Certificates, Series 1995-A1" (herein
called the "Certificates"). This Certificate is issued under and is subject to
the terms, provisions, and conditions of the Agreement, to which Agreement the
Certificateholder of this Certificate by virtue of the acceptance hereof
assents and by which such Certificateholder is bound. The property of the
Trust includes certain Equipment Notes (the "Trust Property"). Each issue of
the Equipment Notes is secured by a security interest in an aircraft leased to
the Company.
The Certificates represent Fractional Undivided Interests in the Trust
and the Trust Property, and have no rights, benefits or interest in respect of
any other separate trust established pursuant to the terms of the Basic
Agreement for any other series of certificates issued pursuant thereto. _
_________________
** This legend to appear on Book-Entry Certificates to be
deposited with The Depository Trust Company. One Certificate
may be issued in a denomination of less than $1,000 which
shall not have this legend.
TRUST SUPPLEMENT NO. 1995-A1
A-1
<PAGE> 12
Subject to and in accordance with the terms of the Agreement, from
funds then available to the Trustee, there will be distributed on January 1 and
July 1 in each year, commencing January 1, 1996 (a "Regular Distribution Date")
to the Person in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date, an amount in
respect of the Scheduled Payments on the Equipment Notes due on such Regular
Distribution Date, the receipt of which has been confirmed by the Trustee,
equal to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Scheduled Payments. Subject
to and in accordance with the terms of the Agreement, in the event that Special
Payments on the Equipment Notes are received by the Trustee, from funds then
available to the Trustee, there shall be distributed on the applicable Special
Distribution Date, to the Person in whose name this Certificate is registered
at the close of business on the 15th day preceding the Special Distribution
Date, an amount in respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate and an amount
equal to the sum of such Special Payments so received. If a Regular
Distribution Date or Special Distribution Date is not a Business Day,
distribution shall be made on the immediately following Business Day with the
same force and effect as if made on such Regular Distribution Date or Special
Distribution Date and no interest shall accrue during the intervening period.
The Trustee shall mail notice of each Special Payment and the Special
Distribution Date therefor to the Certificateholder of this Certificate.
Distributions on this Certificate will be made by the Trustee in
immediately available funds to the Person entitled thereto, without the
presentation or surrender of this Certificate or the making of any notation
hereon. Except as otherwise provided in the Agreement and notwithstanding the
above, the final distribution on this Certificate will be made after notice
mailed by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency of the
Trustee specified in such notice.
The Certificates do not represent a direct obligation of, or an
obligation guaranteed by, or an interest in, the Company or the Trustee or any
affiliate thereof. The Certificates are limited in right or payment, all as
more specifically set forth herein and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made
to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds, and duties, evidenced hereby. A copy of the
Agreement may be examined during normal business hours at the principal office
of the Trustee, and at such other places, if any, designated by the Trustee, by
any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the
TRUST SUPPLEMENT NO. 1995-A1
A-2
<PAGE> 13
Certificateholders under the Agreement at any time by the Company and the
Trustee with the consent of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust. Any such consent by the Certificateholder of this
Certificate shall be conclusive and binding on such Certificateholder and upon
all future Certificateholders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee in its capacity as Registrar, or
by any successor Registrar, duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such Certificateholder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of authorized denominations evidencing the same aggregate Fractional Undivided
Interest in the Trust will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $1,000 or integral multiples thereof except
that one Certificate may be in a denomination of less than $1,000. As provided
in the Agreement and subject to certain limitations therein set forth, the
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust, as
requested by the Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee shall require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the Trustee or the
Registrar may treat the Person in whose name this Certificate is registered as
the owner hereof for all purposes, and none of the Trustee, the Registrar, or
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant
to the Agreement and the disposition of all property held as part of the Trust
Property.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF DELAWARE.
TRUST SUPPLEMENT NO. 1995-A1
A-3
<PAGE> 14
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
SOUTHWEST AIRLINES 1995-A1
PASS THROUGH TRUST
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Trustee
By: _______________________________
Title: _______________________________
Dated: __________________________
TRUST SUPPLEMENT NO. 1995-A1
A-4
<PAGE> 15
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as
Trustee
By: ___________________________________
Authorized Officer
TRUST SUPPLEMENT NO. 1995-A1
A-5
<PAGE> 16
EXHIBIT B
TRUST SUPPLEMENT NO. 1995-A1
Dated as of October 1, 1995
[DTC LETTER OF REPRESENTATIONS]
TRUST SUPPLEMENT NO. 1995-A1
B-1
<PAGE> 17
EXHIBIT C
TRUST SUPPLEMENT NO. 1995-A1
Dated as of October 1, 1995
Scheduled Payments
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
- ---------------------- ----------------------
<S> <C>
July 1, 1997 100.0%
</TABLE>
TRUST SUPPLEMENT NO. 1995-A1
C-1
<PAGE> 1
EXHIBIT 4.4
- --------------------------------------------------------------------------------
TRUST INDENTURE
AND SECURITY AGREEMENT
dated as of April 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly
set forth herein and otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N396SW
- --------------------------------------------------------------------------------
Southwest Airlines Co.
Series SWA 1995 Trust N396SW-I and N396SW Certificates
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 2
THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.01. Certificates; Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05. Holder Lists; Ownership of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 17
Section 2.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.08. Payment on Certificates; Defaulted Principal and Interest . . . . . . . . . . . . . . . . 17
Section 2.09. Payment from Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.10. Execution, Delivery and Dating of Certificates upon Issuance . . . . . . . . . . . . . . 20
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE . . . . . . . . . . . . . . . . . . . . 20
Section 3.01. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.02. Payment in Case of Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.03. Application When No Indenture Event of Default Is
Continuing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.04. Application of Certain Payments in Case of Requisition or Event
of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.05. Payments During Continuance of Indenture Event of Default . . . . . . . . . . . . . . . . 22
Section 3.06. Payments for Which Application Is Provided in Other
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.07. Payments for Which No Application Is Otherwise Provided . . . . . . . . . . . . . . . . . 23
Section 3.08. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4
COVENANTS OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 24
Section 4.01. Covenants of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.02. Covenants of Shawmut Bank Connecticut, National
Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.01. Disposition, Substitution and Release of Property Included in the
Indenture Estate During Continuation of Lease . . . . . . . . . . . . . . . . . . . 26
Section 5.02. Certificates in Respect of Replacement Aircraft and Engines . . . . . . . . . . . . . . . 27
ARTICLE 6
REDEMPTION OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . 27
Section 6.01. Redemption of Certificates upon Certain Events . . . . . . . . . . . . . . . . . . . . . 27
Section 6.02. Redemption or Purchase of Certificates Upon Certain Indenture
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.03. Notice of Redemption to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.04. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.05. Certificates Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.06. Selection of Certificates to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.07. Certificates Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 7
MATTERS CONCERNING THE COMPANY . . . . . . . . . . . . . . . . . . . . 31
Section 7.01. Repayment of Monies for Certificate Payments Held by the
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.03. Assumption of Obligations of Owner Trustee by the Company . . . . . . . . . . . . . . . . 31
ARTICLE 8
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.01. Indenture Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.02. Acceleration; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.03. Other Remedies Available to Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.04. Waiver of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.05. Waiver of Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.06. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.07. Limitation on Suits by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.08. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.09. Indenture Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 9
INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
</TABLE>
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<TABLE>
<S> <C> <C>
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.06. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.07. Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.08. Successor Indenture Trustee, Agents by Merger, Etc. . . . . . . . . . . . . . . . . . . . 48
Section 9.09. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.10. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.11. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.12. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.13. Certain Rights of Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . . . 49
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 50
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance;
Termination of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.02. Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.03. Monies to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.04. Monies to Be Returned to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.05. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 11
AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.01. Amendments to this Agreement Without Consent of Holders . . . . . . . . . . . . . . . . . 54
Section 11.02. Amendments to this Agreement with Consent of Holders . . . . . . . . . . . . . . . . . . 55
Section 11.03. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.04. Notation on or Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.05. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.06. Amendments, Waivers, Etc. of Other Operative Agreements . . . . . . . . . . . . . . . . . 56
Section 11.07. Trust Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.03. Successors and Assigns; Agreement of Holders . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.04. Rules by Indenture Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.05. Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.06. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.07. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.09. Applicability Only to Original Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
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<TABLE>
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ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE . . . . . . . . . . . . . . . . 62
Section 13.01. Actions to Be Taken upon Termination of Lease . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE] . . . . . . . . . . . . . . . . . . . 63
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N396SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N396SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N396SW-I
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.01. Conditions Precedent to Issuance of Series SWA 1995 Trust
N396SW Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.02. Payment upon Issuance of Series SWA 1995 Trust N396SW
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.03. Special Provision Governing Refinancing of the Series SWA 1995
Trust N396SW-I Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.04. Special Provision for Payments in Respect of the Series SWA
1995 Trust N396SW-I Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 15.05. Increased Costs, Break Amount, Additional Interest, Taxes,
Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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<TABLE>
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EXHIBITS
Exhibit A - Form of Series SWA 1995 Trust N396SW-I Certificate
Exhibit A-1 - Form of Series SWA 1995 Trust N396SW Installment Certificates
Exhibit A-2 - Form of Series SWA 1995 Trust N396SW Serial Certificates
Exhibit B - Maturity Dates, Principal Amounts and Interest Rates on Series SWA 1995 Trust N396SW
Certificates
Exhibit B-1 - Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 - Issuance of Series SWA 1995 Trust N396SW Certificates
Exhibit C - [FORM OF] Trust Agreement and Trust Indenture and Security Agreement Supplement
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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TRUST INDENTURE AND SECURITY AGREEMENT
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of April
1, 1995, is between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association organized under the laws of the United States, in its
individual capacity only as expressly provided herein and otherwise solely as
Owner Trustee under the Trust Agreement (capitalized terms used herein having
the respective meanings specified therefor in Article 1), and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as Indenture Trustee hereunder.
W I T N E S S E T H:
WHEREAS, the Owner Participant and the Owner Trustee in its
individual capacity have entered into the Trust Agreement whereby, among other
things, (i) the Owner Trustee has established a certain trust, the Southwest
Airlines 1995 Trust N396SW, for the use and benefit of the Owner Participant,
subject, however, to the Indenture Estate created pursuant hereto for the use
and benefit of, and with the priority of payment to, the holders of the
Certificates issued hereunder, and (ii) the Owner Trustee has been authorized
and directed to execute and deliver this Agreement;
WHEREAS, the parties desire by this Agreement, among other
things, (i) to provide for the issuance by the Owner Trustee of the Series SWA
1995 Trust N396SW-I Certificates and for the potential issuance by the Owner
Trustee of the Series SWA 1995 Trust N396SW Certificates in respect of the
refinancing and redemption of the Series SWA 1995 Trust N396SW-I Certificates
and (ii) to provide for the assignment, mortgage and pledge by the Owner
Trustee to the Indenture Trustee, as part of the Indenture Estate hereunder,
among other things, of certain of the Owner Trustee's right, title and interest
in and to the Aircraft and the Operative Agreements and certain payments and
other amounts received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's obligations to
the Indenture Trustee, for the ratable benefit and security of the Holders; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner Trustee and the Indenture
Trustee, for the uses and purposes herein set forth, in accordance with its
terms, have been done and performed and have happened;
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND SECURITY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal of, Premium, if
any, and interest on, Break Amount, if any, and all other amounts due with
respect to, all Certificates from time to time Outstanding and all other
amounts due to the Holders hereunder and under the Participation Agreement and
the performance and observance by each of the Company and the Owner Trustee of
all the agreements, covenants and provisions contained herein and in the
Operative Agreements to which it is a party, for the benefit of Indenture
Trustee and the Holders, and for the uses and purposes hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of the sum of $1 paid to the
Owner Trustee by the Indenture Trustee at or before the delivery hereof, the
receipt whereof is hereby acknowledged, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time, a
security interest in and mortgage lien on all estate, right, title and interest
of the Owner Trustee in, to and under the following described property, rights,
interests and privileges, other than Excluded Payments (which collectively,
including all property hereafter specifically subjected to the lien of this
Agreement by any instrument supplemental hereto, but excluding the Excluded
Payments, are herein called the "Indenture Estate"):
(1) the Aircraft (including the Airframe and the
Engines originally installed thereon on the Delivery Date), and all
replacements thereof and substitutions therefor in which the Owner
Trustee shall from time to time acquire an interest in accordance with
the Lease, as more particularly described in the Trust Supplement and
the Lease Supplement executed and delivered with respect to the
Aircraft or any such replacements or substitutions therefor, as
provided in this Agreement, and all Records maintained with respect to
the foregoing property;
(2) the Lease and all Rent thereunder, including,
without limitation, all amounts of Basic Rent, Supplemental Rent,
payments of any kind required to be made by the Company thereunder
(including the purchase price for the Aircraft pursuant to Section
18.2 of the Lease) and any sales proceeds of the Aircraft sold
pursuant to Section 9 of the Lease or otherwise; the Purchase
Agreement (to the extent assigned by the Purchase Agreement
Assignment); the Purchase Agreement Assignment; all subleases of the
Airframe and the Engines and all rent thereunder to the extent
assigned to the Owner Trustee by Lessee; the Bills of Sale; and the
Manufacturer's Consent; including, without limitation, in respect of
each of the foregoing documents and instruments, all rights of the
Owner Trustee to receive any payments or other amounts or to exercise
any election or option or to make any decision or determination or to
give or receive any notice, consent, waiver or approval or to take any
other action under or in respect of any such document or to accept
surrender or redelivery of the Aircraft or any part thereof, as well
as all the rights, powers and remedies on the part of the Owner
Trustee, whether acting under any such document or by statute or at
law or in equity, or otherwise, arising out of any Lease Event of
Default;
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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<PAGE> 9
(3) all rents, issues, profits, revenues and
other income of the property subjected or required to be subjected to
the Lien of this Agreement;
(4) all requisition proceeds with respect to the
Aircraft or any part thereof and all insurance proceeds with respect
to the Aircraft or any part thereof;
(5) all moneys and securities now or hereafter
paid or deposited or required to be paid or deposited to or with the
Indenture Trustee by or for the account of the Owner Trustee pursuant
to any term of any Operative Agreement and held or required to be held
by the Indenture Trustee hereunder; and
(6) all proceeds of the foregoing.
Concurrently with the delivery hereof, the Owner Trustee is
delivering to the Indenture Trustee an executed chattel paper original
counterpart of each of the Lease and the Lease Supplement covering the
Aircraft, together with executed copies of the Trust Agreement and each of the
other Indenture Documents received by it (other than the Purchase Agreement,
the Participation Agreement and the FAA bills of sale). All property
constituting part of the Indenture Estate referred to in this Granting Clause,
whenever acquired by the Owner Trustee, shall secure all obligations under and
with respect to the Certificates at any time Outstanding. Any and all
properties constituting part of the Indenture Estate referred to in this
Granting Clause which are hereafter acquired by the Owner Trustee, shall,
without further conveyance, assignment or act by the Owner Trustee or the
Indenture Trustee thereby become and be subject to the security interest hereby
granted as fully and completely as though specifically described herein.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Indenture Trustee and the Holders from time to
time, without any priority of any one Certificate over any other, and for the
uses and purposes and subject to the terms and provisions set forth in this
Agreement.
The Owner Trustee agrees that this Agreement is intended to
and shall create and grant a security interest in the Aircraft to the Indenture
Trustee, which security interest shall attach on the Delivery Date. The
security interest created by this Agreement and granted to the Indenture
Trustee hereunder in the Indenture Estate other than in the Aircraft shall
attach in the case of each other item of property included in the Indenture
Estate upon the delivery thereof or upon the Owner Trustee's acquiring rights
in such property.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Agreements to which it is a party, to perform all of the
obligations assumed by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Indenture Trustee
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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and the Holders shall have no obligation or liability under any of the
Operative Agreements to which the Owner Trustee is a party by reason of or
arising out of the assignment hereunder, nor shall the Indenture Trustee or the
Holders be required or obligated in any manner to perform or fulfill any
obligations of the Owner Trustee under any of the Operative Agreements to which
the Owner Trustee is a party, or, except as herein expressly provided, to make
any payment, or to make any inquiry as to the nature or sufficiency of any
payment received by it, or present or file any claim, or take any action to
collect or enforce the payment of any amounts which may have been assigned to
it or to which it may be entitled at any time or times.
The Owner Trustee does hereby constitute the Indenture Trustee
the true and lawful attorney of the Owner Trustee, irrevocably, with full power
(in the name of the Owner Trustee or otherwise) to ask, require, demand,
receive and, to the extent permitted by Article 8 hereof (if an Event of
Default shall have occurred and be continuing), give acquittance for any and
all moneys and claims for moneys due and to become due to the Owner Trustee
(other than Excluded Payments) under or arising out of any Indenture Document
and all other property which now or hereafter constitutes part of the Indenture
Estate, to endorse any checks or other instruments or orders in connection
therewith and, to file any claims or take any action or institute any
proceedings which the Indenture Trustee may deem to be necessary or advisable
in the premises. The Owner Trustee has directed the Company to make all
payments of Rent (other than Excluded Payments) payable to the Owner Trustee by
the Company and all other amounts which are required to be paid to or deposited
with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee
at its address set forth in Schedule I to the Participation Agreement, for
application as provided in this Agreement. The Owner Trustee agrees that
promptly on receipt thereof, it will transfer to the Indenture Trustee at such
address any and all moneys from time to time received by it constituting part
of the Indenture Estate, for distribution by the Indenture Trustee pursuant to
this Agreement, except that the Owner Trustee shall accept for distribution
pursuant to the Trust Agreement any amounts distributed to it by the Indenture
Trustee as expressly provided in this Agreement and any Excluded Payments.
The Owner Trustee agrees that at any time and from time to
time, upon the written request of the Indenture Trustee, the Owner Trustee will
promptly and duly execute and deliver or cause to be duly executed and
delivered any and all such further instruments and documents as the Indenture
Trustee may reasonably deem desirable in obtaining the full benefits of the
assignment hereunder and of the rights and powers herein granted.
The Owner Trustee does hereby warrant and represent that it
has not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of its
right, title or interest hereby assigned, to anyone other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement
amending or supplementing any of the Operative Agreements, execute any waiver
or modification of, or consent under the terms of any of the Operative
Agreements, settle or compromise any claim (other than claims in respect of
Excluded Payments) against the Company arising under any of the Operative
Agreements, or submit or consent to the submission of any dispute, difference
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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or other matter arising under or in respect of any of the Operative Agreements,
to arbitration thereunder.
The Owner Trustee does hereby ratify and confirm the Indenture
Documents to which it is a party and does hereby agree that (except as
permitted herein) it will not take or omit to take any action, the taking or
omission of which would result in an alteration or impairment of any of the
Indenture Documents or of any of the rights created by any thereof or the
assignment hereunder.
Notwithstanding the Granting Clause, any of the preceding
paragraphs or any other provision of this Indenture, there are hereby expressly
excluded from the foregoing grant, bargain, sale, assignment, transfer,
conveyance, mortgage, pledge and security interest all Excluded Payments.
Further, nothing in the Granting Clause or any of the preceding paragraphs
shall impair in any respect the rights of the Owner Trustee or the Owner
Participant under Section 9.13 or 11.06.
IT IS HEREBY COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article 1 have the
meanings assigned to them in this Article 1, and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(3) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision; and
(4) unless otherwise specified, all references in
this Agreement to Articles, Sections and Exhibits refer to Articles,
Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Bankruptcy Code" means the United States Bankruptcy Code of
1978, as amended, or any successor statute.
"Basis Point" shall have the meaning specified therefor in
Exhibit A.
"Break Amount" shall have the meaning specified therefor in
Section 15.05(b).
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in the
City of Dallas, Texas; New York, New York; San Francisco, California; the city
and state in which (i) so long as any Certificates shall be Outstanding, the
Indenture Trustee and (ii) thereafter, the Owner Trustee, has its principal
place of business; and the city and state in which the Indenture Trustee or the
Owner Trustee, as the case may be, receives and disburses funds; provided,
however, that so long as the Series SWA 1995 Trust N396SW-I Certificates are
Outstanding, such day must also be a day on which dealings are carried on in
the applicable offshore dollar interbank market.
"Certificate" or "Certificates" means any certificate or other
debt instrument issued under this Agreement, including the Series SWA 1995
Trust N396SW-I Certificates and the Series SWA 1995 Trust N396SW Certificates,
if any, issued hereunder.
"Company" means Southwest Airlines Co., a Texas corporation,
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company
executed on its behalf by a Responsible Company Officer of the Company.
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Debt" means any liability for borrowed money, or any
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
"Debt Rate" shall have the meaning specified therefor in
Exhibit A.
"Defaulted Installment" shall have the meaning specified
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
in Section 2.08.
"Defeasance Trustee" shall have the meaning specified therefor
in Section 10.05.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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"Deferred Equity Amount" shall have the meaning specified in
Section 8(dd) of the Participation Agreement.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System or
any governmental authority which is the successor thereto, as in effect from
time to time.
"Eurocurrency Reserve Percentage" for any day means the
reserve percentage applicable in respect of such day under Regulation D of the
Board of Governors of the Federal Reserve System (or any governmental authority
which is the successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for the Original Holder with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities.
"Excluded Payments" means (i) any right, title or interest of
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or their respective, successors, permitted assigns,
directors, officers, employees, servants, partners, and agents to any indemnity
payment, including, but not limited to, any payment which by the terms of
Section 7(b), 7(c), 7(f), 16, 17 or 18 of the Participation Agreement, Section
5.03 or 7.01 of the Trust Agreement or any section of the Tax Indemnity
Agreement or any corresponding payment under Section 3.5 of the Lease shall be
payable to the Owner Trustee in its individual capacity, the Owner Participant
or any such other Person, as the case may be, pursuant to the terms of the
Operative Agreements, (ii) any insurance proceeds payable under insurance
maintained by the Owner Trustee in its individual or trust capacity or the
Owner Participant (whether directly or through the Owner Trustee), or to their
respective Affiliates, successors, permitted assigns, directors, officers,
employees, servants, partners, and agents, (iii) any insurance proceeds (or
proceeds of governmental indemnities in lieu thereof) payable to the Owner
Trustee in its individual capacity or to the Owner Participant or to their
respective Affiliates, successors, permitted assigns, directors, officers,
employees, servants, partners, and agents, under any liability insurance
maintained by the Company pursuant to Section 11 of the Lease or by any other
Person (or proceeds of governmental indemnities in lieu thereof), (iv) payments
to the Owner Participant by the Owner Trustee pursuant to Section 2 of the
Participation Agreement and any funds held by the Owner Trustee or payable to
the Owner Participant pursuant to any funding letter entered into in lieu of
the provisions of Section 2 of the Participation Agreement, (v) amounts paid or
payable to the Owner Trustee from Lessee pursuant to Section 18.2(b) or (c) of
the Lease, (vi) Transaction Costs or other amounts or expenses paid or payable
to, or for the benefit of, the Owner Trustee or the Owner Participant pursuant
to the Participation Agreement, (vii) any portion of Rent attributable to a
payment by the Company in respect to the Tax Indemnity Agreement, (viii) the
respective rights of the Owner Trustee in its individual or trust capacity, the
Owner Participant or any other Person referred to in the foregoing clause (i)
to the proceeds of the foregoing, and (ix) any right to demand, collect, sue or
otherwise receive and enforce the payment of any amount described in clauses
(i) through (viii) above.
"Federal Aviation Act" means Subtitle VII of Title 49, U.S.C.,
as amended.
"Fixed Period" means the period after the Floating Period.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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"Floating Period" means the period any Series SWA 1995 Trust
N396SW-I Certificate is Outstanding.
"Government Obligations" shall have the meaning specified
therefor in Section 10.05.
"Holder" or "Certificate Holder" means a Person in whose name
a Certificate is registered on the Register including, so long as it holds a
Series SWA 1995 Trust N396SW-I Certificate, the Original Holder.
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Documents" means each and every document or
instrument referred to in the Granting Clause hereof.
"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Section 8.01.
"Indenture Trustee" means Wilmington Trust Company, and each
other Person which may from time to time be acting as Indenture Trustee in
accordance with the provisions of this Agreement.
"Independent" when used with respect to an engineer, appraiser
or other expert, means an engineer, appraiser or other expert who (i) is in
fact independent, (ii) does not have any direct financial interest or any
material indirect financial interest in the Company or any Affiliate of the
Company and (iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"Independent Investment Banker" means an Independent
investment banking institution of national standing appointed by the Company on
behalf of the Owner Trustee (and reasonably acceptable to the Owner
Participant, which acceptance shall not be unreasonably withheld after notice
to the Owner Participant); provided, that if the Indenture Trustee shall not
have received written notice of such an appointment at least 10 days prior to
the relevant Redemption Date or if a Lease Event of Default shall have occurred
and be continuing, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
"Installment Certificate" means a Certificate, other than a
Series SWA 1995 Trust N396SW-I Certificate, should any such Certificate be
issued hereunder which shall provide for the payments of principal in
installments.
"Installment Payment Amount" means, with respect to each
Installment Certificate, the amount of the installment payment of principal due
and payable on each
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Installment Payment Date, which amount shall be equal to the product of the
original principal amount of such Certificate and the Installment Payment
Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an
installment payment of principal is due and payable on the Certificates, as set
forth in Exhibit B-l as completed in accordance with Article 15.
"Installment Payment Percentage" means, with respect to each
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-l as completed in accordance with Article 15.
The term "interest" payable, or to be payable, on any date
during the Floating Period in respect of the Series SWA 1995 Trust N396SW-I
Certificates shall include, without limitation, any and all accrued and unpaid
compounded interest thereon.
"Interest Payment Date" means each July 1 and January 1
commencing on July 1, 1995.
"Interest Period" shall have the meaning specified therefor in
Exhibit A.
"Lease" means the Sale and Lease Agreement, dated as of the
date hereof, between the Owner Trustee, as lessor, and the Company, as lessee,
relating to the Aircraft as such Sale and Lease Agreement may from time to time
be supplemented, amended or modified in accordance with the terms thereof and
this Agreement. The term "Lease" shall also include each Lease Supplement
entered into pursuant to the terms of the Lease.
"Lease Loss Payment Date" means the date on which Stipulated
Loss Value is payable pursuant to Section 10.1.4 of the Lease in connection
with an Event of Loss in respect of the Aircraft.
"Lease Termination Date" means the date the Lease terminates
pursuant to Section 9 of the Lease.
"Lending Office" of any Holder of a Series SWA 1995 Trust
N396SW-I Certificate means the office through which such Holder makes and/or
books and maintains the loan evidenced by its Certificate, which, in the case
of the Original Holder, is Concord, California, as of the date hereof.
"Maturity Date" means, with respect to the Series SWA 1995
Trust N396SW Certificates, each of the dates specified in Exhibit B as a
maturity date of such Certificates and shall have, in respect of the Series SWA
1995 Trust N396SW-I Certificates, the meaning specified therefor in Exhibit A.
"New Debt" shall have the meaning specified in Section
17(a)(2) of the Participation Agreement.
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"Officers' Certificate" means a certificate signed in the case
of the Company, by (i) the Chairman of the Board of Directors, the President,
or any Executive or Senior Vice President of the Company, signing alone, or
(ii) any Vice President signing together with the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer or the Controller of the
Company or, in the case of the Owner Trustee, a Responsible Officer of the
Owner Trustee.
"Offshore Rate" shall have the meaning specified therefor in
Exhibit A.
"Opinion of Counsel" means a written opinion of legal counsel,
who in the case of counsel for the Company may be (i) the senior corporate
attorney employed by the Company, (ii) Vinson & Elkins L.L.P. or (iii) other
counsel designated by the Company and who shall be reasonably satisfactory to
the Indenture Trustee or, in the case of legal counsel for the Owner Trustee,
may be (x) Shipman & Goodwin or (y) other counsel designated by the Owner
Trustee and who shall be reasonably satisfactory to the Indenture Trustee.
"Original Holder" means Bank of America National Trust and
Savings Association, as the original holder of the loan evidenced by the Series
SWA 1995 Trust N396SW-I Certificate and any branch or agency thereof to which
the Series SWA 1995 Trust N396SW-I Certificate held by it may be transferred.
"Outstanding", when used with respect to Certificates, means,
as of the date of determination, all Certificates theretofore executed and
delivered under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation
pursuant to Section 2.07 or otherwise;
(ii) Certificates for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates; provided, that
if such Certificates are to be redeemed, notice of such redemption has
been duly given pursuant to this Agreement or provision therefor
satisfactory to the Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant to this
Agreement;
provided, however, that in determining whether the Holders of the requisite
aggregate principal amount of Certificates Outstanding have given any request,
demand, authorization, declaration, direction, notice, consent or waiver
hereunder, Certificates owned by or pledged to the Company or any Affiliate of
the Company or the Owner Trustee or the Owner Participant or any Affiliate
thereof, shall (unless all Certificates are then owned thereby) be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, declaration, direction, notice, consent or waiver, only
Certificates which the Indenture Trustee knows to be so owned or so pledged
shall be disregarded. Certificates owned by the Company, or the Owner Trustee
or the Owner Participant, which have been pledged in good faith may be regarded
as Outstanding if the Company, or the Owner Trustee or the Owner Participant,
as the case may be, establishes to the satisfaction of the Indenture Trustee
the pledgee's right to act with respect
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to such Certificates and that the pledgee is not the Company, or the Owner
Trustee or the Owner Participant or any Affiliate thereof.
"Owner Trustee" means Shawmut Bank Connecticut, National
Association, not in its individual capacity, except as expressly provided
herein, but solely as trustee under the Trust Agreement, and each other Person
which may from time to time be acting as Owner Trustee in accordance with the
provisions of the Operative Agreements.
"Past Due Rate" means, in respect of any Certificate, the rate
of interest applicable pursuant to the provisions of such Certificate to any
amount of principal or interest payable thereunder not paid when due.
"Paying Agent" means any person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means any Installment Payment Date, Interest
Payment Date or Maturity Date.
"Permitted Investment" means any of the investments permitted
by Section 22.1 of the Lease.
"Premium" means, with respect to each Series SWA 1995 Trust
N396SW Certificate to be redeemed, purchased or otherwise prepaid pursuant to
Article 6, an amount determined as of the Business Day next preceding the
applicable Redemption Date which an Independent Investment Banker determines to
be equal to an excess, if any, of (i) the present values of all remaining
scheduled payments of such principal amount or portion thereof and interest
thereon (excluding interest accrued from the immediately preceding Interest
Payment Date to such Redemption Date) to the Maturity Date of such Certificate
in accordance with generally accepted financial practices assuming a 360-day
year consisting of twelve 30-day months at a discount rate equal to the
Treasury Yield, all as determined by the Independent Investment Banker over
(ii) the unpaid principal amount of such Certificate. Premium shall never be
below zero.
"Premium Termination Date" means, with respect to each Series
SWA 1995 Trust N396SW Certificate, the date set forth as the "Premium
Termination Date" in Exhibit B hereto completed in accordance with Article 15
for Certificates of the Maturity Date of such Certificate.
"Principal Payment Date" shall have the meaning specified
therefor in Exhibit A.
"Record Date" for the interest or Installment Payment Amount
payable on any Interest Payment Date or Installment Payment Date (other than
the Maturity Date of the Certificates), as the case may be, means the calendar
day (whether or not a Business Day) which is 15 calendar days prior to the
related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are
to be redeemed or purchased pursuant to Section 6.01 or 6.02.
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"Redemption Price" means the price at which any or all of the
Certificates (as the context may require) are to be redeemed or purchased,
determined as of the applicable Redemption Date, pursuant to Section 6.01, 6.02
or 15.03, as the case may be.
"Refinancing Date" means the date designated by the Company as
the date for a refinancing of the Certificates in accordance with Section 17 of
the Participation Agreement.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Remaining Weighted Average Life" means, for any Installment
Certificate, at the Redemption Date of such Certificate, the number of days
equal to the quotient obtained by dividing (a) the sum of the products obtained
by multiplying (i) the amount of each then remaining scheduled payment of
principal, including the payment due on the Maturity Date of such Certificate,
by (ii) the number of days from and including the Redemption Date to but
excluding the regularly scheduled date of such scheduled payment of principal;
by (b) the then unpaid principal amount of such Certificate.
"Responsible Company Officer" means, with respect to the
Company or Owner Participant, its Chairman of the Board, its President, the
Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (a) working under the direct supervision of such Chairman
of the Board, President, Chief Financial Officer, Vice President or Treasurer
and (b) whose responsibilities include the administration of the transactions
and agreements, including the Lease, contemplated by the Participation
Agreement.
"Responsible Officer", with respect to Shawmut Bank
Connecticut, National Association, the Owner Trustee or the Indenture Trustee,
means any officer in its Corporate Trust Administration Department or any
officer of the Owner Trustee or the Indenture Trustee, as the case may be,
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of his knowledge of and familiarity with a
particular subject, and in each case whose responsibilities include the
administration of the transactions and agreements, including the Lease,
contemplated by the Participation Agreement.
"SEC" means the Securities and Exchange Commission.
"Second Payment Amount" shall have the meaning specified in
Section 8(dd) of the Participation Agreement.
"Section 18 Refinancing Date" means the date specified by the
Company for the refinancing of the Series SWA 1995 Trust N396SW-I Certificates
in accordance with Section 18 of the Participation Agreement.
"Series SWA 1995 Trust N396SW Certificate" means any
certificate of such designation issued by the Owner Trustee under this
Agreement substantially in the form of
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Exhibit A-1 or A-2, should any of such certificates be issued hereunder, and
any such certificate issued in replacement or exchange thereof in accordance
with the provisions hereof.
"Series SWA 1995 Trust N396SW-I Certificate" means any
certificate issued by the Owner Trustee under this Agreement, substantially in
the form of Exhibit A, and any such certificate issued in replacement or
exchange thereof in accordance with the provisions hereof.
"Treasury Rate" shall have the meaning specified therefor in
Exhibit A.
"Treasury Yield" means (i) In the case of a Certificate having
a Maturity Date within one year after the Redemption Date the average yield to
maturity on a government bond equivalent basis of the applicable United States
Treasury Bill due the week of Maturity Date of such Certificate and (ii) in the
case of a Certificate having a Maturity Date one year or more after the
Redemption Date, the average yield of the most actively traded United States
Treasury Notes (as reported by Cantor Fitzgerald Securities Corp. on page 5 of
Telerate Systems, Inc., a financial news service, or if such report is not
available, a source deemed comparable by the Independent Investment Banker
selected to determine the Premium and reasonably acceptable to the Company and
the Owner Participant) corresponding in maturity (x) for any Certificate issued
in serial form, the Maturity Date or (y) for any Certificate issued in
installment form, to the Average Life Date, in each case, of such Certificate
(or, if there is no corresponding maturity, an interpolation of maturities by
the Independent Investment Banker), in each case determined by the Independent
Investment Banker selected to determine the Premium based on the average of the
yields to stated maturity determined from the bid prices as of 10:00 A.M. and
2:00 P.M. New York time, on the second Business Day preceding the Redemption
Date. "Average Life Date" means, with respect to the redemption of an
Installment Certificate, the date which follows the Redemption Date by a period
equal to the Remaining Weighted Average Life of such Certificate.
"Trust Estate" shall have the meaning specified therefor in
the Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Security Agreement", "this Indenture" or
"this Agreement" means this Trust Indenture and Security Agreement, as the same
may from time to time be supplemented, amended or modified, including by any
Trust Supplement.
"Trust Office" means the principal corporate trust office of
the Owner Trustee located at 777 Main Street, Hartford, Connecticut 06115,
Attention: Corporate Trust Administration, or at such other office at which the
Owner Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to the Company, the Indenture
Trustee and each Holder.
"Trust Supplement" means a supplement to the Trust Agreement
and this Agreement substantially in the form of Exhibit C.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
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Section 1.02 Other Definitions. For all purposes of this
Agreement, terms defined in the heading and recitals of this Agreement are used
as so defined and capitalized terms used but not defined have the meanings
attributed thereto in the Lease.
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. One or more
Series SWA 1995 Trust N396SW-I Certificates in the aggregate face amount equal
to the Original Holder's Commitment under Section 1(b) of the Participation
Agreement shall be issued on the Delivery Date as provided in Section 3(e) of
the Participation Agreement in substantially the form set forth, and shall bear
interest as provided, in Exhibit A. In the event more than one such Certificate
is so issued, all references in this Indenture to a single Series SWA 1995
Trust N396SW-I Certificate shall be deemed to include each other such
Certificate. The Series SWA 1995 Trust N396SW-I Certificate shall be dated the
Delivery Date and shall be payable in installments on each Principal Payment
Date as set forth in Annex A to the Series SWA 1995 Trust N396SW-I Certificate.
In connection with a refinancing of the Series SWA 1995 Trust
N396SW-I Certificate in accordance with Section 18 of the Participation
Agreement and Section 15.01 hereof, an additional series of Certificates may be
issued hereunder. Such additional series of Certificates shall be designated as
Series SWA 1995 Trust N396SW Certificates. The Series SWA 1995 Trust N396SW
Certificates shall be substantially in the form set forth in Exhibit A-l or
A-2. The Series SWA 1995 Trust N396SW Certificates shall be dated the Delivery
Date, shall be issued in the maturities and principal amounts, and shall bear
the interest rates per annum (subject to Section 2.10 hereof), in each case as
specified in Exhibit B to be delivered in connection with such refinancing of
the Series SWA 1995 Trust N396SW-I Certificate in accordance with Section 15.01
of this Agreement. The principal of each Certificate, other than Installment
Certificates, shall be payable in full on the Maturity Date for such
Certificate. The principal of each Installment Certificate shall be payable in
installments, on each Installment Payment Date, in amounts equal to the
Installment Payment Amount for such Installment Payment Date.
The Series SWA 1995 Trust N396SW Certificates shall be issued
in denominations of $1,000 and integral multiples thereof, except that one of
such Certificates may be issued in any denomination. The Series SWA 1995 Trust
N396SW-I Certificates may be issued in any denomination.
The Certificates shall be issued in registered form only. The
Certificates are not redeemable prior to maturity except as provided in this
Agreement. Interest accrued on the Certificates shall be calculated on the
basis set forth therein.
The principal of, Break Amount, if any, Premium, if any, and
interest on the Certificates shall be payable at the principal corporate trust
office of the Indenture Trustee or at any office or agency maintained for such
purpose pursuant to Section 2.03, provided, that subject to Section 15.04, all
such amounts (other than those payable on the Maturity Date of the Installment
Certificates) may be payable at the option of the Indenture Trustee or the
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Paying Agent by check mailed on or before the due date by the Indenture Trustee
or the Paying Agent to the address of the Holder entitled thereto as such
address shall appear in the Register.
All payments in respect of the Certificates shall be made in
Dollars. Any payment due on any Certificate on a day that is not a Business
Day shall be made on the next succeeding day which is a Business Day and
(provided such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date.
Section 2.02. Execution and Authentication. (a)
Certificates shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its president, a senior vice president, a vice
president, an assistant vice president, its treasurer, its secretary, an
assistant secretary or an assistant treasurer.
(b) If any officer of the Owner Trustee executing the
Certificates by facsimile signature no longer holds that office at the time the
Certificate is executed on behalf of the Owner Trustee, the Certificate shall
be valid nevertheless.
(c) At any time and from time to time after the execution
of the Certificates, the Owner Trustee may deliver such Certificates to the
Indenture Trustee for authentication and, subject to the provisions of Section
2.10, the Indenture Trustee shall authenticate the Certificates by manual
signature upon written orders of the Owner Trustee. Certificates shall be
authenticated on behalf of the Indenture Trustee by any authorized officer or
signatory of the Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for
any purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner Trustee by the manual or facsimile signature of the officer
of the Owner Trustee specified in the first sentence of Section 2.02(a) and
until authenticated on behalf of the Indenture Trustee by the manual signature
of the officer or signatory of the Indenture Trustee specified in the second
sentence of Section 2.02(c). Such signatures shall be conclusive evidence that
such Certificate has been duly executed, authenticated and issued under this
Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
Trustee shall maintain an office or agency where the Certificates may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where (subject to Sections 2.04 and 2.08) the Certificates may
be presented for payment or for exchange (the "Paying Agent"). The Registrar
shall keep a register (the "Register") with respect to the Certificates and to
their transfer and exchange and the payments of Installment Payment Amounts
thereon, if any. The Indenture Trustee may appoint one or more co-registrars
(the "Co-Registrars") and one or more additional Paying Agents for the
Certificates and the Indenture Trustee may terminate the appointment of any
Co-Registrar or Paying Agent at any time upon written notice. The term
"Registrar" includes any Co-Registrar. The term "Paying Agent" includes any
additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and
Paying Agent.
Section 2.04. Transfer and Exchange. At the option of the
Holder thereof and subject to its compliance with Section 8(bb) of the
Participation Agreement, Series SWA 1995
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Trust N396SW-I Certificates or Series SWA 1995 Trust N396SW Certificates may be
exchanged for an equal aggregate initial principal amount of other Series SWA
1995 Trust N396SW-I Certificates or Series SWA 1995 Trust N396SW Certificates
of the same maturity and type, dated the Delivery Date, and of any authorized
denominations or transferred upon surrender of the Series SWA 1995 Trust
N396SW-I Certificates or Series SWA 1995 Trust N396SW Certificates to be
exchanged or transferred at the principal corporate trust office of the
Indenture Trustee, or at any office or agency maintained for such purpose
pursuant to Section 2.03. Whenever any Series SWA 1995 Trust N396SW-I
Certificate or Series SWA 1995 Trust N396SW Certificate is so surrendered for
exchange, the Owner Trustee shall execute, and the Indenture Trustee shall
authenticate and deliver, the replacement Series SWA 1995 Trust N396SW-I
Certificate or Series SWA 1995 Trust N396SW Certificate which the Holder making
the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Owner Trustee,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Certificates surrendered upon such registration of
transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Holder or any transferee
for any registration of transfer or exchange of Certificates, but the Registrar
may, as a condition to any transfer or exchange hereunder require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of such transfer or exchange of
Certificates.
The Registrar shall not be required to register the transfer
of or to exchange any Certificate called for redemption or purchase pursuant to
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates. (a)
The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semiannually on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders.
(b) Ownership of the Certificates shall be proved by the
Register kept by the Registrar. Prior to due presentment for registration of
transfer of any Certificate, the Owner Trustee, the Owner Participant, the
Company, the Indenture Trustee, the Paying Agent and the Registrar may deem and
treat the Person in whose name any Certificate is registered as the absolute
owner of such Certificate for the purpose of receiving payment of principal
(including, subject to the provisions herein regarding the applicable record
dates, Installment Payment
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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Amounts) of, Premium, if any, and (subject to the provisions herein regarding
the applicable record dates), interest on such Certificate and for all other
purposes whatsoever, whether or not such Certificate is overdue, and none of
the Owner Trustee, the Owner Participant, the Company, the Indenture Trustee,
the Paying Agent or the Registrar shall be affected by notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen
Certificates. If any Certificate shall become mutilated, destroyed, lost or
stolen, the Owner Trustee shall, upon the written request of the Holder of such
Certificate, issue and execute, and the Indenture Trustee shall authenticate
and deliver, in replacement thereof, as applicable, a new Series SWA 1995 Trust
N396SW-I Certificate or a new Series SWA 1995 Trust N396SW Certificate of the
same type and having the same maturity, payable to the same Holder in the same
principal amount and dated the same date as the Certificate so mutilated,
destroyed, lost or stolen. If the Certificate being replaced has become
mutilated, such Certificate shall be surrendered to the Indenture Trustee. If
the Certificate being replaced has been destroyed, lost or stolen, the Holder
of such Certificate shall furnish to the Owner Trustee and the Indenture
Trustee such security or indemnity as may be required by it to save the Owner
Trustee and the Indenture Trustee harmless and evidence satisfactory to the
Owner Trustee and the Indenture Trustee of the destruction, loss or theft of
such Certificate and of the ownership thereof; provided, however, that if the
affected Holder is the Original Holder, the written notice of such destruction,
loss or theft and such ownership and the written undertaking of such Holder
delivered to the Owner Trustee and the Indenture Trustee to hold harmless the
Owner Trustee and the Indenture Trustee in respect of the execution,
authentication and delivery of such new Certificate shall be sufficient
evidence, security and indemnity.
Section 2.07. Cancellation. The Registrar and any Paying
Agent shall forward to the Indenture Trustee all Certificates surrendered to
them for replacement, redemption, registration of transfer, exchange or
payment. The Indenture Trustee shall cancel all Certificates surrendered for
replacement, redemption, registration of transfer, exchange, payment or
cancellation and shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal
and Interest. (a) The Indenture Trustee will arrange directly with any Paying
Agent for the payment, or the Indenture Trustee will make payment, all pursuant
to Section 2.09, of the principal of, the Break Amount, if any, Premium, if
any, and interest on, and any other amounts payable on or in respect of each
Certificate or to the Holder thereof hereunder. Interest, principal and other
amounts payable on or in respect of the Series SWA 1995 Trust N396SW-I
Certificate shall be paid as provided for therein and in Article 15. Payment on
Series SWA 1995 Trust N396SW Certificates in respect of interest and
Installment Payment Amounts, if any, payable on an Interest Payment Date or
Installment Payment Date, respectively (other than the Maturity Date of the
Series SWA 1995 Trust N396SW Certificates) shall be paid in Dollars on each
Interest Payment Date or Installment Payment Date (other than the Maturity Date
of such Series SWA 1995 Trust N396SW Certificates), as the case may be, to the
Holder thereof at the close of business on the relevant Record Date; provided,
however, that the Paying Agent will, at the request of the Indenture Trustee
and may, at its option, pay such interest and Installment Payment Amounts
(other than those payable on the Maturity Date of the Installment Certificate)
by check mailed on or before the due date to such Holder's address as it
appears on the Register. Otherwise, principal of Series SWA 1995 Trust N396SW
Certificates and Premium, if any, with respect
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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thereto, shall be payable only against presentation and surrender thereof at
the principal corporate trust office of the Indenture Trustee or at the office
of the Paying Agent maintained for such purpose pursuant to Section 2.03.
A Holder shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal amount of,
Premium, if any, Break Amount, if any, and interest on all Certificates held by
such Holder and all other sums payable to such Holder hereunder, under such
Certificates and under the Participation Agreement shall have been paid in
full.
(b) Any Installment Payment Amount payable on an
Installment Payment Date (other than the Maturity Date with respect to a
Certificate) or any interest payable on an Interest Payment Date on any Series
SWA 1995 Trust N396SW Certificate which is not punctually paid on such
Installment Payment Date or such Interest Payment Date, as the case may be
(herein called, respectively, a "Defaulted Installment" and "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Record Date by virtue of his having been such Holder; and such Defaulted
Installment or Defaulted Interest may be paid by the Indenture Trustee, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Indenture Trustee may elect to make
payment of any Defaulted Installment or Defaulted Interest, as the
case may be, to the Person in whose name any Series SWA 1995 Trust
N396SW Certificate is registered at the close of business on a special
record date for the payment of such Defaulted Installment or Defaulted
Interest, as the case may be, which shall be fixed in the following
manner. The Indenture Trustee shall notify the Paying Agent in writing
of the amount of Defaulted Installment or Defaulted Interest, as the
case may be, proposed to be paid on each such Certificate and the date
of the proposed payment, and at the same time the Indenture Trustee
shall make arrangements to set aside an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Installment or Defaulted Interest, as the case may be, prior to the
date of the proposed payment, to be held in trust for the benefit of
the Persons entitled to such Defaulted Installment or Defaulted
Interest, as the case may be, as this clause provides and shall fix a
special record date for the payment of such Defaulted Installment or
Defaulted Interest, as the case may be, which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment. The Indenture Trustee shall promptly notify the Owner
Trustee, the Company and the Registrar of such special record date and
shall cause notice of the proposed payment of such Defaulted
Installment or Defaulted Interest, as the case may be, and the special
record date therefor to be mailed, first class postage prepaid, to
each Holder of a Series SWA 1995 Trust N396SW Certificate at its
address as it appears in the Register, not less than 10 days prior to
such special record date. Notice of the proposed payment of such
Defaulted Installment or Defaulted Interest, as the case may be, and
the special record date therefor having been mailed, as aforesaid,
such Defaulted Installment or Defaulted Interest, as the case may be,
shall be paid to the Persons in whose names the applicable Series SWA
1995 Trust N396SW Certificates are registered on such special record
date and shall no longer be payable pursuant to the following clause
(2).
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(2) The Indenture Trustee may make, or cause to
be made, payment of any Defaulted Installment or Defaulted Interest,
as the case may be, in any other lawful manner not inconsistent with
the requirements of any securities exchange on which Series SWA 1995
Trust N396SW Certificates may be listed, and upon such notice as may
be required by such exchange, if such payment shall be deemed
practicable by the Indenture Trustee.
Any interest, principal or other amount payable on the Series
SWA 1995 Trust N396SW-I Certificates which is not punctually paid when due
shall be paid as provided in such Certificates.
(c) The Indenture Trustee shall require each Paying Agent
to agree in writing that such Paying Agent will hold in trust, for the benefit
of the Holders and the Indenture Trustee, all money held by such Paying Agent
for the payment of the principal of, Break Amount, if any, Premium, if any, or
interest or any other amounts payable to any Holder hereunder or under the
Participation Agreement and shall give to the Indenture Trustee notice of any
default in the making of any such payment upon the Certificates. The Indenture
Trustee at any time may require a Paying Agent to repay to the Indenture
Trustee all money held by it. Upon so doing the Paying Agent shall have no
further liability for the money so paid.
Section 2.09. Payment from Indenture Estate Only. All
amounts payable by the Indenture Trustee and the Owner Trustee under the
Certificates and this Agreement shall be made only from the income and proceeds
of the Indenture Estate and from the other amounts specified in Section 3.03.
Each Holder of a Certificate, by its acceptance of such Certificate, agrees
that (a) it will look solely to the income and proceeds of the Indenture Estate
and from the other amounts specified in Section 3.03 for the payment of such
amounts, to the extent available for distribution to it as herein provided, and
(b) none of the Owner Trustee, the Owner Participant or the Indenture Trustee
is or shall be personally liable to any Holder of any Certificate for any
amount payable under such Certificate or this Agreement (including in respect
of the Deferred Equity Amount or Second Payment Amount) or, except as expressly
provided in this Agreement in the case of the Owner Trustee and the Indenture
Trustee, for any liability thereunder.
Shawmut Bank Connecticut, National Association is entering
into this Agreement solely as Owner Trustee under the Trust Agreement and not
in its individual capacity, and in no case whatsoever shall Shawmut Bank
Connecticut, National Association (or any entity acting as successor trustee
under the Trust Agreement) be personally liable for, or for any loss in respect
of, any statements, representations, warranties, agreements or obligations
hereunder or thereunder; provided, that Shawmut Bank Connecticut, National
Association shall be liable hereunder in its individual capacity, (i) for the
performance of its agreements in its individual capacity hereunder and under
Section 8 of the Participation Agreement, and (ii) for its own willful
misconduct or gross negligence. If a successor Owner Trustee is appointed in
accordance with the terms of the Trust Agreement and the Participation
Agreement, such successor Owner Trustee shall, without any further act, succeed
to all of the rights, duties, immunities and obligations hereunder, and its
predecessor Owner Trustee and Shawmut Bank Connecticut, National Association
shall be released from all further duties and obligations hereunder, without
prejudice to any claims against Shawmut Bank Connecticut, National Association
or such predecessor Owner Trustee for any default by Shawmut Bank Connecticut,
National Association
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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or such predecessor Owner Trustee, respectively, in the performance of its
obligations hereunder prior to such appointment.
Section 2.10. Execution, Delivery and Dating of
Certificates upon Issuance. The Owner Trustee shall issue and execute, and the
Indenture Trustee shall authenticate and deliver, the Certificates for original
issuance upon payment of an amount equal to the aggregate original principal
amount of the Series SWA 1995 Trust N396SW-I Certificates to be issued at such
time in the manner contemplated by Section 2 of the Participation Agreement.
Each Certificate issued hereunder shall be dated the Delivery Date, and the
Indenture Trustee shall note thereon, if issued after the Delivery Date, the
date through which has been paid interest thereon. Interest shall accrue on
the Series SWA 1995 Trust N396SW Certificates only from the date of issuance of
such Certificate pursuant to Section 17 or 18.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption of
Certificates. (a) Except as otherwise provided in Section 3.05, in the event
the Certificates are redeemed in accordance with the provisions of Section
6.01(a) or (b), the Indenture Trustee will apply on the Redemption Date any
amounts then held by it in the Indenture Estate and received by it from or on
behalf of the Owner Trustee or, as assignee of the Owner Trustee, from the
Company, including, without limitation, pursuant to Section 9, 10, 11 or
(subject to Section 7.03) 18.2 of the Lease in the following order of priority:
first, so much thereof as was received by the Indenture
Trustee with respect to the amounts due to it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Outstanding
Certificates pursuant to Section 6.01(a) or (b), as the case may be,
on the Redemption Date shall be applied to the redemption of the
Certificates on the Redemption Date; and
third, the balance, if any, thereof remaining thereafter shall
be distributed to the Owner Trustee to be held or distributed to the
Owner Participant in accordance with the terms of the Trust Agreement.
(b) In the case of any refinancing or purchase of the
Certificates pursuant to Section 6.01(c) or 6.02, the Indenture Trustee will
apply on the Redemption Date the amounts received by it from or on behalf of
the Owner Trustee, or as assignee of the Owner Trustee, from the Company, to
the payment of the Redemption Price of the Outstanding Certificates pursuant to
Section 6.01(c) or 6.02, as the case may be, on the Redemption Date; it being
understood that any such payment shall be a refinancing or purchase of the
indebtedness
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represented by the Outstanding Certificates and is not, and shall not be
construed so as to be, a redemption thereof or payment or prepayment thereon.
Section 3.03. Application When No Indenture Event of
Default Is Continuing. Except as otherwise provided in Section 3.02, 3.04, 3.05
or 3.06, each amount of Basic Rent or Advance (as defined in Section 3.8 of the
Lease) received by the Indenture Trustee from the Owner Trustee or, as assignee
of the Owner Trustee, from the Company, any payment of interest payable on any
Interest Payment Date on overdue installments of Basic Rent, any amount
received by the Indenture Trustee pursuant to Section 8(dd) or 18 of the
Participation Agreement as the Deferred Equity Amount or the Second Payment
Amount, together with any amount received by the Indenture Trustee pursuant to
Section 8.03(e)(i), shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be required
to pay in full the interest, principal of, Premium, if any, Break
Amount, if any, and any other amounts then due on, all Outstanding
Certificates shall be distributed to the Persons entitled thereto; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Premium, if any, Break Amount, if any, such other
amounts payable to the Holders, and without any preference or priority
of one Certificate over another, ratably according to the aggregate
amount so due for interest, principal, Premium, if any, Break Amount,
if any, and such other amounts at the date fixed by the Indenture
Trustee for the distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall be
required to pay any amount due the Indenture Trustee pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such
amounts; and
third, the balance, if any, of such aggregate amount remaining
thereafter shall be distributed to the Owner Trustee to be held or
distributed to the Owner Participant in accordance with the terms of
the Trust Agreement; provided, however, that if an Indenture Default
shall have occurred and be continuing, then such balance shall not be
distributed as provided in this clause "third" but shall be held by
the Indenture Trustee as part of the Indenture Estate until whichever
of the following shall first occur: (i) all Indenture Events of
Default shall have been cured, in which event such balance shall, to
the extent not theretofore distributed as provided herein, be
distributed as provided in this clause third", or (ii) Section 3.04 or
Section 3.05 shall be applicable, in which event such balance shall be
distributed in accordance with the provisions of said Section 3.04 or
Section 3.05, as the case may be, or (iii) such installment or payment
shall have been held for a period in excess of 183 days (during which
no Indenture Event of Default which is not a Lease Event of Default
shall have occurred and be continuing and during which period the
Indenture Trustee and the Holders shall not have been stayed or
otherwise precluded by operation of law from taking action to
accelerate the Certificates or to exercise remedies hereunder or under
the Lease), in which event such balance shall, to the extent not
theretofore applied as provided herein, be distributed as provided in
this clause third".
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Section 3.04. Application of Certain Payments in Case of
Requisition or Event of Loss. Except as otherwise provided in Section 3.05, any
amounts received directly or otherwise pursuant to the Lease from any
governmental authority or other Person pursuant to Section 10 of the Lease with
respect to the Airframe or the Airframe and the Engines or engines then
installed on the Airframe as the result of an Event of Loss, to the extent that
such amounts are not required to be paid to the Company pursuant to said
Section 10, and any amounts of insurance proceeds for damage to the Indenture
Estate received directly or otherwise pursuant to the Lease (and not
constituting Excluded Payments) from any insurer pursuant to Section 11 of the
Lease with respect thereto as the result of an Event of Loss, to the extent
such amounts are not required to be paid to the Company pursuant to said
Section 11, shall, except as otherwise provided in the next sentence, be
applied by the Indenture Trustee on behalf of, and as assignee of, the Owner
Trustee in reduction of the Company's obligations to pay Stipulated Loss Value
and the other amounts payable by the Company pursuant to Section 10 of the
Lease and the remainder, if any, shall, except as provided in the next
sentence, be distributed to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease and the Trust Agreement. Any portion of
any such amount referred to in the preceding sentence which is not required to
be so paid to the Company pursuant to the Lease, solely because a Lease Default
of the type referred to in Section 14.1 or 14.5 of the Lease or Lease Event of
Default shall have occurred and be continuing, shall, subject to Section 10.04
hereof, be held by the Indenture Trustee on behalf of the Owner Trustee as
security for the obligations of the Company under the Lease and at such time as
there shall not be continuing any Lease Default of the type referred to in
Section 14.1 or 14.5 of the Lease or Lease Event of Default or such earlier
time as shall be provided for in the Lease, or upon satisfaction and discharge
of this Indenture as provided herein, such portion shall be paid to the Owner
Trustee to be held or distributed in accordance with the terms of the Lease,
unless the Indenture Trustee (as assignee from the Owner Trustee of the Lease)
shall have theretofore commenced to exercise remedies pursuant to Section 15
thereof, in which event such portion shall be distributed in accordance with
the provisions of Section 3.05 hereof.
Section 3.05. Payments During Continuance of Indenture
Event of Default. All payments (except Excluded Payments) received and amounts
held or realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and so long as such an Indenture Event of Default shall be
continuing, and after the Indenture Trustee shall foreclose or enforce this
Indenture or after the Certificates shall have become due and payable as
provided in Section 8.02 (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as
all payments or amounts then held or thereafter received by the Indenture
Trustee as part of the Indenture Estate while such Indenture Event of Default
shall be continuing, shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such payments or amounts as shall be
required to pay the Indenture Trustee all amounts then due it pursuant
to Section 9.06 shall be applied to pay the Indenture Trustee such
amounts;
second, so much of such payments or amounts remaining as shall
be required to (i) pay the expenses incurred (including unbilled
expenses in respect of property delivered or contracted for or
services rendered or contracted for if the amount of such expenses is
liquidated) in using, operating, storing, leasing, controlling or
managing the
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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Indenture Estate, and of all maintenance, insurance, repairs,
replacements, alterations, additions and improvements of and to the
Indenture Estate and to make all payments which the Indenture Trustee
may be required or may elect to make, if any, for taxes, assessments,
insurance or other proper charges upon the Indenture Estate or any
part thereof (including the employment of engineers and accountants to
examine and make reports upon the properties, books and records of the
Owner Trustee and, to the extent permitted under the Lease, the
Company), all in accordance with Section 8.03(c), shall be applied for
such purposes and (ii) reimburse the Holders in full for payments made
pursuant to Section 9.01(c) (to the extent not previously reimbursed)
shall be distributed to such Holders, and if the aggregate amount
remaining shall be insufficient to reimburse all such payments in
full, it shall be distributed ratably, without priority of any
Certificate over any other, in the proportion that the aggregate
amount of the unreimbursed payments made by each such Holder pursuant
to Section 9.01(c) bears to the aggregate amount of the unreimbursed
payments made by all Holders pursuant to Section 9.01(c);
third, so much of such payments or amounts remaining as shall
be required to pay the principal of, Break Amount, if any, and accrued
interest on all Certificates Outstanding and all other amounts payable
to the Holders hereunder or under the Participation Agreement and then
due and payable, whether by declaration of acceleration pursuant to
Section 8.02 or otherwise, shall be applied to the payment of such
interest, principal, Break Amount, if any, and such other amounts; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Break Amount, if any, such other amounts and
interest, without any preference or priority of one Certificate over
another, ratably according to the aggregate amount so due for
interest, principal, Break Amount, if any, and such other amounts at
the date fixed by the Indenture Trustee for the distribution of such
payments or amounts; and
fourth, the balance, if any, of such payments or amounts
remaining thereafter shall be distributed to the Owner Trustee to be
held or distributed to the Owner Participant in accordance with the
terms of the Trust Agreement.
Section 3.06. Payments for Which Application Is Provided in
Other Documents. Except as otherwise provided in this Agreement, any payment
received by the Indenture Trustee for which provision as to the application
thereof is made in the Lease or the Participation Agreement shall be
distributed to the Person for whose benefit such payments were made in
accordance with, and subject to the terms, thereof and hereof. The Indenture
Trustee shall be obligated to distribute any Excluded Payments received by the
Indenture Trustee promptly upon receipt thereof by the Indenture Trustee to the
Person entitled thereto.
Section 3.07. Payments for Which No Application Is
Otherwise Provided. Except as otherwise provided in Section 3.05:
(a) any payment received by the Indenture Trustee for
which no provision as to the application thereof is made elsewhere in
this Agreement, and
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(b) any payment received and amounts realized by the
Indenture Trustee with respect to the Aircraft to the extent received
or realized at any time after the conditions set forth in Article 10
for the satisfaction and discharge of this Agreement or for the
defeasance of the Certificates shall have been duly satisfied, as well
as any other amounts remaining as part of the Indenture Estate after
such satisfaction shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance, if any, of such aggregate amount
remaining thereafter shall be distributed to the Owner Trustee
to be held or distributed to the Owner Participant in
accordance with the terms of the Trust Agreement.
Section 3.08. Application of Payments. Each payment of
principal and interest or other amounts due hereunder to the Indenture Trustee
or any Holder or in respect of each Certificate shall, except as otherwise
expressly provided herein, be applied, first, to the payment of any amount
(other than the principal of or Premium, Break Amount or interest on such
Certificate) due hereunder or in respect of such Certificate, second, to the
payment of Premium or Break Amount, if any, and interest on such Certificate
(as well as any interest on overdue principal and, to the extent permitted by
law, interest and other amounts payable hereunder and thereunder) due
thereunder, third, to the payment of the principal of such Certificate then due
and fourth, the balance, if any, remaining thereafter, to the payment of the
principal of such Certificate remaining unpaid (provided, that such Certificate
shall not be subject to prepayment or purchase without the consent of the
affected Holder except as expressly permitted hereby). The amounts paid
pursuant to clause fourth above shall be applied to the installments of
principal of such Certificate in inverse order of maturity.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner
Trustee hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually
perform its obligations under the Lease and will duly and punctually
pay the principal of, Premium, if any, Break Amount, if any, and
interest on and other amounts due hereunder and under the Certificates
and all other amounts payable by it to the Holders under the
Participation Agreement and the other Operative Agreements;
(ii) the Owner Trustee will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it with respect to any of the properties or assets of
the Indenture Estate and shall, at its own cost and expense, promptly
take such action as may be necessary to discharge duly any such Lessor
Lien, and the Owner Trustee will cause restitution to be made to the
Indenture Estate in the
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
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amount of any diminution of the value thereof as the result of any
Lessor Liens attributable to it;
(iii) in the event a Responsible Officer of the
Owner Trustee shall have actual knowledge of an Indenture Event of
Default or Indenture Default or an Event of Loss, the Owner Trustee
will give prompt written notice of such Indenture Event of Default or
Indenture Default or Event of Loss to the Indenture Trustee, the Owner
Participant, the Company and, so long as the Series SWA 1995 Trust
N396SW-I Certificate shall be Outstanding, the Original Holder;
(iv) except as contemplated by the Operative
Agreements, the Owner Trustee will not contract for, create, incur,
assume or permit to exist any Debt, and will not guarantee (directly
or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so
doing, or otherwise), endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the Debt of any
other Person;
(v) the Owner Trustee will not enter into any
activity other than owning the Aircraft, the leasing thereof to the
Company and the carrying out of the transactions contemplated hereby
and by the Participation Agreement, the Trust Agreement and the other
Operative Agreements;
(vi) the Owner Trustee will furnish to the
Indenture Trustee, and the Indenture Trustee will furnish to each
Holder at the time outstanding, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to
the Owner Trustee under the Lease, including, without limitation, a
copy of each report or notice received pursuant to Section 11 of the
Lease, to the extent that the same shall not have been furnished
directly to such Holder or the Indenture Trustee pursuant to the
Lease; and
(vii) the Owner Trustee will not (except as
permitted herein) assign or pledge or otherwise dispose of, so long as
this Indenture shall remain in effect and shall not have been
terminated pursuant to Section 10.01, any of its right, title or
interest hereby assigned to anyone other than the Indenture Trustee,
and, with respect to such right, title and interest hereby assigned,
will not, except as provided in this Indenture, (1) accept any payment
that is subjected to the Lien of this Indenture from the Lessee or any
sublessee, enter into any agreement amending or supplementing any of
the Indenture Documents, execute any waiver or modification of, or
consent under, the terms of any of the Indenture Documents, (2)
exercise any rights with respect to the Indenture Estate, (3) settle
or compromise any claim arising under any of the Indenture Documents,
or (4) submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Indenture
Documents to arbitration thereunder.
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Section 4.02. Covenants of Shawmut Bank Connecticut,
National Association. Shawmut Bank Connecticut, National Association, hereby
covenants and agrees that it will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Liens attributable to it with respect to
any of the properties or assets of the Indenture Estate and it shall, at its
own cost and expense, promptly take such action as may be necessary to
discharge duly any such Lessor Lien. Shawmut Bank Connecticut, National
Association, will cause restitution to be made to the Indenture Estate in the
amount of any diminution of the value thereof as the result of any Lessor Liens
thereon attributable to it.
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of
Property Included in the Indenture Estate During Continuation of Lease. So
long as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the lien of this
Agreement and be leased to the Company under the Lease; provided, that
to the extent permitted by and as provided in the Lease, the Company
shall have the right, at any time and from time to time, without any
release from or consent by the Owner Trustee or the Indenture Trustee,
to remove, replace and pool Parts and to make alterations,
improvements and modifications in, and additions to, the Aircraft. The
Indenture Trustee agrees that, to the extent permitted by and as
provided in the Lease, title to any such Part shall vest in the
Company. The Indenture Trustee shall from time to time execute an
appropriate written instrument or instruments to confirm the release
of the security interest of the Indenture Trustee in any Part as
provided in this Section 5.01, in each case upon receipt by the
Indenture Trustee of a Company Request stating that said action was
duly taken by the Company in conformity with this Section 5.01 and
that the execution of such written instrument or instruments is
appropriate to evidence such release of a security interest under this
Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
Occurring to Airframe or Engines or upon Voluntary Termination of
Lease with Respect to Engines. Upon (i) the occurrence of an Event of
Loss occurring to the Airframe or an Engine, or (ii) a voluntary
termination of the Lease with respect to an Engine, the Company, in
accordance with the Lease, may, in the case of an Event of Loss which
has occurred to the Airframe, or shall, except as provided in Section
10.2 of the Lease, in the case of an Event of Loss which has occurred
to or termination of the Lease with respect to an Engine, substitute
an airframe or engine, as the case may be, in which case, upon due
satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of
its right, interest and lien in and to the Airframe or such Engine in
accordance with the provisions of the following sentence. The
Indenture Trustee shall execute and deliver to the Owner Trustee an
instrument releasing its lien in and to the Airframe or such Engine
and shall execute for recording in public offices, at the expense of
the Owner Trustee (if requested by the Owner
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Trustee) or the Company (if requested by the Company), such
instruments in writing as the Owner Trustee or the Company shall
reasonably request and as shall be reasonably acceptable to the
Indenture Trustee in order to make clear upon public records that such
lien has been released under the laws of the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and
all rights existing or that may be acquired to any penalties, forfeit or
damages from or against the Indenture Trustee for failure to execute and
deliver any document in connection with the release of a lien or to file any
certificate in compliance with any law or statute requiring the filing of the
same in connection with the release of a lien, except for failure by the
Indenture Trustee to execute and deliver any document or to file any
certificate as may be specifically requested in writing by the Owner Trustee or
the Company and with respect to which the Owner Trustee or the Company shall be
duly entitled.
Section 5.02. Certificates in Respect of Replacement
Aircraft and Engines. Upon the execution and delivery of a Trust Supplement
covering a Replacement Airframe and/or Replacement Engine, as contemplated by
Section 5.01(b), each Certificate shall be deemed to have been issued in
connection with such Replacement Airframe and/or Replacement Engine and each
Certificate issued thereafter upon a transfer or exchange of, or as a
replacement for, a Certificate, shall be designated as having been issued in
connection with such Replacement Airframe and/or Replacement Engine, but
without any other change therein.
ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain
Events. (a) If there shall be an Event of Loss to the Aircraft and the
Aircraft is not replaced pursuant to Section 10.1.2 of the Lease, each
Outstanding Certificate shall be redeemed in whole at a Redemption Price equal
to 100% of the outstanding principal amount of such Certificate plus accrued
and unpaid interest thereon to but excluding the applicable Redemption Date
plus, in the case of the Series SWA 1995 Trust N396SW-I Certificates, Break
Amount, if any, and all other amounts payable to the Holders hereunder or under
the Participation Agreement. The Redemption Date for Certificates to be
redeemed pursuant to this Section 6.01(a) shall be the Lease Loss Payment Date.
No Premium shall be paid in the case of a redemption pursuant to any provision
of this Section 6.01(a).
(b) The Certificates shall be redeemed on the Lease
Termination Date or upon the purchase of the Aircraft by the Company at its
option on the Special Purchase Option Date pursuant to Section 18.2(b) of the
Lease (unless the Company shall have elected to assume the rights and
obligations of the Owner Trustee hereunder to the extent and as provided for in
Section 7.03). In the case of any Series SWA 1995 Trust N396SW-I Certificate,
the Redemption Price therefor shall be equal to the unpaid principal amount of
such Certificate as at such date plus accrued and unpaid interest thereon to
but excluding the Redemption Date, the Break Amount, if any, and all other
amounts payable to the Holder thereof hereunder or under any other Operative
Agreement, but without any other premium or penalty. In the case of any Series
SWA 1995 Trust N396SW Certificate, such Redemption Price therefor shall be
equal to the unpaid principal amount of such Certificate as at such Redemption
Date together
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with an amount equal to the accrued but unpaid interest thereon and, in the
case of each Certificate redeemed prior to the Premium Termination Date
applicable to such Certificate, the Premium, if any. The Redemption Date for
Certificates to be redeemed shall be (A) in the case of a termination of the
Lease pursuant to Section 9 thereof, on the Lease Termination Date or (B) in
the case of purchase of the Aircraft by the Company pursuant to Section 18.2(b)
of the Lease, on the Special Purchase Option Date.
(c) (i) The Series SWA 1995 Trust N396SW-I
Certificates may be refinanced in whole in accordance with the provisions of
Article 15 hereof and Sections 17 and 18 of the Participation Agreement and
(ii) the Series SWA 1995 Trust N396SW Certificates may be refinanced, in whole
or in part, if all the conditions to such refunding or refinancing set forth in
Section 17 of the Participation Agreement shall have been satisfied. In any
such event, each Outstanding Certificate may be so refinanced at a Redemption
Price determined in accordance with the procedures described above in Section
6.01(b); provided, however, that the applicable Redemption Date for the Series
SWA 1995 Trust N396SW-I Certificates to be refinanced pursuant to clause (i) of
this Section 6.01(c) shall be the applicable Refinancing Date under Section 17
of the Participation Agreement or the Section 18 Refinancing Date under Section
18 of the Participation Agreement, as the case may be, and the applicable
Redemption Date for Certificates to be redeemed pursuant to clause (ii) of this
Section 6.01(c) shall be the applicable Refinancing Date under Section 17 of
the Participation Agreement.
Section 6.02. Redemption or Purchase of Certificates Upon
Certain Indenture Events of Default. If the Owner Trustee shall have given
notice of redemption or purchase to the Indenture Trustee pursuant to Section
8.03(e)(ii), each Outstanding Certificate shall be redeemed or purchased in
whole at a Redemption Price equal to 100% of its principal amount plus accrued
and unpaid interest thereon (including, without limitation, interest on overdue
interest) to but excluding the applicable Redemption Date as determined below
and all other amounts payable to the Holders hereunder or under the
Participation Agreement and, in the case of the Series SWA 1995 Trust N396SW-I
Certificate, the Break Amount, if any, and, in the case of the Series SWA 1995
Trust N396SW Certificates, if to be purchased or redeemed pursuant to Section
8.03(e)(ii)(A) prior to the 181st day after the first occurrence of the
relevant Lease Event of Default, the Premium, if any. The Redemption Date for
Certificates to be redeemed or purchased pursuant to this Section 6.02 shall be
the date specified in the notice given by the Owner Trustee to the Indenture
Trustee pursuant to Section 8.03(e)(ii) (provided, however, that in the case of
the Series SWA 1995 Trust N396SW-I Certificates, if such date is the last day
of the then current Interest Period therefor, no Break Amount shall be
payable). If the Owner Trustee elects to purchase the Certificates under
Section 8.03(e)(ii), nothing herein, including use of the terms "Redemption
Date" and "Redemption Price", shall be deemed to result in a redemption of the
Certificates.
Section 6.03. Notice of Redemption to Holders. (a) Notice
of redemption or purchase with respect to the Series SWA 1995 Trust N396SW
Certificates shall be given by first-class mail, postage prepaid, mailed not
less than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of such Certificates to be redeemed or purchased, at such Holder's address
appearing in the Register; provided, that in the case of a redemption pursuant
to Section 6.01(b) related to Lessee's exercise of its option pursuant to
Section 9 of the Lease, such notice shall be revocable and shall be deemed
revoked in the event the Lease does not in fact terminate on the related Lease
Termination Date.
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All notices of redemption or purchase shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption
Price,
(3) if less than all the Outstanding Certificates are to
be redeemed, the identification (and, in the case of partial
redemption of any Certificates, the principal amounts) of the
particular Certificates to be redeemed, and that on and after the
Redemption Date, upon surrender of Certificates, new Certificates in
principal amount equal to the unredeemed part thereof will be issued,
(4) that on the Redemption Date, the Redemption Price
will become due and payable upon each Certificate to be redeemed, and
that interest on Certificates shall cease to accrue on and after such
Redemption Date, and
(5) the place or places where such Certificates are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
(b) Notice of redemption of the Series SWA 1995 Trust
N396SW-I Certificate shall be given by the Owner Trustee (or by the Company on
behalf of the Owner Trustee) not less than three Business Days prior to the
Redemption Date, shall be irrevocable and shall be given by telephone, telex,
telecopy, cable or other customary means of communication by the Owner Trustee
or the Company, as the case may be, to the other and to the Indenture Trustee
and to the Original Holder at each such Person's address designated in Section
12.01(a); provided, that in the case of redemption pursuant to Section 6.01(b)
related to Lessee's exercise of its option pursuant to Section 9 of the Lease,
such notice shall be revocable and shall be deemed revoked in the event the
Lease does not in fact terminate on the related Lease Termination Date.
Notwithstanding any provision to the contrary contained in this Article 6, the
Series SWA 1995 Trust N396SW-I Certificate shall be redeemable as set forth in
this Article 6 and in Article 15 without any premium, prepayment penalty or
other cost or expense except for the Break Amount, if any, and the payment of
all other amounts payable to the Holders thereof hereunder and under the
Participation Agreement.
Section 6.04. Deposit of Redemption Price. On or before
the Redemption Date, the Owner Trustee (or any Person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 Noon in immediately available
funds (i) the Redemption Price of the Certificates to be redeemed, refinanced
or purchased, as the case may be, on the Redemption Date and (ii) all other
amounts due and payable hereunder, including any amounts payable to the
Indenture Trustee pursuant to Section 9.06.
Section 6.05. Certificates Payable on Redemption Date.
Notice of redemption, refinancing or purchase having been given as aforesaid
(and not deemed revoked as contemplated in the proviso to Section 6.03(a) or
(b)), the Certificates so to be redeemed (or
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the purchase or refinancing price therefor) shall, on the applicable Redemption
Date, become due and payable at the Redemption Price therefor at the principal
corporate trust office of the Indenture Trustee or at any office or agency
maintained for such purposes pursuant to Section 2.03, and from and after such
Redemption Date (unless there shall be a default in the payment of the
Redemption Price) any such Certificates then Outstanding shall cease to bear
interest. Unless payment prior to surrender is expressly provided for herein
or in the Participation Agreement, upon surrender of any such Certificate for
redemption or purchase in accordance with said notice such Certificate shall be
paid at the Redemption Price. The Certificates shall not be subject to
prepayment, redemption, refunding or refinancing except as provided in this
Article 6 and in Section 8.02 hereof.
If any Certificate called for redemption or purchase shall not
be so paid upon surrender thereof for redemption or purchase, the principal
amount thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
Section 6.06. Selection of Certificates to Be Redeemed. If
less than all the Outstanding Series SWA 1995 Trust N396SW Certificates are to
be redeemed the particular Certificates to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Indenture Trustee, from
the Outstanding Certificates not previously called for redemption, by such
method as the Indenture Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Certificates or any integral multiple thereof) of
the principal amount of Certificates of a denomination larger than the minimum
authorized denomination for Certificates.
The Indenture Trustee shall promptly notify the Owner Trustee and the
Company in writing of the Certificates selected for redemption and, in the case
of any Certificates selected for partial redemption, the principal amount
thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Certificates shall
relate, in the case of any Certificates redeemed or to be redeemed only in
part, to the portion of the principal amount of such Certificates which has
been or is to be redeemed.
Section 6.07. Certificates Redeemed in Part. Any Certificate
which is to be redeemed only in part shall be surrendered at a place of payment
thereof (with, if the Indenture Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Owner Trustee and
the Indenture Trustee duly executed by, the Holder thereof or its attorney duly
authorized in writing), and the Owner Trustee shall execute, and the Indenture
Trustee shall authenticate and deliver to the Holder of such Certificate
without service charge, a new Certificate of like tenor, of any authorized
denomination as requested by such Holder, in principal amount equal to and in
exchange for the unredeemed portion of the principal of the Certificate so
surrendered.
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ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments
Held by the Indenture Trustee. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Premium, if any, or
interest on any Series SWA 1995 Trust N396SW Certificate, including without
limitation any money deposited pursuant to Article 10 and remaining unclaimed
for two years and eleven months after the due date for such payment, shall be
paid to the Owner Trustee; and the Holders of any Outstanding Certificates
shall thereafter, as unsecured general creditors, look only to the Owner
Participant (to the extent the Owner Trustee distributed any such trust money
to the Owner Participant and the Owner Participant did not distribute such
trust money to the Company) and to the Company on behalf of the Owner Trustee
for payment thereof, and all liability of the Indenture Trustee or any such
Paying Agent with respect to such trust money shall thereupon cease; provided,
that the Indenture Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be mailed to
each such Holder notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
mailing, any unclaimed balance of such money then remaining will be repaid to
the Owner Trustee as provided herein.
Section 7.02. [Reserved for Potential Future Use]
Section 7.03. Assumption of Obligations of Owner Trustee by
the Company. In the event that the Company shall have elected to assume all of
the rights and obligations of the Owner Trustee under this Agreement in respect
of the Certificates pursuant to Section 8(r) of the Participation Agreement in
connection with the purchase by the Company of the Aircraft on the Special
Purchase Option Date, and if on or prior to the Special Purchase Option Date
(the "Assumption Date") the Indenture Trustee shall have received:
(a) an instrument of assumption (the "Assumption
Agreement") pursuant to which the Company irrevocably and unconditionally
assumes and undertakes, with full recourse to the Company, the Owner Trustee's
obligations with respect to principal, interest, Break Amount, Premium and all
other amounts payable to the Holders or the Indenture Trustee under the
Certificates then Outstanding, this Agreement, and the Participation Agreement
and which incorporates therein events of default substantially similar in scope
and effect to those set forth in the Lease and covenants substantially similar
to the covenants of the Company under the Lease and the Participation
Agreement;
(b) a supplement to this Agreement and/or such other
instruments and documents (including, without limitation, Uniform Commercial
Code financing statement(s)) covering all of the security interests created by
or pursuant to this Indenture that are not covered by the recording system
established by the Federal Aviation Act as may be necessary (or reasonably
requested by the Indenture Trustee) for the security interest of the Indenture
Trustee in the Aircraft and in the other rights, property and interests
included in the Indenture Estate (other than those rights, property and
interests that depend on the existence of the Trust Estate and the
participation of the Owner Trustee and Owner Participant in the transactions
contemplated by the Participation Agreement and this Indenture) to continue to
be perfected and duly recorded with the Federal Aviation Administration and in
all other places necessary
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or, in the reasonable opinion of the Indenture Trustee, advisable under the
Uniform Commercial Code;
(c) an insurance report dated the Assumption Date of the
independent insurance broker referred to in Section 11.5 of the Lease and the
certificates of insurance, each in form and substance reasonably satisfactory
to the Indenture Trustee as to the due compliance as of the Assumption Date
with the terms of Section 11 of the Lease (as it relates to the Holders and the
Indenture Trustee) relating to the insurance with respect to the Aircraft;
(d) evidence that as of the Assumption Date, and after
giving effect to the transactions contemplated hereby, the Company has good
title to the Aircraft free and clear of all Liens other than the Lien of, and
the security interest created by, this Indenture and other Permitted Liens
(other than Lessor Liens);
(e) a copy of the application that was filed with the FAA
on the Assumption Date regarding the registration of the Aircraft in the name
of the Company;
(f) a certificate from a Responsible Company Officer of
the Company that no Lease Default of the type referred to in Section 14.1 or
14.5 of the Lease or Lease Event of Default shall have occurred and be
continuing as of the Assumption Date;
(g) an opinion of the General Counsel of the Company (or
other counsel reasonably satisfactory to the Indenture Trustee) in form and
substance reasonably satisfactory to the Indenture Trustee, addressed to the
Indenture Trustee and dated the Assumption Date, to the effect that (i) the
execution, delivery and performance of the Assumption Agreement and the
supplement to this Indenture referred to in paragraph (b) of this Section 7.03
(and all other instruments and documents the execution of which are necessary
for and directly related to the assumption of the obligations contemplated by
this Section 7.03 or the continued perfection of the security interests
referred to in paragraph (b) of this Section 7.03) have been duly authorized by
the Company by all necessary action; (ii) the Assumption Agreement, such
supplement to this Indenture, all such other documents and instruments referred
to above and the security interests arising therefrom are legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, and except as limited by
applicable laws which may affect the remedies provided for in this Indenture,
which laws, however, do not in the opinion of such counsel make the remedies
provided for in this Indenture inadequate for the practical realization of the
rights and benefits purported to be provided thereby; (iii) the Assumption
Agreement, such supplement and all such other documents and instruments
referred to above do not and will not contravene any provision of the Company's
articles of incorporation or by-laws or any law or regulation applicable to the
Company or any agreement, mortgage or instrument to which the Company is a
party or by which the Company is bound; and (iv) the Indenture Trustee (on
behalf of the Certificate Holders) should continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft
upon and after the assumption of the obligations by the Company, provided, that
the opinion referred to in this clause (iv) need not be delivered to the extent
that the benefits of Section 1110 of the Bankruptcy Code were not, by reason of
a change of law or governmental
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interpretation thereof, available to the Indenture Trustee with respect to the
Aircraft immediately prior to such assumption;
(h) an opinion of Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City (or other counsel reasonably satisfactory to the
Indenture Trustee), in form and substance reasonably satisfactory to the
Indenture Trustee, addressed to the Indenture Trustee and dated the Assumption
Date, (i) to the effect that all documents executed in connection with the
assumption of the obligations contemplated by this Section 7.03 and required to
be filed with the Federal Aviation Administration are in proper form, and all
steps necessary have been taken, for the Aircraft to be duly registered in the
name of the Company and for the Lien of this Agreement with respect to the
Aircraft and Engines to continue to be duly perfected and of first priority;
and
(i) such other documentation reasonably requested by the
Indenture Trustee (in form and substance reasonably satisfactory to the
Indenture Trustee) to amend the Operative Agreements to give effect to the
foregoing;
then, automatically and without the requirement of further action by any
Person, effective as of the Assumption Date, the Owner Trustee shall be
released from all of its obligations under this Agreement in respect of the
Certificates or otherwise (other than any obligations or liabilities of the
Owner Trustee in its individual capacity incurred on or prior to the Assumption
Date or arising out of or based upon events occurring on or prior to the
Assumption Date, which obligations and liabilities shall remain the sole
responsibility of the Owner Trustee in such capacity). Promptly upon the
filing and recording of the documents referred to in the opinion of counsel
specified in Section (h) above with the FAA, the Company shall cause such
counsel to deliver to the Indenture Trustee an opinion addressed to the
Indenture Trustee, in form and substance reasonably satisfactory to the
Indenture Trustee, as to due recording of said documents with the FAA.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following
events shall constitute "Indenture Events of Default" under this Agreement
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Indenture Event of Default
shall be deemed to exist so long as, but only so long as, it shall not be
waived or remedied:
(a) the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any payment of principal
of or Premium or Break Amount, if any, or interest on any Certificate
and such failure shall have continued unremedied for seven Business
Days, or the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any other amount due and
payable hereunder, or under any Certificate, and such failure shall
have continued unremedied for 10 Business Days after notice thereof to
the Owner Trustee; or
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(b) any Lessor Lien required to be discharged by Shawmut
Bank Connecticut, National Association, pursuant to Section 4.02 or
required to be discharged by the Owner Trustee pursuant to Section
4.01(ii) or required to be discharged or bonded (in a manner
reasonably satisfactory to the Indenture Trustee) by the Owner
Participant pursuant to Section 8(g) of the Participation Agreement
shall remain undischarged for a period of 30 calendar days after a
Responsible Officer or Responsible Company Officer, as the case may
be, of Shawmut Bank Connecticut, National Association, the Owner
Trustee or the Owner Participant, as the case may be, shall have
actual knowledge of such Lessor Lien; or
(c) any representation or warranty made by the Owner
Trustee or the Owner Participant or Shawmut Bank Connecticut, National
Association, herein or in the Participation Agreement, or made by any
Person guaranteeing or supporting the obligations of the Owner
Participant under the Operative Agreements in its guarantee or support
agreement, shall prove to have been false or incorrect when made in
any material respect to the Certificate Holders, is material at the
time of discovery and, if curable, is not cured within 30 days of
notice thereof to the Owner Participant and the Owner Trustee from the
Indenture Trustee; or
(d) [Reserved for Potential Future Use]
(e) any failure by the Owner Trustee or Shawmut Bank
Connecticut, National Association, to observe or perform any other
covenant or obligation of the Owner Trustee or Shawmut Bank
Connecticut, National Association, as the case may be, contained in
this Indenture or in the Participation Agreement or any failure by the
Owner Participant to observe or perform any other covenant or
obligation of the Owner Participant contained in the Participation
Agreement or any failure by any Person guaranteeing or supporting the
obligations of the Owner Participant under the Operative Agreements to
perform any covenant or obligation of such Person under its guarantee
or support agreement which, in any case, is not remedied within a
period of 30 calendar days after notice thereof has been given to the
Owner Trustee and the Owner Participant or such Person, as the case
may be (provided that such period shall be extended to 180 days if the
Owner Trustee, the Owner Participant or such other Person shall, on or
prior to the expiration of such 30 days, have provided a bond (to the
reasonable satisfaction of the Indenture Trustee) in respect of the
consequences of such failure); or
(f) there shall be a Lease Event of Default other than,
without the consent of the Owner Trustee in its sole discretion, a
Lease Event of Default arising by reason of nonpayment when due of any
Excluded Payments; or
(g) either the Trust Estate or the Owner Trustee with
respect thereto (and not in its individual capacity) or the Owner
Participant or any Person guaranteeing or supporting the obligations
of the Owner Participant under the Operative Agreements
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shall (i) file, or consent by answer or otherwise to the filing
against it of a petition for relief or reorganization or arrangement
or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction,
(ii) make an assignment for the benefit of its creditors, or (iii)
consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers of itself or any substantial part of its
property; provided, that an event referred to in this Section 8.01(g)
with respect to the Owner Participant shall not constitute an
Indenture Event of Default if (A) an order, judgment or decree shall
be entered in a proceeding by a court or a trustee, custodian,
receiver or liquidator which is either final and non-appealable or has
not been stayed pending any appeal, or (B) an opinion of counsel
satisfactory to the Indenture Trustee shall be provided by the Owner
Participant, in each case to the effect that no part of the Trust
Estate created by the Trust Agreement (except for the Owner
Participant's beneficial interest in such Trust Estate) and no right,
title or interest under the Indenture Estate shall be included in, or
be subject to, any declaration or adjudication of, or proceedings with
respect to, the bankruptcy, insolvency or liquidation of the Owner
Participant referred to in this Section 8.01(g); or
(h) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Trust Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant or any Person
guaranteeing or supporting the obligations of the Owner Participant
under the Operative Agreements, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Trust Estate or the
Owner Trustee with respect thereto (and not in its individual
capacity) or the Owner Participant or any Person guaranteeing or
supporting the obligations of the Owner Participant under the
Operative Agreements and any such order or petition is not dismissed
or stayed within 90 days after the earlier of the entering of any such
order or the approval of any such petition; provided, that an event
referred to in this Section 8.01(h) with respect to the Owner
Participant shall not constitute an Event of Default if (A) an order,
judgment or decree shall be entered in a proceeding by a court or a
trustee, custodian, receiver or liquidator which is either final and
non-appealable or has not been stayed pending any appeal, or (B) an
opinion of counsel satisfactory to the Indenture Trustee shall be
provided by the Owner Participant, in each case to the effect that no
part of the Trust Estate created by the Trust Agreement (except for
the Owner Participant's beneficial interest in such Trust Estate) and
no right, title or interest under the Indenture Estate shall be
included in, or be subject to, any declaration or adjudication of, or
proceedings with respect to, the bankruptcy, insolvency or liquidation
of the Owner Participant referred to in this Section 8.01(h).
Section 8.02. Acceleration; Rescission and Annulment. If an
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee and the Owner Trustee may declare the
principal of all the Certificates to be due and payable, whereupon the
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same shall be accelerated and be and become due and payable; provided, that if
an Indenture Event of Default referred to in clause (g) or (h) of Section 8.01
shall have occurred or a Lease Event of Default of the type referred to in
clause (g) or (h) of said Section 8.01 shall have occurred with respect to the
Company, then and in every such case the unpaid principal of all Certificates
then Outstanding shall, unless the Indenture Trustee acting upon instructions
of at least 25% in aggregate principal amount of Outstanding Certificates shall
otherwise direct, immediately and without further act become due and payable,
without presentment, demand, protest or notice, all of which are hereby waived.
Upon such declaration (or automatic acceleration, as the case may be), the
principal of all Certificates together with accrued interest thereon from the
date in respect of which interest was last paid hereunder to the date payment
of such principal has been made or duly provided for, plus, in the case of the
Series SWA 1995 Trust N396SW-I Certificates, the Break Amount, if any, and all
other amounts payable to the Holders hereunder as at such date of payment shall
be immediately due and payable (but not including any Premium). At any time
after such declaration and prior to the sale or disposition of the Indenture
Estate, the Holders of a majority in aggregate principal amount of all of the
Outstanding Certificates, by notice to the Indenture Trustee, the Company and
the Owner Trustee, may rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal of, and, in the
case of the Series SWA 1995 Trust N396SW-I Certificates, the Break Amount, if
any, on any Certificates which have become due otherwise than by such
declaration and any interest thereon and interest due or past due, if any, and
all sums due and payable to the Indenture Trustee have been deposited with the
Indenture Trustee, (ii) the rescission would not conflict with any judgment or
decree and (iii) all existing Indenture Defaults and Indenture Events of
Default under this Agreement have been cured or waived except nonpayment of
principal of, or interest on, the Certificates that has become due solely
because of such acceleration.
Section 8.03. Other Remedies Available to Indenture
Trustee. (a) After an Indenture Event of Default shall have occurred and so
long as such Indenture Event of Default shall be continuing, then and in every
such case the Indenture Trustee, as trustee of an express trust and as assignee
hereunder of the Lease or as holder of a security interest in the Aircraft or
Engines or otherwise, may, and when required pursuant to the provisions of
Article 9 shall, exercise, subject to Sections 8.03(b) and 8.03(e), any or all
of the rights and powers and pursue any and all of the remedies accorded to the
Owner Trustee pursuant to Section 15 of the Lease and this Article 8 (other
than in respect of Excluded Payments), may recover judgment in its own name as
Indenture Trustee against the Indenture Estate and may take possession of all
or any part of the Indenture Estate and may exclude the Owner Trustee and the
Owner Participant and all Persons claiming under any of them wholly or partly
therefrom. The Indenture Trustee shall have and may exercise all of the rights
and remedies of a secured party under the Uniform Commercial Code as in effect
in any applicable jurisdiction.
(b) After an Indenture Event of Default, subject to
Section 8.03(e), the Indenture Trustee may, if at the time such action may be
lawful and always subject to compliance with any mandatory legal requirements,
either with or without taking possession, and either before or after taking
possession, and without instituting any legal proceedings whatsoever, and
having first given notice of such sale to the Owner Trustee, the Owner
Participant and the Company at least 10 days prior to the date of such sale,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public or private auction, in one
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lot as an entirety or in separate lots, and either for cash or on credit and on
such terms as the Indenture Trustee may determine, and at any place (whether or
not it be the location of the Indenture Estate or any part thereof) and time
designated in the notice above referred to; provided, however, that
notwithstanding any provision herein to the contrary, the Indenture Trustee may
not provide the notice provided for above of its intention to sell any of the
Indenture Estate or exercise other remedies against the Indenture Estate
seeking to deprive the Owner Trustee or the Owner Participant of its rights
therein unless a declaration of acceleration has been made pursuant to Section
8.02 or the Certificates have otherwise theretofore become due and payable
through redemption or otherwise. Any such sale or sales may be adjourned from
time to time by announcement at the time and place appointed for such sale or
sales, or for any such adjourned sale or sales, without further notice, and the
Indenture Trustee and the Holder or Holders of any Certificates, or any
interest therein, may bid and become the purchaser at any such sale, and each
Holder shall be entitled, at any such sale, to credit against the purchase
price bid thereby all or any part of the unpaid obligations owing to such
Holder and secured by the Lien of this Agreement. The Indenture Trustee may
exercise such right without possession or production of the Certificates or
proof of ownership thereof, and as representative of the Holders may exercise
such right without notice to the Holders or including the Holders as parties to
any suit or proceeding relating to foreclosure of any property in the Indenture
Estate. The Owner Trustee hereby irrevocably constitutes the Indenture Trustee
the true and lawful attorney-in-fact of the Owner Trustee (in the name of the
Owner Trustee or otherwise) for the purpose of effectuating any sale,
assignment, transfer or delivery for enforcement of the Lien created under this
Agreement, whether pursuant to foreclosure or power of sale or otherwise, to
execute and deliver all such bills of sale, assignments and other instruments
as the Indenture Trustee may consider necessary or appropriate, with full power
of substitution, the Owner Trustee hereby ratifying and confirming all that
such attorney or any substitute shall lawfully do by virtue hereof.
Nevertheless, if so requested by the Indenture Trustee or any purchaser, the
Owner Trustee shall ratify and confirm any such sale, assignment, transfer or
delivery, by executing and delivering to the Indenture Trustee or such
purchaser all bills of sale, assignments, releases and other proper instruments
to effect such ratification and confirmation as may be designated in any such
request.
(c) Subject to Sections 8.03(b) and 8.03(e), if an
Indenture Event of Default has occurred and is continuing, the Owner Trustee
shall, at the request of the Indenture Trustee, promptly execute and deliver to
the Indenture Trustee such instruments of title or other documents as the
Indenture Trustee may deem necessary or advisable to enable the Indenture
Trustee or an agent or representative designated by the Indenture Trustee, at
such time or times and place or places as the Indenture Trustee may specify, to
obtain possession of all or any part of the Indenture Estate. If the Owner
Trustee shall for any reason fail to execute and deliver such instruments and
documents after such request by the Indenture Trustee, the Indenture Trustee
shall be entitled to a judgment for specific performance of the covenants
contained in the foregoing sentence, conferring upon the Indenture Trustee the
right to immediate possession and requiring the Owner Trustee to execute and
deliver such instruments and documents to the Indenture Trustee. The Indenture
Trustee shall also be entitled to pursue all or any part of the Indenture
Estate wherever it may be found and may enter any of the premises of the Owner
Trustee or any other Person wherever the Indenture Estate may be or be supposed
to be and search for the Indenture Estate and take possession of any item of
the Indenture Estate pursuant to this Section 8.03(c). The Indenture Trustee
may, from time to
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time, at the expense of the Indenture Estate, make all such expenditures for
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Indenture Estate, as it may deem proper. In each
such case, the Indenture Trustee shall have the right to use, operate, store,
lease, control or manage the Indenture Estate, and to exercise all rights and
powers of the Owner Trustee relating to the Indenture Estate as the Indenture
Trustee shall deem appropriate, including the right to enter into any and all
such agreements with respect to the use, operation, storage, leasing, control
or management of the Indenture Estate or any part thereof; and the Indenture
Trustee shall be entitled to collect and receive directly all tolls, rents
(including Rent), issues, profits, products, revenues and other income of the
Indenture Estate and every part thereof, without prejudice, however, to the
right of the Indenture Trustee under any provision of this Agreement to collect
and receive all cash held by, or required to be deposited with, the Indenture
Trustee hereunder. In accordance with the terms of this Section 8.03(c), such
tolls, rents (including Rent), issues, profits, products, revenues and other
income shall be applied to pay the expenses of using, operating, storing,
leasing, controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect
to make, if any, for taxes, assessments, insurance or other proper charges upon
the Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine, inspect and make reports upon the properties and
books and records of the Owner Trustee and, to the extent permitted by the
Lease, the Company), and all other payments which the Indenture Trustee may be
required or authorized to make under any provision of this Agreement, including
this Section 8.03(c), as well as just and reasonable compensation for the
services of the Indenture Trustee, and of all persons properly engaged and
employed by the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and
the Indenture Trustee shall have obtained possession of or title to the
Aircraft, the Indenture Trustee shall not be obligated to use or operate the
Aircraft or cause the Aircraft to be used or operated directly or indirectly by
itself or through agents or other representatives or to lease, license or
otherwise permit or provide for the use or operation of the Aircraft by any
other Person unless (i) the Indenture Trustee shall have been able to obtain
insurance in kinds, at rates and in amounts satisfactory to it in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all liability for loss or damage to
the Aircraft and for public liability and property damage resulting from use or
operation of the Aircraft and (ii) funds are available in the Indenture Estate
to pay for all such insurance or, in lieu of such insurance, the Indenture
Trustee is furnished with indemnification from the Holders or any other Person
upon terms and in amounts satisfactory to the Indenture Trustee in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all such liabilities.
(d) Subject to Sections 8.03(b) and 8.03(e), the
Indenture Trustee may proceed to protect and enforce this Agreement and the
Certificates by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Indenture Estate or any part thereof, or for the recovery of judgment
for the indebtedness secured by the
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Lien created under this Agreement or for the enforcement of any other power,
legal or equitable remedy available under applicable law.
(e) (i) If the Company shall fail to make any payment
of Basic Rent under the Lease and such failure shall have become a Lease Event
of Default then as long as no other Indenture Event of Default shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the expiration of
a period of ten Business Days (the "10-Day Period") after such failure shall
have become a Lease Event of Default (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee), notwithstanding any provision hereof to the contrary,
exercise any of the rights, powers or remedies pursuant to Section 15 of the
Lease or this Article 8), an amount equal to the full amount of such payment of
Basic Rent, together with any interest due thereon under the Lease on account
of the delayed payment thereof to the date of such payment, and such payment by
the Owner Participant or the Owner Trustee shall be deemed to cure any
Indenture Event of Default which arose from such failure of the Company as of
such date of payment (but such cure shall not relieve the Company of any of its
obligations). If the Company shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under the Lease (other
than its obligation to pay Basic Rent), and if (but only if) the performance or
observance thereof can be effected by the payment of money alone (it being
understood that actions such as the obtaining of insurance and the procurement
of maintenance services can be so effected), then as long as no other Indenture
Event of Default (other than those arising from a Lease Event of Default) shall
have occurred and be continuing, the Owner Participant or the Owner Trustee may
(but need not) pay to the Indenture Trustee (or to such other Person as may be
entitled to receive the same), at any time prior to the expiration of a period
of ten Business Days after the expiration of the grace period, if any, provided
with respect to such failure on the part of the Company in Section 14 of the
Lease (prior to the expiration of which 10-Day Period the Indenture Trustee
shall not (without the prior written consent of the Owner Trustee),
notwithstanding any provision hereof to the contrary, exercise any of the
rights, powers or remedies pursuant to Section 15 of the Lease or this Article
8), all sums necessary to effect the performance or observance of such covenant
or agreement of the Company, together with any interest due thereon under the
Lease on account of the delayed payment thereof to the date of such payment,
and such payment by the Owner Participant or the Owner Trustee shall be deemed
to cure any Indenture Event of Default which arose from such failure of the
Company as of such date of payment (but such cure shall not relieve the Company
of any of its obligations). If, on the basis specified in the preceding
sentences, any Lease Events of Default shall have been remedied, then any
declaration pursuant to this Indenture that the Certificates are due and
payable or that an Indenture Event of Default exists hereunder, based solely
upon such Lease Events of Default, shall be deemed to be rescinded, and, in the
case of the first and second sentences of this Section 8.03(e)(i), the Owner
Participant or the Owner Trustee shall (to the extent of any such payments made
by it) be subrogated to the rights of the Holders of the Certificates under
Section 3.03, to receive from the Indenture Trustee such payment of overdue
Basic Rent or other amount (and the payment of interest on account of such
Basic Rent or other amount being overdue) and shall be entitled, so long as no
other Indenture Event of Default or Indenture Default shall have occurred and
be continuing or would result therefrom, to receive, subject to the provisions
of this Indenture, such payment upon receipt thereof by the Indenture Trustee;
provided, that the Owner Participant shall not otherwise attempt to recover any
such amount paid by it on behalf of the Company pursuant to this Section
8.03(e)(i) except by demanding of payment of such amount or by commencing
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an action at law against the Company for the payment of such amount; and
provided, further, that:
(x) this Section 8.03(e)(i) shall not apply with respect
to any default in the payment of Basic Rent due under the Lease if the
Lessee itself shall have theretofore failed to pay Basic Rent in the
manner required under the Lease (after giving effect to any applicable
grace period) (i) due on each of the two Rent Payment Dates
immediately preceding the date of such default, or (ii) due on a total
of four Rent Payment Dates; and
(y) neither the Owner Trustee nor the Owner Participant
shall have the right to cure any Lease Event of Default except as
specified in this Section 8.03(e)(i).
(ii) In the event that (A) at any time one or more
Lease Events of Default shall have occurred and be continuing or (B) the
Certificates shall have been accelerated pursuant to Section 8.02, the Owner
Trustee or the Owner Participant may, at its option, give at least 30 days'
prior irrevocable notice to the Indenture Trustee that the Owner Trustee or the
Owner Participant will redeem (except subsequent to the establishment of the
Redemption Date in respect of the Certificates) or purchase all Certificates
then Outstanding on a date determined consistently with the applicable
provisions of Article 6 and, concurrently with such notice, the Owner Trustee
or the Owner Participant will deposit with the Indenture Trustee an amount
sufficient to redeem (except subsequent to the establishment of the Redemption
Date in respect of the Certificates) or purchase at the applicable Redemption
Price determined in accordance with Article 6 all Certificates then Outstanding
(including, when applicable, an estimate of the Premium to be paid on the
Redemption Date computed using the Treasury Yield determined as if the
Redemption Date were the date of such notice) and to pay the Indenture Trustee
all amounts then due it hereunder, which funds shall be held by the Indenture
Trustee as provided in Section 9.04. Subject to the subsequent satisfaction by
the Owner Trustee of its obligations pursuant to the next following sentence,
upon the giving of such notice and the receipt by the Indenture Trustee of such
deposit, the Indenture Trustee shall deem all instructions received from the
Owner Trustee as having been given by the Holders of 100% of the Outstanding
principal amount of Certificates for all purposes of this Indenture. If such
notice is given, the Owner Trustee further agrees that it will deposit or cause
to be deposited with the Indenture Trustee, on or prior to the applicable
Redemption Date, whether or not an Indenture Event of Default is then
continuing, funds sufficient, when added to the funds already held by the
Indenture Trustee for such purpose, to redeem or purchase at the applicable
Redemption Price (including the Break Amount or Premium (if the Redemption
Price includes Premium) actually payable in respect thereof, if any, and all
other amounts payable to the Holders hereunder or under any other Operative
Agreement on such Redemption Date) all Certificates then Outstanding and to pay
the Indenture Trustee all amounts then due it hereunder. Whenever the Owner
Trustee or the Owner Participant shall be entitled to purchase Certificates
pursuant to this Section 8.03(e)(ii), each Holder shall sell its Certificates
to the Owner Trustee or the Owner Participant, as the case may be, in
compliance herewith.
(iii) Anything in this Agreement to the contrary
notwithstanding, the Indenture Trustee shall not be entitled to exercise any
remedy hereunder as a result of an
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Indenture Event of Default which arises solely by reason of one or more events
or circumstances which constitute a Lease Event of Default unless the Indenture
Trustee as security assignee of the Owner Trustee shall have exercised or
concurrently be exercising one or more of the remedies provided for in Section
15 of the Lease with respect to the Aircraft, provided, that the requirement to
exercise such remedies under the Lease shall not apply in circumstances where
the Indenture Trustee is involuntarily stayed or otherwise prohibited by
applicable law or court order from exercising such remedies under the Lease
after the Section 1110 Period. The "Section 1110 Period" shall mean the period
commencing on the date of such stay or prohibition and ending on the earlier of
(x) the 60th day thereafter (or such longer period (A) as may be specified in
Section 1110(a)(1) of the Bankruptcy Code, (B) equal to the period of an
extension with the consent of the Indenture Trustee of the 60-day period
specified therein pursuant to Section 1110(b) of the Bankruptcy Code, or (C)
resulting from the Indenture Trustee's own failure to give any requisite notice
to any Person) and (y) the date of repossession of the Aircraft. References in
this sentence to particular sections of the Bankruptcy Code as in effect on the
date hereof shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to
the contrary, including, without limitation, Sections 8.03(b), 8.03(c) and
8.03(d), as long as no Lease Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee shall take any
action in violation of the Company's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Company's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Subject to Sections 8.03(b) and 8.03(e), each and
every right, power and remedy herein given to the Indenture Trustee
specifically or otherwise in this Agreement shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or
now or hereafter existing at law, in equity or by statute, and each and every
right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and as often in such order as may be deemed
expedient by the Indenture Trustee, and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Indenture Trustee in the exercise of any
right, remedy or power or in pursuing any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of
the Owner Trustee or the Company or to be an acquiescence therein.
Section 8.04. Waiver of Owner Trustee. To the extent now
or at any time hereafter enforceable under applicable law, the Owner Trustee
covenants that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Indenture
Estate or any part thereof, prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or prior to any applicable decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute now or hereafter made
or enacted by any state or otherwise to redeem the property so sold or any part
thereof, and hereby expressly waives for itself and on behalf of each and
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every Person, except decree or judgment creditors of the Owner Trustee
acquiring any interest in or title to the Indenture Estate or any part thereof
subsequent to the date of this Agreement, all benefit and advantage of any such
law or laws, and covenants that it will not invoke or utilize any such law or
laws, but will suffer and permit the execution of every such power as though no
such law or laws had been made or enacted. Nothing in this Section 8.04 shall
be deemed to be a waiver by the Owner Trustee of its rights under Section
8.03(e).
The Indenture Trustee may maintain such a pleading, or in any
manner whatsoever claim or take any benefit or advantage of or from any law now
or hereafter in force even if it does not possess any of the Certificates or
does not produce any of them in the proceeding. A delay or omission by the
Indenture Trustee or any Holder in exercising any right or remedy accruing upon
an Indenture Event of Default under this Agreement shall not impair the right
or remedy or constitute a waiver of or acquiescence in such Indenture Event of
Default.
Section 8.05. Waiver of Existing Defaults. The Holders of
a majority in aggregate principal amount of the Outstanding Certificates by
notice to the Indenture Trustee may waive on behalf of the Holders an existing
Indenture Default or Indenture Event of Default and its consequences except (i)
an Indenture Default or Indenture Event of Default in the payment of the
principal of or interest on any Certificate or (ii) in respect of a covenant or
provision hereof which pursuant to Section 11.02 cannot be amended or modified
without the consent of the Holder affected.
Section 8.06. Control by Majority. The Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee or exercising any trust or power conferred
on it by this Agreement. However, the Indenture Trustee may refuse to follow
any direction that conflicts with law or this Agreement, that is unduly
prejudicial to the rights of the Holders so affected, or that would, without
satisfactory indemnity from the Holders, subject the Indenture Trustee to
personal liability.
Section 8.07. Limitation on Suits by Holders. A Holder of
a Certificate may pursue a remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written
notice of a continuing Indenture Event of Default under this
Agreement;
(2) the Holders of at least 25% in aggregate principal
amount of the Outstanding Certificates make a written request to the
Indenture Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss,
liability or expense to be, or which may be, incurred by the Indenture
Trustee in pursuing the remedy;
(4) the Indenture Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
indemnity; and
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(5) during such 60-day period the Holders of a majority
in aggregate principal amount of the Outstanding Certificates do not
give the Indenture Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Agreement the right of any Holder
to receive payment of principal of, Premium or Break Amount, if any, and
interest on such Holder's Certificate on or after the respective due dates
expressed in such Certificate, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
Section 8.09. Indenture Trustee May File Proofs of Claim.
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Holders allowed in any judicial proceedings
relating to any obligor on the Certificates, its creditors, or its property.
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee.
(a) The Indenture Trustee will furnish to each
Certificate Holder promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and
other instruments furnished to the Indenture Trustee under any Operative
Agreement or received from the Owner Trustee pursuant to Section 4.01(vi) to
the extent the same shall not have been otherwise directly distributed to the
Holders pursuant to the express provision of any other Operative Agreement.
(b) Subject to the terms of Sections 8.03(e), 8.05, 8.06,
9.01(c), 11.02 and 11.06, upon the written instructions at any time and from
time to time of Holders of a majority in aggregate principal amount of the
Outstanding Certificates, the Indenture Trustee shall take such of the
following actions as may be specified in such instructions: (i) exercise such
election or option, or make such decision or determination, or give such
notice, consent, waiver or approval or exercise such right, remedy or power or
take such other action hereunder or under any other Operative Agreement or in
respect of any part or all of the Indenture Estate as shall be specified in
such instructions; (ii) take such action with respect to, or to preserve or
protect, the Indenture Estate (including the discharge of Liens) as shall be
specified in such instructions and as are consistent with this Indenture; and
(iii) take such other action in respect of the subject matter of this Indenture
as is consistent with the terms hereof and the other Indenture Documents. The
Indenture Trustee will execute and the Owner Trustee will file or cause to be
filed such continuation statements with respect to financing statements
relating to the security interest created hereunder in the Indenture Estate as
may be specified from time to time in written instructions of Holders of a
majority in aggregate principal amount of the Outstanding
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Certificates (which instructions may, by their terms, be operative only at a
future date and which shall be accompanied by the execution form of such
continuation statement so to be filed).
(c) The Indenture Trustee shall not be required to take
any action or refrain from taking any action under Section 8.06 or 9.01(b)
unless the Indenture Trustee shall have been indemnified by the Holders against
any liability, cost or expense (including counsel fees) which may be incurred
in connection therewith. The Indenture Trustee shall not be under any
obligation to take any action under this Agreement and nothing in this
Agreement contained shall require the Indenture Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. The Indenture Trustee shall not be required to take any action under
Section 8.06 or 9.01(b), nor shall any other provision of this Indenture be
deemed to impose a duty on the Indenture Trustee to take any action, if the
Indenture Trustee shall have been advised by counsel that such action is
contrary to the terms hereof or is otherwise contrary to law.
(d) The Indenture Trustee shall not have any duty or
obligation to use, operate, store, lease, control, manage, sell, dispose of or
otherwise deal with the Aircraft or any other part of the Indenture Estate, or
to otherwise take or refrain from taking any action under, or in connection
with, this Indenture or any part of the Indenture Estate, except as expressly
provided by the terms of this Indenture or as expressly provided in written
instructions from Holders as provided in this Indenture; and no implied duties
or obligations shall be read into this Indenture against the Indenture Trustee.
(e) The Owner Trustee and the Indenture Trustee agree
that they will not use, operate, store, lease, control, manage, sell, dispose
of or otherwise deal with the Aircraft or any other part of the Indenture
Estate except (i) in accordance with the terms of the Lease or the
Participation Agreement, or (ii) in accordance with the powers granted or
reserved to, or the authority conferred upon, the Owner Trustee and the
Indenture Trustee pursuant to this Indenture and in accordance with the express
terms hereof.
(f) Subject to the provisions of Section 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Agreement. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to be
extent required by law.
Section 9.02. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may consult with counsel or require an Officer's Certificate or an
Opinion of Counsel from the Company or the Owner Trustee after which it will
take such action or refrain from acting as it deems appropriate. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith and in accordance herewith in reliance on a resolution of the Board of
Directors
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of the Company, the written advice of counsel acceptable to the Owner Trustee,
the Company and the Indenture Trustee, officer's certificates or opinions of
counsel provided by the Company or the Owner Trustee.
(c) The Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care; provided, that so long as no Indenture Event of
Default shall have occurred and be continuing no such agents shall be appointed
by the Indenture Trustee without the consent of the Company and the Owner
Trustee, which consent shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) If an Indenture Event of Default under this Agreement
has occurred and is continuing, the Indenture Trustee shall exercise its rights
and powers under this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
Section 9.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates and may otherwise deal with the Owner Trustee, the
Company or an Affiliate of the Owner Trustee or the Company or a subsidiary of
the Owner Trustee or the Company with the same rights it would have if it were
not the Indenture Trustee. Any Agent may do the same with like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or
Paying Agent; Investments. Any monies (including without limitation for
purposes of this Section 9.04 Permitted Investments constituting the proceeds
of the maturity, sale or other disposition of any Permitted Investment) held by
the Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its account
with any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
States thereof having combined capital and surplus and retained earnings of at
least $100,000,000, and neither the Indenture Trustee nor the Paying Agent
shall have any liability for interest upon any such monies except as otherwise
agreed in writing or (ii) at any time and from time to time, so long as no
Lease Default (of the type described in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, at the request
(given directly by the Company to the Indenture Trustee) of the Company acting
as the agent of the Owner Trustee, shall be invested and reinvested in
Permitted Investments as specified in such request (if such investments are
reasonably available for purchase) and sold, in any case at such prices,
including accrued interest or its equivalent, as are set forth in such request,
and such Permitted Investments shall be held by the Indenture Trustee in trust
as part of the Indenture Estate until so sold; provided, that the Company, on
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity,
sale or other disposition of any such Permitted Investment and, so long as no
Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be
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continuing, be entitled to receive from the Indenture Trustee, and the
Indenture Trustee on behalf of the Owner Trustee, shall promptly pay to the
Company pursuant to Section 22.1 of the Lease, any profit, income, interest,
dividend or gain realized upon maturity, sale or other disposition of any
Permitted Investment. If any Lease Default (of the type referred to in Section
14.1 or 14.5 of the Lease) or Lease Event of Default shall have occurred and be
continuing, any net income, profit, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment shall be held
as part of the Indenture Estate and shall be applied by the Indenture Trustee
at the same time, on the same conditions and in the same manner as the amounts
in respect of which such income, profit, interest, dividend or gain was
realized are required to be distributed in accordance with the provisions
hereof or of the Lease pursuant to which such amounts were required to be held.
The Indenture Trustee shall not be responsible for any losses on any
investments or sales of Permitted Investments made pursuant to the procedure
specified in this Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event of
Default under this Agreement occurs and is continuing and the Indenture Trustee
has actual knowledge of same, the Indenture Trustee shall (i) promptly send
written notice thereof to the Company, the Owner Trustee and the Owner
Participant and, so long as the Series SWA 1995 Trust N396SW-I Certificates
shall be Outstanding, the Holders thereof and (ii) within 90 days after it
occurs, mail to each other Holder notice of all uncured Indenture Events of
Default under this Agreement. Except in the case of a default in the payment of
the principal of, Premium, if any, or interest on any Certificates or during
any period when the Series SWA 1995 Trust N396SW-I Certificate shall be
Outstanding, Break Amount, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii) above if and so long as the
executive committee or trust committee of directors of the Indenture Trustee
and/or Responsible Officers thereof in good faith determines that withholding
such notice is in the interest of the Holders. In addition, if an Indenture
Default under this Agreement occurs and is continuing and if the Indenture
Trustee has actual knowledge of same, the Indenture Trustee shall promptly send
written notice thereof to the Company, the Owner Trustee and the Owner
Participant and, so long as the Series SWA 1995 Trust N396SW-I Certificates
shall be Outstanding, the Holders thereof.
Section 9.06. Compensation and Indemnity. (a) The Owner
Trustee shall pay to the Indenture Trustee from time to time (i) reasonable
compensation for its services, which compensation shall not be limited by any
law on compensation of a trustee of an express trust, (ii) reimbursement for
all reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the reasonable compensation and expenses of the Indenture Trustee's counsel and
any agent appointed in accordance with Section 9.02(c)), and (iii)
indemnification against any loss or liability incurred by it arising out of or
in connection with its acceptance or administration of the trust or trusts
hereunder except (A) as such expenses or loss or liability might result from
the gross negligence or willful misconduct of the Indenture Trustee or the
inaccuracy of any representation or warranty of the Indenture Trustee in its
individual capacity in Section 8 of the Participation Agreement or failure by
the Indenture Trustee to perform its payment and investment obligations
hereunder, (B) as otherwise provided in Section 9.10 and (C) as otherwise
excluded by the terms of Sections 7(b) and 7(c) of the Participation Agreement
from the Company's indemnities under said Sections; provided, that the
Indenture Trustee shall not make any claim
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under this Section 9.06(a) for any claim or expense indemnified against by the
Company under the Participation Agreement without first making demand on, and
pursuing such demand on a reasonable basis for a reasonable length of time, the
Company for payment of such claim or expense. The Indenture Trustee shall
notify the Owner Trustee and the Company promptly of any claim for which it is
entitled to be indemnified hereunder. The Indenture Trustee may have separate
counsel and the Owner Trustee shall pay the reasonable fees and expenses of
such counsel. The Owner Trustee need not pay for any settlement made without
its and the Company's consent.
(b) To secure the payment obligations of the Owner
Trustee pursuant to this Section 9.06, the Indenture Trustee shall have a lien
prior to that of the Holders of the Certificates on all money or property
constituting a part of the Indenture Estate held or collected by the Indenture
Trustee, except that held in trust to pay the principal of, and interest on,
the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least
30 days' prior written notice to the Company, the Owner Trustee and the Holders
of a majority in aggregate principal amount of the Outstanding Certificates.
The Holders of a majority in aggregate principal amount of the Outstanding
Certificates may remove the Indenture Trustee by giving at least 30 days' prior
written notice to the Indenture Trustee, the Owner Trustee and the Company and
may appoint a successor Indenture Trustee with the Owner Trustee's and the
Company's consent. At such time as Series SWA 1995 Trust N396SW Certificates
are Outstanding, the Owner Trustee may remove the Indenture Trustee if:
(1) the Indenture Trustee fails to comply with
Section 9.09, fails to perform its payment obligations hereunder or
otherwise fails to perform any of its material obligations hereunder;
(2) the Indenture Trustee is adjudged a bankrupt
or an insolvent;
(3) a receiver or public officer takes charge of
the Indenture Trustee or its property; or
(4) the Indenture Trustee becomes incapable of
acting.
(c) If the Indenture Trustee resigns or is removed, or if
a vacancy exists in the office of Indenture Trustee for any reason, Holders of
a majority in aggregate principal amount of the Certificates or, at such time
as Series SWA 1995 Trust N396SW Certificates are Outstanding, the Owner
Trustee, shall promptly appoint a successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the
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Company, the Owner Trustee or the Holders of a majority in aggregate principal
amount of the Outstanding Certificates may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Holder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Company
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the lien provided for in Section 9.06. The successor
Indenture Trustee shall give notice of each appointment of a successor
Indenture Trustee if there are Certificates Outstanding, by mailing written
notice of such event by first-class mail to the Holders.
(g) All provisions of this Section 9.07 except
subparagraphs (b)(l) and (e) and the words "subject to the lien provided for in
Section 9.06" in subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by
Merger, Etc. If the Indenture Trustee or any Agent consolidates with, merges
or converts into, or transfers all or substantially all of its corporate trust
business assets to, another corporation, the successor corporation, without any
further act, shall be the successor Indenture Trustee or Agent, as the case may
be.
Section 9.09. Eligibility; Disqualification. This
Agreement shall at all times have an Indenture Trustee which shall have a
combined capital and surplus of at least $100,000,000 and shall be a "citizen
of the United States" as defined in the Federal Aviation Act. If such
corporation publishes reports of conditions at least annually, pursuant to law
or to the requirements of Federal, State, Territorial, or District of Columbia
supervising or examining authority, then for the purposes of this Section 9.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
conditions so published.
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in
its individual capacity agrees that it will at its own cost and expense
promptly take such action as may be necessary to duly discharge and satisfy in
full all Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
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unrelated to the transactions contemplated by the Operative Agreements, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting.
Without limitation of subsections 15.05(d) and 15.05(e), the Indenture Trustee
shall exclude and withhold from each distribution of principal, Premium, if
any, Break Amount, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect to the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders, that
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to
each Holder appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such Holders may reasonably
request from time to time. The Indenture Trustee agrees to file any other
information reports as it may be required to file under United States law. Such
withholding by the Indenture Trustee shall in no event give rise to an
Indenture Event of Default and shall be deemed to constitute payment in full of
the amount withheld.
Section 9.12. [Reserved for Potential Future Use]
Section 9.13. Certain Rights of Owner Trustee and Owner
Participant. Notwithstanding any other provisions of this Indenture, including
the Granting Clause, the following rights shall be reserved to the Owner
Trustee or the Owner Participant, as the case may be (as separate and
independent rights) to the extent described herein:
(a) at all times the Owner Trustee and the Owner
Participant shall have the right, together with the Indenture Trustee,
to receive from the Lessee all notices, certificates, reports,
filings, opinions of counsel and other documents and all information
which the Company is permitted or required to give or furnish to the
Owner Participant, the Owner Trustee or the Lessor pursuant to any
Indenture Document;
(b) at all times (unless otherwise specified) the Owner
Trustee shall have the right (1) to the exclusion of the Indenture
Trustee but subject to and without affecting the provisions of Section
11.06, (i) to exercise the rights, elections and options of the Lessor
to make any decision or determination and to give any notice, consent,
waiver or approval with respect to any adjustments under Section 3.7
of the Lease or the identification of Permitted Foreign Air Carriers
pursuant to Section 23 of the Lease, Sections 17 and 18 of the
Participation Agreement, the Tax Indemnity Agreement and any provision
of the Operative Agreements related to Excluded Payments, (ii) to
exercise the rights, elections and options of the Lessor and to
approve the purchase or other acquisition of the Aircraft by a
Prohibited Person with respect to the termination of the Lease and
solicitations of bids and appraisals pursuant to Section 9 of the
Lease, or with respect to renewals or purchase options and
terminations to take effect upon or after the payment in full (or
assumption by the Company) of the obligations secured hereby,
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(iii) without limiting the terms of Section 8.03(e)(i), to effect
cures pursuant to Section 20 of the Lease, and (iv) to maintain and
exercise all rights regarding separate insurance with respect to the
Aircraft for its own account pursuant to Section 11.7 of the Lease
(provided, that no such insurance impairs or reduces coverage under
any insurance required to be maintained by the Company under Section
11 of the Lease) and (2) so long as no Indenture Event of Default
shall have occurred and be continuing, (x) during the Floating Period,
together with the Indenture Trustee (agreement of both being required)
and (y) during the Fixed Period, to the exclusion of the Indenture
Trustee (i) to approve as satisfactory any other accountants,
inspectors, engineers or counsel to render services for or issue
opinions to the Owner Trustee, together with the contents of any
certificates and opinions to be delivered by such Persons, in each
case pursuant to express provisions of the Operative Agreements and
(ii) to grant such consents, approvals and waivers as may be requested
under the Indenture Documents and (3) together with the Indenture
Trustee (each acting separately), to request all certificates and
documents of Lessee, to request assignment of any sublease of the
Aircraft and to exercise inspection rights pursuant to Section 12 of
the Lease;
(c) at all times, the Owner Trustee shall have the
non-exclusive right, as Lessor, to seek specific performance of the
covenants of the Company under the Lease relating to the protection,
insurance, maintenance, possession and use of the Aircraft and to
obtain performance by Lessee under Sections 11(a) and (b) of the
Participation Agreement; and
(d) at all times each of the Owner Trustee (as Owner
Trustee, individually and as Lessor) and the Owner Participant shall
have the right, to the exclusion of the Indenture Trustee, to demand,
collect, sue for or receive the payment of, and waive, modify or
otherwise deal with Excluded Payments due and payable to it, and, in
the case of the Owner Participant, to give the written notice referred
to in the proviso to Section 14.1 of the Lease.
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement;
Defeasance; Termination of Obligations. Subject to Section 10.02, this
Agreement shall cease to be of further effect, and the Owner Trustee and the
Indenture Trustee shall, except as herein provided, be deemed to have been
discharged from their respective obligations hereunder and with respect to the
Certificates (and the Indenture Trustee, on demand and at the expense of the
Owner Trustee, shall execute proper instruments acknowledging satisfaction and
discharge of this Agreement in respect of the Certificates), when
(a) (i) all Certificates theretofore executed and
delivered (other than (A) Certificates which have been mutilated, destroyed,
lost or stolen and which have been replaced or exchanged as provided in Section
2.06 and (B) Certificates for the payment of which money
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held in trust hereunder has been paid and discharged from such trust, as
provided in Section 7.01) have been delivered to the Indenture Trustee for
cancellation; or
(ii) all Certificates not theretofore delivered to
the Indenture Trustee for cancellation have become due and payable (whether
upon stated maturity or as a result of redemption or upon acceleration), or
will become due and payable (including as a result of redemption in respect of
which irrevocable notice has been given to the Indenture Trustee on or prior to
the date of such deposit) at maturity within one year, and there has been
deposited with the Indenture Trustee in trust for the purpose of paying and
discharging the entire indebtedness on the Certificates not theretofore
canceled by the Indenture Trustee or delivered to the Indenture Trustee for
cancellation, an amount of cash and/or Government Obligations sufficient to
discharge such indebtedness, including the principal of, Premium, if any, and
interest on the Certificates to the date of such deposit (in the case of
Certificates which have become due and payable), or to the maturity thereof, as
the case may be and, in the case of the Series SWA 1995 Trust N396SW-I
Certificate, Break Amount, if any, and all other amounts payable to the
Original Holder hereunder or under any other Operative Agreement; or
(iii) the Certificates shall have been defeased as
provided in Section 10.05; provided, however, that upon the making of the
deposit referred to in subsection A of Section 10.05, the right of the Owner
Trustee or the Company to cause the redemption of Certificates (except a
redemption in respect of which irrevocable notice has theretofore been given)
shall terminate;
(b) all other amounts then due and payable hereunder have
been paid; and
(c) the Owner Trustee or the Company on behalf of the
Owner Trustee has delivered to the Indenture Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
for or relating to the satisfaction and discharge of this Agreement
contemplated by this Section 10.01 have been complied with.
Section 10.02. Survival of Certain Obligations.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, 2.10, Article III
(other than Section 3.05), Section 7.01, Section 9.11, Section 10.03 and
Section 10.04, and the rights, duties, immunities and privileges hereunder of
the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All money and
Government Obligations deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment in the case
of the Series SWA 1995 Trust N396SW-I Certificates, as provided for in Section
15.04 or, in the case of the Series SWA 1995 Trust N396SW Certificates, either
directly or through any Paying Agent as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, Premium,
if any, interest, and, in the case of the Series SWA 1995 Trust N396SW-I
Certificates, Break Amount, if any, and all other amounts payable to the
Holders hereunder or under any other Operative Agreement, but such money need
not be segregated from other funds except to the extent required by law.
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Section 10.04. Monies to Be Returned to Owner Trustee. The
Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or Government
Obligations held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Certificates for which
money or Government Obligations have been deposited pursuant to Section 10.01,
and the Holders shall have no claim in respect of any money or Government
Obligations so paid or returned.
Section 10.05. Defeasance. The Owner Trustee may, at any
time, defease the interest of the Indenture Trustee in the Indenture Estate in
whole, but not in part, through the deposit with the Defeasance Trustee, in
accordance with the provisions of this Section 10.05, of cash and/or Government
Obligations; provided, however, that such defeasance shall not be applicable in
respect of the Series SWA 1995 Trust N396SW-I Certificates. Such deposit shall
be made pursuant to a declaration or other appropriate instrument of trust
satisfactory in form and substance to the Defeasance Trustee and the Indenture
Trustee; such deposit shall be absolute and irrevocable and the instrument of
trust shall expressly provide that the Owner Trustee shall have no further
title to or interest in or power to direct the use or application of the cash
and/or Government Obligations so deposited or any of the proceeds arising
therefrom; such instrument shall state that the trust created thereby and the
cash and/or Government Obligations deposited pursuant thereto are for the sole
and exclusive benefit of the Holders and shall expressly provide that the
Defeasance Trustee shall apply such cash and payments of principal and/or
interest on such Government Obligations to, and only to, the punctual payment
of the principal and interest on the Certificates as and when such payments
become due (such declaration or instrument to contain appropriate provisions
for the recording of transfers of Certificates and the names and addresses of
the Holders); and the Owner Trustee shall agree to pay, as the same shall
become due and payable, all fees, costs and charges of the Defeasance Trustee
under such instrument of trust, including those which may become payable after
the date the conditions hereinbelow specified have been met. Upon compliance
with the following conditions, and provided, that no Indenture Event of Default
or Indenture Default shall have occurred and be continuing on a date 91 days
after the date of the deposit of Government Obligations and/or cash with the
Defeasance Trustee as provided in Subsection A below, the Owner Trustee's
obligations with respect to the Certificates will be discharged and this
Indenture shall terminate as provided in Section 10.01:
A. the Owner Trustee shall have deposited with the
Defeasance Trustee absolutely and irrevocably (irrespective of whether
the conditions in Subsections B, C, D and E of this Section 10.05 have
been satisfied) (1) cash and/or (2) Government Obligations which
through the payment of principal and interest in respect thereof in
accordance with their terms, without any reinvestment or further
investment of the principal of or interest earned on such Government
Obligations, will absolutely and unconditionally provide in any and
all circumstances not later than one day before each Payment Date an
amount sufficient to pay and discharge the payment of principal and
interest to be due and payable on such Payment Date;
B. no Indenture Event of Default or Indenture Default
shall have occurred and be continuing on the date of the deposit of
cash and/or Government Obligations as contemplated hereby;
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C. the Owner Trustee shall have delivered to the
Defeasance Trustee and to the Certificate Holders written confirmation
by a nationally recognized firm of independent public accountants
(other than the accounting firm then serving as Shawmut Bank
Connecticut, National Association's or the Owner Participant's regular
auditors) selected by the Owner Trustee, the form and substance of
which confirmation and the identity of such accounting firm shall be
satisfactory to the Indenture Trustee, that the Government Obligations
deposited for payment of the Certificates, together with any cash
deposited by the Owner Trustee, are sufficient to satisfy the
requirements of Subsection A hereof;
D. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate Holders
an opinion of counsel in form and substance satisfactory to the
Indenture Trustee to the effect that (1) the trust declaration or
other instrument, as the case may be, is legal, valid, binding and
enforceable in accordance with its terms for the sole benefit and use
of the Holders, is irrevocable and the Government Obligations and/or
cash deposited thereunder and the proceeds thereof and therefrom are
held by the Defeasance Trustee thereunder in trust solely for the
benefit of the Holders and will not be subject to any valid interest,
lien, claim or encumbrance of any other Person, including the Owner
Trustee or the Owner Participant or any Person claiming by, through,
under or in the name or on behalf of the Owner Trustee or the Owner
Participant or any creditor or beneficiary of the Owner Trustee or the
Owner Participant, or by any court or trustee in bankruptcy and (2)
such deposit will not constitute a preferential transfer or a
fraudulent conveyance under any bankruptcy or other similar law and
shall cover such other matters as the Indenture Trustee may reasonably
require in connection with such final deposit and matters relating
thereto;
E. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate Holders
an Officers' Certificate and an Opinion of Counsel (1) to the effect
that there has been published by the Internal Revenue Service a
ruling, or (2) since the date of this Agreement that there has been a
change in or clarification of the applicable Federal income tax law,
in either case to the effect that Holders will not recognize income,
gain or loss for Federal income tax purposes as a result of the
exercise by the Owner Trustee of its option under Section
10.01(a)(iii) and will be subject to Federal income tax on the same
amounts and in the same manner and at the same times, as would have
been the case if such option had not been exercised; and
F. the Owner Trustee shall have (1) taken such further
action and executed such further documents as may be reasonably
required by any Holder, the Indenture Trustee or the Defeasance
Trustee and (2) delivered to the Defeasance Trustee, the Indenture
Trustee and to the Holders a certificate of a Responsible Officer of
the Owner Trustee stating that all conditions precedent herein to the
defeasance of the Certificates contemplated by this Section 10.05 have
been satisfied.
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The Owner Trustee will pay all expenses (including, without
limitation, reasonable legal fees) incident to the implementation of the
transactions contemplated by this Section 10.05.
For the purpose of this Article 10, the following terms have
the following definitions:
"Defeasance Trustee" shall mean an institution authorized to
transact in the State of New York the business of a trust company
selected by the Owner Trustee and approved by the Indenture Trustee;
provided, that at the time of the delivery of cash and/or Government
Obligations pursuant to this Section 10.05, the institution selected
shall have a combined capital and surplus of at least $500,000,000 and
shall not be an Affiliate of the Company, the Owner Participant or
Shawmut Bank Connecticut, National Association.
"Government Obligations" shall mean direct U.S. Dollar
obligations of the United States of America which are not callable,
redeemable or prepayable, directly or indirectly, by any Person.
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent
of Holders. The Owner Trustee and the Indenture Trustee may enter into one or
more agreements supplemental hereto without the consent of any Holder for any
of the following purposes:
(1) to correct any mistake or cure any ambiguity,
defect or inconsistency herein or in the Certificates or to make any
change not inconsistent with the provisions hereof; provided, that
such change does not adversely affect the interests of any Holder;
(2) to evidence the succession of another party
as the Owner Trustee in accordance with the terms of the Trust
Agreement or to evidence (in accordance with Article 9) the succession
of a new trustee hereunder, the removal of the trustee hereunder or
the appointment of any co-trustee or co-trustees or any separate or
additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee or to make any
other provisions with respect to matters or questions arising
hereunder so long as such action shall not adversely affect the
interests of the Holders;
(4) to correct or amplify the description of any
property at any time subject to the Lien of this Agreement or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subject to the Lien of this Agreement or to
subject to the Lien of this Agreement the Airframe or Engines or
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airframe or engines substituted for the Airframe or Engines in
accordance herewith or with the Lease; provided, that Trust
Supplements entered into for the purpose of subjecting to the Lien of
this Agreement the Airframe or Engines (or the Replacement Airframe or
any Replacement Engines) in accordance with the Lease need only be
executed by the Owner Trustee;
(5) to add to the covenants of the Owner Trustee,
for the benefit of the Holders, or to surrender any rights or power
herein conferred upon the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
(7) to provide for the assumption by the Company
of the obligations of the Owner Trustee hereunder in accordance with
the terms and conditions applicable thereto specified in Section 7.03;
(8) to provide for the redemption of (i) the
Series SWA 1995 Trust N396SW-I Certificate and the issuance of the
Series SWA 1995 Trust N396SW Certificates in accordance with the terms
and conditions applicable thereto specified in Article 15 or (ii) any
Series SWA 1995 Trust N396SW Certificates issued hereunder and the
issuance of the New Debt in accordance with the terms and conditions
applicable thereto specified in Section 17 of the Participation
Agreement; or
(9) to include on the Certificates any legend as
may be required by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
Holders. (a) With the written consent of the Holders of a majority of the
aggregate principal amount of the Outstanding Certificates, the Owner Trustee
and the Indenture Trustee may enter into such supplemental agreements to add
any provisions to or to change or eliminate any provisions of this Agreement or
of any such supplemental agreements or to modify the rights of the Holders;
provided, however, that without the consent of each Holder affected thereby, an
amendment under this Section 11.02 may not:
(1) reduce the principal amount of, Premium or
Break Amount, if any, or any installment of interest on, any
Certificate; or
(2) change the date on which any principal amount
of, any Installment Payment Amount payable with respect to, Premium or
Break Amount, if any, or interest on any Certificate, is due or
payable; or
(3) create any Lien on the Indenture Estate prior
to or pari passu with the Lien thereon under this Agreement except
such as are permitted by this Agreement, or deprive any Holder of the
benefit of the Lien on the Indenture Estate created by this Agreement;
or
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(4) reduce the percentage in principal amount of
the Outstanding Certificates, the consent of whose holders is required
for any such supplemental agreement, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of
this Agreement or of certain defaults hereunder or their consequences)
provided for in this Agreement; or
(5) make any change in Section 8.05, 8.08, or
(but only for so long as the Series SWA 1995 Trust N396SW-I
Certificates shall be Outstanding) Article 15, or this Section
11.02(a).
(b) It is not necessary under this Section 11.02 for the
Holders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and
the Indenture Trustee of any supplemental agreement pursuant to the provisions
of this Section 11.02, the Indenture Trustee shall transmit by first-class mail
a notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of such Holders appear on
the Register. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental agreement.
Section 11.03. Revocation and Effect of Consents. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder, even if notation
of the consent is not made on any Certificate. However, any such Holder or
subsequent Holder may revoke the consent as to his Certificate if the Indenture
Trustee receives the notice of revocation before the date the amendment or
waiver becomes effective. After an amendment or waiver becomes effective, it
shall bind every Holder affected by such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates. The
Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Certificate thereafter executed. The Indenture Trustee in
exchange for such Certificates may execute new Certificates that reflect the
amendment or waiver.
Section 11.05. Indenture Trustee Protected. The Indenture
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, Etc. of Other Operative
Agreements. (a) Subject to Section 11.01, without the consent of the Holders
of a majority in principal amount of Outstanding Certificates, the respective
parties to the Participation Agreement, the Lease and the Trust Agreement may
not modify, amend or supplement any of said agreements, or give any consent,
waiver, authorization or approval thereunder, for any purpose, including adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or modifying in any manner the rights of the respective
parties thereunder; provided, however, that the actions specified in subsection
(b) of this Section 11.06 may be taken without the consent of the Indenture
Trustee or any Holder.
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(b) Subject to the provisions of subsection (c) of this
Section 11.06, the respective parties to the Participation Agreement, the Lease
and the Trust Agreement, at any time and from time to time without the consent
of the Indenture Trustee or of any Holder may:
(1) so long as no Indenture Event of Default
shall have occurred and be continuing, modify, amend or supplement the
Lease, or give any consent, waiver, authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 (except as specifically provided below) the parties
to the Lease shall not modify, amend or supplement, or give any
consent, waiver, authorization or approval for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the
respective parties thereunder, with respect to the following
provisions of the Lease as originally executed: Sections 2, 3.1, 3.2
(if the result thereof would be to shorten the Term of the Lease to a
period shorter than the period ending with the final Principal Payment
Date, Installment Date or Maturity Date of the Certificates), 3.3,
3.4, 3.5 (except to the extent such Section relates to Excluded
Payments and amounts payable to the Indenture Trustee in its
individual capacity), 3.6 (except insofar as it relates to the address
or account information of the Owner Trustee or the Indenture Trustee),
the first sentence of Section 3.8 or any proviso in said Section, 4, 5
(but only insofar as it relates to return condition upon termination
of the Lease pursuant to Section 15), 6, 7 (except that further
restrictions may be imposed on the Company), 9, 10 (except that
additional requirements may be imposed on the Company), 11 (except for
Section 11.6 insofar as such Section relates to the Owner Participant
and the Lessor and except that additional insurance requirements may
be imposed on the Company), 12 (except in order to increase the
Company's liabilities or enhance the Lessor's rights thereunder), 13
(except in the case of an assignment by the Lessor in circumstances
where the Aircraft shall remain registrable under the Federal Aviation
Act), 14 (except to impose additional or more stringent Lease Events
of Default), 15 (except to impose additional remedies), 16, 17,
18.2(b) (except to impose additional requirements on the Company), 19,
20, 21 and 22, and (i) any definition of terms used in the Lease, to
the extent that any modification of such definition would result in a
modification of the Lease not permitted pursuant to this subsection
(b) and (ii) any other provision of the Lease not hereinabove referred
to if the modification, amendment or supplement thereto, or consent,
waiver, authorization or approval in respect thereof would adversely
affect the Indenture Trustee's interest in the Trust Estate, reduce
Lessee's obligations in respect of maintaining the Aircraft or
otherwise impair the value of the Trust Estate; provided, that in the
event an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as Lessor under the Lease to modify, amend or supplement the
Lease or give any consent, waiver, authorization or approval
thereunder, for any purpose, including, adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or
of modifying in any manner the rights of the Lessor thereunder;
provided, further, that without the prior consent of the Owner
Trustee, and whether or not an Indenture Event of Default shall have
occurred and be continuing, no such action shall be taken with respect
to any of the provisions of Sections 1 (to the extent any modification
of a definition contained therein would result in a modification of
the Lease not permitted by this proviso), 3.4 (to the extent any
modification would result in amounts payable by
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Lessor under the Indenture not also being payable by Lessee to Lessor
under the Lease), 3.7, 3.8, 4, 5 (to the extent not related to return
upon termination of the Lease pursuant to Section 15 of the Lease), 6
(to the extent such action would reduce the Company's obligations), 7,
8, 9, 10, 11, 12, 13, 14, 15, 16 (insofar as it relates to the
Lessor), 17, 18, 19, 20, 21 and 22 of the Lease, or any other Section
of the Lease to the extent such action shall affect any Excluded
Payment or the amount or timing of any amounts payable by the Company
under the Lease as originally executed (or as subsequently modified
with the consent of the Owner Trustee) which, absent the occurrence
and continuance of an Indenture Event of Default, will be
distributable to the Owner Trustee under Article 3; and provided,
further, that the parties to the Lease may take any such action
without the consent of the Indenture Trustee or any Holder to the
extent such action relates to the payment of amounts constituting, or
the Owner Trustee's, the Owner Participant's or the Company's rights
or obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, in each case only to the extent any such action shall
not adversely affect the interests of the Holders;
(3) modify, amend or supplement the Participation
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 the parties to the Participation Agreement shall
not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to the following provisions of the
Participation Agreement as originally executed: Sections 1(b), 7
(insofar as such Section 7 relates to the Indenture Trustee and the
Holders), 8, 11, 13, 17, 18 and 19 and (i) any definition of terms
used in the Participation Agreement, to the extent that any
modification of such definition would result in a modification of the
Participation Agreement not permitted pursuant to this subsection (b)
and (ii) any other provision of the Participation Agreement not
hereinabove referred to if the modification, amendment or supplement
thereto, or consent, authorization or approval in respect thereof
would adversely affect the Indenture Trustee's interest in the Trust
Estate or otherwise impair the value of the Trust Estate; and
(4) modify, amend or supplement any of said
agreements in order to cure any ambiguity, to correct or supplement
any provisions thereof which may be defective or inconsistent with any
other provision thereof or of any provision of this Indenture, or to
make any other provision with respect to matters or questions arising
thereunder or under this Agreement which shall not be inconsistent
with the provisions of this Agreement, provided the making of any such
other provision shall not adversely affect the interests of the
Holders.
(c) No modification, amendment, supplement, consent,
waiver, authorization or approval with respect to the Lease or the
Participation Agreement, whether effected pursuant to subsection (a) or
pursuant to subsection (b) of this Section 11.06 and anything in such
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subsections or elsewhere in this Agreement to the contrary notwithstanding,
shall, without the consent of the holder of each Outstanding Certificate
affected thereby,
(1) modify, amend or supplement the Lease in such
a way as to extend the time of, or the manner of making any, payment
of any Advance or Basic Rent, or Stipulated Loss Value or any other
amounts payable to the Indenture Trustee for its own account or for
the account of the Holders (subject in any event to the last paragraph
of Section 3.3 of the Lease) upon the occurrence of an Event of Loss
or Termination Value and any other amounts payable to the Indenture
Trustee for its own account or for the account of the Holders (subject
in any event to the last paragraph of Section 3.3 of the Lease) upon
termination of the Lease with respect to the Aircraft, payable under,
or as provided in, the Lease as originally executed, or reduce the
amount of any installment of any Advance or Basic Rent or Supplemental
Rent so that the same is less than the payment of principal of,
Premium, if any, Break Amount, if any, and interest on the
Certificates, as the case may be, to be made from such installment of
any Advance or Basic Rent or Supplemental Rent, or reduce the
aggregate amount of Stipulated Loss Value, or any other amounts
payable under, or as provided in, the Lease as originally executed
upon the occurrence of an Event of Loss so that the same is less than
the accrued interest on and the principal as of the Lease Loss Payment
Date, and Break Amount, if any, of the Certificates at the time
Outstanding or reduce the amount of Termination Value or Special
Purchase Price and any other amounts payable under, or as provided in,
the Lease as originally executed upon termination of the Lease so that
the same is less than the accrued interest on and principal as of the
date of any such termination and Premium, if any, and Break Amount, if
any of Certificates at the time Outstanding, or
(2) modify, amend or supplement the Lease in such
a way as to, or consent to any assignment of the Lease or give any
consent, waiver, authorization or approval which would, release the
Company from its obligations in respect of payment of Basic Rent or
Supplemental Rent, or Stipulated Loss Value and any other amounts
payable to the Indenture Trustee for its own account or the account of
the Holders (subject in any event to the last paragraph of Section 3.3
of the Lease) upon the occurrence of any Event of Loss, or Termination
Value or Special Purchase Price and any other amounts payable to the
Indenture Trustee for its own account or the account of the Holders
(subject in any event to the last paragraph of Section 3.3 of the
Lease), payable under, or as provided in, the Lease as originally
executed, except for any such assignment pursuant to Section 8(s) of
the Participation Agreement, and except as provided in the Lease as
originally executed.
Section 11.07. Trust Supplement. The Owner Trustee and the
Indenture Trustee hereby confirm and agree that upon execution and delivery of
any Trust Supplement covering the Aircraft by the Owner Trustee substantially
in the form attached hereto as Exhibit C or any trust supplement covering a
sublease of the Aircraft, this Agreement shall be supplemented by such Trust
Supplement or such trust supplement without further action by the Owner Trustee
or Indenture Trustee.
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ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically
provided herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by courier service, telegram, telex, telemessage, telecopy, telefax, cable or
facsimile (confirmed by telephone or in writing in the case of notice by
telegram, telex, telemessage, telecopy, telefax, cable or facsimile) or any
other customary means of written communication, and any such notice shall be
effective when delivered,
if to the Indenture Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telex: 835437 WILM TR
Facsimile: (302) 651-8882
Telephone: (302) 651-1000
if to the Owner Trustee, to:
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telex: 221086 CTNB-HFD
Facsimile: (203) 240-7920
Telephone: (203) 722-9079
or if to any other Person, addressed to such Person as provided in the
Participation Agreement.
(b) The Company, the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Original Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Holders of the Series
SWA 1995 Trust N396SW Certificates shall be mailed by first-class mail to the
addresses for Holders shown on the Register kept by the Registrar and to
addresses filed with the Indenture Trustee for other Holders. Failure so to
mail a notice or communication or any defect in such notice or
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communication shall not affect its sufficiency with respect to other Holders of
such Certificates of that or any other series entitled to receive notice.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) Notwithstanding the foregoing, all communications or
notices to the Indenture Trustee shall be deemed to be given only when received
by a Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. Successors and Assigns; Agreement of Holders.
All covenants and agreements contained herein shall be binding upon, and inure
to the benefit of, each of the parties hereto and the successors and assigns of
each, whether so expressed or not. Any request, notice direction, consent,
waiver or other action by any Certificate Holder shall bind the successors and
assigns of such Certificate Holder. Each Certificate Holder, by its acceptance
of a Certificate, agrees to be bound by all provisions of this Indenture and
the Participation Agreement applicable to it.
Section 12.04. Rules by Indenture Trustee and Agents. The
Indenture Trustee may make reasonable rules for action by or a meeting of the
Holders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
Section 12.05. Non-Business Days. With respect to the
Series SWA 1995 Trust N396SW Certificates only, if a payment date is not a
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for
the intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
Section 12.07. No Recourse Against Others. No director,
officer, employee or stockholder, as such, of the Company, the Owner Trustee or
the Owner Participant, as the case may be, shall have any liability for any
obligations of the Company, the Owner Trustee or the Owner Participant, as the
case may be, under any Operative Agreement or for any claim based on, in
respect of or by reason of such obligations or their creation. Each Holder by
accepting a Certificate waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute but one instrument.
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Section 12.09. Applicability Only to Original Holder.
Notwithstanding any provision to the contrary herein, Sections 15.03 through
15.05 shall only be applicable to the Holders of Series SWA Trust N396SW-I
Certificates.
Section 12.10. Severability. Any provision of this
Indenture which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of
Lease. Upon any of:
(a) the voluntary termination of the Lease by the Company
pursuant to Section 9 thereof on the Lease Termination Date, and upon payment
to the Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its
option pursuant to Section 18.2 of the Lease on the Special Purchase Option
Date (unless the Company shall have elected to assume all of the rights and
obligations of the Owner Trustee hereunder as provided for in Section 8(r) of
the Participation Agreement), and upon payment to the Indenture Trustee of an
amount equal to the Redemption Price as at the applicable Redemption Date of
all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss
Payment Date, following an Event of Loss suffered by the Airframe under
circumstances where the Company does not exercise its option to substitute a
Replacement Airframe therefor pursuant to Section 10.1.2 of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price as
at the Redemption Date of all Outstanding Certificates, or
(d) the satisfaction, discharge, defeasance and
termination of obligations under this Agreement in accordance with Section
10.01,
the Lien of this Agreement on the Indenture Estate shall terminate (except for
the Lien on funds held by the Indenture Trustee to pay the Certificates and the
Lien on amounts due from the Company under the Lease necessary to pay the
Certificates or the Indenture Trustee) and the Indenture Trustee shall execute
such instruments as may be requested by the Company or the Owner Trustee to
evidence such termination (at the Company's or the Owner Trustee's expense).
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ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE]
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N396SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N396SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N396SW-I
CERTIFICATES
Section 15.01. Conditions Precedent to Issuance of Series
SWA 1995 Trust N396SW Certificates. The issuance of the Series SWA 1995 Trust
N396SW Certificates pursuant to Section 18 of the Participation Agreement is
subject to all conditions specified in such section.
Simultaneously with the satisfaction of such conditions, the
Owner Trustee shall deliver to the Indenture Trustee a completed version of
Exhibits B, B-l and B-2 with respect to the Series SWA 1995 Trust N396SW
Certificates, which completed Exhibits B, B-l and B-2 shall specify the
maturities and principal amounts of the Series SWA 1995 Trust N396SW
Certificates and the applicable interest rates, together with the reference
dates for purposes of determining the Owner Trustee's rights to redeem such
Certificates as provided for in the Operative Agreements. Such completed
Exhibits B, B-l and B-2 shall be deemed upon such delivery automatically to
have been incorporated herein without further action of the parties hereto.
Section 15.02. Payment upon Issuance of Series SWA 1995
Trust N396SW Certificates. Simultaneously with the receipt of the proceeds of
the issuance of the Series SWA 1995 Trust N396SW Certificates, the Indenture
Trustee, on behalf of the Owner Trustee, shall apply an amount equal to the
Redemption Price of the Series SWA 1995 Trust N396SW-I Certificates to the
redemption of the Series SWA 1995 Trust N396SW-I Certificates in accordance
with Section 15.03.
Section 15.03. Special Provision Governing Refinancing of
the Series SWA 1995 Trust N396SW-I Certificate. Notwithstanding any other
provision of this Agreement, as long as any Series SWA 1995 Trust N396SW-I
Certificate is Outstanding, if a refinancing shall be effected pursuant to
Section 17 or 18 of the Participation Agreement and if all the conditions to
such refinancing set forth herein and in such Section 17 or 18 shall have been
satisfied, the Series SWA 1995 Trust N396SW-I Certificates may be refinanced in
whole at a Redemption Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to, but excluding, the applicable
Redemption Date plus the Break Amount, if any, and any other amounts payable to
the Holders thereof hereunder or under the Participation Agreement,
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but without any other premium or penalty; provided, however, that the
applicable Redemption Date for the redemption of the Series SWA 1995 Trust
N396SW-I Certificates pursuant to this Section 15.03 shall be the applicable
Refinancing Date or Section 18 Refinancing Date, as the case may be.
Section 15.04. Special Provision for Payments in Respect of
the Series SWA 1995 Trust N396SW-I Certificate. Notwithstanding any other
provision of this Agreement, all amounts payable in respect of the Series SWA
1995 Trust N396SW-I Certificates shall be paid by the Indenture Trustee (i) if
to the Original Holder by FedWire transfer in immediately available funds in
Dollars through the Federal Reserve Bank of San Francisco for the account of
Bank of America National Trust and Savings Association ABA #121000358, for
credit to GPO Account Administration #5693, Account No. 12331-83980, ref:
Southwest Airlines Interim Debt, or (ii) if to any other Holder of such
Certificates (or as may otherwise be directed by the Original Holder), to such
account maintained by such Holder with any bank located in the United States
and designated by such Holder to the Indenture Trustee, in any case without
presentment or surrender of any Certificate, except that in the case of any
final payment with respect to any Series SWA 1995 Trust N396SW-I Certificate,
such Certificate shall be surrendered promptly thereafter to the Indenture
Trustee by the Holder thereof for cancellation. Such payment shall be made by
the Indenture Trustee, in the case of any such designated account in New York,
New York, prior to 2:00 P.M., New York time, on the due date thereof if such
payment is received by the Indenture Trustee by 1:00 P.M., New York time, or by
12:00 Noon, New York time on the next succeeding Business Day if such payment
is received after 1:00 P.M., New York time. In the event the Indenture Trustee
shall fail to make any such payment as provided in the immediately foregoing
sentence after its receipt of funds at the place and prior to the time
specified above, the Indenture Trustee, in its individual capacity and not as
trustee, agrees to compensate the Certificate Holders for loss of use of funds
in a commercially reasonable manner.
Section 15.05. Increased Costs, Break Amount, Additional
Interest, Taxes, Etc. (a) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements which are provided for in subsection (c), below) after the
Delivery Date in any law or regulation or in the interpretation thereof by any
government or central bank or other governmental department, agency, board,
service or governmental body charged with responsibility for the administration
or interpretation thereof or (ii) the compliance with any guideline or request
made after the Delivery Date by any government or central bank or other
governmental department, agency, board, service or other governmental body
(whether or not having the force of law), there shall be any increase in the
cost to, or any reduction of the rate of return on assets or equity of, any
Holder (or any of its Affiliates) of the Series SWA 1995 Trust N396SW-I
Certificate of agreeing to make or making, funding or maintaining the loan
evidenced by its Series SWA 1995 Trust N396SW-I Certificate in respect of (x)
any period as to which the applicable Debt Rate is determined by reference to
the Offshore Rate and (y) capital adequacy requirements, then the Owner Trustee
shall from time to time pay to such Holder such amount as shall be necessary to
reimburse such Holder for such increase in cost within 10 Business Days after
delivery to the Owner Trustee, the Indenture Trustee and the Company of a
certificate of an officer of such Holder setting forth in reasonable detail the
event by reason of which it claims such increase in cost and the basis for the
determination of the amount of such increase in cost; provided, however, that
the
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Original Holder shall not be entitled to assert any claim under this subsection
15.05(a) in respect of taxes (including Taxes (as defined in the Participation
Agreement) and the taxes referred to in subsections (d) and (e) of this Section
15.05). Such certificate shall, in the absence of manifest error, be binding
and conclusive. Such Holder shall notify the Owner Trustee, the Indenture
Trustee and the Company as soon as possible of the occurrence of any event by
reason of which it is entitled to make a claim as described in this subsection
(a), but the failure to give such notice shall not affect the obligations of
the Owner Trustee hereunder.
(b) In the event that any Holder of the Series SWA 1995
Trust N396SW-I Certificate incurs any Break Amount (as defined below) in
connection with any payment, prepayment, acceleration, redemption, refinancing
or purchase, in whole or in part, of the principal of its Series SWA 1995 Trust
N396SW-I Certificate in accordance with the provisions of this Agreement or
otherwise on a date other than the last day of an Interest Period, then the
Owner Trustee shall pay to such Holder such Break Amount on the date of such
payment, prepayment, acceleration, redemption, refinancing or purchase, as the
case may be.
For the purposes hereof, "Break Amount" means an amount equal
to the net funding loss or additional expense which any Holder of a Series SWA
1995 Trust N396SW-I Certificate sustains or incurs or will sustain or incur as
a result of any payment, prepayment, acceleration, redemption, refinancing or
purchase (whether by mandatory or voluntary prepayment, optional purchase,
acceleration or otherwise) of any principal of its Series SWA 1995 Trust
N396SW-I Certificate on a date other than the last day of an Interest Period,
as reasonably determined by such Holder and set forth in a certificate of such
Holder which includes in reasonable detail the basis or the calculations of the
amount being claimed.
(c) The Owner Trustee agrees to pay to any Holder of a
Series SWA 1995 Trust N396SW-I Certificate, to the extent that such Holder
shall require, due to either (i) the introduction of or any change after the
Delivery Date in any law or regulation or in the interpretation thereof by the
Federal Reserve Board (or any governmental authority succeeding thereto) or
(ii) compliance with any guideline or request made after the Delivery Date by
the Federal Reserve Board (whether or not having the force of law), to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
the loan evidenced by its Series SWA 1995 Trust N396SW-I Certificate, in
respect of any period to which such reserve maintenance requirement is so
applicable and the applicable Debt Rate is determined by reference to the
Offshore Rate, in an amount as to any such period equal to the amount obtained
by applying to the outstanding principal amount of such loan during such period
an interest rate equal at all times to the remainder obtained by subtracting
(A) the applicable Offshore Rate from (B) the rate obtained by dividing such
Offshore Rate by a percentage equal to 100% minus the Eurocurrency Reserve
Percentage, if any, applicable from time to time to such Holder. Such
additional interest shall be paid by the Owner Trustee to any Holder of a
Series SWA 1995 Trust N396SW-I Certificate from time to time as and when
interest is payable under such Holder's Certificate, subject to receipt of
notice of the amount of such additional interest for such Holder.
(d) Should any Holder of a Series SWA 1995 Trust N396SW-I
Certificate fail to qualify for a complete exemption from withholding of United
States Federal income tax
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because of a change in the provisions of the Code or other relevant laws from
those in effect on the Delivery Date, and the Indenture Trustee is required by
law to deduct or withhold United States Federal income tax from amounts paid to
such Holder, the amounts payable hereunder and under its Series SWA 1995 Trust
N396SW-I Certificate shall be increased as may be necessary so that, after all
required deductions and withholdings for United States Federal income tax
resulting from any such change in the Code, such Holder receives an amount
equal to the excess of (i) the amount it would have received had no such
deduction or withholding been made over (ii) the additional amount of United
States Federal income tax that would have been payable by it under Section 882
of the Code in the absence of such change in the Code.
(e) Each Holder of a Series SWA 1995 Trust N396SW-I
Certificate by its acceptance of such Series SWA 1995 Trust N396SW-I
Certificate, agrees that it will, promptly after it becomes aware of any event
or the existence of a condition that would give rise to reimbursement or
payment pursuant to subsection 15.05(a), 15.05(c) or 15.05(d) or to increased
payment hereunder and under the Series SWA 1995 Trust N396SW-I Certificate
pursuant to subsection 15.05(d), to the extent not inconsistent with such
Holder's internal policies, use reasonable efforts to make, fund or maintain
the loan evidenced by the Series SWA 1995 Trust N396SW-I Certificate through a
different Lending Office if, as a result thereof, the amount of such
reimbursement or payment or increased payment, as the case may be, which would
otherwise be required to be made would be materially reduced and if, as
determined by such Holder in its reasonable discretion the making, funding or
maintaining of such loan through such different Lending Office would not
otherwise adversely affect such loan or such Holder. Each Holder agrees that it
will consult with the Owner Trustee in connection with any relocation of its
Lending Office. The Owner Trustee hereby agrees to pay all reasonable expenses
incurred by each such Holder in considering or taking action pursuant to this
subsection (e).
(f) Amounts payable to the Holder of any Series SWA 1995
Trust N396SW-I Certificate pursuant to this Article 15 that are not paid when
due shall bear interest from the due date thereof to, but excluding the date
paid, at the Past Due Rate.
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IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided
herein and otherwise solely as Owner Trustee
By: /s/ Pablo de la Canal
-----------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity, except as otherwise
expressly provided herein, but solely as Indenture
Trustee
By: /s/ David A. Vanaskey, Jr.
-----------------------------------
Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
-67-
<PAGE> 74
Exhibit A
to Trust Indenture
and Security Agreement
Form of Series SWA 1995 Trust N396SW-I Certificate
THIS CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS CERTIFICATE MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
$________________ No. ________________
SERIES SWA 1995 TRUST N396SW-I CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but solely as Owner Trustee under a
Trust Agreement
Dated as of April 1, 1995
Issued in Connection with Aircraft N396SW
Leased to
SOUTHWEST AIRLINES CO.
Date: _________ ___, 1995
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement, dated as of April 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (such agreement as the same
may be modified, amended or supplemented being referred to herein as the "Trust
Agreement"), for value received hereby promises to pay to BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank"), the principal sum of
________________ Dollars on or before _____________________ (the "Maturity
Date"), together with interest on such principal amount remaining unpaid from
time to time from the date hereof until such principal amount is paid in full.
The principal amount of this Certificate shall be payable in installments on
the dates (each a "Principal Payment Date") set forth in Annex A hereto equal
to the corresponding percentage of the original principal amount of this
Certificate set forth in Annex A hereto.
<PAGE> 75
Notwithstanding the foregoing, the final payment made on this
Certificate shall be in an amount sufficient to discharge in full the unpaid
principal amount and all accrued and unpaid interest on, and any other amounts
due under this Certificate or as provided for in the Trust Indenture and
Security Agreement, dated as of April 1, 1995 relating to the Aircraft (such
agreement as the same may be modified, amended or supplemented being referred
to herein as the "Indenture"; the defined terms used therein and not otherwise
defined herein being used herein with the same meanings), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder.
Interest on the principal amount of this Certificate shall
accrue at the applicable Debt Rate (as defined below). The "Debt Rate"
applicable in respect of any day in any Interest Period (as defined below)
selected by the Owner Trustee or Southwest Airlines Co. (the "Company") (acting
on behalf of the Owner Trustee) as provided for below, or portion thereof,
shall be the Offshore Rate (as defined below) applicable to such Interest
Period as selected by the Owner Trustee or the Company (acting on behalf of the
Owner Trustee) as provided for below, plus in each case the margin applicable
from time to time determined pursuant to the following table:
<TABLE>
<CAPTION>
Interest Period:
---------------------------------------------------
Ending on Margin in Basis
Commencing On: And Including: Points Per Annum:
------------- ------------- ----------------
<S> <C> <C>
Delivery Date First anniversary 40
of the Delivery Date
First day subsequent to One-year and six-months 50
the first anniversary of anniversary of the
the Delivery Date Delivery Date
First day subsequent to the Second anniversary of the 75
one-year and six months Delivery Date
anniversary of the
Delivery Date
First day subsequent to the Third anniversary of the 500
second anniversary of the Delivery Date
Delivery Date
First day subsequent to the Fourth anniversary of the 600
third anniversary of the Delivery Date
Delivery Date
First day subsequent to the Any date subsequent to the 700
fourth anniversary of the fourth anniversary of the
Delivery Date Delivery Date
</TABLE>
provided, however, for any Interest Period beginning after the second
anniversary of the Delivery Date, the Debt Rate shall never be less than the
Treasury Rate applicable to such Interest
A-2
<PAGE> 76
Period, plus in each case the margin applicable from time to time determined
pursuant to the foregoing table.
Interest accrued and unpaid on any Interest Payment Date shall
be paid on such Interest Payment Date; provided, however, that all interest
accrued and unpaid on this Certificate on the date this Certificate shall be
paid in full shall be paid on such date; provided, however, that if any
Interest Period Date (as defined below) is not also an Interest Payment Date,
all interest accrued during the Interest Period relevant thereto and unpaid as
at such Interest Period Date shall be compounded until the next succeeding
Interest Payment Date and shall bear interest at the Debt Rate applicable from
time to time hereunder during the period from such Interest Period Date to the
next succeeding Interest Payment Date and all such compounded interest shall be
due and payable on such next succeeding Interest Payment Date; provided,
finally, that any amount of principal or interest payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest,
payable on demand, from the due date therefor until the date of payment at an
interest rate equal to the Debt Rate plus 2% per annum. All computations of
interest shall be made by the Original Holder on the basis of a year of 360
days for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest is payable.
Notwithstanding any provision hereof to the contrary, this
Certificate shall not constitute an obligation to pay nor shall the Bank be
entitled hereunder to collect any amount of interest to the extent not
permitted by applicable law.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
For purposes of this Certificate, the following capitalized
terms used herein shall have the following meanings:
"Basis Point" shall mean one one-hundredth of one percent
(1/100 of 1%).
"Interest Payment Date" shall mean each July 1 and January 1
beginning July 1, 1995.
"Interest Period" shall mean, with reference to the Offshore
Rate, a period of up to 30 consecutive days, as available, or one,
two, three or six months, as selected by the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) as provided for below,
and shall mean, with reference to the Treasury Rate, a period of 30,
60, 90 or 180 days, corresponding to the one, two, three or six month
Interest Period, as the case may be, which shall have been so selected
with reference to the Offshore Rate; provided, however, that (i) the
initial Interest Period shall commence on the Delivery Date; (ii) each
Interest Period immediately succeeding an Interest Period shall
commence on the last day of the preceding Interest Period; (iii) if
any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day; and (iv) notwithstanding anything to the contrary
A-3
<PAGE> 77
contained herein, no Interest Period shall extend beyond a date which
is a Principal Payment Date.
"Interest Period Date" shall mean each Business Day on which
an Interest Period expires.
"Offshore Rate" shall mean, for each Interest Period, the rate
at which deposits in U.S. dollars in same day funds would be offered
at 11:00 A.M., New York time, two Business Days prior to the
commencement of such Interest Period by the Bank's Grand Cayman Branch
(or such other office as the Bank may designate for such purpose,
including its London Branch, but in that case such time shall be
London rather than New York time) to major banks in the offshore
interbank market upon request of such major banks for a period equal
to the relevant interest period and in the amount of the advance
scheduled to be outstanding during such interest period. The exact
length of interest periods shall be determined in accordance with
standard practices of the offshore dollar interbank market.
"Treasury Rate" shall mean, as to any Interest Period, the
yield to maturity (rounded to the nearest 1/100 of 1%) of the most
recently auctioned United States Treasury securities having maturities
most closely corresponding (linearly interpolating between the next
preceding and next succeeding maturities) to the Maturity Date, as
determined at 11 a.m. (New York City time) on the first day of such
Interest Period by reference to the Telerate Trading Assistant or, if
such Telerate Trading Assistant is not available to provide such data,
the average (rounded upwards to the nearest 1/100 of 1%), as
determined by the Bank, of quotes furnished at (or as proximately
thereto as is reasonably practicable) such time by two reputable
dealers in United States Treasury securities, which shall be selected
by the Bank.
The selection of the Offshore Rate and the duration of the
Interest Period related thereto shall be made by telephonic notice (followed by
telex, telecopy or other written confirmation) from the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) to the Original Holder or its
designee by not later than (i) 11:00 A.M. (New York time) on the second
Business Day preceding the first day of the relevant Interest Period or (ii)
11:00 A.M. (New York time) on the third Business Day preceding the first day
of the relevant Interest Period, if such Offshore Rate is to relate to the
Bank's London Branch; provided, however, that if a Lease Default shall have
occurred or be continuing or no such notice shall have been given, the Debt
Rate will be deemed, effective upon the last day of the then current Interest
Period, to be determined by reference to the Offshore Rate for an Interest
Period of one month.
All payments of principal, interest and other amounts, if any,
to be made by the Owner Trustee hereunder and under the Indenture shall be made
only from the income and proceeds from the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture and only to the extent
that the Indenture Trustee shall have sufficient income or proceeds from the
Indenture Estate and such other amounts to make such payments in accordance
with the terms of the Indenture, and the Bank, by its acceptance of this
Certificate, agrees that it will look solely to the income and proceeds from
the Indenture Estate and the other amounts referred to in Section 3.03 of the
Indenture to the extent available for distribution to the Holder hereof as
above provided and that none of the Owner Participant,
A-4
<PAGE> 78
the Owner Trustee or the Indenture Trustee is or shall be personally liable or
liable in any manner extending to any assets, other than the Indenture Estate,
to the Bank for any amounts payable under this Certificate or the Indenture or,
except as provided in the Indenture, for any liability under the Indenture;
provided, however, that nothing herein contained shall limit, restrict or
impair the right of the Indenture Trustee, subject always to the terms and
provisions of the Indenture, to accelerate the maturity of this Certificate
upon an Indenture Event of Default, to bring suit and obtain a judgment against
the Owner Trustee on this Certificate for purposes of realizing upon the
Indenture Estate and to exercise all rights and remedies provided under the
Indenture or otherwise realized upon the Indenture Estate.
Both the original amount of principal due hereunder and
interest and other amounts due hereunder shall be payable in United States
currency in immediately available funds pursuant to Section 15.04 of the
Indenture. Each such payment shall be made on the date such payment is due and
without any presentment or surrender of this Certificate, except that in the
case of any final payment with respect to this Certificate, the Certificate
shall be surrendered promptly thereafter to the Indenture Trustee by the Bank
for cancellation.
The Bank, by its acceptance of this Certificate, agrees that
each payment received by it hereunder shall be applied in the manner provided
in Section 3.08 of the Indenture.
This Certificate is one of the Series SWA 1995 Trust N396SW-I
Certificates referred to in the Indenture which has been or is to be issued by
the Owner Trustee pursuant to the terms of the Indenture. The Indenture Estate
is held by the Indenture Trustee as security for the Certificates. The rights
of the Owner Trustee under the Indenture, as well as the beneficial interest of
the Owner Participant in and to the properties of the Owner Trustee assigned,
pledged or mortgaged as part of the Indenture Estate, are subject and
subordinate to the rights of the Holders of the Certificates to the extent
provided for in the Indenture. Reference is hereby made to the Indenture and
the Participation Agreement for a statement of the rights of the Bank in
respect of, and the nature and extent of the security for, this Certificate,
and the rights of the Owner Trustee and the Owner Participant, as well as for a
statement of the terms and conditions of the trusts created by the Indenture,
to all of which terms and conditions in the Indenture the Bank agrees by its
acceptance of this Certificate.
Any Holder of this Certificate shall be deemed to have made
the following representation by its acquisition of this Certificate: either
that (a) no part of the funds used by it to acquire this Certificate
constitutes "plan assets" of any "employee benefit plan" within the meaning of
ERISA or any "plan" within the meaning of Section 4975(e)(1) of the Code, or
(b) its purchase or acquisition of this Certificate will not result in a
non-exempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA.
This Certificate is subject to prepayment by redemption or
acceleration as provided in Articles 6 and 15 of the Indenture.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue,
A-5
<PAGE> 79
and neither the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant nor the Company shall be affected by notice to
the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK.
A-6
<PAGE> 80
IN WITNESS WHEREOF, the Owner Trustee has caused this
Certificate to be executed in its corporate name by its officer thereunto duly
authorized on the date hereof.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee
By:
-----------------------------------
Title:
A-7
<PAGE> 81
[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
Indenture Trustee
By:
-----------------------------------
Title:
A-8
<PAGE> 82
Annex A to
Equipment Trust
Certificate
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
---------------------- ---------------------------
<S> <C>
</TABLE>
A-9
<PAGE> 83
Exhibit A-1 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N396SW Installment Certificates
$________________ No. ________________
Dated as of ______________ __, 199_
SERIES SWA 1995 TRUST N396SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of April 1, 1995
Issued in connection with Aircraft N396SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of April 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars in
installments on each Installment Payment Date as set forth herein with the
final installment due and payable on the Maturity Date specified above and to
pay interest on the principal amount remaining unpaid from time to time at the
rate per annum specified above from ________________, 1995 or from the most
recent date to which interest has been paid or duly provided for, semiannually,
on _____________ and _______ in each year, commencing ____________________,
1995, until the principal hereof is paid or made available for payment in full.
All amounts payable by the Owner Trustee hereunder and under the Trust
Indenture and Security Agreement dated as of April 1, 1995, as supplemented (as
amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and the other amounts referred to in Section
3.03 of the Indenture for
<PAGE> 84
payment of such amounts, to the extent available for distribution to the Holder
hereof as provided in the Indenture and (b) neither the Owner Trustee, the
Owner Participant nor the Indenture Trustee is or shall be personally liable to
the Holder hereof for any amount payable hereunder or under the Indenture or
the other Operative Agreements or, except as provided in the Indenture, for any
liability under the Indenture.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payments Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
A-1-2
<PAGE> 85
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee, the
Owner Participant and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, and the terms upon
which the Certificates may be redeemed, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein.
<TABLE>
<CAPTION>
Installment Installment
Payment Payment
Date Percentage
----------- -----------
<S> <C>
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
</TABLE>
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Certificates may be
declared due and payable in the manner and with the effect provided in the
Indenture. If, and only if, such an Indenture Event of Default constitutes a
Lease Event of Default by the Company under the Lease, the Indenture Trustee
may, to the exclusion of the Owner Trustee, exercise one or more of the
remedies of the Owner Trustee provided in the Lease. Such remedies include (but
are not limited to) the right to repossess and use or operate the Aircraft, to
sell or relet the Aircraft free and clear of the Company's rights and retain
the proceeds and to require the Company to pay as liquidated damages (i) any
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
A-1-3
<PAGE> 86
Value of the Aircraft over the aggregate fair market rental value thereof for
the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for
A-1-4
<PAGE> 87
a like aggregate principal amount of Certificates of the same maturity and type
and of authorized denominations, as requested by the Holder surrendering the
same, upon presentation thereof for such purpose at the principal corporate
trust office of the Registrar, or at an office or agency maintained for such
purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-1-5
<PAGE> 88
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee
By:
-----------------------------------
Title:
Issue Date:
A-1-6
<PAGE> 89
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
Indenture Trustee
By:
-----------------------------------
Authorized officer or signatory
A-1-7
<PAGE> 90
Exhibit A-2 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N396SW Serial Certificates
$________________ No. ________________
Dated as of __________________ __, 199_
SERIES SWA 1995 TRUST N396SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of April 1, 1995
Issued in connection with Aircraft N396SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of April 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars on the
Maturity Date specified above and to pay interest thereon at the rate per annum
specified above from ________________, 1995 or from the most recent date to
which interest has been paid or duly provided for, semiannually, on
_______________________ and ___________________ in each year, commencing
______________________, 1995, until the principal hereof is paid or made
available for payment. All amounts payable by the Owner Trustee hereunder and
under the Trust Indenture and Security Agreement dated as of April 1, 1995, as
supplemented (as amended or supplemented from time to time referred to herein
as the "Indenture", the defined terms therein not otherwise defined herein
being used herein with the same meanings), by and among the Owner Trustee and
Wilmington Trust Company, as Indenture Trustee thereunder, shall be made only
from the income and proceeds of the Indenture Estate and the other amounts
referred to in Section 3.03 of the Indenture. Each Holder hereof, by its
acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for
<PAGE> 91
any amount payable hereunder or under the Indenture or the other Operative
Agreements or, except as provided in the Indenture, for any liability under the
Indenture.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
A-2-2
<PAGE> 92
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee, the
Owner Participant and the Holders of the Certificates, and the terms upon which
the Certificates are, and are to be, executed and delivered, the terms upon
which the Certificates may be redeemed, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the right
to repossess and use or operate the Aircraft, to sell or relet the Aircraft
free and clear of the Company's rights and retain the proceeds and to require
the Company to pay as liquidated damages (i) any unpaid Basic Rent plus an
amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated
A-2-3
<PAGE> 93
Certificates, maintain paying agencies and hold money for payment in trust),
and the Indenture Trustee may thereupon cause the release of the Indenture
Estate from the lien of the Indenture, if (a) the Owner Trustee deposits or
causes to be deposited irrevocably with the Indenture Trustee, in trust, money
or Government Obligations which through the payment of interest and principal
in respect thereof in accordance with their terms will provide money in an
amount sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
CertifiCate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-2-4
<PAGE> 94
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee
By:
-----------------------------------
Title:
Issue Date:
A-2-5
<PAGE> 95
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
Indenture Trustee
By:
-----------------------------------
Authorized officer or signatory
A-2-6
<PAGE> 96
Exhibit B to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts and
Interest Rates of Series SWA 1995 Trust N396SW Certificates
<TABLE>
<CAPTION>
Premium
Principal Termination
Maturity Date Amount Interest Rate Date
- ------------- -------- ------------- ------------
<S> <C> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N396SW
Certificates, if any shall be issued hereunder.]
</TABLE>
<PAGE> 97
Exhibit B-1 to
Trust Indenture and
Security Agreement
Installment Payment Dates and Installment Payment Percentages
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N396SW
Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
Installment Certificate No. 2 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N396SW
Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
<PAGE> 98
Exhibit B-2 to
Trust Indenture and
Security Agreement
Issuance of Series SWA 1995 Trust N396SW Certificates
The Series SWA 1995 Trust N396SW Certificates issued hereunder
shall be issued to and shall be payable to _________ under the __________ with
respect to the [grantor trusts created thereby], in each case as set forth
below:
<PAGE> 99
Exhibit C to
Trust Indenture and
Security Agreement
[FORM OF]
TRUST AGREEMENT AND TRUST INDENTURE AND
SECURITY AGREEMENT SUPPLEMENT
This TRUST AGREEMENT AND TRUST INDENTURE AND SECURITY
AGREEMENT SUPPLEMENT, is dated ____________, 1995 (herein called the
"Supplement") of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee (herein called the "Owner
Trustee"), under the Trust Agreement, dated as of April 1, 1995 (herein called
the "Trust Agreement"), between the Owner Trustee and the Owner Participant
named therein,
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and
delivery of one or more supplements thereto substantially in the form hereof,
which shall particularly describe the Aircraft (such term and other terms
defined in the Trust Indenture referred to below, or in the Lease therein
referred to, being used herein as therein defined) included in the property
covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Security Agreement, dated as
of April 1, 1995 (herein called the "Trust Indenture"), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee (herein called the
"Indenture Trustee"), provides for the execution and delivery of a supplement
thereto substantially in the form hereof, which shall particularly describe the
Aircraft, and shall specifically mortgage such Aircraft to the Indenture
Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture
relates to the Airframe and Engines described below, and a counterpart of the
Trust Indenture is attached hereto and made a part hereof and this Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, This Supplement Witnesseth, that, to secure
the prompt payment of the principal of, Break Amount, if any, Premium, if any,
and interest on, and all other amounts due with respect to, all Certificates
from time to time Outstanding and all other amounts due to the Holders under
the Trust Indenture and the Participation Agreement and the performance and
observance by each of the Company and the Owner Trustee of all the agreements,
covenants and provisions in the Trust Indenture and in the other Operative
Agreements for the benefit of the Indenture Trustee and the Holders of the
Certificates and in the Certificates contained, and the prompt payment of all
amounts from time to time owing under the Operative Agreements to the Holders
of the Certificates, and for the uses and purposes of the Trust Indenture, and
in consideration of the premises and of the covenants contained in the Trust
Indenture, and of the acceptance of the Certificates by the Holders thereof,
and of the sum of $1.00 paid to the Owner Trustee by the Indenture Trustee at
or before the delivery hereof, the receipt whereof is hereby acknowledged, the
Owner Trustee has
<PAGE> 100
granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged
and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, upon the trusts created by the Trust Indenture, all right, title
and interest of the Owner Trustee in, to and under the following described
property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ ---------------
<S> <C> <C> <C>
The Boeing Company 737-3H4 N396SW 27690
</TABLE>
together with all Parts relating to such airframe.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, whether or not such
engines shall be installed in or attached to the Airframe or any other
airframe, identified as follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ ----- ---------------
<S> <C> <C>
CFM International CFM56-3-B1 856995
CFM International CFM56-3-B1 857982
</TABLE>
together with all Parts relating to such engines.
Together with all substitutions or replacements of and
additions, improvements, accessories and accumulations to the property above
described for which title vests in the Owner Trustee under the Operative
Agreements and all property which shall hereafter become physically attached to
or incorporated in the property above described, whether the same are now owned
by the Owner Trustee or shall hereafter be acquired by it for which title vests
in the Owner Trustee under the Operative Agreements.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, in the trust created by the Trust Indenture, all of the right,
title and interest of the Owner Trustee in, to and under the Lease Supplement
of even date herewith covering the property described above.
C-2
<PAGE> 101
Notwithstanding any provision hereof, no Excluded Payment
shall constitute security for any of the aforementioned obligations, and
nothing herein shall impair in any respect the rights of the Owner Trustee or
the Owner Participant under Section 9.13 or 11.06 of the Trust Indenture.
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Holders from time to time of the Certificates for
the uses and purposes and subject to the terms and provisions set forth in the
Trust Indenture.
This Supplement shall be construed as supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
AND, FURTHER, the Owner Trustee hereby acknowledges that the
Aircraft referred to in this Supplement and the aforesaid Lease Supplement has
been delivered to the Owner Trustee and is included in the property of the
Owner Trustee covered by all the terms and conditions of the Trust Agreement,
subject to the pledge and mortgage thereof under the Trust Indenture.
THIS SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
C-3
<PAGE> 102
IN WITNESS WHEREOF, the Owner Trustee has caused this
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee
By:
-----------------------------------
Title:
C-4
<PAGE> 1
EXHIBIT 4.5
________________________________________________________________________________
FIRST AMENDMENT
TO
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly set forth herein and
otherwise solely as Owner Trustee
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
One Boeing 737-3H4 Aircraft N396SW
Southwest Airlines Co.
Series 1995 Trust N396SW Certificates
(Southwest Airlines 1995 Trust N396SW)
________________________________________________________________________________
<PAGE> 2
FIRST AMENDMENT TO
TRUST INDENTURE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO TRUST INDENTURE AND SECURITY AGREEMENT N396SW)
dated as of October 1, 1995 (this "Amendment") between SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, in its individual capacity only as expressly
set forth herein and otherwise solely as Owner Trustee under that certain Trust
Agreement establishing the Southwest Airlines 1995 Trust N396SW and dated as of
April 1, 1995 (in such capacity, the "Owner Trustee") and WILMINGTON TRUST
COMPANY, as Indenture Trustee (the "Indenture Trustee"), amends that certain
related Trust Indenture and Security Agreement dated as of April 1, 1995 (the
"Original Indenture") between the Owner Trustee and the Indenture Trustee (the
Original Indenture, as supplemented by Trust Agreement and Trust Indenture and
Security Agreement Supplement dated April 3, 1995 by the Owner Trustee, being
referred to herein as the "Indenture"),
W I T N E S S E T H :
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Indenture;
WHEREAS, a counterpart to the Indenture was recorded by the Federal
Aviation Administration on April 5, 1995 and assigned Conveyance No. JJ13609;
WHEREAS, the Owner Trustee has agreed to refinance the Series SWA 1995
Trust N396SW-I Certificates with Series 1995 Trust N396SW Certificates; and
WHEREAS, in order to effect such refinancing, the Owner Trustee and
the Indenture Trustee have agreed to amend the Indenture as provided for below;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to the Indenture. The Indenture is, effective
as of the date hereof, hereby amended as follows:
(a) The definitions of "Business Day" and "Holder" in
Section 1.01(b) of the Indenture are amended in their entirety to read
as follows:
"Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or
authorized to close in the City of Dallas, Texas; New York,
New York; San Francisco, California; or the city and state in
which (i) so long as any Certificates shall be Outstanding,
each of the Indenture Trustee and the Pass Through Trustee and
(ii) thereafter, the Owner Trustee, has its principal place of
business; or the city and state in which the
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
-1-
<PAGE> 3
Indenture Trustee, the Pass Through Trustee or the Owner
Trustee, as the case may be, receives and disburses funds.
"Holder" or "Certificate Holder" means a Person in
whose name a Certificate is registered on the Register
including, so long as it holds a Series SWA 1995 Trust N396SW
Certificate, the Pass Through Trustee.
(b) The following new definitions are inserted in Section
1.01(b) of the Indenture after the definition of "Owner Trustee":
"Pass Through Certificates" means any of the Pass
Through Certificates issued pursuant to the Pass Through Trust
Agreements.
"Pass Through Trust" means each pass through trust
created pursuant to the Pass Through Trust Agreements.
"Pass Through Trust Agreements" means the Pass
Through Trust Agreement dated as of February 1, 1993, between
the Company and the Pass Through Trustee, as supplemented by
the four Trust Supplements Nos. 1995-A1, 1995-A2, 1995-A3 and
1995-A4, each dated as of October 1, 1995, as the same may
from time to time be further amended, supplemented or
otherwise modified.
"Pass Through Trustee" means Wilmington Trust Company
in its capacity as trustee under each Pass Through Trust
Agreement, and such other Person that may from time to time be
acting as successor trustee under any such Pass Through Trust
Agreement.
(c) The first sentence of Section 6.02 of the Indenture
is amended by adding thereto the words "(x) the Premium Termination
Date in respect of such Certificate and (y)" immediately before the
words "the 181st day" therein.
(d) Exhibits A-1, A-2, B, B-1 and B-2 to the Indenture
are replaced in their entirety by Exhibits A-1, A-2, B, B-1 and B-2
hereto. Said revised Exhibits B, B-1 and B-2 shall, for all purposes,
be deemed to have been, and are, completed in accordance with Article
15 of the Indenture.
Section 2. Lease Amendment. As of the date hereof, the Lessee
and the Owner Trustee are entering into First Amendment to Sale and Lease
Agreement (the "Lease Amendment") to the Sale and Lease Agreement dated as of
April 1, 1995 relating to the Aircraft, which Sale and Lease Agreement
(together with Sale and Lease Agreement Supplement No. 1, dated April 3, 1995
thereto) was recorded with the Federal Aviation Administration on April 5, 1995
and assigned Conveyance No. JJ13610. The Lease Amendment is attached hereto
and, without limiting the generality of the Granting Clause of the Indenture,
is covered by the Lien of the Indenture and is made part of the Indenture
Estate.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
-2-
<PAGE> 4
Section 3. Amendment and Incorporation by Reference. This
Amendment is and shall be construed as an amendment and supplement to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated herein by reference and is hereby ratified, approved and
confirmed.
Section 4. GOVERNING LAW. THIS AMENDMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 5. Execution in Counterparts. This Amendment may be
executed by the Owner Trustee and the Indenture Trustee in separate
counterparts, each of which when so executed and delivered is an original, but
all such counterparts shall together constitute but one and the same
instrument.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
-3-
<PAGE> 5
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity
only as expressly set forth
herein and otherwise solely as
Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY,
not in its individual
capacity, except as otherwise
expressly provided herein,
but solely as Indenture Trustee
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
-4-
<PAGE> 6
Exhibit A-1 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N396SW Installment Certificates
$______________ No._____________
Dated as of April 3, 1995
SERIES SWA 1995 TRUST N396SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of April 1, 1995
Issued in connection with Aircraft N396SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, _____
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of April 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to _______________ or
registered assigns the principal sum of ______________ Dollars in installments
on each Installment Payment Date as set forth herein with the final installment
due and payable on the Maturity Date specified above and to pay interest on the
principal amount remaining unpaid from time to time at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment in full. All amounts payable by the Owner
Trustee hereunder and under the related Trust Indenture and Security Agreement
dated as of April 1, 1995, as supplemented and
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-1-1
<PAGE> 7
amended by Trust Agreement and Trust Indenture and Security Agreement
Supplement dated April 3, 1995 and First Amendment to Trust Indenture and
Security Agreement dated as of October 1, 1995 (as further amended or
supplemented from time to time referred to herein as the "Indenture", the
defined terms therein not otherwise defined herein being used herein with the
same meanings), by and among the Owner Trustee and Wilmington Trust Company, as
Indenture Trustee thereunder, shall be made only from the income and proceeds
of the Indenture Estate and the other amounts referred to in Section 3.03 of
the Indenture. Each Holder hereof, by its acceptance of this Certificate,
agrees that (a) it will look solely to the income and proceeds of the Indenture
Estate and the other amounts referred to in Section 3.03 of the Indenture for
payment of such amounts, to the extent available for distribution to the Holder
hereof as provided in the Indenture and (b) neither the Owner Trustee, the
Owner Participant nor the Indenture Trustee is or shall be personally liable to
the Holder hereof for any amount payable hereunder or under the Indenture or
the other Operative Agreements or, except as provided in the Indenture, for any
liability under the Indenture.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-1-2
<PAGE> 8
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payment Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of any authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee, the
Owner Participant and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, and the terms upon
which the Certificates may be redeemed, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein, all as shown on Exhibit A hereto.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Basic Rent plus
an amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-1-3
<PAGE> 9
unpaid Basic Rent plus the excess of the Stipulated Loss Value of the Aircraft
over the fair market sales value thereof or (iii) if the Aircraft has been
sold, any unpaid Basic Rent plus the excess of the Stipulated Loss Value
thereof over the net sales proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-1-4
<PAGE> 10
aggregate principal amount of Certificates of the same maturity and type and of
authorized denominations, as requested by the Holder surrendering the same,
upon presentation thereof for such purpose at the principal corporate trust
office of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration or
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-1-5
<PAGE> 11
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-1-6
<PAGE> 12
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: ___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-1-7
<PAGE> 13
Exhibit A-2 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N396SW Serial Certificates
$___________________ No._______________
Dated as of April 3, 1995
SERIES SWA 1995 TRUST N396SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of April 1, 1995
Issued in connection with Aircraft N396SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, ______
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of April 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ___________ or
registered assigns the principal sum of ___________ Dollars on the Maturity
Date specified above and to pay interest thereon at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment. All amounts payable by the Owner Trustee
hereunder and under the related Trust Indenture and Security Agreement dated as
of April 1, 1995, as supplemented and amended by Trust Agreement and Trust
Indenture and Security Agreement Supplement dated April 3, 1995 and First
Amendment to Trust Indenture and Security Agreement dated as of
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-2-1
<PAGE> 14
October 1, 1995 (as further amended or supplemented from time to time referred
to herein as the "Indenture", the defined terms therein not otherwise defined
herein being used herein with the same meanings), by and among the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder, shall be
made only from the income and proceeds of the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture. Each Holder hereof, by
its acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and other amounts referred to in
Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for any amount
payable hereunder or under the Indenture or the other Operative Agreements or,
except as provided in the Indenture, for any liability under the Indenture.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-2-2
<PAGE> 15
debts; provided, however, that payment of interest may be made at the option of
the Indenture Trustee or the Paying Agent by check mailed on or before the due
date to the address of the Holder entitled thereto as such address shall appear
on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Owner Participant the
Indenture Trustee and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, and the terms upon
which the Certificates may be redeemed, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Basic Rent plus
an amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-2-3
<PAGE> 16
performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company, subject,
however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-2-4
<PAGE> 17
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-2-5
<PAGE> 18
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-2-6
<PAGE> 19
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: _________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
A-2-7
<PAGE> 20
Exhibit B to
First Amendment to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N396SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A1 July 1, 1997 $425,123.00 6.16% * Serial
1995-A2 July 1, 1998 $451,310.50 6.29% * Serial
1995-A3 January 1, 2013 $18,310,765.10 7.22% October 4, 2007 Installment
1995-A4 July 1, 2016 $4,104,810.30 7.64% January 4, 2016 Installment
</TABLE>
____________________________
* Not applicable.
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
B-1
<PAGE> 21
Exhibit B-1 to
First Amendment to
Trust Indenture and
Security Agreement
PAYMENT DATES AND PAYMENT PERCENTAGES AND AMOUNTS
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
B-1-1
<PAGE> 22
Exhibit B-2 to
First Amendment to
Trust Indenture and
Security Agreement
ISSUANCE OF SERIES SWA 1995 TRUST N396SW CERTIFICATES
The Series SWA 1995 Trust N396SW Certificates issued hereunder
shall be issued to and shall be payable to the Pass Through Trustee under each
Pass Through Trust Agreement with respect to the grantor trust created thereby,
in each case as set forth below:
1995-A1 Trust:
6.16% Certificate due July 1, 1997
1995-A2 Trust:
6.29% Certificate due July 1, 1998
1995-A3 Trust:
7.22% Certificate due January 1, 2013
1995-A4 Trust:
7.64% Certificate due July 1, 2016
TRUST INDENTURE AND SECURITY AGREEMENT [N396SW]
B-2-1
<PAGE> 1
EXHIBIT 4.7
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
dated as of April 1, 1995
among
SOUTHWEST AIRLINES CO.,
Lessee,
FORD MOTOR CREDIT COMPANY,
Owner Participant,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
Original Loan Participant,
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N396SW
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Certain Definitions; Participations in Lessor's Cost of the Aircraft . . . . . . . . . . . . . . . . . 2
SECTION 2. Lessee's Notice of Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the Aircraft . . . . . . . . . . . . . . . . . . . 6
(i) Notice; Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ii) No Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(iii) Original Loan Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . . 7
(iv) Owner Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Authorization, Execution and Delivery of Documents . . . . . . . . . . . . . . . . . . 7
(vi) UCC-1's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(vii) Proof of Corporate Action, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(viii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . . . . . . 10
(x) Representations and Warranties Accurate; No Event of Default; No Adverse
Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xi) Opinions of Lessee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xii) Opinion of Manufacturer's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xiii) Opinion of Owner Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xiv) Opinions of Owner Participant's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 11
(xv) Opinion of Oklahoma City Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xvi) Opinion of Indenture Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 11
(xvii) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xviii) Lessee's Bringdown Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xix) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxi) Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxii) No Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxiii) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxiv) Bringdown of Other Parties' Representations and Warranties . . . . . . . . . . . . . . 12
(xxv) Opinion of Owner Participant's Tax Counsel . . . . . . . . . . . . . . . . . . . . . . 12
(xxvi) No Tax Law Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxvii) Copy of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(xxviii) Withholding Tax Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Conditions Precedent to the Obligations of Lessee . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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SECTION 5. Confidentiality of Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6. Extent of Interest of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(iii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(iv) Valid Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(vi) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(vii) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(viii) Registration and Recordation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(ix) Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(x) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xi) No Misstatement or Omission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xii) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xiii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xiv) Effective Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xv) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xvii) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xviii) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xix) No Federal Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xx) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(iii) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(iv) Notice and Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(v) Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(iii) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(iv) Right to Defend; Subrogation; Fees and Expenses of Trustees. . . . . . . . . . . . . . 27
(d) Owner Participant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(g) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8. Other Representations, Warranties, Covenants and Indemnities . . . . . . . . . . . . . . . . . . . . . 30
(a) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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(c) Chief Executive Office of SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(f) Owner Participant's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 31
(g) Lessor Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Indenture Trustee Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(i) Termination Instructions to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(j) Excess Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(k) Representations and Warranties of Indenture Trustee in Individual Capacity . . . . . . . . . . . 33
(l) Transfers of Equity Interests; Rights of Owner Participant and Owner Trustee . . . . . . . . . . 34
(m) Obligations of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(n) Compliance with Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(o) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(p) SBC's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(q) Owner Participant's Lease Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(r) Lessee's Assumption of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(s) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(t) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(u) Lease Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(v) Revocation of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(w) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(x) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(y) Discharge of Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(z) Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(aa) Assumption on Exercise of Purchase Option With Installments. . . . . . . . . . . . . . . . . . . 41
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(cc) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(dd) Deferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(ee) Lessee as Pricing Agent for Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9. Payments to Lessee of Trust Indenture Monies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 10. Other Documents; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 11. Certain Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(c) FAA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Engine Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(f) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(g) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(i) No Certificate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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SECTION 12. Ownership of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 13. Notices; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 14. Change of Situs of Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(a) Consents under Lease and Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(c) Counterparts; Waivers; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(d) No Recourse Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(e) Duties Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(f) Binding on Parties and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(g) Enforceability Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(h) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 16. Transaction Costs; Invoices and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 17. Optional Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 18. Interim Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 19. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
SCHEDULE III
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
</TABLE>
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of April 1, 1995 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) FORD MOTOR CREDIT COMPANY, a Delaware corporation (the "Owner
Participant"), (iii) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association (the "Original Loan Participant"), (iv) SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, in its
individual capacity, only as expressly provided herein (in such capacity,
"SBC") and otherwise, solely as Owner Trustee under the Trust Agreement (in
such capacity, the "Owner Trustee"), and (v) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, in its individual capacity and as Indenture
Trustee under the Trust Indenture (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, one of which, having U.S. Registration No. N396SW and Manufacturer's
serial number 27690, has been recently purchased by Lessee and is the subject
of this Agreement; and
WHEREAS, immediately prior to the execution and delivery of
this Agreement, the Owner Participant and the Owner Trustee have entered into
the Trust Agreement pursuant to which the Owner Trustee has agreed, among other
things, to hold the Trust Estate defined in Section 1.01 thereof (the "Trust
Estate") for the use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
(i) Lessee and the Owner Trustee are entering
into the Purchase Agreement Assignment whereby Lessee agrees to assign
to the Owner Trustee certain rights and interests of Lessee under the
Purchase Agreement with respect to the Aircraft; and
(ii) the Manufacturer has executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and
WHEREAS, the Indenture Trustee and the Owner Trustee
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft created
PARTICIPATION AGREEMENT [N396SW]
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pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
WHEREAS, as described in Section 2 hereof, concurrently with
the execution and delivery of this Agreement, the Owner Trustee and Lessee are
entering into the Lease whereby, subject to the terms and conditions set forth
therein, the Owner Trustee agrees to purchase the Aircraft from Lessee and to
lease the same back to Lessee, and Lessee agrees to sell the Aircraft to the
Owner Trustee and to lease the same back from the Owner Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "SBC," "Owner Trustee" and "Indenture Trustee"
shall have the further meanings attributed thereto in the Sale and Lease
Agreement dated as of the date hereof (the "Lease") between the Owner Trustee
and Lessee relating to the Aircraft referred to in the first recital herein,
and, except as otherwise defined in this Agreement, terms used herein in
capitalized form shall have the meanings attributed thereto in the Lease or, if
not defined therein, in the Trust Indenture. The term "Trust Supplement" has
the meaning attributed to the term "Indenture and Trust Supplement" in the
Lease and to the term "Trust Supplement" in the Trust Indenture. Unless the
context otherwise requires, any reference herein to any of the Operative
Agreements refers to such document as it may be amended from time to time in
accordance with its terms and the terms of each other agreement restricting the
amendment thereof. All rules of construction referred to in Section 1 of the
Lease shall apply to this Agreement likewise.
(b) Subject to the terms and conditions of this Agreement
(including Section 4), (i) the Original Loan Participant agrees to finance, in
part, the Owner Trustee's payment of Lessor's Cost for the Aircraft by making a
secured loan to the Owner Trustee (herein called the "Loan") on a date to be
designated pursuant to Section 2 hereof, in the amount in Dollars equal to the
lesser of (x) the percentage of Lessor's Cost and (y) the actual Dollar amount
set forth opposite its name on Schedule II hereto and (ii) the Owner
Participant hereby agrees, in connection with its equity investment in the
beneficial ownership of the Aircraft and the sale of the Aircraft by Lessee to
the Owner Trustee pursuant to the Lessee FAA Bill of Sale and Lessee Warranty
Bill of Sale, as contemplated hereby, to make its equity investment in the
beneficial ownership of the Aircraft on a date to be designated pursuant to
Section 2 hereof, in an amount in Dollars equal to the lesser of (x) the
percentage of Lessor's Cost and (y) the actual Dollar amount set forth opposite
its name on Schedule II hereto. In the case of the Owner Participant, the
amount of such equity investment to be made as provided above in the payment of
Lessor's Cost and, in the case of the Original Loan Participant, the aggregate
principal amount of the Series SWA 1995 Trust N396SW-I Certificate to be
simultaneously issued to it, is hereinafter called such Participant's
"Commitment" for the Aircraft. In case either Participant shall default in its
obligation to make the amount of its Commitment available pursuant to Section 2
hereof in respect of the Aircraft, the other Participant shall have no
obligation to make any portion of such amount available or to increase
PARTICIPATION AGREEMENT [N396SW]
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the amount of its Commitment and the obligation of the nondefaulting
Participant shall remain subject to the terms and conditions set forth in this
Agreement.
(c) In the event that either Participant shall for any
reason fail or refuse to make the full amount of its Commitment available to
the Owner Trustee in accordance with the terms of paragraph (b) of this Section
1 (such Participant, for the purpose of this Agreement, being called a
"Defaulting Participant"), the Owner Trustee shall give, at the earliest
practicable time (which may be the next Business Day), each party hereto
telephonic notice (to be confirmed promptly in writing) of such failure or
refusal and any funds received by the Owner Trustee in connection with the
Aircraft will be held in accordance with the terms of, and for the period
provided in, paragraph (b) of Section 2. In such event the Defaulting
Participant will have no further right to participate in, or make a loan for,
as the case may be, the payment of Lessor's Cost for the Aircraft. Lessee
shall have the right to designate a financial institution (which term, as used
in this paragraph (c), shall mean any banking or financial institution,
institutional investor or fund which is not affiliated with Lessee or with
Owner Participant) to be substituted for the Defaulting Participant; provided,
however, that (i) such substituted financial institution shall sign and deliver
an amendment to this Agreement, in form and substance satisfactory to the Owner
Trustee, the Indenture Trustee and the remaining Participant (other than the
Defaulting Participant), whereby such financial institution agrees to be a
party to this Agreement, to be bound by all the terms hereof and to undertake
all the obligations of the Defaulting Participant contained herein, other than
obligations, if any, arising from the aforesaid failure or refusal by such
Defaulting Participant, (ii) if the Defaulting Participant is Owner Participant
(A) such substituted financial institution shall have been approved by all
Original Loan Participants, (B) each such substituted financial institution
shall be domiciled in the United States and shall be a citizen of the United
States within the meaning of the Act and shall have the requisite power and
authority to enter into and carry out the transactions contemplated by this
Agreement and the Trust Agreement, (C) such substituted financial institution
shall enter into amendments to the Trust Agreement, in form and substance
satisfactory to the Owner Trustee, the Indenture Trustee and the Original Loan
Participants, whereby such substituted financial institution agrees to be a
party to the Trust Agreement, to be bound by all the terms thereof and to
undertake all the obligations of the Defaulting Participant contained therein,
and (D) the substitution of such substituted financial institution as above
provided shall not violate any provisions of the Act or the regulations
promulgated thereunder, or create a relationship which would be in violation
thereof and such substituted financial institution shall so represent in
writing to each other party hereto, and (iii) if the Defaulting Participant is
an Original Loan Participant, such substituted financial institution shall be
approved in writing by Owner Participant and the Agent. No action by Lessee in
finding a financial institution to be substituted as above provided shall be
deemed to constitute a waiver or release of any right which Lessee may have
against the Defaulting Participant. Each financial institution substituted for
an Original Loan Participant pursuant to this paragraph (c) shall be deemed an
Original Loan Participant for all purposes of this Agreement and the other
Operative Agreements; and each financial institution substituted for the Owner
Participant pursuant to this paragraph (c) shall (collectively, if more than
one) be deemed the Owner Participant for all purposes of this Agreement and the
other Operative Agreements.
PARTICIPATION AGREEMENT [N396SW]
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SECTION 2. Lessee's Notice of Delivery Date. (a) Lessee
agrees to give the Owner Participant, the Owner Trustee, the Original Loan
Participant and the Indenture Trustee at least three (3) Business Days' written
notice of the Delivery Date for the Aircraft, which Delivery Date shall be a
Business Day not later than April 30, 1995. As to each Participant, the making
of its Commitment for such Aircraft available in the manner required by this
Section 2 shall constitute a waiver of such notice. The Owner Trustee and the
Indenture Trustee shall be deemed to have waived such notice if the Owner
Trustee shall have received from the Owner Participant funds in the full amount
of the Owner Participant's Commitment and the proceeds of the sale of the
Series SWA 1995 Trust N396SW-I Certificate in the full amount of the Original
Loan Participant's Commitment.
Subject to the terms and conditions of this Agreement
(including Section 4), and simultaneously with receipt by the parties hereto of
all amounts to be paid to them on the Delivery Date pursuant to this Section 2,
(x) Lessee shall transfer title to and deliver the Aircraft to the Owner
Trustee, the Owner Trustee shall purchase and take title to, and accept
delivery of, the Aircraft, the Owner Trustee shall lease the Aircraft to Lessee
and Lessee shall lease the Aircraft from the Owner Trustee, it being understood
that the transactions described in this Section 2 shall be simultaneous and
mutually dependent and (y) the Owner Trustee shall issue and the Indenture
Trustee shall authenticate the Series SWA 1995 Trust N396SW-I Certificate which
shall be delivered simultaneously to the Original Loan Participant. On the
Delivery Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. 98120109 at Bank One, Dallas, N.A., ABA No. 111000614,
1717 Main Street, Dallas, Texas.
Subject to the terms and conditions of this Agreement
(including Section 4), the Original Loan Participant and the Owner Participant
each agree to make its Commitment available to Shawmut Bank Connecticut,
National Association, Hartford, Connecticut, Account No. 0067548290, ABA No.
011-900-445, Reference: Southwest Airlines 1995 Trust N396SW, at or before
10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's notice
referred to in the first paragraph of this Section 2 (such specified Delivery
Date, or the date on which the Commitments are made available as a waiver of
such notice, being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than April 30, 1995. In the event that no
Delayed Delivery Date is designated or, if designated, such closing does not
occur on the Delayed Delivery Date, or if any Participant shall so request,
such funds of each Participant shall be promptly returned to it by the Owner
Trustee or the Indenture Trustee, as the case may be.
PARTICIPATION AGREEMENT [N396SW]
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If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
made available for the period from and including the Scheduled Delivery Date to
but excluding the Delayed Delivery Date, or, as the case may be, to but
excluding the Business Day on which such Participant's funds are returned if
such return is made by 10:00 a.m. (New York City time) or to but excluding the
next following Business Day if such return is not made by such time and, in the
case of the Original Loan Participant, for the Break Amount, if any, applicable
to the Series SWA 1995 Trust N396SW-I Certificate.
"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Original
Loan Participant, the rate per annum borne by the Series SWA 1995 Trust
N396SW-I Certificate in respect of which such Original Loan Participant's
Commitment is made available. "Federal Funds Effective Rate" means, for any
period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for the day of such
transactions received by the Owner Participant from three federal funds brokers
of recognized standing selected by it; provided, that, subject to the
foregoing, the "Federal Funds Effective Rate" for any non-Business Day shall be
the "Federal Funds Effective Rate" for the previous Business Day.
SBC agrees that in the event it has received telephonic notice
(to be confirmed promptly in writing) from Lessee on the Scheduled Delivery
Date that the closing of the transactions contemplated hereby will not be
consummated on the Scheduled Delivery Date, it will, if instructed in the
notice from Lessee in regard to the funds received by it from the Participants,
use reasonable efforts to invest, at the risk, expense and direction of Lessee,
the funds received by it from the Participants in marketable direct obligations
of the United States of America or obligations of any of its agencies that are
guaranteed as to principal and interest by the United States of America, in any
such case having a stated maturity not later than 91 days from the date of
acquisition. Any such investment may be made through a repurchase agreement in
commercially reasonable form with SBC or a bank or other financial institution
having capital, surplus and undivided profits of at least $100,000,000;
provided, that title to the underlying obligations shall pass to SBC and that
such underlying securities shall be segregated in a custodial or trust account
of or for the benefit of the Owner Trustee. Any such obligations purchased by
SBC, whether directly or through a repurchase agreement, shall be held in trust
by SBC (but not as part of the Trust Estate or Trust Indenture Estate) for the
benefit of the respective Participants. Lessee shall, on the Delayed Delivery
Date or the date the funds furnished by the Participants are required to be
returned to the Participants, as the case may be, reimburse SBC for the benefit
of the respective Participant, for any losses incurred on such investments.
PARTICIPATION AGREEMENT [N396SW]
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All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the respective accounts of the
Participants (such income and profits to be credited against Lessee's
obligation to reimburse the Participants for the loss of use of funds made
available to SBC) and all other income and profits and all losses on the
investment of such funds shall be for the account of Lessee; and SBC shall not
be liable for failure to invest such funds or for any losses incurred on such
investments except for its own willful misconduct or negligence. Any failure
by SBC to invest such funds shall not affect Lessee's obligations hereunder
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee. Subject to the terms and conditions of this Agreement, the
Owner Trustee, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with written instructions from such Participant or its
special counsel to release such funds to Lessee, shall transfer such funds to
Lessee and the Owner Trustee shall purchase the Aircraft from Lessee and lease
the Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
(a) to pay to Lessee (on behalf of the Owner Trustee) the
Lessor's Cost in the manner set forth in Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
(c) to accept from Lessee the Lessee Warranty Bill of
Sale and the Lessee FAA Bill of Sale and the invoice with respect to the
Aircraft;
(d) to execute an aircraft registration application, a
Lease Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow the Loan from the Holders to finance a
portion of Lessor's Cost and to issue to the Original Loan Participant a Series
SWA 1995 Trust N396SW-I Certificate in a principal amount equal to the amount
borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be
taken by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. Conditions. (a) Conditions Precedent to the
Participations in the Aircraft. It is agreed that the respective obligations
of the Participants to participate in the payments of Lessor's Cost and the
other transactions contemplated hereby are subject to the satisfaction prior to
or on the Delivery Date of the following conditions precedent, except that
paragraphs (iii), (xx), (xxiv) (insofar as it relates to the Original Loan
Participant), (xxv) and (xxvi) shall not be a condition precedent to the
obligation of the Original Loan Participant, and paragraphs (iv), (x)(B)
(insofar as it relates to an Indenture Event of Default attributable to the
PARTICIPATION AGREEMENT [N396SW]
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Owner Participant), (xiv), (xxiv) (insofar as it relates to representations of
the Owner Participant) and (xxvii) shall not be a condition precedent to the
obligation of the Owner Participant:
(i) Notice; Delivery Date. Each Participant
shall have received due notice with respect to such participation
pursuant to Section 2 hereof (or shall have waived such notice either
in writing or as otherwise provided in Section 2). The Delivery Date
shall have occurred on or before April 30, 1995.
(ii) No Change in Law. No change shall have
occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is, or is to become, a
party or (y) the Original Loan Participant or the Owner Participant to
make its Commitment available or, in the case of the Original Loan
Participant, to acquire the Series SWA 1995 Trust N396SW-I Certificate
or to realize the benefits of the security afforded by the Trust
Indenture.
(iii) Original Loan Participant's Commitment. In
the case of the Owner Participant, the Original Loan Participant shall
have made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(iv) Owner Participant's Commitment. In the case
of the Original Loan Participant, the Owner Participant shall have
made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(v) Authorization, Execution and Delivery of
Documents. The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto,
shall each be satisfactory in form and substance to the Participants
and shall be in full force and effect and executed counterparts shall
have been delivered to each Participant and its respective counsel;
provided, that only the Original Loan Participant shall receive an
executed original of the Series SWA 1995 Trust N396SW-I Certificate,
only the Indenture Trustee, acting on behalf of the Holders, shall
receive the original counterpart of the Lease and the initial Lease
Supplement, and only Lessee and the Owner Participant shall receive
copies of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering the
Aircraft and dated the Delivery Date;
(3) the Tax Indemnity Agreement;
PARTICIPATION AGREEMENT [N396SW]
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(4) the Trust Agreement;
(5) a Trust Supplement covering the
Aircraft and dated the Delivery Date;
(6) the Bills of Sale and an invoice
from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement Assignment;
(8) an acceptance certificate covering
the Aircraft in the form agreed to by the Participants and
Lessee (the "Acceptance Certificate") duly completed and
executed by the Owner Trustee or its agent, which shall be a
representative of Lessee, and by such representative on behalf
of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1995 Trust N396SW-I
Certificate; and
(11) the Manufacturer's Consent.
(vi) UCC-1's. Uniform Commercial Code financing
statement or statements covering all of the security interests created
by or pursuant to the Granting Clause of the Trust Indenture and
precautionary Uniform Commercial Code financing statement or
statements with respect to the Lease shall have been executed and
delivered, and all such financing statement or statements shall have
been duly filed in all places necessary or advisable, and any
additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Original Loan Participant
shall have been executed and delivered by Lessee, the Indenture
Trustee or the Owner Trustee and duly filed.
(vii) Proof of Corporate Action, Etc. Each
Participant and the Indenture Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(1) a certified copy of the Restated
Articles of Incorporation and Bylaws of Lessee and a copy of
resolutions of the board of directors of Lessee or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of Lessee, duly authorizing the execution,
delivery and performance by Lessee of this Agreement, the
Lease, the Purchase Agreement Assignment, the Lessee Warranty
Bill of Sale, the Lessee FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with
the provisions hereof and thereof;
PARTICIPATION AGREEMENT [N396SW]
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<PAGE> 14
(2) such other documents and evidence
with respect to Lessee, the Manufacturer, the Owner Trustee,
the Indenture Trustee and the Participants, as the Original
Loan Participant or the Owner Participant, or their respective
counsel, may reasonably request in order to establish the
authority of such parties to consummate the transactions
contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and the compliance with
the conditions herein set forth;
(3) a certificate of Lessee as to the
person or persons authorized to execute and deliver this
Agreement, the other Lessee Documents, and any other documents
to be executed on behalf of Lessee in connection with the
transactions contemplated hereby and as to the signature of
such person or persons;
(4) a copy of the Purchase Agreement (to
the Owner Participant and the Indenture Trustee only)
certified by the Treasurer, the Assistant Treasurer or an
Assistant Secretary of Lessee as being a true and accurate
copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations
or any right in such Agreement assigned by Lessee to the Owner
Trustee pursuant to the Purchase Agreement Assignment; and
(5) a copy of the general authorizing
resolutions of the boards of directors (or executive
committees) or other satisfactory evidence of authorization of
the Indenture Trustee (in its individual capacity), SBC and
the Owner Participant, certified as of the Delivery Date by
the Secretary or an Assistant Secretary of the Indenture
Trustee (in its individual capacity), SBC and the Owner
Participant, respectively, which authorize the execution,
delivery and performance by the Indenture Trustee (in its
individual capacity), SBC and the Owner Participant,
respectively, of all of the Operative Agreements to which it
is a party, together with such other documents and evidence
with respect to the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant as either the
Original Loan Participant (or its counsel) or the Owner
Participant (or its counsel) may reasonably request in order
to establish the consummation of the transactions contemplated
by this Agreement, the taking of all corporate proceedings in
connection therewith and compliance with the conditions herein
set forth; provided, this clause shall not be a condition
precedent as to any Participant as to documents to be provided
by that Participant.
(viii) Governmental Approvals. All appropriate
action required to have been taken by the Federal Aviation
Administration, or any other governmental or political agency,
subdivision or instrumentality of the United States, prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders,
PARTICIPATION AGREEMENT [N396SW]
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permits, waivers, authorizations, exemptions and approvals shall be in
full force and effect on the Delivery Date.
(ix) Title, Registration, Airworthiness, Etc. On
the Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:
(1) the Owner Trustee has good and
marketable title (subject to filing and recording of the
Lessee FAA Bill of Sale with the Federal Aviation
Administration in accordance with the Act) to the Aircraft,
free and clear of Liens other than the rights of Lessee under
the Lease and Lease Supplement covering the Aircraft, the
mortgage and security interest created by the Trust Indenture,
the rights of the Owner Participant under the Trust Agreement
and the Trust Supplement and Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the
Lease;
(2) application for registration of the
Aircraft in the name of the Owner Trustee (together with any
required affidavits), the FAA Bill of Sale and the Lessee FAA
Bill of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the Trust
Indenture and the Trust Supplement and the Lease and the Lease
Supplement have been duly filed with the FAA for recordation
pursuant to the Act;
(4) each of the Owner Trustee, as lessor
under the Lease, and the Indenture Trustee, as assignee
thereof, is entitled to the protection of Section 1110 of the
United States Bankruptcy Code in connection with its right to
take possession of the Airframe and Engines in the event of a
case under Chapter 11 of the United States Bankruptcy Code in
which Lessee is a debtor; and
(5) the Aircraft has been duly
certificated by the FAA as to type and airworthiness in
accordance with the terms of the Lease and has a current,
valid U.S. standard certificate of airworthiness issued by the
FAA.
(x) Representations and Warranties Accurate; No
Event of Default; No Adverse Change. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties shall be true and
accurate on and as of such earlier date), (B) no event shall have
occurred and be continuing, or would result from the purchase, sale,
lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) a
Lease Event of Default or an Indenture Event of Default, and (C) no
material adverse change shall have occurred
PARTICIPATION AGREEMENT [N396SW]
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<PAGE> 16
in the consolidated financial condition of Lessee and its subsidiaries
from that shown in the consolidated financial statements of Lessee and
its subsidiaries as of December 31, 1993.
(xi) Opinions of Lessee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee and the Owner Trustee from Vinson & Elkins L.L.P.,
special counsel to Lessee.
(xii) Opinion of Manufacturer's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee, the Indenture Trustee and Lessee from counsel to the
Manufacturer.
(xiii) Opinion of Owner Trustee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Shipman &
Goodwin, counsel for the Owner Trustee.
(xiv) Opinions of Owner Participant's Counsel. The
Original Loan Participant shall have received a favorable opinion, in
form and substance satisfactory to it, addressed to the Indenture
Trustee, the Original Loan Participant, the Owner Trustee and Lessee
from (a) White & Case, special New York counsel to the Owner
Participant and (b) Stanley E. Gutman, Esq., senior counsel to USL
Capital Corporation, agent for the Owner Participant.
(xv) Opinion of Oklahoma City Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma.
(xvi) Opinion of Indenture Trustee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee and Lessee from Potter Anderson & Corroon, special counsel for
the Indenture Trustee.
(xvii) [Intentionally Reserved].
(xviii) Lessee's Bringdown Certificate. Each
Participant and the Indenture Trustee shall have received a
certificate signed by the President, any Vice President, the Treasurer
or the Assistant Treasurer of Lessee, dated the Delivery Date,
certifying as to the fulfillment of all conditions in this Section
4(a) insofar as they relate to Lessee or the Aircraft.
(xix) [Intentionally Reserved].
PARTICIPATION AGREEMENT [N396SW]
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(xx) Appraisal. The Owner Participant shall have
received an opinion, in form and substance reasonably satisfactory to
the Owner Participant, from Aero Economics, Inc., independent aircraft
appraisers, or such other recognized aircraft appraiser selected by
the Owner Participant, to the effect set forth in Schedule III hereto
and with respect to such other matters as the Owner Participant shall
request.
(xxi) Insurance Certificates. Each Participant,
the Owner Trustee and the Indenture Trustee shall have received an
independent insurance broker's report and certificates of insurance,
in form and substance reasonably satisfactory to the Participants, as
to the due compliance with the terms of Section 11 of the Lease
relating to insurance with respect to the Aircraft.
(xxii) No Event of Loss. On the Delivery Date, it
shall be true that no Event of Loss (or event which with the passage
of time would become an Event of Loss) with respect to the Airframe or
any Engine has occurred.
(xxiii) No Proceedings. No action or proceeding
shall have been instituted, nor shall action or proceeding be
threatened before any court or governmental agency, nor shall any
order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency at the time of the Delivery Date to
set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) Bringdown of Other Parties' Representations
and Warranties. The respective representations and warranties of each
Participant, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof shall be true and accurate as of the Delivery Date as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which event such representations and warranties shall have been true
and accurate on and as of such earlier date), it being understood and
agreed that (a) each Participant shall, by making its Commitment
available as provided in Section 1(b) of this Agreement, (b) the
Indenture Trustee shall, by authenticating the Series SWA 1995 Trust
N396SW-I Certificate issued on the Delivery Date, and (c) the Owner
Trustee shall, by accepting the Lessee Warranty Bill of Sale and the
Lessee FAA Bill of Sale, be respectively deemed to have reaffirmed as
of the Delivery Date the representations and warranties made by it
(individually or in its trust capacities, as the case may be) in
Section 8 of this Agreement.
(xxv) Opinion of Owner Participant's Tax Counsel.
The Owner Participant shall have received from White & Case, special
counsel to the Owner Participant, a favorable opinion, in form and
substance satisfactory to the Owner Participant, with respect to
income tax aspects of the transactions contemplated by the Operative
Agreements.
(xxvi) No Tax Law Change. In the opinion of the
Owner Participant and its special counsel, there shall have been,
since March 1, 1995, no amendment,
PARTICIPATION AGREEMENT [N396SW]
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<PAGE> 18
modification, addition or change in or to the provisions of the Code
(including for this purpose, any non-Code provisions of legislation
affecting the Code such as transition rules or effective date
provisions), the regulations promulgated under the Code (including
temporary or proposed regulations), Internal Revenue Service Revenue
Procedures or Revenue Rulings, or other administrative
interpretations, applicable judicial precedents or Executive Orders of
the President of the United States which would adversely affect the
accuracy of the Tax Assumptions set forth in Section 2 of the Tax
Indemnity Agreement.
(xxvii) Copy of Appraisal. The Original Loan
Participant shall have received a copy of the opinion referred to in
paragraph (xx) above (without any tax-sensitive provisions) in form
and substance reasonably satisfactory to the Original Loan Participant
to the effect that the fair market value of the Aircraft on the
Delivery Date is at least equal to Lessor's Cost, and that the
assumptions made in reaching such conclusion are fair and reasonable,
but otherwise without regard to the form and substance thereof.
(xxviii) Withholding Tax Forms. If the Original Loan
Participant is required to execute any form or document in order for
payments to it to qualify for exemption from, or reduction of,
withholding tax imposed by the Government, in respect to such
payments, such Original Loan Participant shall have executed such form
or document (including, without limitation, United States Internal
Revenue Forms 1001, W-8 and/or 4224) and delivered it to the Indenture
Trustee and to the Owner Trustee in accordance with applicable
regulations to qualify for such exemption or reduction.
Promptly upon the registration of the Aircraft and the
recording of the Lessee FAA Bill of Sale, the Lease, the Trust Indenture, the
Trust Agreement, the Lease Supplement and the Trust Supplement covering the
Aircraft pursuant to the Federal Aviation Act, Lessee will request Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to deliver to
the Owner Participant, the Indenture Trustee, the Original Loan Participant,
the Owner Trustee and Lessee an opinion as to the due and valid registration of
the Aircraft in the name of the Owner Trustee, the due recording of the FAA
Bill of Sale, the Lessee FAA Bill of Sale, the Trust Indenture, the Lease
Supplement, the Trust Supplement, the Lease and the Trust Agreement and the
lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee.
It is agreed that the obligations of Lessee (A) to participate in the sale of
the Aircraft to the Owner Trustee, (B) to accept delivery of the Aircraft under
the Lease, and (C) to enter into its other Operative Agreements, are all
subject to the fulfillment to the satisfaction of Lessee prior to or on the
Delivery Date of the following conditions precedent:
(i) The conditions specified in Sections
4(a)(iii), 4(a)(iv), 4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and
4(a)(xxviii) hereof shall have been satisfied, unless such
nonsatisfaction is the result of the actions of, or other event
attributable to, Lessee.
PARTICIPATION AGREEMENT [N396SW]
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(ii) Those documents described in Section 4(a)(v)
shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Lessee) in the manner
specified in Section 4(a)(v), shall each be satisfactory in form and
substance to Lessee, shall be in full force and effect on the Delivery
Date, and an executed counterpart of each thereof (other than the
Series SWA 1995 Trust N396SW-I Certificate) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of the Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the Indenture
Trustee (in its individual capacity), SBC and the Owner Participant,
respectively, of all the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to the
Indenture Trustee (in its individual capacity), SBC and the Owner
Participant as Lessee or its counsel may reasonably request in order
to establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and compliance with the conditions herein set forth.
(iv) The representations and warranties of each
Participant, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof shall be true and accurate as of the Delivery Date as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which event such representations and warranties shall have been true
and accurate on and as of such earlier date).
(v) Lessee shall have received the opinions set
forth in Sections 4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv) and
4(a)(xvi), in each case addressed to Lessee and dated the Delivery
Date.
(vi) No change shall have occurred after the date
of the execution and delivery of this Agreement in applicable law or
regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of Lessee,
would make it a violation of law or regulations for Lessee to execute,
deliver or perform the Operative Agreements to which it is a party.
(vii) In the opinion of Lessee and its counsel,
there shall have been, since March 1, 1995, no amendment,
modification, addition or change in or to the Code (including for this
purpose, any non-Code provisions of legislation affecting the Code
such as transition rules or effective date provisions), the
regulations promulgated under the Code (including temporary or
proposed regulations), Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, applicable
judicial precedents or Executive Orders of the President of the United
States which might give rise to an indemnity obligation under any of
the Operative Agreements,
PARTICIPATION AGREEMENT [N396SW]
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or as a result of which any adjustments to the Lease payments are
requested by the Owner Participant which would adversely affect the
accuracy of the Tax Assumptions set forth in Section 2 of the Tax
Indemnity Agreement.
SECTION 5. Confidentiality of Purchase Agreement. The
Owner Trustee, the Participants and the Indenture Trustee shall keep the
Purchase Agreement confidential and shall not disclose the same to any Person,
except (A) to prospective and permitted transferees of the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
interest who agree to hold such information confidential on the same terms as
set forth in this Section 5, (B) to the aforementioned prospective and
permitted transferees', the Owner Trustee's, the Original Loan Participant's,
the Owner Participant's or the Indenture Trustee's counsel or special counsel,
independent insurance brokers or other agents who agree to hold such
information confidential, (C) as may be required by any statute, court or
administrative order or decree or governmental ruling or regulation, including
federal or state banking examiners, tax auditors or taxing authorities, or (D)
as may be necessary or desirable for purposes of protecting the interest of any
such Person or for enforcement of any Operative Agreement by the Owner Trustee,
the Original Loan Participant, the Owner Participant or the Indenture Trustee;
provided, however, that any disclosures of any part of the Purchase Agreement
which are permitted by clause (C) or (D) above shall be made only to the extent
necessary to meet the specific requirements or needs of the Persons to whom
such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Holders. No Holder
shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
outstanding principal amount of, Break Amount, if any, Premium, if any, and
interest on all Certificates held by such Holder and all other sums payable to
such Holder hereunder, under the Trust Indenture and under such Certificates
shall have been paid in full. Each Holder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to such Holder as
provided in Section 2.09 of the Trust Indenture and that neither the Owner
Participant nor the Owner Trustee shall be personally liable to any Holder for
any amounts payable under the Certificates, the Trust Indenture, hereunder, or
under any other Operative Agreement (including, without limitation, amounts
payable as Premium or Break Amount), except as expressly provided in this
Agreement or (in the case of the Owner Trustee) in the Trust Indenture, and
that neither the Owner Participant nor the Owner Trustee shall have any
liability to any Holder in respect of the Deferred Equity Amount or the Second
Payment Amount.
SECTION 7. Lessee's Representations and Warranties;
Indemnities.
(a) In General. Lessee represents warrants, covenants
and agrees that:
(i) Organization, Citizenship, Etc. Lessee (A)
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas, (B) is a "citizen of the United
States" (as defined in Section 40102(a)(15)(C) of Title 49, U.S.C.)
holding an air carrier operating certificate issued by the Secretary
of
PARTICIPATION AGREEMENT [N396SW]
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Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) has the corporate power and authority to carry on
its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Agreement and the other Operative Agreements to which Lessee is or
will be a party, and (D) is duly qualified to do business as a foreign
corporation in good standing in each state in which the nature of its
business makes such qualification necessary or the failure to be so
qualified or so to be in good standing would have a material adverse
effect on its business or operations or would impair its ability to
perform its obligations under the Operative Agreements.
(ii) Corporate Authorization, Etc. The execution,
delivery and performance of this Agreement and the other Operative
Agreements to which Lessee is or will be a party (A) have been duly
authorized by all necessary corporate action on the part of Lessee,
(B) do not require any shareholder approval, or approval or consent of
any trustee or holders of indebtedness or obligations of Lessee or of
any lessor under any lease to Lessee except such as have been duly
obtained, and (C) do not and will not (1) contravene any law,
judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) Governmental Approvals. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
(other than the FAA Bill of Sale) and 4(a)(ix)(3), and (C) such
federal and state securities law approvals or filings that will be
required in connection with the public offering, if any, of the
Certificates.
(iv) Valid Agreements. This Agreement and the
other Operative Agreements to which Lessee is or will be a party
constitute, or will constitute when entered into, assuming due
authorization, execution and delivery by the party or parties thereto
other than Lessee, legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
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(v) No Proceedings. There are no pending or, to
Lessee's knowledge, threatened actions or proceedings before any court
or administrative agency which, having regard to both the size of the
claim and the possibility of an adverse determination, are likely to
materially adversely affect the consolidated financial condition of
Lessee and its subsidiaries, or the ability of Lessee to perform its
obligations under this Agreement and the other Operative Agreements to
which Lessee is or will be a party.
(vi) Taxes. Lessee and its subsidiaries have
filed or caused to be filed all federal, state, local and foreign tax
returns which are required to be filed and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessment received by Lessee or any of its subsidiaries to the extent
that such taxes have become due and payable (except to the extent
being contested in good faith and by appropriate proceedings and for
the payment of which adequate provisions have been made).
(vii) Financial Condition. The audited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Annual Report to Shareholders for the year ended
December 31, 1993 and the unaudited consolidated financial statements
of Lessee and its subsidiaries contained in Lessee's Quarterly Report
on Form 10-Q for the period ended September 30, 1994 (copies of each
of which have been furnished to each Participant) have been prepared
in accordance with generally accepted accounting principles, present
fairly, in all material respects, the consolidated financial position
of Lessee and its subsidiaries as of such dates and the consolidated
results of their operations and their cash flows for the periods then
ended, and there has been no material adverse change in the
consolidated financial position of Lessee and its subsidiaries from
that reflected in such audited consolidated financial statements.
(viii) Registration and Recordation. Except for (A)
the registration of the Aircraft with the FAA pursuant to the Act in
the name of Owner Trustee, (B) the filing for recordation of the
instruments referred to in Section 4(a)(ix)(2) (other than the FAA
Bill of Sale) and (3) and this Agreement, if deemed necessary due to
the incorporation by reference in such other instruments of terms
defined herein, (C) the filing of the UCC financing statements
referred to in Section 4(a)(vi) and continuation statements at
periodic intervals, (D) the taking of possession by the Indenture
Trustee of the original counterparts of the Lease and the initial
Lease Supplement, and (E) the affixation of the nameplate referred to
in Section 7.1.2 of the Lease, no further action, including any filing
or recording of any document (including any financing statement in
respect thereof under Article 9 of the Uniform Commercial Code of any
applicable jurisdiction), is necessary or advisable in order to
establish and perfect, as against the interests or rights of any
Person, the right, title or interest of the Owner Trustee or Owner
Participant in the property constituting the Trust Estate, or of
Indenture Trustee in the property constituting the Trust Indenture
Estate, in any applicable jurisdiction within the United States of
America.
PARTICIPATION AGREEMENT [N396SW]
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(ix) Chief Executive Office. The chief executive
office (as such term is defined in Article 9 of the UCC) of Lessee is
2702 Love Field Drive, Dallas, Texas 75235, and Lessee agrees to give
the Participants, Owner Trustee and Indenture Trustee 10 days' prior
written notice of any relocation of said chief executive office from
its present location.
(x) Securities Laws. Neither Lessee nor anyone
acting on behalf of Lessee has directly or indirectly offered any
beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, or any similar interest or
security, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security
to, any Person other than the Participants and not more than 30 other
leasing companies or other institutional investors (in the case of
such beneficial interest or securities), or one other institutional
investor (in the case of the Certificates and other similar interests
and securities) or (assuming the accuracy of the representations in
Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii)) to any Person in
violation of the Securities Act or applicable state securities laws,
or both, and Lessee will take no action which would constitute or
cause such violation.
(xi) No Misstatement or Omission. Neither the
financial statements referred to in Section 7(a)(vii) nor any other
documents furnished by Lessee to Owner Trustee, Indenture Trustee or
any Participant in connection with the transactions contemplated by
this Agreement or the other Operative Agreements contains any untrue
statement of a material fact or omits a material fact necessary to
make the statements contained therein (in the case of statements
referred to in Section 7(a)(vii), as of the date made) not misleading;
there is no fact known by Lessee which Lessee has not disclosed to
such parties in writing which materially adversely affects or, so far
as Lessee can now reasonably foresee, will materially adversely affect
the ability of Lessee to carry on its business and perform its
obligations under this Agreement or the other Operative Agreements to
which it is a party.
(xii) Investment Company. Neither Lessee nor any
subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) No Event of Default. No Lease Event of
Default or Lease Default has occurred and is continuing under the
Lease.
(xiv) Effective Sale. On the Delivery Date, the
Aircraft will be situated in Texas and the sale of the Aircraft by
Lessee to Owner Trustee shall be complete and effective and not
voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (in
PARTICIPATION AGREEMENT [N396SW]
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reliance upon the Participants' representations in Section 8(o)) the
transactions contemplated by the Operative Agreements do not
constitute a "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code for which an exemption is not
available by statute, regulation or class exemption. The execution and
delivery of this Agreement and the other Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will
not involve any non-exempt prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code (such
representation being made solely in reliance upon and subject to the
accuracy of the representations contained in Section 8(o)).
(xvi) Title to Aircraft, etc. Good and marketable
title to the Aircraft will be, immediately prior to the time of
delivery to Owner Trustee, vested in Lessee and, upon such delivery
and subject to the filing for recordation of the Lessee FAA Bill of
Sale in accordance with the Act, good and marketable title to the
Aircraft will have been duly conveyed by Lessee to Owner Trustee, free
and clear of all Liens other than the rights of Lessee under the Lease
and the Lease Supplement covering the Aircraft, the Lien of the Trust
Indenture, the beneficial interest of the Owner Participant in the
Aircraft, and the Liens permitted by clause (d) (solely for taxes not
yet due) or (e) of Section 6 of the Lease.
(xvii) Condition of Aircraft. The Aircraft has been
duly certificated by the FAA as to type and airworthiness, is fully
equipped to operate in commercial service and complies with all
material governmental requirements governing such service; the
Aircraft has been continuously operated and maintained by Lessee (in a
manner that would satisfy the provisions of Sections 7.1.3, 8.1 and
8.4 of the Lease) since its delivery to Lessee by Manufacturer, Lessee
is unaware of any material mechanical or structural defects in or
damage to the Aircraft since its delivery to Lessee by Manufacturer
and there has not occurred any event which constitutes or would, with
the passage of time or the giving of notice, or both, constitute an
Event of Loss.
(xviii) Use of Proceeds. None of the proceeds from
the issuance of the Certificates or from the acquisition by the Owner
Participant of its beneficial interest in the Trust Estate will be
used directly or indirectly by Lessee so as to result in a violation
of Regulation G or U of the Board of Governors of the Federal Reserve
System.
(xix) No Federal Approvals. No governmental
approval in the United States of any kind is required of the Owner
Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance
under this Agreement or any agreement contemplated hereby solely by
reason of any fact or circumstance peculiar to: (a) Lessee (as
contrasted to other airlines), (b) the nature of the Aircraft, or (c)
Lessee's proposed operations or use of the Aircraft, including as
contemplated in the Lease.
(xx) Section 1110. Owner Trustee and the
Indenture Trustee, as assignee thereof, are entitled to the protection
of Section 1110 of the United States
PARTICIPATION AGREEMENT [N396SW]
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Bankruptcy Code in connection with their right to take possession of
the Airframe and Engines in the event of a case under Chapter 11 of
the United States Bankruptcy Code in which Lessee is a debtor.
Southwest acquired the Aircraft new from the Manufacturer after
October 22, 1994, and Southwest first placed the Aircraft in service
after such date.
(b) General Tax Indemnity.
(i) Indemnity. Lessee hereby agrees to pay, to
indemnify, and, on written demand, reimburse and hold each Indemnified
Party (which, unless otherwise indicated herein, for purposes of this
Section 7(b) shall include any Affiliate of any Participant, and all
entities which are included in a consolidated, combined or unitary
return with such Indemnified Party) harmless from, any and all
license, documentation, recording and registration fees and any and
all taxes (including, without limitation, sales, use, turnover,
value-added, property (tangible and intangible), ad valorem,
consumption, rental, license, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature
whatsoever together with any and all penalties, fines, additions to
tax or interest thereon or computed with reference thereto
(collectively "Taxes"), howsoever imposed by any federal, state or
local government or governmental subdivision or taxing authority in or
of the United States of America (including any possession or territory
of the United States of America), or by any foreign government, taxing
authority or governmental subdivision of a foreign country, upon,
against, or with respect to any Indemnified Party, Lessee, the
Aircraft, Airframe, any Engine, any other engine installed on the
Airframe, Part or any other part thereof or interest therein or upon
or with respect to the purchase, acquisition, acceptance, rejection,
mortgaging, financing, refinancing, manufacture, sale, transfer of
title, ownership, delivery, nondelivery, insuring, inspection,
leasing, possession, use, registration, reregistration,
deregistration, operation, repair, replacement, abandonment,
redelivery, modification, rebuilding, importation, exportation, return
or other disposition thereof, or the imposition of any Lien (or the
occurrence of any liability to refund or pay over any amount as a
result of any Lien) thereon, or upon or with respect to the rentals,
receipts or earnings arising therefrom, or upon or with respect to
this Agreement, the Trust Agreement, the Trust Indenture, the Lease, a
Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Certificates or the issuance, reissuance, acquisition,
redemption, expiration or subsequent transfer thereof under the Trust
Indenture, or the beneficial interests in the Trust Estate or the
creation thereof, or any payment made pursuant to any such agreement
or instrument or upon or with respect to the property, held by Owner
Participant or by the Trust Estate or by Indenture Trustee under the
Trust Indenture, or otherwise with respect to or in connection with
the transactions contemplated by the Operative Agreements.
(ii) Exceptions. The indemnity set forth in
Section 7(b)(i) shall not extend in the case of any Indemnified Party
to Taxes (1) on, based on, or measured by, the receipts, gross or net
income, capital or net worth of such Indemnified Party (whether
denominated as franchise, excess profits, conduct of business, capital
gains, minimum and/or alternative minimum taxes) or accumulated
earnings, personal holding
PARTICIPATION AGREEMENT [N396SW]
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company, succession taxes and estate or franchise taxes (other than,
in any case referred to in this clause (1), taxes which are in the
nature of sales or use taxes, value-added taxes, rental taxes, license
taxes, consumption taxes, ad valorem taxes or property (tangible and
intangible) taxes) imposed by (A) the federal government of the United
States (including without limitation any taxes collected by
withholding) (but specifically excluding any excise taxes or penalties
imposed in connection with the occurrence of a "prohibited
transaction", within the meaning of Section 406 of ERISA or Section
4975 of the Code, for which an exemption is not available by statute,
regulation or class exemption) or (B) any state or local government or
governmental subdivision or state or local taxing authority in the
United States of America (including any possession or territory of the
United States of America) other than in the case of (B) any such tax
which is a Covered Income Tax, as defined below; (2) on, based on, or
measured by, any fees or compensation received by Owner Trustee or
Indenture Trustee in its individual capacity for services rendered in
connection with the transactions contemplated hereby; (3) relating to
the Aircraft for any period after the later of (A) the expiration or
early termination of the Lease and the return of the Aircraft in
connection therewith in accordance with the terms thereof and (B)
payment in full of Stipulated Loss Value or Termination Value, as the
case may be, and all Rent due and owing in accordance with the Lease;
(4) arising out of or caused by the wilful misconduct or gross
negligence of such Indemnified Party or the inaccuracy or breach of
any representation, warranty or covenant of such Indemnified Party
contained in any Operative Agreement; (5) imposed on the income of
such Indemnified Party by a foreign government or taxing authority,
except to the extent such Taxes are imposed by reason of the location,
operation, use or rental of the Aircraft or any Part thereof in such
jurisdiction or the presence of Lessee or Sublessee or other user in
such jurisdiction or the making of payments from such jurisdiction;
(6) which may become payable in connection with the occurrence of a
"prohibited transaction", within the meaning of Section 406(b) of
ERISA or Section 4975(c)(1)(E) or (F) of the Code, involving the
assets of any "employee benefit plan" within the meaning of Section
3(3) of ERISA, or of any "plan" within the meaning of Section
4975(e)(1) of the Code, with respect to which the Owner Participant is
the "plan sponsor" within the meaning of Section 3(16)(B) of ERISA;
and (7) which become payable as a result of any involuntary
disposition attributable to the bankruptcy of the Owner Participant or
Owner Trustee or any voluntary sale, transfer, mortgaging, pledging or
financing by such Indemnified Party of all or a portion of its
interest in the Aircraft, the Trust Estate, the Trust Indenture
Estate, the Lease, or any other Operative Agreement in a transaction
not contemplated by the Operative Agreements (it being understood that
any disposition of the Aircraft or any Part as a result of a
substitution, replacement or modification thereof or thereto by Lessee
shall not be treated as voluntary) unless, in each case, such transfer
shall occur (A) pursuant to the exercise of remedies under Section 15
of the Lease or (B) pursuant to Section 7, 8, 9, 10 or 18 thereof. As
used in clause (1)(B) of this Section 7(b)(ii), the term "Covered
Income Tax" means a Tax described in said clause (1)(B) imposed on an
Indemnified Party by any taxing authority (A) in whose jurisdiction
such Indemnified Party (including for this purpose all entities with
which it is combined, integrated or consolidated in such taxing
authority's jurisdiction) did not engage in business, did not maintain
an office or other place of business and was not otherwise located, if
such Tax resulted from the operation
PARTICIPATION AGREEMENT [N396SW]
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of the Aircraft or any Engine in such jurisdiction or the transactions
contemplated by the Operative Agreements, or (B) in whose jurisdiction
such Indemnified Party in fact is doing business, maintaining an
office or other place of business or is otherwise located, if such
circumstance was no factor in the imposition of such Tax.
(iii) Calculation. Lessee agrees that, with
respect to any payment or indemnity pursuant to Section 7(b)(i)
hereof, such payment or indemnity shall include an amount payable to
the Indemnified Party sufficient to hold such Indemnified Party
harmless on an after-tax basis from all Taxes required to be paid by
such Indemnified Party with respect to such payment or indemnity under
the laws of any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America,
including any possession or territory of the United States, or under
the laws of any foreign government, taxing authority or governmental
subdivision of a foreign country; provided, that if any Indemnified
Party realizes a reduction in Taxes not subject to indemnification
hereunder (a "tax benefit") by reason of such payment or indemnity
(whether such tax benefit shall be by means of investment tax credit,
foreign tax credit, depreciation deduction or otherwise), such
Indemnified Party shall, so long as no Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred or be continuing, pay Lessee (but not
before Lessee shall have made all payments or indemnities to such
Indemnified Party then due under the Operative Agreements) an amount
equal to the sum of such tax benefit plus any other tax benefit
realized by such Indemnified Party as the result of any payment made
pursuant to this proviso; provided, however, that such payment by an
Indemnified Party shall not exceed the aggregate payments by Lessee to
such Indemnified Party under Section 7(b)(i) hereof (but any such
excess shall be carried forward and shall reduce Lessee's obligation
to make any subsequent payments to such Indemnified Party pursuant to
Section 7(b) or 7(c) hereof). Each such Indemnified Party shall in
good faith use reasonable efforts in filing its tax returns and in
dealing with taxing authorities to seek and claim any such tax benefit
of which it is actually aware or of which it has been given notice.
Any Taxes that are imposed on any Indemnified Party as a result of the
disallowance or reduction of such tax benefit referred to in the next
preceding sentence in a taxable year subsequent to the year of
allowance and utilization by such Indemnified Party (including the
expiration of any tax credit carryovers or carrybacks of such
Indemnified Party that would not otherwise have expired) shall be
indemnifiable pursuant to the provisions of Section 7(b)(i) without
regard to Section 7(b)(ii). In determining the amount of any net
reduction in Taxes which is attributable to more than one transaction,
an Indemnified Party shall be deemed to have utilized its deductions
and credits attributable first, to all transactions other than
leveraged equipment leasing transactions and then to this transaction
and all such other leveraged equipment leasing transactions on a pari
passu basis.
If as a result of any Advance (as hereinafter
defined) to an Indemnified Party the aggregate taxes paid or accrued
by such Indemnified Party for any taxable year shall be more than the
amount of such taxes which would have been payable by the Indemnified
Party had no such Advance been made, and if such increase in taxes was
not taken into account in determining the amount of the Advance, then
such increase
PARTICIPATION AGREEMENT [N396SW]
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in taxes will be treated as Taxes for which Lessee must indemnify the
Indemnified Party pursuant to this Section 7(b). Upon the final
determination of any contest pursuant to Section 7(b)(iv) hereof in
respect of any Taxes for which Lessee has made an Advance, the amount
of Lessee's obligation shall be determined under this Section
7(b)(iii) as if such Advance had not been made. Any obligation of
Lessee under this Section 7(b) and the Indemnified Party's obligation
to repay the Advance will be satisfied first by set off against each
other and any difference owing by either party will be paid within 10
days of such final determination.
(iv) Notice and Contest. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 30 days after its receipt; provided, that failure to provide
such notice within 30 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of Vinson & Elkins L.L.P. or other independent counsel selected by
Lessee and reasonably satisfactory to Indemnified Party to the effect
that a reasonable basis in law and fact exists under ABA opinion
85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or permit Lessee, if desired by Lessee, to contest in
the name of Lessee) if permissible under applicable laws, the
validity, applicability or amount of such Taxes by (i) resisting
payment thereof if practicable, (ii) not paying the same except under
protest, if protest shall be necessary and proper, (iii) if payment
shall be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings, and (iv) taking
such other action as is reasonably requested by Lessee from time to
time. The Indemnified Party shall determine the method of any contest
and (in good faith consultation with Lessee) control the conduct
thereof. Notwithstanding anything contained in this Section 7(b)(iv),
an Indemnified Party will not be required to contest, or to continue
to contest, the validity, applicability or amount of any Tax (or
portion thereof) (w) unless Lessee shall have acknowledged in writing
its obligation to indemnify the Indemnified Party hereunder in the
event the Indemnified Party does not prevail in such contest, (x) if
such contest would result in any material risk of criminal penalties
or any material risk of sale, forfeiture or loss (or loss of use) of
the Aircraft, the Airframe or any Engine or any Part or any interest
therein, (y) if a Lease Event of Default has occurred and is
continuing or (z) if the claim (when aggregated with related or
correlative adjustments with respect to such Indemnified Party) will
not exceed $10,000. The Owner Participant shall not be required to
appeal, or seek leave to appeal, an adverse judicial determination
with respect to such Taxes to the United States Supreme Court. If an
Indemnified Party contests a Tax by making a
PARTICIPATION AGREEMENT [N396SW]
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payment and seeking a refund thereof, then Lessee shall advance to
such Indemnified Party, on an interest-free basis, an amount equal to
the Taxes and any penalties, additions to tax, fines and interest
thereon (which shall collectively be known, only for the purpose of
this Section 7(b), as an "Advance") that are paid by such Indemnified
Party in connection with such contest. Such Advance shall be
repayable to Lessee at the time and in the manner specified in the
last paragraph of Section 7(b)(iii). If any Indemnified Party shall
obtain a refund of all or any part of such Taxes for which an
indemnity was paid by Lessee, such Indemnified Party shall pay Lessee
the amount of such refund as is attributable to the Taxes for which
such indemnity was paid; provided, however, that such amount shall not
be payable before such time as Lessee shall have made all payments or
indemnities to such Indemnified Party then due under this Section 7(b)
and under the Lease. If in addition to such refund such Indemnified
Party shall receive an amount representing interest on the amount of
such refund, Lessee shall be paid that proportion of such interest
which is fairly attributable to Taxes paid with an indemnity payment
or Advance by Lessee prior to the receipt of such refund, reduced by
taxes imposed on such Indemnified Party on receipt of such refund or
interest and increased by any taxes saved by reason of the
deductibility of such payment by the Indemnified Party. Any
subsequent determination that such Indemnified Party was not entitled
to all or any portion of any refund paid to Lessee shall be treated as
a Tax indemnifiable under Section 7(b)(i) without regard to Section
7(b)(ii). Lessee shall not be deemed to be in default under any of
the indemnification provisions under this Section 7(b) so long as it
or any Indemnified Party shall diligently prosecute such contest;
provided, that Lessee shall nonetheless be required to pay all
Advances and expenses required hereunder. In case any report or
return is required to be made with respect to any obligation of Lessee
under this Section 7(b) or arising out of this Section 7(b), Lessee
will either timely make such report or return in such manner as will
show the ownership of the Aircraft in Owner Trustee, and send a copy
of such report or return to Owner Trustee (except for any report or
return that an Indemnified Party has notified Lessee that the
Indemnified Party intends to file or that the Indemnified Party is
required by law to file), or will notify Owner Trustee of such
requirement and prepare and deliver such report or return to the
Indemnified Party in such manner as shall be satisfactory to such
Indemnified Party and Owner Trustee.
Notwithstanding the above provisions of this Section 7(b), any
Indemnified Party in its sole discretion (by written notice to Lessee) may
unconditionally waive its rights to the indemnities provided for in this
Section 7(b) with respect to any Taxes, and refrain from contesting, or
continuing the contest of such Taxes, in which event Lessee shall have no
liability to such Indemnified Party hereunder with respect to such Taxes. In
addition, if an Indemnified Party shall agree to a settlement of any contest
under this Section 7(b) without the prior written consent of Lessee, then the
Indemnified Party shall be deemed to have waived its rights to the indemnities
provided in this Section 7(b) with respect to the subject matter of such
settlement.
(v) Withholdings. Notwithstanding the exceptions in
Section 7(b)(ii), Lessee agrees that each payment of Rent and any amount
payable on the Certificates shall be free of all withholdings (other than a
U.S. withholding tax, except to the extent described in Section 15.05(d) of
the Trust Indenture) of any nature whatsoever except to the extent
PARTICIPATION AGREEMENT [N396SW]
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otherwise required by law, and in the event that any such withholding is so
required, Lessee shall pay an additional amount of Rent such that after the
deduction of all amounts required to be withheld, the net amount actually
received by each Indemnified Party will equal the amount that would be due
absent such withholding. In the event additional Rent is paid by Lessee to
provide for withholdings pursuant to the preceding sentence in respect of Taxes
that are excepted from indemnification hereunder pursuant to Section 7(b)(ii),
the Indemnified Party on whom the Tax is imposed by way of withholding on
payments to such person shall, promptly upon receipt of notice from Lessee,
reimburse Lessee for such additional Rent. As used in this Section 7(b)(v), a
"U.S. withholding tax" shall mean any withholding tax imposed by the United
States of America (A) with respect to interest payments under any Certificate
pursuant to treaty or federal law imposing withholding tax generally on
interest payments to Persons not resident in the United States or (B) in the
nature of backup withholding under section 3406 of the Code and the regulations
thereunder, or any successor or similar provision of the Code, federal tax law
or regulations thereunder. All U.S. withholding taxes with respect to interest
payments shall be borne by the Holder of the relevant Certificate and none of
Lessee, Owner Participant, Indenture Trustee or Owner Trustee shall be
responsible for any U.S. withholding tax with respect to interest payments on
such Certificate. Owner Trustee may (or, if Lessee is making any payment
directly to the Holder of any Certificate or to the Indenture Trustee, Lessee
shall) withhold any applicable U.S. withholding tax from the amount of the
interest payment then due and pay (and, if Lessee is making any payment to the
Holder or the Indenture Trustee, Lessee shall pay) any amount withheld to the
appropriate federal taxing authority; provided, that Lessee shall indemnify and
hold the Owner Trustee and the Owner Participant harmless on an after-tax basis
from and against any and all liability arising from any failure by any Person
to withhold any U.S. withholding taxes with respect to payments required to be
made with respect to the Certificates, and Lessee shall timely prepare and
file, or, if required by applicable law, present to the Owner Trustee for
filing, all information returns required to be prepared with respect to any
such withholding tax payments or otherwise with respect to payments under the
Certificates.
(c) General Indemnity.
(i) Indemnity. Lessee hereby agrees, whether or
not any of the transactions contemplated hereby shall be consummated,
to pay, assume liability for and indemnify, protect, defend, save and
keep harmless each Indemnified Party from and against, on a net
after-tax basis as provided in Section 7(b)(iii), any and all
liabilities, obligations, losses, damages, settlements, claims,
actions, suits, penalties, costs, expenses and disbursements
(including but not limited to reasonable legal and investigative fees
and expenses and Transaction Costs to the extent not required to be
paid by Owner Participant pursuant to Section 16 hereof, and all costs
and expenses relating to amendments, supplements, waivers and consents
to and under the Operative Agreements, but excluding internal overhead
costs and expenses such as salaries (other than a reasonable
allocation in respect of the Original Loan Participant's in-house
counsel)) of whatsoever kind and nature, including but not limited to
negligence, liability of an owner, strict or absolute liability,
liability without fault and liability in tort (any of the foregoing
being called a "Loss") which may from time to time be imposed on,
incurred by or asserted against any Indemnified Party or the Aircraft,
Airframe, any Engine or any Part or any portion of the Trust Estate or
the Trust Indenture Estate
PARTICIPATION AGREEMENT [N396SW]
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(whether or not any such Loss is also indemnified or insured against
by any other Person or such Indemnified Party has also indemnified any
other Person against such Loss) in any way relating to or arising out
of (a) any Operative Agreement, the enforcement thereof or any of the
transactions contemplated thereby (including, without limitation, the
performance or observance of all obligations and conditions of Lessee
thereunder, or the falsity of any representations or warranties of
Lessee therein or thereunder or in any document or certificate
delivered pursuant thereto), (b) the purchase, acceptance or rejection
of the Aircraft, (c) the Aircraft, the Airframe, any Engine, any
engine or any Part, any data or any other thing delivered or to be
delivered under an Operative Agreement, including without limitation,
the ownership, financing, refinancing, delivery, nondelivery, lease,
sublease, assignment, registration, reregistration, deregistration,
possession, use, non-use, presence, operation, condition, storage,
preparation, installation, testing, manufacture, design, fitness for
use, merchantability, modification, replacement, substitution,
alteration, maintenance, repair, re- lease, sale, return,
transportation, transfer, abandonment or other disposition thereof or
any portion thereof (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent,
trademark or copyright infringement, or arising under environmental
control, noise or pollution laws or regulations, and loss of or damage
to any property or the environment or death or injury to any person),
or (d) the offer, sale or delivery of the Certificates, whether before
or after the Delivery Date (the indemnity in this clause (d) to extend
also to any Person who controls an Indemnified Party, its successors,
assigns, employees, servants and agents within the meaning of Section
15 of the Securities Act).
(ii) Exceptions. The indemnity set forth in
Section 7(c)(i) shall not extend to any Loss with respect to a
particular Indemnified Party (A) to the extent that such Loss is
caused by acts, omissions or events which occur after full and final
compliance by Lessee with all the terms of the Operative Agreements,
(B) to the extent such Loss is caused by acts, omissions or events
which occur following the earlier of: (I) acceptance of possession of
the Airframe or any Engine or Part by Lessor or its designee in
accordance with the terms of the Lease (other than (x) pursuant to
Section 15 thereof, in which case Lessee's liability under this
Section 7(c) shall survive for so long as Lessor shall be entitled to
exercise remedies under such Section 15, or (y) in connection with the
initial delivery of the Aircraft to the Owner Trustee), (II) the
termination of the Term in accordance with Section 9 of the Lease, or
(III) the transfer of title to the Aircraft to Lessee (or its
designee) in accordance with Section 10.1.4 or Section 18.2 of the
Lease, (C) to the extent that such Loss is a Tax or a loss of tax
benefits, whether or not Lessee is required to indemnify therefor
pursuant to Section 7(b) hereof, (D) to the extent that such Loss is
caused by the willful misconduct or gross negligence of such
Indemnified Party (other than willful misconduct or gross negligence
imputed to such Indemnified Party solely by reason of its interest in
the Aircraft) or any material misrepresentation by or violation or
breach of any obligations of such Indemnified Party contained in the
Operative Agreements then in force unless such misrepresentation,
violation or breach is a result of Lessee's failure to comply with the
terms of any Operative Agreement to which it is a party, or (E) to the
extent such Loss results from a sale, assignment or transfer by such
Indemnified Party of its interest
PARTICIPATION AGREEMENT [N396SW]
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in the Aircraft, the Certificates or the transactions contemplated
hereby (other than (1) as required by the Operative Agreements or (2)
during the continuance of a Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or a Lease Event of Default or the
exercise of remedies under the Lease). This Section 7(c) does not
constitute a guarantee of the useful life or residual value of the
Aircraft or a guarantee that the Certificates will be paid.
(iii) Notice. If any Indemnified Party or Lessee
has knowledge of any Loss for which Lessee is obligated to indemnify
under this Section 7(c), it shall give prompt written notice thereof
to Lessee or each Indemnified Party, as the case may be, but failure
by any such Person to give such notice shall not relieve Lessee of its
obligations hereunder or from any other obligation that Lessee may
have to any Indemnified Party at law or in equity, and no payment by
Lessee to an Indemnified Party pursuant to this Section 7(c) shall be
deemed to constitute a waiver or release of any right or remedy which
Lessee may have against such Indemnified Party for any actual damages
as a result of the failure by such indemnified Party to give Lessee
such notice.
(iv) Right to Defend; Subrogation; Fees and
Expenses of Trustees. Lessee shall be entitled (and, at the
Indemnified Party's election, shall be obligated), at its sole cost
and expense, acting through counsel selected by Lessee reasonably
acceptable to the respective Indemnified Party, (A) in any judicial or
administrative proceeding that involves solely a claim for which
payment or indemnity is sought under this Section 7(c), to assume
responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for which payment or
indemnity is sought under this Section 7(c), and other claims related
or unrelated to the transactions contemplated by the Operative
Agreements, to assume responsibility for and the control of such claim
for which payment or indemnity is sought under this Section 7(c) to
the extent that the same may be and is severed from such other claims
(and such Indemnified Party shall use its reasonable best efforts to
obtain such severance), and (C) in any other case, to be consulted by
such Indemnified Party with respect to judicial proceedings subject to
the control of such Indemnified Party. Notwithstanding any of the
foregoing to the contrary, Lessee shall not be entitled to assume
responsibility for and control of any such judicial or administrative
proceedings (1) while any Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or Lease Event of Default shall
have occurred and be continuing, (2) if such proceedings will involve
a material risk of the sale, forfeiture or loss of, or the creation of
any Lien (other than a Permitted Lien) on, the Aircraft or the Trust
Estate or the Trust Indenture Estate or any part thereof or the loss
or impairment of the Lien of the Trust Indenture on all or any part of
the Trust Indenture Estate, (3) if such proceedings could, in the good
faith opinion of the Indemnified Party, entail any risk of material
criminal liability or material civil penalty or (4) if in the written
opinion of counsel to such Indemnified Party an actual or potential
material conflict of interest exists making it advisable for such
Indemnified Party to be represented by separate counsel. The
Indemnified Party may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to
the preceding provisions.
PARTICIPATION AGREEMENT [N396SW]
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The Indemnified Party shall supply Lessee, at Lessee's
expense, with such information within its possession reasonably requested by
Lessee as is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c) (other than the tax
records or returns or pricing or confidential information of or relating to the
Owner Participant or its Affiliates). Such Indemnified Party shall not enter
into a settlement or other compromise with respect to any Loss without the
prior written consent of Lessee (except during the continuance of a Lease
Default (of the type described in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default when such consent shall not be required if such Indemnified
Party gives 10 days' prior written notice to Lessee describing the proposed
settlement or other compromise), which consent shall not be unreasonably
withheld or delayed, unless such Indemnified Party waives its right to be
indemnified with respect to such Loss under this Section 7(c).
Lessee shall supply the Indemnified Party with such
information reasonably requested by the Indemnified Party as is necessary or
advisable for the Indemnified Party to control or participate in any proceeding
to the extent permitted by this Section 7(c).
Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.
In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person seeking indemnification from Lessee pursuant to any provision of
this Agreement may proceed directly against Lessee without first seeking to
enforce any other right of indemnification.
Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 2.03 or
9.02(c) of the Trust Indenture) and the amounts payable to the Owner Trustee
pursuant to Section 6.07 of the Trust Agreement (including, but not limited to,
the reasonable fees and expenses of its counsel), without cost, on a net
after-tax
PARTICIPATION AGREEMENT [N396SW]
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basis, to the Owner Participant, for acting as such, other than such fees and
expenses which constitute Transaction Costs for which the Owner Participant is
obligated under Section 16. Lessee agrees that it will pay the reasonable fees
and expenses of any separate owner trustee or co-trustee appointed pursuant to
Section 9.02 of the Trust Agreement as a result of any requirement of law or if
otherwise required by any Operative Agreement or if requested, or consented to,
by Lessee.
Lessee hereby waives and releases any claim now or hereafter
existing against any Indemnified Party arising out of the death or personal
injury to personnel of Lessee, loss or damage to the property or business of
Lessee, or the loss of use of any property or business of Lessee, which results
from or arises out of the condition, use or operation of the Aircraft,
including, without limitation, any latent or patent defect whether or not
discoverable unless, in any such case, such claim would, if asserted against
Lessee, be excluded from Lessee's indemnification obligations hereunder by
reason of Section 7(c)(ii).
(d) Owner Participant's Indemnity. Owner Participant
covenants and agrees that if (i) Lessee has elected pursuant to Section 9.1 of
the Lease to terminate the Lease by causing the Aircraft to be sold pursuant to
Section 9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of
the Lease, given to Lessee written notice of Lessor's election to retain title
to the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
on or before the proposed termination date from a Person that is not a
Prohibited Person over the price for which the Aircraft may subsequently be
sold (but disregarding any portion of such bid or such price in excess of the
applicable Termination Value), any additional Rent paid by Lessee (less an
amount representing the fair value to Lessee of its use of the Aircraft for the
period of time in respect of which such Rent was paid) and any reasonable fees
and expenses of lawyers, appraisers, brokers or accountants) incurred as a
consequence of such failure by Owner Trustee.
(e) Payments. Any payments made pursuant to this Section
7 shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.
(f) Interest on Overdue Amounts. If any amount payable
by Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.
(g) Survival. All indemnities, obligations, adjustments
and payments provided for in this Section 7 shall survive, and remain in full
force and effect, notwithstanding the
PARTICIPATION AGREEMENT [N396SW]
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expiration or other termination of this Agreement, the Lease or any other
Operative Agreement. The obligations of Lessee in respect of all such
indemnities, obligations, adjustments and payments are expressly made for the
benefit of, and shall be enforceable by, each Indemnified Party or other
indemnitee entitled thereto, without taking any action under the Lease.
SECTION 8. Other Representations, Warranties, Covenants
and Indemnities. (a) Securities Laws. The Owner Participant represents that
it is acquiring its interest in the Trust Estate for investment purposes only
and not with a present intent as to any resale or distribution thereof (subject
nonetheless to any requirement of law that the disposition of its properties
shall at all times be and remain within its control) and that neither it nor
anyone acting on its behalf has directly or indirectly offered any interest in
the Trust Estate or any Certificates or any similar securities for sale to, or
solicited any offer to acquire any of the same from, anyone in a manner which
would result (assuming the accuracy of the representations in Sections 7(a)(x),
8(d), 8(k)(vi) and 8(p)(viii)) in a violation of the Securities Act or the
securities laws, rules and regulations of any state.
(b) Citizenship. Each of the Owner Participant and SBC,
in its individual capacity, severally represents and warrants to the other
parties to this Agreement that it is a "citizen of the United States" as
defined in the Act. The Owner Participant agrees, solely for the benefit of
Lessee, the Indenture Trustee and the Holders, that if at any time (i) it shall
not be a "citizen of the United States" within the meaning of the Act and (ii)
thereby the Aircraft shall be, or would become, ineligible for registration in
the name of the Owner Trustee under the Act and regulations then applicable
thereunder (it being understood that the effect of any such status shall be
determined without giving consideration to any provision of the Act (or any
superseding statute) which permits United States registration of an aircraft
based on conditions which impose restrictions on the location and use of such
aircraft or otherwise restrict the ability of an air carrier to operate an
aircraft in the ordinary course of its business), then the Owner Participant
shall (at its own expense and without any reimbursement or indemnification from
Lessee) as soon as is reasonably practicable but in any event within 30 days
after obtaining actual knowledge of such loss of citizenship (A) effect voting
trust or other similar arrangements or take any other action as may be
necessary to prevent any deregistration or to maintain the United States
registration of the Aircraft and (to the extent such recordation is dependent
on the U.S. registration of the Aircraft) the recordation with the FAA of the
Trust Indenture and the Lease, or (B) transfer its beneficial interest in the
Trust Estate in accordance with Section 8(l) hereof. Each of the Original Loan
Participant, the Owner Trustee and the Indenture Trustee agrees, upon the
request and at the sole expense of the Owner Participant, to take all
reasonable acts requested by the Owner Participant in complying with its
obligations under clause (A) or (B) of the second sentence of this Section
8(b). SBC, in its individual capacity, agrees that if at any time a
responsible officer of SBC shall obtain actual knowledge that SBC has ceased to
be a "citizen of the United States" within the meaning of the Act, it will
promptly resign as Owner Trustee (if and so long as such citizenship is
necessary under the Act as in effect at such time or, if it is not necessary,
if and so long as the Owner Trustee's citizenship would have any adverse effect
on a Holder, Lessee, a Sublessee or the Owner Participant), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of the
Trust Agreement.
PARTICIPATION AGREEMENT [N396SW]
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(c) Chief Executive Office of SBC. SBC in its individual
capacity represents and warrants that both the principal place of business of
the Owner Trustee and the place where its records concerning the Aircraft and
all of its interest in, to and under the Operative Agreements to which it is a
party are or will be kept is Hartford, Connecticut (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture)
and has its chief executive office (as such term is used in Article 9 of the
Uniform Commercial Code) in Hartford, Connecticut. SBC in its individual
capacity agrees that it will not change the location of such office to a
location outside of Hartford, Connecticut, without 10 days' prior written
notice to Lessee, Indenture Trustee and the Owner Participant.
(d) Securities Laws. The Original Loan Participant
represents and warrants that the Series SWA 1995 Trust N396SW-I Certificate to
be issued to it pursuant to the Trust Indenture is being acquired by it with no
present intent to make any resale or distribution thereof which would require
registration under the Securities Act and it will not offer or sell any
Certificate in violation of the Securities Act; provided, that the disposition
of its property shall at all times be and remain within its control, and that
neither it nor anyone acting on its behalf has offered any Certificates or any
similar securities relating to the Aircraft for sale to, or solicited any offer
to buy any Certificates or any similar securities relating to the Aircraft
from, any person or entity other than in a manner required by the Securities
Act and the rules and regulations thereunder and the securities laws, rules and
regulations of any state.
(e) [Intentionally Reserved].
(f) Owner Participant's Representations and Warranties.
The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation duly
organized and validly existing in good standing under the laws of the
State of Delaware and has the corporate power and authority to carry
on its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under the
Owner Participant Agreements;
(ii) the Owner Participant Agreements have been
duly authorized by all necessary corporate action on the part of the
Owner Participant, do not require any approval not already obtained of
stockholders of the Owner Participant or any approval or consent not
already obtained of any trustee or holders of any indebtedness or
obligations of the Owner Participant, and have been duly executed and
delivered by the Owner Participant or USL Capital Corporation as its
agent, and, subject to and in reliance upon the representations made
by the Original Loan Participant and Lessee in Sections 8(o) and
7(a)(xv), respectively, neither the execution and delivery thereof by
the Owner Participant, nor the consummation of the transactions
contemplated thereby by the Owner Participant, nor compliance by the
Owner Participant with any of the terms and provisions thereof will
contravene any United States federal or state law, judgment,
governmental rule, regulation or order applicable to or binding on the
Owner Participant (it being understood that no representation or
warranty is made with respect to laws, rules or regulations relating
to (x) aviation or the nature of the equipment owned by the
PARTICIPATION AGREEMENT [N396SW]
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Owner Trustee, except to the extent expressly made by the Owner
Participant in the first sentence of Section 8(b) or (y) any
securities laws, except as expressly provided in Section 8(a)) or
contravene or result in any breach of or constitute any default under,
or result in the creation of any Lien (other than Permitted Liens of
the type described in clause (a) of the definition thereof) upon the
Trust Estate under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement,
corporate charter, by-law or other agreement or instrument to which
the Owner Participant is a party or by which it or its properties may
be bound or affected;
(iii) assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, each
of the Owner Participant Agreements constitutes a legal, valid and
binding obligation of the Owner Participant enforceable against the
Owner Participant in accordance with the terms thereof;
(iv) there are no pending or, to the knowledge of
the Owner Participant, threatened actions or proceedings against the
Owner Participant before any court or administrative agency which, if
determined adversely to the Owner Participant, would materially
adversely affect the financial condition of the Owner Participant or
the ability of the Owner Participant to perform its obligations under
the Owner Participant Agreements;
(v) on the Delivery Date, there will be no Lessor
Liens attributable to the Owner Participant;
(vi) the Owner Participant's net worth (as defined
in Section 8(l)) is at least $75,000,000; and
(vii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to the Owner
Participant and which is presently continuing.
(g) Lessor Liens. Each of SBC in its individual capacity
and the Owner Participant severally covenants and agrees (i) that it shall not
cause or permit to exist a Lessor Lien attributable to it with respect to the
Aircraft or any other portion of the Trust Estate, (ii) that it will promptly,
at its own expense, take such action as may be necessary duly to discharge such
Lessor Lien attributable to it, and (iii) that it will make restitution to the
Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it.
(h) Indenture Trustee Liens. Wilmington Trust Company in
its individual capacity covenants and agrees that it shall not cause or permit
to exist any Lien, arising as a result of (i) claims against the Indenture
Trustee not related to its interest in the Aircraft or the administration of
the Trust Estate pursuant to the Trust Indenture, (ii) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to take any
action required by, the Operative Agreements to the extent such acts arise or
such failure arises from or constitutes
PARTICIPATION AGREEMENT [N396SW]
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gross negligence or willful misconduct, (iii) claims against the Indenture
Trustee relating to Taxes or Losses which are excluded from the indemnification
provided by Section 7 hereof pursuant to said Section 7, or (iv) claims against
the Indenture Trustee arising out of the transfer by the Indenture Trustee of
all or any portion of its interest in the Aircraft, the Trust Estate, the Trust
Indenture Estate or the Operative Agreements other than (A) a transfer of the
Aircraft pursuant to Section 9, 10 or 18 of the Lease or Article 5 or 8 of the
Trust Indenture, (B) any borrowing pursuant to Section 17 hereof, or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while a Lease
Event of Default is continuing and prior to the time that the Indenture Trustee
has received all amounts due pursuant to the Trust Indenture.
(i) Termination Instructions to Owner Trustee. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.
(j) Excess Payment. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly, to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and (iii) any such Holder or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects
any payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Holder or the Indenture
Trustee shall promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made such payment) such Excess Payment. For purposes of
this Section 8(j), "Excess Payment" means the amount by which any payment
exceeds the amount which would have been received by such Holder or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the
Owner Participant had not become subject to the recourse liability referred to
in clause (ii) above. Nothing contained in this Section 8(j) shall prevent
such Holder or the Indenture Trustee from enforcing any personal recourse
obligation (and retaining the proceeds thereof) of the Owner Trustee (in its
individual capacity) or the Owner Participant under this Agreement or the Trust
Indenture (and any exhibits or annexes thereto), it being understood that the
foregoing shall not be construed so as to permit the Indenture Trustee or any
Holder to enforce the Owner Participant's or Owner Trustee's obligation to the
Lessee with respect to the Deferred Equity Amount or the Second Payment Amount.
(k) Representations and Warranties of Indenture Trustee
in Individual Capacity. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States" as
defined in the Act, that it will notify promptly all parties to this
Agreement if in its reasonable opinion its status as a "citizen of the
United States" is likely to change and that it will resign as
Indenture Trustee as provided in Section 9.07 of the Trust Indenture
if it should cease to be a "citizen of the United States";
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(ii) it is a banking corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into and
perform its obligations under the Trust Indenture and this Agreement
and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and the
authentication of the Certificates have been duly authorized by all
necessary corporate action on its part, and neither the execution and
delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation governing its banking or trust powers or any judgment or
order binding on it or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it or its properties may be bound or affected;
(iv) each of the Indenture Trustee Agreements has
been duly executed and delivered by it and, assuming that each such
agreement is the legal, valid and binding obligation of each other
party thereto, is the legal, valid and binding obligation of the
Indenture Trustee, enforceable against it in accordance with its
terms;
(v) neither the execution and delivery by it, in
its individual capacity or as Indenture Trustee, as the case may be,
of this Agreement or the Trust Indenture nor the consummation of any
of the transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, or the registration
with, any governmental authority or agency pursuant to any law of the
State of Delaware or the United States governing the banking or trust
powers of the Indenture Trustee; and
(vi) neither it nor anyone authorized to act on
its behalf has directly or indirectly offered any beneficial interest
or security relating to the ownership of the Aircraft or the Lease or
any interest in the Trust Estate or the Trust Indenture Estate, or any
of the Certificates or any other interest in or security under the
Trust Indenture, for sale to, or solicited any offer to acquire any
such interest or security from, or has sold any interest or security
to, any Person, and it will not directly or indirectly make any such
offer, solicitation or sale.
(l) Transfers of Equity Interests; Rights of Owner
Participant and Owner Trustee. So long as the Aircraft shall be leased to
Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion of
counsel (who shall be reasonably satisfactory to the Indenture Trustee and
Lessee) to the effect that the agreement referred to in clause (O) below and
any guaranty required by clause (B) or (C) below, are the legal, valid, binding
and enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital and surplus
PARTICIPATION AGREEMENT [N396SW]
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of at least $75,000,000 or a limited partnership or corporation whose net worth
is at least $75,000,000, (B) any subsidiary of such a bank, financial
institution, limited partnership or corporation; provided, that such bank,
financial institution, limited partnership or corporation furnishes to the
Owner Trustee, the Indenture Trustee and Lessee a guaranty reasonably
satisfactory to them with respect to the Owner Participant's obligations, in
the case of the Owner Trustee, under the Trust Agreement and, in the case of
the Indenture Trustee and Lessee, the Owner Participant's obligations
hereunder, or (C) any other corporation or limited partnership, provided such
obligations are guaranteed by the transferor Owner Participant; provided,
however, that unless otherwise consented to by Lessee any Transferee shall not
be an air carrier, an air freight forwarder or other similar Person or a
corporation controlling, controlled by or under common control with such an air
carrier, an air freight forwarder or other similar Person. Each such transfer
to a Transferee shall be subject to the conditions that (M) upon giving effect
to such transfer, the Transferee is a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) or the Transferee, at its sole
cost and expense on an after-tax basis (including any continuing costs of any
voting trust), shall have entered into a voting trust or other arrangement
which permits the registration of the Aircraft under the Act in the name of the
Owner Trustee without any restriction on the operation of the Aircraft, (N) the
Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
or agreements whereby the Transferee confirms that it shall be deemed a party
to this Agreement and a party to the Trust Agreement and agrees to be bound by
all of the terms of, and to undertake all of the obligations of the transferor
Owner Participant contained in the Owner Participant Agreements and makes
representations of the scope provided for as to the Owner Participant in each
of the Operative Agreements, (P) such transfer does not result in a nonexempt
prohibited transaction under Section 4975 of the Code or Section 406 of ERISA
with respect to such Holders about which the Owner Participant shall have
received, within ten Business Days of its request to the Indenture Trustee
therefor, such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Original Loan Participant and the Indenture Trustee shall cooperate
in providing such information as may be available), (Q) such transfer does not
violate any applicable law including, without limitation, the Act, or any rules
or regulations promulgated thereunder, the Securities Act or the Trust
Indenture Act of 1939, (R) after giving effect to such transfer, there shall be
no more than one Owner Participant of record at that time and (S) such transfer
will not, in and of itself, give rise to an Indenture Default or Indenture
Event of Default; and Lessee or the Indenture Trustee may request such
Transferee to provide an opinion of counsel (who shall be reasonably
satisfactory to Lessee and the Indenture Trustee) as to the non-violation of
the Act or the registration requirements of the Securities Act by reason of
such transfer. Upon any such transfer by the Owner Participant as above
provided, the Transferee shall be deemed the Owner Participant for all purposes
hereof and of the other Operative Agreements and each reference herein to the
transferor Owner Participant shall be deemed for all purposes, with respect to
circumstances existing and requirements arising thereafter, to be to the
Transferee and the transferor Owner Participant shall be relieved of all
obligations of the transferring Owner Participant under the Owner Participant
Agreements assumed by the transferee Owner Participant. If the Owner
Participant intends to transfer its interests hereunder, it shall give prior
written notice thereof as soon as practicable, but in no event less than ten
(10) Business Days prior thereto, to the Indenture Trustee, the Owner
PARTICIPATION AGREEMENT [N396SW]
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Trustee and Lessee, specifying the name and address of the proposed Transferee
and the facts necessary to determine whether or not the requirements for a
Transferee, as set forth herein, are satisfied. The Owner Participant shall
pay, or shall cause the transferee Owner Participant to pay, all of the
reasonable costs and expenses (including, without limitation, legal fees and
expenses) of the other parties hereto (except if such transfer is effected
during the continuance of a Lease Default (of the type described in Section
14.1 or 14.5 of the Lease) or a Lease Event of Default or in connection with
the exercise of remedies under the Lease), on a net after-tax basis, of any
such transfer. For purposes of this Agreement, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined
in accordance with generally accepted accounting principles consistently
applied.
(m) Obligations of Trustees. The Indenture Trustee shall
be responsible for the payment, performance and discharge of, and shall fully
and completely pay, perform and discharge, all of its obligations under the
Trust Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Operative Agreements, the Owner Trustee shall be responsible
for the performance and discharge of, and shall fully and completely perform
and discharge, all of its obligations under the Lease in accordance with the
terms thereof.
(n) Compliance with Trust Indenture. SBC and Wilmington
Trust Company, each in its individual capacity, agrees for the benefit of
Lessee to comply with the terms of the Trust Indenture which it is required to
comply with in its individual capacity.
(o) ERISA. The Owner Participant represents and warrants
that no part of the funds used by it to acquire its interest in the Trust
Estate constitutes "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4975(e)(1) of
the Code, as interpreted by the Department of Labor. The Original Loan
Participant represents and warrants that no part of the funds used by it to
acquire the Certificates or any interest therein (including any participation
in such Certificates) constitutes "plan assets" of any "employee benefit plan"
within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code.
(p) SBC's Representations and Warranties. SBC, in its
individual capacity, represents, warrants and covenants that:
(i) each of the Owner Trustee Documents has been
duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such instruments on behalf of the
Owner Trustee or SBC, as the case may be;
(ii) the Trust Estate is free and clear of Lessor
Liens attributable to SBC in its individual capacity, and there are no
Liens affecting the title of the Owner Trustee to the Aircraft or
resulting from any act or claim against SBC in its individual capacity
arising out of any event or condition not related to the ownership,
leasing, use or operation of the Aircraft or to any other transaction
contemplated by this Agreement or any of the other Operative
Agreements, including any Lien resulting from the nonpayment by SBC in
its individual capacity of any Taxes imposed or measured by its net
income;
PARTICIPATION AGREEMENT [N396SW]
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(iii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to SBC in its
individual capacity and which is presently continuing;
(iv) it is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States and (assuming due authorization, execution and delivery
of the Trust Agreement by the Owner Participant) has the corporate
power and authority to enter into and perform its obligations under
the Trust Agreement and this Agreement (in its individual capacity),
and (assuming due authorization, execution and delivery of the Trust
Agreement by the Owner Participant) has full right, power and
authority to enter into and perform its obligations as Owner Trustee
pursuant to the Trust Agreement under each of the other Owner Trustee
Documents;
(v) each of the Trust Agreement and this
Agreement (in its individual capacity) and the Owner Trustee Documents
(in its trust capacity) has been duly authorized by all necessary
corporate action on its part, and neither the execution and delivery
thereof nor its performance of any of the terms and provisions thereof
will violate any federal or Connecticut law or regulation relating to
its banking or trust powers or contravene or result in any breach of,
or constitute any default under, its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant, each of the
Owner Trustee Documents has been duly executed and delivered by it
and, each of the Trust Agreement and this Agreement (to the extent
executed by the Owner Trustee in its individual capacity), assuming
due authorization, execution and delivery thereof by the other party
or parties thereto, is a legal, valid and binding obligation of SBC in
its individual capacity and as Owner Trustee, as the case may be,
enforceable against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall
have received whatever title to the Aircraft as was conveyed to it by
Lessee;
(viii) neither it nor anyone acting on its behalf
has offered any interest in the Trust Estate or any Certificates or
any similar securities for sale to, or solicited any offer to acquire
the same from, anyone other than the Participants, and no responsible
officer or responsible employee of SBC has knowledge of any such offer
or solicitation, except as set forth in Section 7(a)(x) hereof;
(ix) assuming due authorization, execution and
delivery of each of the Owner Trustee Documents by each of the parties
thereto (other than the Owner Trustee), each of the Owner Trustee
Documents is a legal, valid and binding obligation
PARTICIPATION AGREEMENT [N396SW]
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of the Owner Trustee, enforceable against the Owner Trustee in
accordance with its respective terms;
(x) there are no proceedings pending or, to the
best knowledge of SBC, threatened, against SBC in any court or before
any governmental authority or arbitration board or tribunal which, if
adversely determined, would materially and adversely affect the right,
power and authority of SBC to enter into or perform its obligations
under the Owner Trustee Documents;
(xi) neither the due execution and delivery of the
Owner Trustee Documents by SBC, in its individual capacity or as Owner
Trustee under the Trust Agreement, as the case may be, nor the
consummation by it of any of the transactions contemplated thereby
require the consent or approval of, the giving of notice to, or the
registration with, any federal or Connecticut governmental authority
or agency pursuant to any federal or Connecticut law governing the
banking or trust powers of SBC; and
(xii) no later than sixty (60) days after Lessee
shall so request, Owner Trustee shall execute and deliver to Lessee
(on a form to be supplied by Lessee) a Texas Sales and Use Tax
Certificate of Resale reflecting Owner Trustee's Texas or Connecticut
sales tax permit number and Owner Trustee's purchase of the Aircraft
pursuant to the Lease for lease to Lessee thereunder, and, if
necessary to permit Owner Trustee to issue such Certificate, Owner
Trustee shall apply for (on a form to be supplied by Lessee) a Texas
sales tax permit.
(q) Owner Participant's Lease Expenses. The Owner
Participant covenants and agrees to pay or cause the Owner Trustee to pay any
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) Lessee's Assumption of Debt. Subject to compliance
by Lessee with all of its obligations under the Operative Agreements and
provided that the Series SWA 1995 Trust N396SW-I Certificate is no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense on a net after-tax
basis (including, without limitation, reasonable attorneys' fees and expenses
of each of such parties), (i) if Lessee elects to terminate the Lease and to
purchase the Aircraft pursuant to Section 18.2(b) of the Lease, each of such
parties will, subject to due compliance by Lessee with the provisions of said
Section 18.2(b) and the other Operative Agreements, execute and deliver
appropriate documentation to Transfer to Lessee the Aircraft, and (ii) Lessee,
in connection with such purchase, may (if no Lease Event of Default shall have
occurred and be continuing, unless such Lease Event of Default is waived by the
Indenture Trustee) assume (and, as set forth in Section 18.2(c) of the Lease,
receive a credit in an amount equal to the principal amount of the debt
assumed, against the purchase price payable by Lessee pursuant to Section
18.2(b) of the Lease) the obligations of the Owner Trustee pursuant to Section
7.03 of the Trust Indenture and the Certificates (and the Lease, to the extent
that the Owner Trustee's obligations thereunder are incorporated into the Trust
Indenture or the Certificates), and in such event each of the parties shall
execute and deliver appropriate documentation as contemplated by Section 7.03
of the Trust Indenture.
PARTICIPATION AGREEMENT [N396SW]
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(s) [Intentionally Reserved].
(t) [Intentionally Reserved].
(u) Lease Adjustments. Section 3.7 of the Lease
contemplates that, under certain circumstances, the Owner Participant will make
certain recalculations and the Owner Participant hereby agrees to promptly take
such actions as may be necessary or desirable to give effect to and to cause
the Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.
(v) Revocation of Trust Agreement. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee that it will not
revoke or otherwise terminate the Trust Agreement as long as the lien of the
Trust Indenture is in effect, and (ii) solely for the benefit of Lessee that it
will not revoke or otherwise terminate the Trust Agreement during the Term
without the prior written consent of Lessee, except that, notwithstanding the
foregoing clauses (i) and (ii), or any other provision of the Operative
Agreements to the contrary, the Owner Participant shall have the right to
terminate the trusts set forth in the Trust Agreement without the consent of
any other party to the Operative Agreements, at any time, if in connection
therewith the Owner Participant shall simultaneously create a new trust upon
substantially the same terms and conditions as the trusts so terminated and
shall cause the Trust Estate to be vested in the Owner Trustee under the new
trust upon the same terms and conditions so applied to such terminated trust;
provided, however, that in connection with any such termination (A) none of the
creation of such new trust, the termination of the trust set forth in the Trust
Agreement or the transactions consummated in connection therewith will have any
adverse impact on any of Lessee's rights or the Indenture Trustee's rights
under the Operative Agreements (including the first priority lien status of the
Lien of the Trust Indenture), (B) Lessee shall have no responsibility to
indemnify any Indemnified Party under any provision of any Operative Agreement
for any Taxes or other consequences that in either case would not have been
incurred but for such termination and transfer, (C) the Owner Participant shall
indemnify Lessee and the Indenture Trustee for any costs, expenses, taxes or
other consequences that in either case would not have been incurred but for
such termination and transfer, (D) the Owner Participant shall provide Lessee
and the Indenture Trustee with an opinion in form and substance reasonably
satisfactory to them as to the validity of such termination and transfer, and
(E) immediately after such transfer, the beneficiary of the new trust shall be
the same as the beneficiary of the trust set forth in the Trust Agreement,
unless the Owner Participant makes a transfer complying with Section 8(l). The
Owner Participant further agrees (x) promptly to provide instructions to the
Owner Trustee, upon the request of the Owner Trustee and as otherwise required
or permitted under the Trust Agreement, so as to enable the Owner Trustee to
perform its duties and obligations under the Operative Agreements in accordance
with the terms and provisions thereof and (y) not to remove the institution
acting as Owner Trustee, and not to replace the institution acting as Owner
Trustee in the event that such institution resigns as Owner Trustee, unless the
Owner Participant shall have consulted in good faith with Lessee prior to such
removal or replacement; provided, that no such consultation shall be required
if a Lease Event of Default shall have occurred and be continuing.
PARTICIPATION AGREEMENT [N396SW]
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(w) [Intentionally Reserved].
(x) Withholding Taxes. The Original Loan Participant
represents that it is exempt from United States withholding taxes, and
covenants that, if required to obtain or renew such exemption, it will properly
prepare and promptly furnish to each of the Owner Trustee, the Indenture
Trustee and Lessee Internal Revenue Service Form 1001, Form 4224 (with respect
to each tax year) or Form W-8, whichever is applicable. The Original Loan
Participant represents, warrants and covenants that it will promptly notify the
Owner Trustee, the Indenture Trustee and Lessee if it transfers any interest in
its Series SWA 1995 Trust N396SW-I Certificate to any Person, other than
pursuant to Section 17 or 18 hereof or Section 8.03(e)(ii) of the Indenture.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee, Lessee and
the Owner Participant against any United States withholding taxes (and related
interest and penalties) which the Indenture Trustee fails to withhold on
payments to it as a result of its failure to provide the required certificate
or form or the invalidity of any certificate or form provided by it pursuant to
this Section 8(x) or as a result of any inaccuracy of the representations set
forth in the immediately preceding paragraph. Any amount payable hereunder
shall be paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor and shall include interest at the Overdue Rate from
the date any withholding tax has been paid by such party until the date
indemnified by the Original Loan Participant.
(y) Discharge of Trust Indenture. The Owner Participant
agrees that, at Lessee's expense (including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses of the Owner Trustee and Owner
Participant), upon request of Lessee, the Owner Participant will negotiate
promptly in good faith with respect to any arrangements pursuant to which the
Trust Indenture may be satisfied and discharged in respect of the Certificates
in accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that during
such time as a Lease Event of Default has not occurred it will not, and the
Owner Participant agrees that during such time as a Lease Event of Default has
not occurred it will not cause the Owner Trustee to, take any action to effect
such satisfaction and discharge except upon the request of Lessee made pursuant
to this Section 8(y).
(z) Permitted Investments. The Owner Trustee and the
Indenture Trustee agree that (i) so long as the Trust Indenture has not been
duly discharged, any profit, income, interest, dividend or gain realized upon
the maturity, sale or other disposition of any Permitted Investment made by the
Indenture Trustee pursuant to Section 9.04 of the Trust Indenture, and paid to
Lessee on behalf of the Owner Trustee by the Indenture Trustee in accordance
with the terms of such Section 9.04, shall be entirely for the account of, and
the sole property of, Lessee who, for such purposes, shall not be deemed to be
acting as agent of the Owner Trustee, and Lessee shall have no obligation to
pay over such profit, income, interest, dividend or gain to the Owner Trustee,
(ii) any such profit, income, interest, dividend or gain not theretofore
PARTICIPATION AGREEMENT [N396SW]
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distributed shall, upon discharge of the Trust Indenture, be paid by the
Indenture Trustee to Lessee, unless instructed by the Owner Participant to
distribute such funds to the Owner Participant or the Owner Trustee to the
extent the Owner Participant or the Owner Trustee is owed any amounts under the
Operative Agreements that have not been paid when due, and (iii) to the extent
the Owner Trustee or Owner Participant is owed any amounts under the Operative
Agreements by Lessee and such amounts are not paid when due, the Owner
Participant may cause the Indenture Trustee to distribute and apply such
profit, income, interest, dividend or gain realized upon the maturity, sale or
other disposition of investment of funds in satisfaction or partial
satisfaction of the amounts so due.
(aa) Assumption on Exercise of Purchase Option With
Installments. If Lessee shall have elected both (i) to assume all of the
rights and obligations of Lessor under the Trust Indenture in accordance with
Section 7.03 of the Trust Indenture and (ii) to pay to Lessor the installments
specified in the proviso to Section 18.2(c) of the Lease, then the consummation
of such assumption shall be subject to the following additional conditions:
(i) in addition to the provisions
contemplated by clauses (a) and (b) of Section 7.03 of the Trust
Indenture, the Trust Indenture shall be amended (1) to provide for an
additional series of loan certificates (the "EBO Certificates") to be
issued to the Owner Participant on the Special Purchase Option Date to
evidence the aggregate amount calculated pursuant to Section 18.2(c)
of the Lease payable after the first EBO Installment Payment Date, (2)
to provide for distribution of payments in respect of the EBO
Certificates to be made to the Owner Participant on the payment date
therefor out of funds available therefor after all amounts then due to
the other Holders and the Indenture Trustee have been paid, (3) to
include the failure to pay any installment of EBO Certificates within
seven Business Days of when due as an Indenture Event of Default, (4)
to include a right so long as the EBO Certificates shall be
outstanding for the Owner Participant or the Owner Trustee to (x)
purchase the other Certificates under circumstances similar to, and on
the same terms as provided in, clause (e)(ii) of Section 8.03 of the
Trust Indenture, and (y) cure Indenture Events of Default
substantially as provided in clause (e)(i) of Section 8.03 of the
Trust Indenture (it being understood that upon any assumption pursuant
to Section 7.03 of the Trust Indenture the other provisions of the
Trust Indenture intended for the benefit of the Owner Participant or
Owner Trustee, other than as to Excluded Payments or Section 9
thereof, shall be of no further force and effect), (5) to provide that
the Owner Participant and the Owner Trustee shall have no voting or
consent rights under the Trust Indenture by reason of being the holder
of the EBO Certificates or otherwise until all other Certificates have
either been paid in full or been purchased by the Owner Participant or
the Owner Trustee (pursuant to the provisions contemplated by
clause(i)(4) of this Section 8(aa) by the reference therein to clause
(e)(ii) of Section 8.03 of the Trust Indenture), except that without
the consent of the Owner Participant the Trust Indenture may not be
amended, modified or supplemented to reduce the amount or extend the
time of payment of any amount owing or payable under the EBO
Certificates, and (6) to confirm that, although the Owner Participant
cannot participate in the exercise of remedies under the Trust
Indenture, it shall not be precluded from
PARTICIPATION AGREEMENT [N396SW]
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demanding, collecting, suing for or otherwise receiving and enforcing
payment of the EBO Certificates;
(ii) for purposes of satisfaction of
the conditions of Section 7.03 of the Trust Indenture, (1) the EBO
Certificates shall be treated separately from the other Certificates
such that matters required to be satisfactory to the Holders (or the
Indenture Trustee) must be satisfactory both to the Owner Participant
and to the holders of the other Certificates, (2) the EBO Certificates
shall be obligations assumed by the Lessee under the Assumption
Agreement (as defined in Section 7.03 of the Trust Indenture), and (3)
references in said Section 7.03 to the transactions contemplated by
said Section 7.03 shall also include the transactions contemplated by
this Section 8(aa);
(iii) upon the Lessee's payment in
full of all amounts due on or prior to the Special Purchase Option
Date in accordance with clauses (i) and (ii) of Section 18.2(c) of the
Lease and compliance with all of the conditions to such assumption in
accordance with Section 7.03 of the Trust Indenture and clause (i) of
this Section 8(aa), (1) the Owner Trustee shall assign the right to
the remaining installments of the Special Purchase Price to the Owner
Participant, (2) the EBO Certificates shall be issued to the Owner
Participant in the aggregate amount of such remaining installments of
the Special Purchase Price, and (3) the Owner Trustee shall Transfer
to the Lessee all right, title, and interest of the Owner Trustee in
and to the Aircraft; and
(iv) the Owner Participant shall
have received such additional security with respect to the EBO
Certificates as it may reasonably request, it being understood that
the Lessee's taking out an irrevocable direct-pay letter of credit
issued by a Qualified Issuing Bank for the account of the Owner
Participant in an aggregate amount at any time equal to the remaining
installments of the Special Purchase Price plus an amount equal to 20
days of interest thereon calculated at the Past Due Rate shall be
deemed to be acceptable additional security.
(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or Section 8.03(e)(ii)
of the Indenture, the Original Loan Participant covenants that it will not (i)
transfer or (ii) grant participations in, its Certificate to any Person unless
such Person represents, warrants and covenants in writing to the Original Loan
Participant and, in the case of a transfer, to the Owner Participant and
Lessee, (A) to the effect set forth in Section 8(x) hereof and (B) further
represents and warrants to the Original Loan Participant and, in the case of a
transfer, to the Owner Participant and Lessee either that (a) no part of the
funds used by it to acquire its Series SWA 1995 Trust N396SW-I Certificate or
participation constitutes "plan assets" of any "employee benefit plan" within
the meaning of ERISA or any "plan" within the meaning of Section 4975(e)(1) of
the Code, or (b) its purchase or acquisition of such Series SWA 1995 Trust
N396SW-I Certificate or participation will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of ERISA. Any such
Person shall require any transferee of its interest to make the
representations, warranties and covenants in the preceding sentence.
(cc) [Intentionally Reserved].
PARTICIPATION AGREEMENT [N396SW]
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(dd) Deferred Equity. The Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and not with or for
the benefit of any other party to this Agreement or the Holders of any
Certificates), that, so long as no Lease Event of Default or Lease Default (of
the type described in Section 14.1 or 14.5 of the Lease) shall have occurred
and be continuing and no refunding or refinancing of the Certificates shall
have occurred prior to the Deferred Equity Date, it will pay or cause to be
paid to the Indenture Trustee on the Deferred Equity Date sufficient funds to
effect the payment of an amount (the "Deferred Equity Amount") equal to the
amount due on such date in respect of principal together with accrued interest
on the Certificates from their date of issuance to and including the Deferred
Equity Date. The Owner Participant and the Owner Trustee hereby direct the
Indenture Trustee, and the Indenture Trustee hereby agrees, to apply the
Deferred Equity Amount to the payment of principal and interest on the
Certificates which may be due and payable pursuant to the provisions of the
Trust Indenture on the Deferred Equity Date. The Owner Participant agrees to
make payment of the Deferred Equity Amount in immediately available funds on or
before 11:00 a.m., New York City time, on the Deferred Equity Date; provided,
that the Owner Participant agrees to give Lessee notice by 11:00 a.m., New York
City time, on the second Business Day prior to the Deferred Equity Date if it
shall not make such payment. The Indenture Trustee agrees to give Lessee
prompt notice if it shall not have received such payment by noon, New York City
time, on the Deferred Equity Date. The Owner Participant further agrees with
Lessee, and only with Lessee (and not with or for the benefit of any other
party to this Agreement or the Holders of any Certificates), to fund the
obligations of the Owner Trustee arising pursuant to clause (5) of Section
18(a) (the "Second Payment Amount"). In the event the Owner Participant fails
to make any payment in respect of the Deferred Equity Amount or the Second
Payment Amount when required, or if the Owner Trustee shall fail to make any
such payment when required, in any such case no Indenture Default or Indenture
Event of Default shall arise solely by virtue of such failure. Further, if in
any such case Lessee shall make an Advance as required by Section 3.8 of the
Lease in circumstances where the Owner Participant was required to pay the
Deferred Equity Amount or the Second Payment Amount but failed to do so, Lessee
may to the extent of such failure obtain reimbursement in the manner and to the
extent provided in Section 3.8 of the Lease for the Advance, together with
interest on such amount at the rate described below from (and including) the
date of the making of such Advance to (but excluding) the date of reimbursement
by the Owner Participant or the date Lessee deducts such Advance from other
payments to the extent and as provided in Section 3.8 of the Lease. Interest
shall accrue on the amount of the Advance at an annual rate equal to 5% in
excess of the Base Rate, unless the Advance is made when any Lease Event of
Default or Lease Default (of the type described in Section 14.1 or 14.5 of the
Lease) shall have occurred and be continuing, in which event interest shall
accrue on the amount of the Advance at the Base Rate, but in each case not to
exceed the maximum rate permitted by applicable law. All amounts paid to
Lessee by the Owner Participant in respect of the Advance or deducted by Lessee
pursuant to Section 3.8 of the Lease shall be applied first to payment to
Lessee of interest and then to payment to Lessee of amounts equal to the
Advance. Notwithstanding anything to the contrary contained in the Operative
Agreements, the Owner Participant shall have no obligation to pay or fund any
amount under this Section 8(dd) in excess of $2,600,000. Nothing in this
Section 8(dd) or in clause (5) of Section 18(a) shall be deemed to alter the
non-recourse nature of the Owner Trustee's borrowings under the Trust Indenture
or limit the provisions of Section 2.09 thereof.
PARTICIPATION AGREEMENT [N396SW]
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(ee) Lessee as Pricing Agent for Certificate. The Owner
Trustee hereby appoints Lessee as its agent to select the pricing provisions
and related Interest Periods in respect of the Series SWA 1995 Trust N396SW-I
Certificate, such appointment to be effective so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing.
SECTION 9. Payments to Lessee of Trust Indenture Monies.
The Owner Participant hereby agrees to instruct the Owner Trustee to promptly
distribute any money received by it pursuant to Section 7.01 or 10.04 of the
Trust Indenture to Lessee to the extent such amounts were paid by Lessee or on
behalf of Lessee and the Owner Trustee or the Owner Participant is not owed any
amounts under any of the Operative Agreements by Lessee (and if the Owner
Trustee or Owner Participant is owed any such amount, the monies received under
Section 7.01 or 10.04 of the Trust Indenture may be applied in satisfaction or
partial satisfaction thereof). Lessee agrees to hold any money received by it
pursuant to the foregoing sentence in trust for the benefit of the Owner
Participant and may, in its discretion, invest and reinvest all money so held
by it in such Permitted Investments as Lessee deems appropriate. Lessee will
apply such money to the payment of previously unclaimed payments with respect
to the Certificates when and as claims for payment are made by the Holders of
such Certificates. As compensation for its services pursuant to this Section
9, Lessee shall be entitled to an annual fee from the Owner Participant in an
amount to be agreed to at the time by Lessee and the Owner Participant but in
no event shall such fee exceed at any time the amount of earnings on the monies
so held in trust and, subject to the netting provisions of the second
succeeding sentence, distributed at such time to the Owner Participant. Any
net losses on such investment shall be for the account of Lessee. Any net
earnings on such investment shall be distributed from time to time by Lessee to
the Owner Participant after deducting therefrom any portion of such fee then
due and unpaid. Upon the date required by applicable law dealing with
unclaimed property, Lessee will distribute to the Owner Participant any amount
held by it pursuant to this Section 9 and not previously applied to the payment
of the Certificates, after deducting therefrom any portion of such fee then due
and unpaid.
SECTION 10. Other Documents; Amendment. Lessee
acknowledges receipt of executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to the execution and delivery of
the Trust Agreement and Trust Indenture and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, to the extent the same purports or
is stated to bind the Owner Participant, the Trust Indenture (each as the same
may hereafter be amended or supplemented from time to time in accordance with
the terms thereof) applicable to it, to the extent such non-compliance would be
adverse to such party; and (B) subject to Section 8(v), agrees with Lessee and
the Indenture Trustee not to amend, supplement or otherwise modify any
provision of the Trust Agreement in a manner adversely affecting such party
without the prior written consent of such party. In addition, unless a Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing, the Indenture Trustee
and the Owner Trustee hereby agree for the benefit of Lessee that without the
consent of Lessee they will not (and the Owner Participant agrees that it will
not cause the Owner Trustee to) amend, supplement or otherwise modify any
provision of the
PARTICIPATION AGREEMENT [N396SW]
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Trust Indenture in a manner adversely affecting Lessee. The Indenture Trustee
and the Owner Trustee agree to promptly furnish to Lessee copies of any
supplement, amendment, waiver or modification of any of the Operative
Agreements to which Lessee is not a party. Each Holder agrees that it will not
take any action in respect of the Trust Indenture Estate except through the
Indenture Trustee pursuant to the Trust Indenture or as otherwise permitted by
the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee
covenants and agrees with the Participants, the Indenture Trustee and the Owner
Trustee, in its capacity as such and in its individual capacity, as follows:
(a) Further Assurances. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of the Owner Trustee, and shall furnish to the Owner Trustee such information
as may be required to enable the Owner Trustee to make application for such
registration (at the expense of Lessee, including, without limitation,
reasonable attorneys' fees and expenses), and shall promptly furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to timely file any reports required to be filed by it as the lessor under the
Lease or as the owner of the Aircraft with any governmental authority
(including tax authorities), it being understood that Lessee shall not be
required to comply with this covenant to the extent that SBC's or the Owner
Participant's failure to comply with its covenant in Section 8(b) with regard
to its citizenship makes such compliance by Lessee impossible.
(b) Filing and Recording, Etc. Lessee, at its expense,
will, at the request of any party hereto, take, or cause to be taken, such
action with respect to the recording, filing, rerecording and refiling of the
Lessee FAA Bill of Sale, the Trust Agreement, the Lease, all Lease Supplements,
the Trust Indenture, all Trust Supplements and any financing statements or
other instruments as are necessary to create or maintain, so long as the Trust
Indenture or the Lease is in effect, the perfection of the security interests
created by the Trust Indenture and any security interest that may be claimed to
have been created by the Lease and the ownership interest of the Owner Trustee
in the Aircraft. Lessee agrees, upon the request and at the sole expense of
the Owner Participant, to take all reasonable acts requested by the Owner
Participant in complying with its obligations under clause (A) or (B) of the
second sentence of Section 8(b).
(c) FAA Filings. Upon execution and delivery, the
following documents shall be filed for recording with the FAA in the following
order of priority: first, the Lessee FAA Bill of Sale; second, the FAA
registration application referred to in Section 4(a)(ix)(2) (together with any
required affidavits); third, the Trust Indenture, with the Trust Agreement and
the Trust Supplement covering the Aircraft attached; and fourth, the Lease,
with the Lease Supplement covering the Aircraft, the Trust Indenture and the
Trust Supplement covering the Aircraft attached. Lessee agrees to furnish the
Participants and the Indenture Trustee with
PARTICIPATION AGREEMENT [N396SW]
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copies of the foregoing documents with recording data as promptly as
practicable following the issuance of same by the FAA.
(d) Annual Compliance Opinions. Lessee will furnish to
Owner Trustee and Indenture Trustee annually after the execution hereof (but
not later than December 1 of each year), commencing with the year 1996,
opinions of counsel for Lessee selected by Lessee and reasonably satisfactory
to Owner Trustee and Indenture Trustee stating that, in the opinion of such
counsel, either (a) such action has been taken (or specifying any action which
must be taken) with respect to the recording, filing, rerecording and refiling
of (i) the appropriate Operative Agreements and any supplements and amendments
thereto, (ii) UCC financing statements, and (iii) such other filings or
recordings as are necessary to maintain for the 15-month period succeeding the
date of such opinion the perfection of Owner Trustee's and Indenture Trustee's
title to and interest in the Aircraft and the Operative Agreements and the
ownership interest of Owner Trustee in the Aircraft, reciting the details of
such actions, or (b) no such action is necessary to maintain for the 15-month
period succeeding the date of such opinion the perfection of such title and
interest.
(e) Engine Purchase Agreement. Lessee agrees to furnish
the Owner Trustee and the Indenture Trustee, promptly upon demand therefor, an
agreement (the "Engine Purchase Agreement Assignment") assigning the rights of
Lessee under the purchase agreement pursuant to which Lessee originally
acquired the Engines (the "Engine Purchase Agreement") to the Owner Trustee
(which rights are collaterally assigned to the Indenture Trustee under the
Trust Indenture), substantially in the form of the Purchase Agreement
Assignment, and to use its best efforts to obtain from the Engine Manufacturer
a consent and agreement in substantially the form of the Manufacturer's
Consent.
(f) Merger. Lessee will not consolidate with or merge
into any other Person or convey, transfer or lease all or substantially all of
its assets to any Person unless:
(i) the Person formed by such consolidation or
into which Lessee is merged or the Person which acquires by
conveyance, transfer or lease all or substantially all of the assets
of Lessee as an entirety, as the case may be (the "Successor") shall
be (i) a Person organized and existing under the laws of the United
States of America or any state thereof or the District of Columbia,
(ii) a "citizen of the United States" as defined in the Act, and (iii)
a United States certificated air carrier;
(ii) the Successor shall execute and deliver to
the Owner Trustee, the Indenture Trustee and the Participants an
agreement in form reasonably satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant containing an assumption by the
Successor of the due and punctual performance and observance of each
covenant and condition of the Operative Agreements to be performed or
observed by Lessee;
(iii) immediately after giving effect to such
transaction and as a result of giving effect to such transaction, no
Lease Default or Lease Event of Default shall have occurred and be
continuing;
PARTICIPATION AGREEMENT [N396SW]
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(iv) Lessee shall have delivered to the Owner
Trustee, the Indenture Trustee and each Participant an Officer's
Certificate and an opinion of counsel to the Successor reasonably
satisfactory to the Owner Trustee, the Indenture Trustee and each
Participant, each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
subparagraph (ii) above comply with this Section 11(f) (except that
such opinion need not refer to subparagraph (iii) above), that the
agreements entered into to effect such consolidation, merger,
conveyance, transfer or lease and such assumption agreement are legal,
valid and binding obligations of the Successor, enforceable against
the Successor in accordance with their respective terms (subject to
applicable bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and to general principles
of equity), and that all conditions precedent herein provided for
relating to such transaction have been complied with; and
(v) the Successor shall make such filings and
recordings (including those with the FAA pursuant to the Act) as shall
be necessary or desirable to evidence such consolidation, merger,
conveyance, transfer or lease with or to such Successor.
Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor Person which shall theretofore have become such in the manner
prescribed in this Section 11(f) from its liability in respect of any Operative
Agreement to which it is a party. Nothing contained herein shall permit any
lease, sublease or other arrangement for the use, operation or possession of
the Aircraft except in compliance with the applicable provisions of the Lease
(or any assignment by Lessee of its rights under the Lease, except in
connection with a transaction in compliance with the express provisions of this
Section 11(f)).
(g) Corporate Existence. Except as permitted by Section
11(f) hereof, Lessee shall at all times maintain its corporate existence.
Lessee covenants and agrees that it will at all times be a "citizen of the
United States" within the meaning of the Act.
(h) Certificate Schedule. Lessee will provide on behalf
of the Owner Trustee the amortization schedule for the Certificate to be issued
to the Original Loan Participant at least two days before the Delivery Date.
(i) No Certificate Ownership. Except as permitted by
Section 7.03 of the Trust Indenture, Lessee agrees that it will not, at any
time, hold any Certificates or any interest (including through another Person)
in any Certificates or any security secured by, in whole or in part, such
Certificates.
SECTION 12. Ownership of Aircraft. It is hereby agreed
among Lessee, the Owner Participant and the Owner Trustee that for all purposes
the Owner Trustee will be the owner of the Aircraft (except that the Owner
Participant will be the owner for income tax
PARTICIPATION AGREEMENT [N396SW]
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purposes and except to the extent and under the circumstances contemplated by
the proviso to Section 18.2(d) of the Lease) and Lessee will be the lessee
thereof, and each party hereto agrees to characterize the Lease as a lease for
income tax purposes and all other relevant purposes (subject to the election
referred to above).
SECTION 13. Notices; Consent to Jurisdiction. (a)
Except as otherwise provided in this Agreement respecting telephone notices,
all notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be in writing and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, or by prepaid telex, TWX or telegram (with messenger delivery
specified in the case of a telegram), or by telecopier, or by prepaid courier
service, and shall be deemed to be given for purposes of this Agreement on the
day that such writing is delivered or, if given by certified mail, three (3)
Business Days after being deposited in the mails, in accordance with the
provisions of this Section 13(a). Unless otherwise specified in a notice sent
or delivered in accordance with the foregoing provisions of this Section 13(a),
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) as follows:
(A) if to Lessee, the Owner Trustee, the Original Loan Participant, the
Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I hereto (and in the case of Owner Trustee a copy shall be
sent to the Owner Participant) or (B) if to a subsequent Owner Participant,
addressed to such subsequent Owner Participant at such address as such
subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Holder, addressed to such Holder at its
address set forth in the Register maintained pursuant to Section 2.03 of the
Trust Indenture.
(b) Each party to this Agreement (individually a "Party"
and collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises solely out of or relates
solely to the Operative Agreements or any of the transactions contemplated
hereby or thereby or any document referred to herein or therein, may be
instituted in the competent courts of the State of New York in New York County
or the United States District Court for the Southern District of New York and
that they, to the maximum extent permitted by law, hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
parties in the same or different jurisdictions. The agreement set forth in
this Section 13(b) is given solely for the benefit of the Parties, and such
agreement is not intended to and shall not (i) confer exclusive jurisdiction on
any court or (ii) inure to the benefit of any other Person.
SECTION 14. Change of Situs of Owner Trust. The Owner
Participant agrees that if, at any time, the Trust Estate becomes subject to
any Taxes for which it is indemnified pursuant to Section 7(b) hereof and if,
as a consequence thereof, Lessee should request that the situs of the trust be
moved to another state in the United States from the state in which it is then
located, the situs of the trust may be moved and the Owner Participant will
PARTICIPATION AGREEMENT [N396SW]
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take whatever action may be reasonably necessary to accomplish such removal;
provided, that (A) Lessee shall provide such additional tax or other
indemnification as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Agreements of the Owner Participant shall
not be adversely altered as a result of the taking of such action, or the Owner
Participant shall be indemnified by Lessee to the former's reasonable
satisfaction for any such alteration, (C) the lien of the Trust Indenture on
the Trust Indenture Estate shall not be adversely affected by such action, and
Lessee shall execute and deliver such documents as may be requested by the
Indenture Trustee to continue the perfection and priority of the lien on the
Trust Indenture Estate, (D) the Owner Participant shall have received an
opinion or opinions of counsel (reasonably satisfactory to the Owner
Participant) in scope, form and substance reasonably satisfactory to the Owner
Participant to the effect that (I) the trust, as thus removed, shall remain a
validly established trust and the Trust Agreement and other Operative
Agreements shall remain valid, binding and enforceable in accordance with their
terms, (II) any amendments to the Trust Agreement necessitated by such removal
shall have been duly authorized, executed and delivered by the parties thereto
and shall constitute the legal, valid and binding obligations of such parties,
enforceable in accordance with their terms, (III) such removal will not result
in the imposition of, or increase in the amount of, any Tax or other expense,
cost or liability for which Lessee is not required to indemnify the Owner
Participant, the Owner Trustee or the Trust Estate pursuant to Section 7(b)
hereof (taking into account any additional indemnification provided by Lessee
pursuant to clause (A) of this sentence), (IV) such removal will not result in
any Loss of MACRS Deductions, Transaction Expense Deductions, Interest
Deductions or an Inclusion (as defined in the Tax Indemnity Agreement) with
respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 6 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to
such successor Owner Trustee in form and substance reasonably satisfactory to
the Owner Participant covering the matters addressed by the opinion delivered
pursuant to Section 4(a)(xiii) hereof, (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees incurred by the Owner
Trustee or Owner Participant, in connection with such change of situs and (G)
no Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default shall exist.
SECTION 15. Miscellaneous.
(a) Consents under Lease and Trust Indenture. Each of
the Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.
PARTICIPATION AGREEMENT [N396SW]
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(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, the Owner Trustee, the Indenture Trustee,
the Owner Participant and the Original Loan Participant provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, the
Original Loan Participant's and the Owner Participant's obligations under any
and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement, except as
otherwise expressly provided herein or therein.
(c) Counterparts; Waivers; Governing Law. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. Neither this
Agreement nor any of the terms hereof may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement, waiver
or modification is sought; and no such termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy thereof shall
have been delivered to Lessee, the Owner Participant, the Indenture Trustee and
the Owner Trustee. The terms of this Agreement shall be binding upon, and
inure to the benefit of and shall be enforceable by, Lessee, the Participants,
the Indenture Trustee and the Owner Trustee. THIS AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(d) No Recourse Against Owner Trustee. The parties
hereto agree that all of the statements, representations, covenants and
agreements made by the Owner Trustee (when made in such capacity) contained in
this Agreement and any agreement referred to herein other than the Trust
Agreement, unless expressly otherwise stated, are made and intended only for
the purpose of binding the Trust Estate and establishing the existence of
rights and remedies which can be exercised and enforced against the Trust
Estate. Therefore, anything contained in this Agreement or such other
agreements to the contrary notwithstanding (except for any express provisions
that the Owner Trustee is responsible for or is acting in or making
representations or agreements in its individual capacity), no recourse shall be
had with respect to this Agreement or such other agreements against the Owner
Trustee in its individual capacity or against any institution or person which
becomes a successor trustee or co-trustee or any officer, director, trustee,
servant or direct or indirect parent or controlling person or persons of any of
them; provided, however, that this Section 15(d) shall not be construed to
prohibit any action or proceeding against any party hereto for its own willful
misconduct or grossly negligent conduct; and provided, further, that nothing
contained in this Section 15(d) shall be construed to limit the exercise and
enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement and the other Operative Agreements.
PARTICIPATION AGREEMENT [N396SW]
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(e) Duties Limited. No Participant shall have any
obligation or duty to Lessee, to any other Participant or to others with
respect to the transactions contemplated hereby except those obligations or
duties of such Participant expressly set forth in this Agreement and the other
Operative Agreements, and no Participant shall be liable for performance by any
other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever shall any Participant be liable to Lessee, nor shall any Participant
be liable to any other Participant, for any action or inaction on the part of
the Indenture Trustee or the Owner Trustee in connection with the transactions
contemplated herein, whether or not such action or inaction is caused by the
willful misconduct or gross negligence of the Indenture Trustee or the Owner
Trustee.
(f) Binding on Parties and Successors. This Agreement
shall be binding upon and shall inure to the benefit of and shall be
enforceable against, the parties hereto and their respective successors and
permitted assigns including each successive holder of any Certificate issued
and delivered pursuant to this Agreement or the Trust Indenture whether or not
an express assignment to such holder of rights and obligations under this
Agreement has been made.
(g) Enforceability Representations. Every representation
or warranty contained herein as to the enforceability of any Operative
Agreement shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity.
(h) Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred and be continuing during the Term, none of the
Participants, the Indenture Trustee or the Owner Trustee will, through its own
actions or breaches of any of its obligations under the Operative Agreements,
interfere in the quiet enjoyment of the Aircraft by Lessee or any Permitted
Sublessee.
SECTION 16. Transaction Costs; Invoices and Payment of
Expenses. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the
subsequent placement of the permanent debt pursuant to Section 18 hereof, the
reasonable and actual fees, expenses and disbursements of (1) Potter Anderson &
Corroon, special counsel for the Indenture Trustee, (2) Shipman & Goodwin,
counsel for the Owner Trustee, (3) Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel
for the underwriters in a potential refinancing transaction pursuant to Section
18 hereof (to the extent not payable by the underwriters, if any), (5) Vinson &
Elkins L.L.P., special counsel for Lessee, but only to the extent of their
expenses and disbursements and (6) Office of the General Counsel of the
Original Loan Participant, (ii) all fees, taxes and other charges payable in
connection with the recording or filing of instruments and financing statements
in respect of the transactions contemplated hereby, (iii) the initial fee and
initial reasonable and actual disbursements of the Owner Trustee under the
Trust Agreement, (iv) the initial fee and initial reasonable and actual
disbursements of the Indenture Trustee under the Trust Indenture, (v) the fee
and expenses of Aero Economics, Inc. (or of such other appraiser as shall be
acceptable to Lessee and the
PARTICIPATION AGREEMENT [N396SW]
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Owner Participant) with respect to the appraisal of the Aircraft required on or
before the Delivery Date pursuant to Section 4(a) hereof, (vi) the advisory
fees and expenses of Babcock & Brown Financial Corporation in respect of the
transactions contemplated hereby on the Delivery Date, (vii) the reasonable
out-of-pocket disbursements, costs and expenses of the Original Loan
Participant relating to the transactions contemplated hereby, (viii) the
reasonable out- of-pocket expenses of the Owner Participant relating to the
transactions contemplated hereby (excluding the fees, expenses and
disbursements of its counsel), (ix) the initial fee, if any, of the Original
Loan Participant in respect of the transactions contemplated hereby, (x) the
placement or underwriting fees, commissions and expenses, if any, in placing
the permanent debt pursuant to Section 18 hereof and all costs and expenses
associated with a public offering, if any, pursuant thereto, and (xi) printing
and distribution costs in respect of the transactions contemplated hereby.
(b) Each of the Owner Trustee, the Indenture Trustee,
Lessee and the Participants shall promptly submit to the Owner Participant
copies of invoices of the Transaction Costs as they are received. Lessee shall
also be provided with a copy of any bill for legal expenses, with an
opportunity to review and approve it (such approval not to be unreasonably
withheld or delayed). Provided the transactions contemplated hereby are
consummated and the Owner Participant receives invoices and any required
approvals for Transaction Costs within six months of the relevant closing date
and no Lease Default (of the type referred to in Section 14.1 or 14.5 of the
Lease) or Lease Event of Default shall then exist, the Owner Participant agrees
to pay such Transaction Costs incurred in connection with the closing of this
transaction on the Delivery Date (up to a maximum amount of $200,000) and
incurred in connection with the refinancing or refunding of the Certificates
pursuant to Section 18 (up to a maximum amount of $300,000), either directly or
by transferring to the Owner Trustee from time to time such amount as shall be
necessary in order to enable the Owner Trustee to pay such Transaction Costs.
To the extent of funds received by it, the Owner Trustee agrees to pay all
invoices of Transaction Costs that have been so approved promptly upon receipt
thereof. Notwithstanding the foregoing, Lessee, (x) at its option, may pay
directly any Transaction Costs in excess of (i) 0.365% of Lessor's Cost
incurred in connection with the closing of this transaction on the Delivery
Date and (ii) 0.625% of Lessor's Cost incurred in connection with the
refinancing or refunding of the Certificates pursuant to Section 18, (y) shall
pay the fees of its special counsel and all Transaction Costs not required to
be paid by the Owner Participant hereunder and (z) in the event that the
transactions contemplated hereby shall not be consummated, Lessee shall pay all
Transaction Costs plus the reasonable fees, expenses and disbursements of the
Owner Participant's special counsel, White & Case, except that the fees,
expenses and disbursements of the Owner Participant (including those relating
to its counsel) shall be borne by the Owner Participant if such failure to
consummate the transactions results from the failure of the Owner Participant
to close after all conditions precedent to the Owner Participant's funding
(other than those conditions within the control of the Owner Participant) of
its Commitment set forth herein have been satisfied. In any and all events,
Lessee agrees to pay on a net after-tax basis the reasonable out-of-pocket
costs and expenses (including counsel fees) of each Indemnified Party incurred
in connection with the entering into or giving or withholding of any future
waiver, modification, supplement, consent, amendment or other action with
respect to any Operative Agreement which (a) is requested by Lessee, (b)
results from any adjustment pursuant to Section 3.7 of the Lease, or (c) is
necessary
PARTICIPATION AGREEMENT [N396SW]
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to effectuate the intent of any Operative Agreement. In addition, upon such
failure to consummate, Lessee shall pay the Original Loan Participant any
applicable Break Amount.
SECTION 17. Optional Redemption of Certificates. (a)
Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of all or
part of the Outstanding Certificates by the Owner Trustee as part of a
refunding or refinancing transaction, the Owner Participant agrees to negotiate
promptly in good faith to conclude an agreement with Lessee as to the terms of
such refunding or refinancing transaction (including the terms of any debt to
be issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new debt to be issued and the other aspects of such
refunding or refinancing transaction to be consummated (such date, the
"Refinancing Date", which date shall be determined so as to comply
with Section 6.03(a) of the Trust Indenture) and (ii) the following
information: (A) subject to the limitations set forth in this Section
17, any proposed adjusted ratio of debt evidenced by the Certificates
to the Owner Participant's investment in the beneficial ownership of
the Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date and, if such amount is less than the aggregate principal amount
of the Outstanding Certificates (as the Owner Participant may agree in
its sole discretion) the amount of any additional contribution to the
Trust Estate to be made by the Owner Participant on the Refinancing
Date, and (C) any proposed revised debt amortization and schedules of
Basic Rent, Stipulated Loss Value percentages and Termination Value
percentages and any revised Special Purchase Price (including any
installments thereof). The Refinancing Certificate shall not provide
for a Debt/Equity ratio of more than 4:1. Within ten (10) Business
Days of its receipt of the Refinancing Certificate, Lessee may demand
a verification of the information set forth in the Refinancing
Certificate in the manner described in Section 3.7 of the Lease. Upon
the acceptance by Lessee of the accuracy of the information set forth
in the Refinancing Certificate or the determination of such
information pursuant to such verification procedures (such
information, the "Refinancing Information") the appropriate parties
will take the actions specified in subparagraphs (2) through (6)
below;
(2) the appropriate parties will enter into a
financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities) or the sale of the Owner
Trustee's interest in the Trust Estate and/or the Aircraft and its
simultaneous resale to the Owner Trustee) with the institution or
PARTICIPATION AGREEMENT [N396SW]
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institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities (the "New Debt") in an
aggregate principal amount specified in the Refinancing Information,
(ii) the application of the proceeds of the sale of the New Debt, plus
any additional contribution to the Trust Estate, to the redemption of
all such Certificates on the Refinancing Date and the payment of any
other amounts payable to the Holders under the Operative Agreements on
the Refinancing Date, and (iii) the payment of the excess, if any, of
such proceeds over the amount necessary to effect such redemption to
the Owner Trustee for payment to the Owner Participant and (B)
pursuant to which the parties to the refinancing transaction
(including the Owner Participant and Lessee but excluding any public
holders of debt) make such representations, warranties and covenants
as the Owner Participant or Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend the
Lease to provide that (i) Basic Rent payable in respect of the period
from and after the Refinancing Date shall be as provided in the
Refinancing Information (and shall take into account any variation of
the Deferred Equity Amount paid by or on behalf of the Owner
Participant pursuant to Section 8(dd), if applicable, from the
corresponding Assumed Interest Amount with respect to the Deferred
Equity Date), (ii) amounts payable in respect of Stipulated Loss Value
and Termination Value from and after the Refinancing Date shall be as
provided in the Refinancing Information, and (iii) in the event that
the Series SWA 1995 Trust N396SW Certificates shall have been publicly
issued, the early termination notice revocation and payment provisions
shall be modified to comport with the applicable notice and payment
requirements of The Depository Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing of the New Debt in like manner
as the Certificates and will enter into such amendments and
supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to by the Owner
Participant (acting in its sole discretion) and whether or not such
refunding or refinancing transaction is consummated, Lessee shall pay
on a net after- tax basis all of the reasonable out-of-pocket expenses
of all parties to such refunding or refinancing, including, without
limitation, the reasonable fees and expenses of such parties' counsel
(including allocated costs of the Original Loan Participant's in-house
counsel) and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee
with all applicable terms and conditions for voluntary redemption
under the Trust Indenture and this Agreement, each Holder of a
Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
PARTICIPATION AGREEMENT [N396SW]
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interest thereon, Premium, if any, plus in the case of the Series SWA
1995 Trust N396SW-I Certificates, Break Amount, if any, together with
payment in full of all other amounts then payable to such Holder and
the Indenture Trustee hereunder or under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a
public offering of the New Debt, the Owner Participant shall have the right
(but not the obligation) to review and approve (which approval shall not be
unreasonably withheld) any registration statement filed with the SEC to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as required by Lessee, contain any restrictions on the sale to
Holders who may use ERISA funding sources. It is expressly understood that the
Owner Participant shall have no obligation hereunder to consent to such public
refunding or refinancing if, in its good faith judgment, such refunding or
refinancing increases its or any of its Affiliates' exposure to (i) liabilities
under federal or state securities laws, (ii) regulation under state or federal
securities laws, (iii) the need to disclose publicly information that is not
generally available to the public, or (iv) being adversely affected in its
ability to engage in any other financing transaction, in each case to a level
unacceptable to it in its reasonable, good faith judgment. Any trustee of
public debt shall be (i) Wilmington Trust Company or (ii) a bank or trust
company in the United States and having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of trustee upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least
thirty (30) days' irrevocable written notice of the proposed date of the
optional refunding or refinancing.
(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) no refinancing or refunding shall be consummated and neither
the Owner Participant nor the Owner Trustee shall be required to execute and
deliver any such agreement or instrument or to make any other arrangements
which in its opinion would result in any unreimbursed increased costs or
liability, including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would have any other
adverse effect on it, and (iii) the Owner Participant shall have no obligation
to make any additional investment in connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
(f) Any refunding or refinancing pursuant to this Section
17 shall be effected in accordance with Section 6.03(a) of the Trust Indenture.
(g) When calculating any of the information required to
be set forth in a Refinancing Certificate, the Owner Participant shall make
such calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc.
PARTICIPATION AGREEMENT [N396SW]
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75-28 (or any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) complies with Temp.
Treasury Reg. Section 1.861-10T or any successor thereto and uses the same
methodology and assumptions used by the Owner Participant in determining Basic
Rent, Stipulated Loss Values, Termination Values and Special Purchase Price on
the Delivery Date (except to the extent such assumptions have been altered
since the Delivery Date in connection with an adjustment to Rent pursuant to
Section 3.7 of the Lease).
(h) No refinancing or refunding pursuant to this Section
17 shall be permitted prior to the second anniversary of the Delivery Date or
during the continuance of a Lease Default or a Lease Event of Default.
SECTION 18. Interim Debt. (a) The parties hereto
acknowledge and agree that each Series SWA 1995 Trust N396SW-I Certificate
originally issued to the Original Loan Participant on the Delivery Date
represents interim debt financing and that it is intended that the Series SWA
1995 Trust N396SW-I Certificates be refinanced by Series SWA 1995 Trust N396SW
Certificates issued to new Holders. In connection therewith, in the event that
Lessee shall have given written notice to the Owner Trustee, the Indenture
Trustee, the Owner Participant and the Original Loan Participant that Lessee is
requesting a voluntary redemption of the Series SWA 1995 Trust N396SW-I
Certificates (in compliance with the provisions of Articles 6 and 15 of the
Trust Indenture) by the Owner Trustee as part of a refunding or refinancing
transaction, the Owner Participant agrees to negotiate promptly in good faith
with Lessee in connection therewith (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Agreements as may be necessary in order to
facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within five (5) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Section 18 Refinancing Certificate") setting forth
(i) the proposed date on which the Outstanding Series SWA 1995 Trust
N396SW-I Certificates will be redeemed, describing the new debt to be
issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, to be determined so as to
comply with Section 6.03(a) or 6.03(b) of the Trust Indenture (as
appropriate), the "Section 18 Refinancing Date") and (ii) the
following information: (A) the principal amount of debt to be issued
by the Owner Trustee on the Section 18 Refinancing Date, (B) and, if
such amount is less than the principal amount of the Outstanding
Series SWA 1995 Trust N396SW-I Certificates (as the Owner Participant
may agree in its sole discretion) the amount of any additional
contribution to the Trust Estate to be made by the Owner Participant
on the Section 18 Refinancing Date and (C) any proposed revised debt
amortization and schedules of Basic Rent, Stipulated Loss Value
percentages and Termination Value percentages and any revised Special
Purchase Price (including any installments thereof). The principal
amount of debt to be issued by the Owner Trustee on the Section 18
Refinancing Date shall not equal more than
PARTICIPATION AGREEMENT [N396SW]
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80.00% of Lessor's Cost. Within five (5) Business Days of its receipt
of the Section 18 Refinancing Certificate, Lessee may demand a
verification of the information set forth in the Section 18
Refinancing Certificate in the manner described in Section 3.7 of the
Lease. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Section 18 Refinancing Certificate or the
determination of such information pursuant to such verification
procedures (such information, the "Section 18 Refinancing
Information") the appropriate parties will take the actions specified
in paragraphs (2) through (10) below;
(2) the appropriate parties will enter into a
financing or loan agreement in form and substance reasonably
satisfactory to Lessee, the Owner Participant and the Owner Trustee
(which, subject to subsection (d) below, may involve an underwriting
agreement in connection with a public offering of such debt or the
purchase of such debt by a publicly funded entity (or entities)) with
the institution or institutions to be named therein (A) providing for
(i) the issuance and sale by the Owner Trustee to such institution or
institutions on the Section 18 Refinancing Date of Series SWA 1995
Trust N396SW Certificates in an aggregate principal amount specified
in the Section 18 Refinancing Information (such debt securities, the
"Section 18 New Debt"), (ii) the application of the proceeds of the
sale of the Section 18 New Debt, plus any additional contribution to
the Trust Estate, to the redemption of the Series SWA 1995 Trust
N396SW-I Certificates Outstanding on the Section 18 Refinancing Date
and the payment of any other amounts payable to the Holders under the
Operative Agreements on the Section 18 Refinancing Date, all in
accordance with Section 6.03(b) of the Trust Indenture, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend the
Lease to provide that (i) Basic Rent payable in respect of the period
from and after the Section 18 Refinancing Date shall be as provided in
the Section 18 Refinancing Information (and shall take into account
any variation of the sum of any interest or other payment made
pursuant to paragraph (5) or (5A) of this Section 18(a) and the
Deferred Equity Amount paid by or on behalf of the Owner Participant
pursuant to Section 8(dd), if applicable, from the Assumed Interest
Amount with respect to the Deferred Equity Date), (ii) amounts payable
in respect of Stipulated Loss Value, Termination Value and Special
Purchase Price from and after the Section 18 Refinancing Date shall be
as provided in the Section 18 Refinancing Information, and (iii) in
the event that the Series SWA 1995 Trust N396SW Certificates shall
have been publicly issued, the early termination notice revocation and
payment provisions shall be modified to comport with the applicable
notice and payment requirements of The Depository Trust Company or any
other depository;
PARTICIPATION AGREEMENT [N396SW]
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(4) the Owner Trustee will enter into an
agreement to provide for the securing of the Section 18 New Debt in
like manner as the Series SWA 1995 Trust N396SW-I Certificates and
will enter into such amendments and supplements to the Trust Indenture
(or such new indenture or other security agreement) as may be
necessary to effect such security;
(5) subject in all respects to the provisions of
Section 8(dd) and provided the Owner Participant shall have provided
the requisite funds in compliance with such Section 8(dd), if such
refunding or refinancing shall be consummated on or prior to December
31, 1995, the Owner Trustee shall pay to the Original Loan Participant
the Break Amount, if any (as indemnification for the loss resulting
from such refunding or refinancing), and all accrued and unpaid
interest on the Certificates, subject to Lessee's obligations under
Sections 3.4 and 3.8 of the Lease;
(5A) if such refunding or refinancing shall be
consummated after December 31, 1995, Lessee on behalf of the Owner
Trustee shall pay to the Original Loan Participant as Supplemental
Rent the Break Amount, if any (as indemnification for the loss
resulting from such refunding or refinancing), and all accrued and
unpaid interest on the Certificates (in each case, without duplication
of other amounts, if any, payable pursuant to any other provision of
the Operative Agreements);
(6) the Owner Trustee shall pay all of the costs
of any such refunding or refinancing so consummated, to the extent the
same are Transaction Costs required to be paid by the Owner
Participant pursuant to Section 16 above and such Transaction Costs
shall be appropriately considered in calculating any proposed revised
debt amortization and schedules of Basic Rent, Stipulated Loss Value
percentages and Termination Value percentages and the Special Purchase
Price;
(7) each Holder of the Series SWA 1995 Trust
N396SW-I Certificates will deliver to the Owner Trustee the Series SWA
1995 Trust N396SW-I Certificate held by it immediately prior to such
refunding or refinancing for cancellation (and the Owner Trustee shall
cancel the same), against simultaneous receipt by such Holder of
payment of the then outstanding principal amount of such Series SWA
1995 Trust N396SW-I Certificate, accrued and unpaid interest thereon
plus Break Amount, if any, together with payment in full of all other
amounts then payable to such Holder hereunder or under the Series SWA
1995 Trust N396SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such of
the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) no refinancing or refunding shall be consummated and
neither Owner Participant nor the Owner Trustee shall be required to
execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would
PARTICIPATION AGREEMENT [N396SW]
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result in any unreimbursed increased costs or liability, including any
adverse tax consequences or risk thereof (unless indemnified against
to its reasonable satisfaction) or would have any other adverse effect
on it, and (iii) the Owner Participant shall have no obligation to
make any additional investment in connection with any such refinancing
(other than, for Lessee's sole benefit, the Deferred Equity Amount, if
applicable);
(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel;
(10) the Owner Participant shall not be obligated
to proceed with any refinancing under this Section 18 if, in its
opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax and, in the case of
a private refinancing, ERISA consequences); provided, however, that
the Owner Participant will be obligated to proceed with such
refinancing if Lessee agrees to indemnify the Owner Participant for
such unindemnified adverse consequences (any such indemnity to be
satisfactory to the Owner Participant) or provides compensation that
will maintain the Owner Participant's Net Economic Return if its
counsel cannot provide a tax opinion satisfactory to it that will
permit the Owner Participant to report properly the proposed
refinancing and rely on Lessee's indemnity; and
(11) unless otherwise agreed to by the Owner
Participant (acting in its sole discretion) and whether or not such
refunding or refinancing transaction is consummated and except to the
extent provided in paragraph (6) above, Lessee shall pay on a net
after-tax basis all of the reasonable out-of-pocket expenses of all
parties to such refunding or refinancing, including, without
limitation, the reasonable fees and expenses of such parties' counsel
(including allocated costs of the Original Loan Participant's in-house
counsel) and any related loan or commitment fees.
(b) Only one optional refinancing or refunding pursuant
to this Section 18 shall be permitted during the Term and such refinancing
shall occur on or prior to the second anniversary of the Delivery Date.
(c) Any refinancing or refunding pursuant to this Section
18 shall be of all Series SWA 1995 Trust N396SW-I Certificates then
Outstanding.
(d) Any public refinancing pursuant to this Section 18
shall comply with all the restrictions, limitations and conditions applicable
in the case of a public refinancing pursuant to Section 17(b) hereof.
(e) No refunding or refinancing pursuant to this Section
18 shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to
be set forth in a Section 18 Refinancing Certificate, the Owner Participant
shall make such calculations in a
PARTICIPATION AGREEMENT [N396SW]
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manner which (A) maintains its Net Economic Return, (B) minimizes the Net
Present Value of Rents to the extent possible consistent with clause (A), (C)
is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or any successor
thereto) and would not cause the Lease to constitute a "disqualified leaseback
or long term agreement" within the meaning of Section 467 of the Code (or any
successor thereto), and (D) satisfies the requirements of Temp. Treasury
Regulation Section 1.861-10T and any successor thereto and uses the same
methodology and assumptions used by the Owner Participant in determining Basic
Rent, Stipulated Loss Values, Termination Values and Special Purchase Price on
the Delivery Date (except to the extent such assumptions have been altered
since the Delivery Date in connection with an adjustment to Rent pursuant to
Section 3.7 of the Lease).
SECTION 19. Section 1110 Compliance. The Participants
and Lessee agree that the Owner Trustee, the Indenture Trustee and the
transactions contemplated by this Agreement and the other Operative Agreements
are intended to be, shall be and should be construed so as to be, entitled to
the full benefits of 11 U.S.C. Section 1110.
PARTICIPATION AGREEMENT [N396SW]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ John D. Owen
-----------------------------------
Treasurer
FORD MOTOR CREDIT COMPANY,
Owner Participant
By: USL CAPITAL CORPORATION,
as agent
By: /s/ Nancy B. Clark
--------------------------------
Nancy B. Clark
Senior Investment Officer
Transportation and
Industrial Financing
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
Original Loan Participant
By: /s/ Timothy C. Hintz
-----------------------------------
Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual
capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
By: /s/ Pablo de la Canal
-----------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as otherwise
expressly provided herein, but solely as
Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
-----------------------------------
Senior Financial Services Officer
PARTICIPATION AGREEMENT [N396SW]
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SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee: With a copy to:
- ------ Timothy C. Hintz, Vice President
Southwest Airlines Co. Bank of America National Trust and
2702 Love Field Drive Savings Association
P.O. Box 36611 555 South Flower Street, 11th Floor,
Dallas, Texas 75235-1611 Unit 5618
Attn: Treasurer Los Angeles, California 90071
Telecopy: (214) 904-4022 Telephone: (213) 228-2810
Payment Instructions:
Federal Reserve Bank of S.F.
Owner Participant: ABA No. 121000358
- ----------------- For the account of Bank of America National
Ford Motor Credit Company Trust and Savings Association
c/o USL Capital Corporation For credit to GPO Account Administration #5693
730 Front Street, Sixth Floor Account No. 12331-83980
San Francisco, California 94111 Reference: Southwest Airlines Interim Debt
Attn: Portfolio Management, Attn: Nona Merritt
M.S. 610
Telephone: (415) 627-9345
Telecopy: (415) 627-9241
Payment Instructions:
Citibank, N.A. Owner Trustee:
New York, New York -------------
ABA No. 021000089 Shawmut Bank Connecticut, National
For the account of Ford Motor Association
Credit Company 777 Main Street
Account Name: USL/FMCC DFO Wire Hartford, Connecticut 06115
Account Attn: Corporate Trust Administration
Account No. 4060-1687 Telecopy: (203) 240-7920
Reference: T&IF Southwest Airlines
1995 Transaction Indenture Trustee:
-----------------
Wilmington Trust Company
Rodney Square North
Original Loan Participant: 1100 North Market Street
- ------------------------- Wilmington, Delaware 19890-0001
Bank of America National Trust and Attn: Corporate Trust Administration
Savings Association Telecopy: (302) 651-8882
GPO Account Admin. #5693 Payment Instructions:
1850 Gateway Boulevard Wilmington Trust Company
Concord, California 94520 Wilmington, Delaware
Attn: Nona Merritt ABA No. 031100092
Telecopy: (510) 675-7531 For the account of Southwest Airlines 1995-1
Telephone: (510) 675-7156 Account No. 34522-0
Reference: N396SW
Attn: David A. Vanaskey
Corporate Trust Administration
</TABLE>
PARTICIPATION AGREEMENT [N396SW]
S-1
<PAGE> 68
SCHEDULE II
Commitments
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
---------------- ------------- -------------
<S> <C> <C>
Bank of America National Trust
and Savings Association 80.0% $25,320,000.00
Owner Participant:
- -----------------
Ford Motor Credit Company 20.0% $6,330,000.00
Total Commitments: 100.0% $31,650,000.00
================= ====== ==============
</TABLE>
PARTICIPATION AGREEMENT [N396SW]
S-2
<PAGE> 69
SCHEDULE III
Appraisal
1. The fair market value of the Aircraft on the Delivery Date is equal to
Lessor's Cost.
2. The Aircraft is reasonably estimated to have:
(A) a useful life of 30.5 years;
(B) a residual value as of a date 24 years after the Delivery Date
of more than 20% of Lessor's Cost (without taking into account
any increase or decrease for inflation or deflation); and
(C) an estimated fair market value (taking into account expected
inflation or deflation) of not more than the Special Purchase
Price on January 1, 2014.
3. The Aircraft will not be "limited use property" as described in Rev.
Proc. 76-30, 1976-7. CB. 647.
4. Such other matters as may be reasonably requested by the Owner
Participant.
PARTICIPATION AGREEMENT [N396SW]
S-3
<PAGE> 1
EXHIBIT 4.8
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO.,
as Lessee
FORD MOTOR CREDIT COMPANY,
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
and in its capacity as Pass Through Trustee under
each of the four Pass Through Trust Agreements
and as Holder
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N396SW)
<PAGE> 2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT dated as of October 1,
1995 (this "Amendment") by and among (i) Southwest Airlines Co., a Texas
corporation ("Lessee"), (ii) Ford Motor Credit Company, a Delaware corporation
("Owner Participant"), (iii) Shawmut Bank Connecticut, National Association, a
national banking association, not in its individual capacity, except as
expressly provided herein, but solely as Owner Trustee under the Trust
Agreement ( "Owner Trustee"), and (iv) Wilmington Trust Company, a Delaware
banking corporation, in its individual capacity and as Indenture Trustee under
the Trust Indenture (the "Indenture Trustee") and in its capacity as Pass
Through Trustee under each of the four separate Pass Through Trust Agreements
("Pass Through Trustee") and as Holder, amends that certain Participation
Agreement respecting the aircraft bearing U.S. registration number N396SW and
dated as of April 1, 1995 (the "Participation Agreement"), by and among Lessee,
Owner Participant, Bank of America National Trust and Savings Association (the
"Original Loan Participant"), Owner Trustee and Indenture Trustee,
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, Indenture Trustee received the Deferred Equity Amount in full
on the Deferred Equity Date from Owner Participant as contemplated by Section
8(dd) of the Participation Agreement;
WHEREAS, concurrently with the execution of this Amendment, the Series
SWA 1995 Trust N396SW-I Certificate held by the Original Loan Participant is
being refinanced by the issuance of one or more new Certificates issued to Pass
Through Trustee as Holder; and
WHEREAS, as contemplated by Section 18 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
Section 1. Amendment to Schedule I. Schedule I to the
Participation Agreement is hereby deleted in its entirety and replaced with
Schedule I to this Agreement.
Section 2. Amendments to Section 7(b). Section 7(b) of the
Participation Agreement is hereby amended in the following manner:
(i) Section 7(b) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase is
hereby amended to be and read in its entirety as follows:
"Operative Agreement or each Pass Through Trust Agreement" and
"Operative Agreements or each Pass Through Trust Agreement"
PARTICIPATION AMENDMENT [N396SW]
-1-
<PAGE> 3
except in the case of Section 7(b)(iii) where the phrase "Operative
Agreements" is hereby amended to be and read in its entirety "Operative
Agreements and the Pass Through Trust Agreements."
(ii) Section 7(b)(i) is hereby amended as follows:
(a) the following language is added immediately after the
words "combined or unitary return with such Indemnified
Party)" and before the words "harmless from, any and all":
"except that for purposes of this Section 7(b)(i) an
Indemnified Party shall not include any Holder other than
Original Loan Participant";
(b) unless as otherwise provided in (c) below, wherever the
term "Certificates" is used, such term is hereby amended to be
and read in its entirety as follows:
"Certificates and each Pass Through Certificate"; and
(c) the language immediately after the phrase "or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture" is
hereby amended to be and read in its entirety as follows:
"and each Pass Through Trust Agreement, or the beneficial
interests in the Trust Estate and each Pass Through Trust
Estate or the creation thereof, or any payments made pursuant
to any such agreement or instrument or upon or with respect to
the property held by Owner Participant or by the Trust Estate
or by Indenture Trustee under the Trust Indenture or the
property held by Pass Through Trustee under the respective
Pass Through Trust Estate, amounts payable with respect to the
Certificates and each Pass Through Certificate, including
withholding Taxes imposed on payments of principal, interest,
Premium or Break Amount on the Certificates or payments of
principal of, interest on or any other amounts payable with
respect to each Pass Through Certificate that are asserted
against the Owner Participant, Owner Trustee or Pass Through
Trustee, as withholding agent, or otherwise with respect to or
in connection with the transactions contemplated by the
Operative Agreements."
Section 3. Amendments to Section 7(c). Section 7(c) of the
Participation Agreement shall be amended in the following manner:
(i) Section 7(c) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase
shall be deemed to include each Pass Through Trust Agreement.
(ii) Clause (d) of Section 7(c)(i) is hereby amended to be
and read in its entirety as follows:
"(d) the offer, sale or delivery of the Certificates or the
Pass Through Certificates, whether before or after the
Delivery Date (the indemnity in this
PARTICIPATION AMENDMENT [N396SW]
-2-
<PAGE> 4
clause (d) to extend also to any Person who controls an
Indemnified Party, its successors, assigns, employees,
servants and agents within the meaning of Section 15 of the
Securities Act)."
(iii) The penultimate paragraph of Section 7(c) is hereby
amended to be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of Indenture Trustee (including the reasonable fees
and expenses of its counsel and any agent appointed in
accordance with Section 2.03 or 9.02(c) of the Trust
Indenture) and Pass Through Trustee and the amounts payable to
Owner Trustee pursuant to Section 6.07 of the Trust Agreement
(including, but not limited to, the reasonable fees and
expenses of its counsel), without cost, on a net after-tax
basis, to Owner Participant, for acting as such, other than
such fees and expenses which constitute Transaction Costs for
which Owner Participant is obligated under Section 16. Lessee
agrees that it will pay the reasonable fees and expenses of
any separate owner trustee or co-trustee appointed pursuant to
Section 9.02 of the Trust Agreement as a result of any
requirement of law or if otherwise required by any Operative
Agreement or if requested, or consented to, by the Lessee."
Section 4. Amendments to Section 8. Section 8 of the
Participation Agreement is hereby amended in the following respects:
(i) Section 8(e) is hereby amended to be and read in its
entirety as follows:
"(e) (i) Pass Through Trustee hereby agrees that, except
as otherwise required by applicable law including, without
limitation, any law which requires Pass Through Trustee to act
within its own discretion, it shall not, without the prior
written consent of Owner Trustee, direct Indenture Trustee to
take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization,
direction or consent of, or notice from, the Holders holding a
specified percentage in principal amount of Outstanding (as
defined in the Trust Indenture) Certificates unless Pass
Through Trustee receives a Direction (as defined in the
relevant Pass Through Trust Agreement) to so direct the
Indenture Trustee from Certificateholders (as defined in the
relevant Pass Through Trust Agreement) holding the same
percentage of Certificates (as defined in the relevant Pass
Through Trust Agreement) evidencing Fractional Undivided
Interests (as defined in the relevant Pass Through Trust
Agreement) in the Trust (as defined in the relevant Pass
Through Trust Agreement) holding the Certificates.
(ii) Lessee and Pass Through Trustee hereby agree
that Article X of each Pass Through Trust Agreement (to the
extent relating to the Certificates) shall not be amended
without the prior written consent of Owner Participant.
(iii) Pass Through Trustee hereby agrees that,
except as otherwise required by applicable law including,
without limitation, any law which requires Pass Through
Trustee to act within its own discretion, if requested to do
so by Owner Trustee or Owner Participant, Pass Through Trustee
shall request a
PARTICIPATION AMENDMENT [N396SW]
-3-
<PAGE> 5
Direction from the relevant Certificateholders to establish
whether Pass Through Trustee, in its capacity as a Holder, may
direct the Indenture Trustee to take or refrain from taking
any action under the Operative Agreements."
(ii) Section 8(l) is hereby amended by deleting the
references therein to the Original Loan Participant.
(iii) Section 8(bb) is hereby amended to be and read in its
entirety as follows:
"(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or
Section 8.03(e)(ii) of the Indenture, each Holder covenants
that it will not transfer its Certificate to any Person unless
such Person represents and warrants in writing to such Holder,
the Owner Participant and Lessee either that (a) no part of
the funds used by it to acquire its Certificate constitutes
'plan assets' of any 'employee benefit plan' within the
meaning of ERISA or any 'plan' within the meaning of Section
4975(e)(1) of the Code or (b) its purchase or acquisition of
such Certificate will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of
ERISA. Any such Person shall require any transferee of its
interest to make the representations and warranties in the
preceding sentence."
(iv) Section 8(dd) is hereby amended by substituting the
amount $3,033,333" for the amount "$2,600,000" therein.
Section 5. Amendments to Section 11(f). Section 11(f) of the
Participation Agreement is hereby amended such that wherever the phrase
"Operative Agreement" or "Operative Agreements" is used, such phrase is hereby
amended to be and read in its entirety as follows:
"Operative Agreement and each Pass Through Trust Agreement"
and "Operative Agreements and each Pass Through Trust
Agreement."
Section 6. Amendments to Section 15. Section 15(b) of the
Participation Agreement is hereby amended to be and read in its entirety as
follows:
"(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, Owner Trustee, Indenture
Trustee, Owner Participant, Pass Through Trustee and any
Holder provided for in this Agreement, and Lessee's, Owner
Trustee's, Indenture Trustee's, Owner Participant's, Pass
Through Trustee's and any Holder's obligations under any and
all thereof, shall survive the making available of the Owner
Participant's Commitment, the delivery or return of the
Aircraft, the transfer of any interest of Owner Participant in
the Trust Estate or the Aircraft or any Engine or the transfer
of any interest by any Holder in any Certificate or the Trust
Indenture Estate and the expiration or other termination of
this Agreement, any other Operative Agreement or the Pass
Through Trust Agreements, except as otherwise expressly
provided herein or therein."
PARTICIPATION AMENDMENT [N396SW]
-4-
<PAGE> 6
Section 7. Amendment to Section 16. Section 16(b) of the
Participation Agreement is hereby amended by changing "0.365%" in clause (i) of
the fourth sentence thereof to read "0.354142" and by changing "0.625%" in
clause (ii) of the fourth sentence thereof to read "0.623076."
Section 8. Amendment to Section 17. Section 17(a)(3) of the
Participation Agreement is hereby amended by deleting the parenthetical
contained in clause (i) thereof.
Section 9. Ratification. Except as amended hereby, the
Participation Agreement continues and shall remain in full force and effect in
all respects.
Section 10. Authorization to Execute Amendments. By execution of
this Amendment, but subject to the fulfillment of the conditions precedent set
forth in Section 3 of the Refinancing Agreement, Owner Participant hereby
authorizes, directs and instructs Owner Trustee to execute and deliver this
Amendment and any and all other amendments, agreements and certificates as may
be necessary as a result of the refinancing contemplated hereby and by Section
18 of the Participation Agreement.
Section 11. Pass Through Trustee a Party. Effective as of the
date hereof, Pass Through Trustee shall be a party to the Participation
Agreement and shall have the rights and obligations of the Holders as set forth
in the Participation Agreement, as amended hereby.
Section 12. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 13. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
PARTICIPATION AMENDMENT [N396SW]
-5-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Participation Agreement to be duly delivered in the State of New
York and executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By: /s/ JOHN D. OWEN
Treasurer
FORD MOTOR CREDIT COMPANY,
Owner Participant
By: USL CAPITAL CORPORATION,
as agent
By: /s/ NANCY B. CLARK
Nancy B. Clark
Senior Investment Officer
Transportation and Industrial
Financing
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as otherwise expressly
provided herein, but solely as
Indenture Trustee
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
PARTICIPATION AMENDMENT [N396SW]
-6-
<PAGE> 8
SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee: Indenture Trustee and Pass Through
Southwest Airlines Co. Trustee and Holder:
2702 Love Field Drive Wilmington Trust Company
P.O. Box 36611 Rodney Square North
Dallas, Texas 75235-1611 1100 North Market Street
Attn: Treasurer Wilmington, Delaware 19890-0001
Telecopy: (214) 904-4022 Attn: Corporate Trust Administration
Telecopy: (302) 651-8882
Payment Instructions:
Owner Participant: Wilmington Trust Company
Ford Motor Credit Company Wilmington, Delaware
c/o USL Capital Corporation ABA No. 031100092
730 Front Street, Sixth Floor For the account of Southwest Airlines 1995-1
San Francisco, California 94111 Account No. 34522-0
Attn: Portfolio Management, Reference: N396SW
M.S. 610 Attn: David A. Vanaskey
Telephone: (415) 627-9345 Corporate Trust Administration
Telecopy: (415) 627-9241
Payment Instructions:
Citibank, N.A.
New York, New York
ABA No. 021000089
For the account of Ford Motor
Credit Company
Account Name: USL/FMCC DFO Wire
Account
Account No. 4060-1687
Reference: T&IF Southwest Airlines
1995 Transaction
Owner Trustee:
Shawmut Bank Connecticut, National
Association
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration
Telecopy: (203) 240-7920
</TABLE>
PARTICIPATION AGREEMENT [N396SW]
S-1
<PAGE> 1
EXHIBIT 4.9
- --------------------------------------------------------------------------------
SALE AND LEASE AGREEMENT
dated as of April 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N396SW
- --------------------------------------------------------------------------------
All right, title and interest of Lessor in and to this Sale and Lease
Agreement and the Aircraft (including the Engines) has been assigned to and is
subject to a security interest in favor of WILMINGTON TRUST COMPANY, as
Indenture Trustee. This Sale and Lease Agreement has been executed in several
counterparts. No security interest in Lessor's right, title and interest in
and to this Sale and Lease Agreement may be created through the transfer or
possession of any counterpart other than the counterpart identified, for
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart. This is not the original
counterpart.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Sale, Lease and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Variable Amounts on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Adjustment to Basic Rent, Stipulated Loss Value and Termination Value . . . . . . . . . . . . . . . 16
3.7.1 Adjustments upon Payment by Lessor of Transaction Costs, Etc . . . . . . . . . . . . . . 16
3.7.2 Recalculation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.8 Certain Advances; Reimbursement Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain
Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 Lessor's Representations and Warranties; DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1 General Condition upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.1 Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.2 Free of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.3 Operating Configuration and Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.4 Cleanliness and Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1.5 Parts and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Return of Other Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Return at End of Base Lease Term or Renewal Lease Term . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Manuals; Service Bulletins, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Failure to Return Aircraft or Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Aid in Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Storage upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7. Registration, Operation, Possession, Subleasing and Records . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
SALE AND LEASE AGREEMENT [N396SW]
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
7.1 Registration and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.2 Nameplate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1.4 Insurance Requirements; Government Requisition; Indemnity . . . . . . . . . . . . . . . . 25
7.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.1 Interchange and Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.2 Testing and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.3 Civil Reserve Air Fleet Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.4 Installation of Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.5 Installation of Engines on Other Airframes . . . . . . . . . . . . . . . . . . . . . . . 27
7.2.6 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2.7 Wet Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2.8 Sublease to Permitted Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.2 Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations;
Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.1 Maintenance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.2 Compliance with Government Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4.1 Mandatory Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4.2 Voluntary Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Right of Termination upon Obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Sale of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Retention by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.4 Termination As to Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10. Loss, Destruction, Requisition, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Event of Loss with Respect to Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.1 Lessee's Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.2 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.3 Payment of Stipulated Loss Value and Rent . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.4 Stipulated Loss Value Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.5 Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.6 Conditions to Replacement of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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10.1.6.1 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.6.2 Tax Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.6.3 Lessee's Obligations with Respect to Replacement Aircraft . . . . . . . . . . . 37
10.1.7 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.1.8 Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.2 Conditions; Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.3 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2.4 Conveyance; Replacement Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2.5 No Reduction of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Application of Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.1 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.2 Replacement of Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.3 Nonreplacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.4 Requisition of Aircraft for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 43
10.5 Requisition of an Engine for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 43
10.6 Application of Payments During Existence of Default . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1 Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.2 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.3 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2 Insurance Against Loss of or Damage to Aircraft and Engines . . . . . . . . . . . . . . . . . . . . 44
11.2.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.2 War-Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3 Certain Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.1 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.2 Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2.4 Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2.5 Government Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3 General Policy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.1 Primary Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.2 Coverage for Each Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.3 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.5 Notice of Termination or Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.6 Nonliability for Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.7 Identity of Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.8 Fifty-fifty Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4 Application of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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11.5 Certificates; Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.6 Lessor's Right to Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.7 Insurance for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.8 Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.2 Security for Lessor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.1 Failure to Pay Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.2 Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.3 General Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.4 Misrepresentation and Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.5 Bankruptcy, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1 Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.1 Return; Repossession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.2 Sale; Use Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.1.3 Certain Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.1.3.1 Liquidated Damages--Fair Market Rental Value . . . . . . . . . . . . . . . . . 52
15.1.3.2 Liquidated Damages--Fair Market Sales Value . . . . . . . . . . . . . . . . . . 52
15.1.4 Liquidated Damages upon Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
15.1.5 Termination and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
15.2 Determination of Fair Market Rental Value and Fair Market Sales
Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.3 No Waiver, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17. Net Lease; Lessee's Obligations; No Setoff, Counterclaim, Etc . . . . . . . . . . . . . . . . . . . 55
Section 18. Renewal and Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.1 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.2 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 19. Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 20. Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 21. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
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Section 22. Investment of Security Funds; Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . 61
22.1 Investment of Security Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
22.2 Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 23. Permitted Foreign Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
EXHIBIT A Form of Sale and Lease Agreement Supplement
EXHIBIT B-1 Stipulated Loss Value Schedule
EXHIBIT B-2 Termination Value Schedule
EXHIBIT C Rent Payment Schedule and EBO Installment Payment Schedule
EXHIBIT D Permitted Foreign Air Carriers
EXHIBIT E Assumed Interest Amounts
APPENDIX A Certain Return Conditions
</TABLE>
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THIS SALE AND LEASE AGREEMENT, dated as of April 1, 1995, is between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity except as expressly stated herein, and otherwise
as Owner Trustee under the Trust Agreement hereinafter referred to (together
with any successor in such capacity and its permitted assigns, "Lessor"), and
SOUTHWEST AIRLINES CO., a Texas corporation (together with its successors and
permitted assigns, "Lessee").
RECITALS
1. On December 9, 1994, an AC Form 8050-2 Bill of Sale dated
November 8, 1994, from Manufacturer (as defined below) in favor of Lessee
covering the Aircraft (as defined below) was recorded by the FAA (as defined
below) as Conveyance Number S093890.
2. The parties hereto desire that Lessor purchase the Aircraft
from and lease it back to Lessee as hereinbelow provided.
In consideration of the premises and the mutual agreements herein
contained, Lessor and Lessee agree as follows:
Section 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease and shall be equally applicable to both the singular and the plural forms
of the terms herein defined. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified (including as the same may be
amended and restated) from time to time, to the extent permitted by, and in
accordance with, the terms thereof. For all purposes of this Lease the
capitalized terms used but not defined herein are used as defined in the Trust
Indenture or, if not defined therein, as defined in the Participation
Agreement. A reference to a Person shall include the successors and permitted
assigns of such Person.
"Act" means Subtitle VII of Title 49 of the United States Code, as
amended from time to time.
"Advance" is defined in Section 3.8.
"Affiliate" means, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aircraft" means the Airframe, together with the two Engines, whether
or not any of such Engines may from time to time be installed on the Airframe
or may be installed on any other airframe or on any other aircraft.
SALE AND LEASE AGREEMENT [N396SW]
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"Airframe" means (i) the Boeing Model 737-3H4 aircraft (excluding
Engines or engines from time to time installed thereon) specified in the
initial Lease Supplement, manufactured by Manufacturer and sold by Manufacturer
to Lessee pursuant to the Purchase Agreement, sold hereunder by Lessee to
Lessor, and leased back by Lessor to Lessee, all hereunder and under the
initial Lease Supplement, (ii) any Replacement Airframe, (iii) any and all
Parts so long as the same shall be incorporated in such aircraft or such
Replacement Airframe and title thereto shall have vested in Lessor pursuant to
the terms of Section 8, and any and all Parts removed from such aircraft or
such Replacement Airframe so long as title thereto shall remain vested in
Lessor in accordance with the terms of Section 8, and (iv) all Records at any
time maintained with respect to the foregoing property; provided, however, that
at such time as a Replacement Airframe shall be substituted hereunder and the
replaced Airframe shall be released from the Lien of the Trust Indenture, such
replaced Airframe shall cease to be the Airframe hereunder.
"Assumed Interest Rate" means (i) for the period from and including
the Delivery Date to but excluding the Deferred Equity Date, the equivalent
(computed on the basis of the actual number of days elapsed over a 360-day
year) of 6.75% per annum, compounded semi-annually and (ii) for the period from
and including the Deferred Equity Date, 8.27% per annum, compounded
semi-annually and computed on the basis of a 360-day year of twelve 30-day
months.
"Assumed Interest Amount" means, with respect to the Deferred Equity
Date and each Rent Payment Date, the amount set forth on Exhibit E opposite
such date.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time, or any successor statute.
"Base Lease Term" means the period commencing on the Base Lease Term
Commencement Date and expiring at the end of the day on April 2, 2019.
"Base Lease Term Commencement Date" means July 1, 1995.
"Base Rate" means the interest rate publicly announced in New York
City from time to time by The Chase Manhattan Bank (National Association) as
its prime or base lending rate.
"Basic Rent" means the rent identified as Basic Rent in and payable
pursuant to Section 3.3.
"Bills of Sale" means the FAA Bill of Sale, the Warranty Bill of Sale,
the Lessee FAA Bill of Sale and the Lessee Warranty Bill of Sale.
"Break Amount" is defined in Section 15.05(b) of the Trust Indenture.
"Business Day" shall have the meaning attributed thereto in the Trust
Indenture, so long as the Trust Indenture shall remain in effect, and otherwise
means a day on which banks are
SALE AND LEASE AGREEMENT [N396SW]
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not required or authorized to close in any of the City of New York, New York,
San Francisco, California, Dallas, Texas, and Hartford, Connecticut, or such
other city as shall be the situs of the principal office of Lessee or Lessor at
the time in question.
"Certificate Holder" is defined in Section 1.01(b) of the Trust
Indenture.
"Certificate Rate" means, as of any date of determination thereof, (i)
in respect of amounts owing or distributable pursuant to the Trust Indenture to
the Holders of Certificates issued prior to the Refinancing Date or the Section
18 Refinancing Date, as the case may be, the applicable Assumed Interest Rate,
(ii) in respect of amounts owing to the Holders of Certificates issued on or
after the Refinancing Date or the Section 18 Refinancing Date, as the case may
be, the interest rate or, if such Certificates shall have been issued with more
than one Maturity Date or interest rate, the weighted average of the interest
rates (which weighting is to be based on the Outstanding principal amounts of
the Certificates of each Maturity Date or interest rate), then in effect with
respect to the then Outstanding principal amounts of the Certificates, (iii) in
respect of any portion of Stipulated Loss Value, Termination Value or the
Special Purchase Price expected to be distributed to the Owner Trustee or the
Owner Participant, an interest rate equal to the yield utilized in calculating
the Owner Participant's Net Economic Return, and (iv) in respect of any other
amount owing to the Owner Participant (and which is not required to be
distributed to the Holders pursuant to the Trust Indenture), 1% in excess of
the Base Rate, but in no event to exceed the maximum rate permitted by
applicable law.
"Certificates" means the Certificates (as defined in the Trust
Indenture) issued under the Trust Indenture.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Deferred Equity Amount" is defined in Section 8(dd) of the
Participation Agreement.
"Deferred Equity Date" means July 1, 1995, the first day of the Base
Lease Term.
"Delivery Date" means the date of the initial Lease Supplement, which
date shall be the date on which the Aircraft is delivered by Lessee to, and
accepted by, Lessor hereunder and in turn leased back by Lessor to Lessee
hereunder, which date shall be a Business Day.
"Dollars" and "$" mean the lawful currency of the United States of
America.
"DOT" means the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"EBO Installment Payment Date" means a date set forth in Part II of
Exhibit C hereto.
SALE AND LEASE AGREEMENT [N396SW]
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"Engine" means (i) each of the CFM International Model CFM56-3-B1
engines identified by manufacturer's serial number in the initial Lease
Supplement subjecting the Aircraft to this Lease and originally installed on
the Airframe covered by such Lease Supplement, whether or not from time to time
thereafter installed on such Airframe or installed on any other airframe or on
any other aircraft, and (ii) any Replacement Engine, whether or not from time
to time thereafter installed on the Airframe or any other airframe or on any
other aircraft, together in each case with any and all Parts incorporated in
such Engine or Replacement Engine and any and all Parts removed from such
Engine or Replacement Engine, in each case so long as title thereto shall have
been and shall remain vested in Lessor in accordance with the terms of Section
8, and all Records at any time maintained with respect to the foregoing
property. Except as otherwise set forth herein, at such time as a Replacement
Engine shall be substituted hereunder and the Engine for which the substitution
is made shall be released from the Lien of the Trust Indenture, such replaced
Engine shall cease to be an Engine hereunder. The term "Engines" means, as of
any date of determination, all Engines then leased hereunder.
"Engine Manufacturer" means CFM International, Inc., a Delaware
corporation, in its capacity as manufacturer of the Engines.
"Estate" means the Trust Estate as that term is defined in the Trust
Agreement.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such property: (i)
disappearance or theft of such property or the loss of the use thereof for any
reason not covered by any other clause of this definition, including hijacking,
for a period of three consecutive months or for a period continuing through the
last day of the Term, whichever first occurs, or destruction, damage beyond
economic repair or rendition of such property permanently unfit for normal use
for any reason whatsoever; (ii) any damage to such property which results in an
insurance settlement with respect to such property on the basis of a total loss
or a constructive or compromised total loss; (iii) the confiscation,
condemnation or requisition of use of such property by the Government or any
other government or any instrumentality or agency thereof for a period in
excess of six consecutive months or for a period continuing beyond the Term,
whichever first occurs; (iv) as a result of any rule, regulation, order or
other action by the FAA, DOT or other governmental body (including any court)
having jurisdiction, the use of such property in the normal course of
interstate air transportation of persons shall have been prohibited for a
period of more than six consecutive months, unless Lessee, prior to the
expiration of such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit normal use by Lessee, but in any event (a) in any case in which such
prohibition shall apply generally to all similar Boeing Model 737-300 series
aircraft, if such prohibition is continuing on the last day of the Term, or (b)
in all other cases, if such prohibition is continuing on the earlier of the
first anniversary of such prohibition and the last day of the Term; provided,
however, that if such prohibition is continuing on the last day of the Term, no
Event of Loss pursuant to this clause (iv) shall exist if Lessor shall have
delivered to Lessee a written notice not less than two days prior to the end of
the Term that such prohibition on the last day of the Term shall not be deemed
an Event of Loss; (v) the confiscation, condemnation or requisition
SALE AND LEASE AGREEMENT [N396SW]
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of title to such property by the Government or any other government or any
instrumentality or agency thereof; or (vi) respecting any Engine, any
divestiture of title treated as an Event of Loss pursuant to Section 7.2.1 or
any other provision of this Lease. An Event of Loss with respect to the
Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe. An Event of Loss shall be deemed to occur as of the
date of the disappearance, theft, destruction, damage, divestiture, rendition,
loss of use, insurance settlement, prohibition, confiscation, condemnation or
requisition of title or of use, as applicable, except that no Event of Loss
shall be deemed to have occurred pursuant to clause (i), (iii) or (iv) above
until the expiration of the applicable period referred to therein.
"FAA" or "Federal Aviation Administration" means the Federal Aviation
Administration or any governmental person, agency or other authority succeeding
to the functions of the Federal Aviation Administration.
"FAA Bill of Sale" means a bill of sale for the Aircraft on AC Form
8050-2 delivered to Lessee on the date of delivery of the Aircraft to Lessee by
Manufacturer under the Purchase Agreement.
"FAA Regulations" means the Federal Aviation Regulations issued
pursuant to the Act from time to time, or any successor regulations thereto.
"Government" means the federal government of the United States of
America or any instrumentality or agency thereof having the full faith and
credit of the United States of America.
"Holder" is defined in Section 1.01(b) of the Trust Indenture.
The term "incorporated in" means incorporated or installed in or
attached to or otherwise made a part of.
"Indemnified Parties" means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1994 Trust N396SW-I
Certificate (including without limitation the Original Loan Participant), (v)
the Estate and the Trust Indenture Estate, (vi) the respective Affiliates,
successors and assigns of the foregoing, and (vii) the respective directors,
officers, employees, agents, partners and servants of the foregoing.
"Indenture and Trust Supplement" means a supplement to the Trust
Agreement and the Trust Indenture, substantially in the form of Exhibit C to
the Trust Indenture.
"Indenture Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Indenture Trustee under the Trust Indenture
and any successor, separate or additional Indenture Trustee thereunder.
SALE AND LEASE AGREEMENT [N396SW]
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"Indenture Trustee Agreements" means the Participation Agreement and
the Trust Indenture.
"Interim Lease Term" means the period commencing on the Delivery Date
and expiring at the end of the day on the day before the Base Lease Term
Commencement Date.
"Investment Grade" is defined in Section 11.8.
"Lease", "this Lease", "this Agreement", "hereby", "herein", "hereof",
"hereunder" or other words mean this Sale and Lease Agreement, including
without limitation supplementation hereof by one or more Lease Supplements.
"Lease Default" means any event or condition which, with notice or
lapse of time or both, would constitute a Lease Event of Default.
"Lease Event of Default" is defined in Section 14.
"Lease Period" means each of (i) the Interim Lease Term, (ii) each
six-month period commencing on a January 1 (other than January 1, 2019) or July
1, as the case may be, thereafter during the Term and (iii) the period
commencing on January 1, 2019 and ending on April 2, 2019.
"Lease Supplement" means a supplement to this Lease, in the case of
the initial such supplement substantially in the form attached as Exhibit A
hereto, subjecting the Aircraft or other property to this Lease.
"Lessee FAA Bill of Sale" means a bill of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the FAA and delivered to
Lessor on the Delivery Date by Lessee.
"Lessee Warranty Bill of Sale" means a full warranty bill of sale
covering the Aircraft delivered to Lessor on the Delivery Date by Lessee.
"Lessor's Cost" for the Aircraft means the amount identified as such
in the initial Lease Supplement subjecting the Aircraft to this Lease.
"Lessor Liens" means Liens of any Person claiming by, through or under
Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant which arise as a result of (i) claims against Lessor, the
Person serving as Owner Trustee, in its individual capacity, or Owner
Participant, as the case may be, not related to the transactions contemplated
by the Operative Agreements, (ii) any act or omission of Lessor, the Person
serving as Owner Trustee, in its individual capacity, or Owner Participant, as
the case may be, which is not related to the transactions contemplated by the
Operative Agreements, or is in violation of any of the express terms of any of
the Operative Agreements, (iii) Taxes or Losses imposed against or
SALE AND LEASE AGREEMENT [N396SW]
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incurred by Lessor, the Person serving as Owner Trustee, in its individual
capacity, or Owner Participant, as the case may be, for which Lessee is not
obligated to indemnify pursuant to the Participation Agreement or the Tax
Indemnity Agreement, other than Liens for Taxes not yet due or for Taxes or
Losses being contested in good faith (and for the payment of which adequate
reserves have been provided in accordance with generally accepted accounting
principles) by appropriate proceedings so long as such proceedings do not
involve any material danger of the sale, forfeiture, loss or loss of use of the
Aircraft, the Airframe or any Engine or any interest therein, or (iv) claims
against Lessor, the Person serving as Owner Trustee, in its individual
capacity, or Owner Participant, as the case may be, arising out of any transfer
by any of such Persons in violation of the express terms of the Operative
Agreements; provided, however, that no such Lien shall constitute a Lessor Lien
for any purpose of the Operative Agreements if the same shall have been bonded
to the reasonable satisfaction of Lessee and the Indenture Trustee.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest, or any claim or exercise of rights, affecting the title to
or any interest in property.
"Loss" is defined in Section 7(c)(i) of the Participation Agreement.
"Maintenance Program" is defined in Section 8.1.1.
"Manufacturer" means The Boeing Company, a Delaware corporation, or
any Affiliate thereof whose obligations are guaranteed by The Boeing Company,
and their respective successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
Manufacturer dated as of April 1, 1995, attached to the Purchase Agreement
Assignment and, if applicable, the Agreement of Subsidiary by Boeing Domestic
Sales Corporation of even date therewith.
"Net Economic Return" means the initial Owner Participant's internal
rate of return as calculated by it and anticipated after-tax economic yield,
total aggregate after-tax cash flow and general pattern of book earnings
expected by the initial Owner Participant with respect to the Aircraft for the
Base Lease Term, utilizing the same assumptions (including tax assumptions and
constraints) as were utilized by the Owner Participant in determining Basic
Rent, Stipulated Loss Value and Termination Value percentages as of the
Delivery Date, as such assumptions may be adjusted from time to time to take
into account the impact of any change of the type specified in Section 3.7
which theretofore has resulted in an adjustment of the percentages of Basic
Rent, Stipulated Loss Value or Termination Value.
"Net Present Value of Rents" means, as of any date of determination,
the net present value, as of the Delivery Date, of each of (i) all unpaid Basic
Rent through the end of the Term and (ii) for any date of determination prior
to the Special Purchase Option Date, all unpaid Basic Rent through the Special
Purchase Option Date plus the Special Purchase Price, in each case utilizing a
semi-annual discount rate that, on an annual basis, is equal to 8.60%.
SALE AND LEASE AGREEMENT [N396SW]
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"Officer's Certificate" means a certificate signed by the Chairman,
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Assistant Secretary of the Person providing
such certificate.
"Operative Agreements" means this Agreement, each Lease Supplement,
the Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement
and the Manufacturer's Consent, including any consents included in or attached
to any thereof.
"Original Loan Participant" means Bank of America National Trust and
Savings Association, and its successors and permitted assigns as holder of the
Series SWA 1994 Trust N396SW-I Certificates.
"Overdue Rate" means (i) in respect of that portion of Basic Rent,
Stipulated Loss Value, Termination Value or Special Purchase Price (or any
installment thereof) expected to be applied to principal of or interest on the
Certificates, the Past Due Rate, or if Certificates shall have been issued
after the Section 18 Refinancing Date with more than one Maturity Date,
interest rate or Past Due Rate, the weighted average of the Past Due Rates in
respect of the then-outstanding Certificates of each Maturity Date (which
weighting is to be based on the Outstanding principal amounts of the
Certificates of each Maturity Date, interest rate or Past Due Rate) and (ii) in
respect of any other portion of Basic Rent, Stipulated Loss Value, Termination
Value or Special Purchase Price (or any installment thereof), any Renewal Rent,
any Supplemental Rent owing to any Person, or any amount payable to Lessee
(except as otherwise provided), 2% in excess of the Base Rate, but in no event
to exceed the maximum rate permitted by applicable law. Any interest payable
at the Overdue Rate that is determined with reference to clause (i) of this
definition shall be computed on the same basis as the Past Due Rate, and any
interest payable at the Overdue Rate that is determined with reference to
clause (ii) of this definition shall be computed on the basis of a year of 365
or 366 days, as the case may be, and actual days elapsed.
"Owner Participant" means Ford Motor Credit Company, a Delaware
corporation, and its successors and permitted assigns.
"Owner Participant Agreements" means the Participation Agreement, the
Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means Shawmut Bank Connecticut, National Association,
not in its individual capacity but solely as trustee under the Trust Agreement,
and any successor, separate or additional Owner Trustee thereunder.
"Owner Trustee Documents" means the Participation Agreement, this
Lease, the Trust Agreement, the Trust Indenture, the Certificates and the
Purchase Agreement Assignment.
SALE AND LEASE AGREEMENT [N396SW]
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"Participant" means Owner Participant and Original Loan Participant
and their respective successors and permitted assigns.
"Participation Agreement" means the Participation Agreement, dated as
of April 1, 1995, among Lessee, Participants, Lessor and Indenture Trustee,
relating to the Aircraft.
"Parts" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(other than (a) complete Engines or engines and (b) any items leased by Lessee
from a third party (other than Lessor)) which may from time to time be
incorporated in the Airframe or any Engine and title to which shall vest in
Lessor (and "Part" means any of the foregoing) or, so long as title thereto
shall remain vested in Lessor in accordance with Section 8.2 or any other
provision hereof, after removal therefrom.
"Permitted Foreign Air Carrier" means a "foreign air carrier" (as
defined in the Act) named in Exhibit D hereto (as the same may be modified from
time to time in accordance with Section 23) and any successor of any such
carrier.
"Permitted Lien" means any Lien referred to in clauses (a) through (g)
of Section 6.
"Permitted Sublease" means a sublease permitted under Section 7.2.8.
"Permitted Sublessee" means the sublessee under a Permitted Sublease.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Prohibited Person" is defined in Section 9.2.
"Purchase Agreement" means the Purchase Agreement between Manufacturer
and Lessee specified in the Purchase Agreement Assignment providing, among
other things, for the manufacture and sale by Manufacturer to Lessee of certain
Boeing Model 737-300 series aircraft (including the Aircraft), as the same has
been or may hereafter (to the extent permitted by the terms of the Purchase
Agreement Assignment) be amended, modified or supplemented and including,
without limitation, as part thereof, the detail specifications referred to
therein and any and all change orders from time to time entered into with
respect thereto (to the extent permitted by the terms of the Purchase Agreement
Assignment), as such Purchase Agreement relates to the Aircraft and has been
assigned pursuant to the Purchase Agreement Assignment.
"Purchase Agreement Assignment" means the Purchase Agreement
Assignment, dated as of April 1, 1995, between Lessee and Lessor, assigning to
Lessor certain of Lessee's rights and interests under the Purchase Agreement
with respect to the Aircraft, which Purchase Agreement Assignment has annexed
thereto the Manufacturer's Consent, executed by Manufacturer.
SALE AND LEASE AGREEMENT [N396SW]
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"Qualifying Issuing Bank" means any bank or financial institution
principally based in Canada, France, Germany, Switzerland, Japan, the United
Kingdom or the United States (which may be state owned, but may not be the
central bank of such country) having a rating on its certificates of deposits
of "A2" or higher from Moody's Investor Service (or a rating from any other
nationally recognized bond rating service equivalent to or better than such a
rating) and a combined capital, surplus and undivided profits of at least
$500,000,000 (or the equivalent thereof) and which is otherwise reasonably
satisfactory to Lessor based upon established credit or country limit policies
and like criteria of the Owner Participant.
"Records" is defined in Section 5.4.
"Refinancing Date" is defined in Section 17(a) of the Participation
Agreement.
"Renewal Rent" means the rent payable in respect of a Renewal Term
determined pursuant to Section 18.1.
"Renewal Term" means any of the successive periods of six months or
one, two, three of four years each, not to exceed four years in the aggregate,
which follow the end of the Base Lease Term and with respect to which Lessee
shall have exercised its option pursuant to Section 18.1 hereof.
"Rent" means Basic Rent, Renewal Rent and Supplemental Rent.
"Rent Differential Amount" is defined in Section 3.3.
"Rent Payment Date" means (i) each January 1 and July 1 during the
Base Lease Term and any Renewal Term, commencing with January 1, 1996, and (ii)
April 2, 2019.
"Replacement Aircraft" means any Aircraft of which a Replacement
Airframe is a part.
"Replacement Airframe" means a Boeing Model 737-300 (or an improved
model) aircraft (except Engines or engines from time to time installed thereon)
which shall be leased hereunder pursuant to Section 10.1.2.
"Replacement Engine" means a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer or an engine
of another manufacturer of at least equivalent utility, remaining useful life
and value, in each case suitable for installation and use on the Airframe and
fully compatible with the other Engine or engine installed thereon) which shall
have been substituted for an Engine leased hereunder pursuant to Section 5.2,
9.4, 10.1 or 10.2.
"Section 18 Refinancing Date" is defined in Section 18(a) of the
Participation Agreement.
SALE AND LEASE AGREEMENT [N396SW]
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"Securities Act" means the Securities Act of 1933, as amended.
"SLV Determination Date" means any date set forth in Exhibit B-1
hereto.
"Special Purchase Option Date" is defined in Section 18.2(b).
"Special Purchase Price" is defined in Section 18.2(b).
"Special Purchase Price After-Tax Yield" means the after-tax economic
yield, total aggregate after-tax cash flow and general pattern of book earnings
expected by the Owner Participant with respect to the Aircraft through the
Special Purchase Option Date if the Special Purchase Option were exercised and
the Special Purchase Option Price paid in installments, utilizing the multiple
investment sinking fund method of analysis and the same assumptions as used by
such Owner Participant (including the Tax Assumptions set forth in Section 2 of
the Tax Indemnity Agreement and the assumption that the amount of interest
payable on the Certificates on each Rent Payment Date occurring prior to or
concurrent with the Special Purchase Option Date will be the Assumed Interest
Amount set forth on Exhibit E in respect of such Rent Payment Date) in its
economic analysis of the transaction as of the Delivery Date.
"Stipulated Loss Value" means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment (and, to the
extent that the actual amount of interest paid and to be paid on the
Certificates during the Lease Period in which such SLV Determination Date
occurs up to and including such date is greater or less than the amount
included in calculating the percentage set forth in Exhibit B-1 with respect to
such SLV Determination Date on account of such interest, such percentage shall
be adjusted appropriately to compensate for such differential). Stipulated
Loss Value may be subject to adjustment in accordance with Section 3.7 and
Section 18.2(d) of this Agreement.
"Supplemental Rent" means, without duplication, all amounts,
liabilities and obligations (other than Basic Rent or Renewal Rent) which
Lessee assumes or agrees to pay to Lessor or any other Person hereunder, under
the Participation Agreement or any of the other Operative Agreements,
including, without limitation (i) Stipulated Loss Value and Termination Value
payments and Special Purchase Price payments, (ii) all amounts required to be
paid by Lessee under the agreements, covenants and indemnities contained in the
Participation Agreement and the Tax Indemnity Agreement and (iii) all amounts
required to be paid pursuant to Sections 3.4, 3.5 and 3.8 hereof.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement, dated as
of April 1, 1995, between Owner Participant and Lessee, relating to the
Aircraft.
SALE AND LEASE AGREEMENT [N396SW]
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"Taxes" is defined in Section 7(b)(i) of the Participation Agreement.
"Term" means the term for which the Aircraft is leased pursuant to
Section 3 hereof and, unless earlier terminated, shall include the Interim
Lease Term, the Base Lease Term and any Renewal Term then in force or committed
to in accordance with Section 18.1.
"Termination Date" is defined in Section 9.1.
"Termination Value" means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined (and, to the extent that the actual amount of interest paid and to
be paid on the Certificates during the Lease Period in which such TV
Determination Date occurs up to and including such date is greater or less than
the amount included in calculating the percentage set forth in Exhibit B-2 with
respect to such TV Determination Date on account of such interest, such
percentage shall be adjusted appropriately to compensate for such
differential). Termination Value may be subject to adjustment in accordance
with Section 3.7 of this Agreement.
"Transfer" means, with respect to any Person, to transfer, by bill of
sale or otherwise, all such Person's right, title and interest in and to the
Aircraft, Airframe or any Engine, as the case may be, to another Person on an
"as is, where is" basis, free and clear of any Lessor Lien but otherwise
without recourse, representation or warranty, express or implied, and including
an express disclaimer of warranties, representations and guarantees in a manner
comparable to that set forth in Section 4.1.
"Trust Agreement" means the Trust Agreement, dated as of April 1,
1995, between Owner Participant and Shawmut Bank Connecticut, National
Association, in its individual capacity, relating to the Aircraft.
"Trust Indenture" means the Trust Indenture and Security Agreement,
dated as of April 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft.
"Trust Indenture Estate" has the meaning attributed to the term
"Indenture Estate" in the Trust Indenture.
"TV Determination Date" means any date set forth in Exhibit B-2 hereto.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to 49 U.S.C. Section 41102 and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
SALE AND LEASE AGREEMENT [N396SW]
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"Warranty Bill of Sale" means the full warranty bill of sale for the
Aircraft delivered to Lessee on the date of delivery of the Aircraft to Lessee
by the Manufacturer under the Purchase Agreement.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which the Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under the Act for the performance by such employees of
similar functions within the United States of America (it being understood that
cabin attendants need not be regular employees of Lessee), (ii) shall be
maintained by Lessee in accordance with its Maintenance Program, and (iii)
shall be and remain, in the hands of such third party, subject to all other
terms and conditions of this Lease.
Section 2. Sale, Lease and Acceptance.
(a) Lessor, subject to satisfaction or waiver of the conditions
set forth in Section 4 of the Participation Agreement and the concurrent
acceptance hereunder by Lessee of the Aircraft, hereby agrees, to the extent
that the funds received by it pursuant to Section 2 of the Participation
Agreement are adequate for the purpose, to purchase at a purchase price equal
to Lessor's Cost and to accept delivery on the Delivery Date from Lessee
hereunder and to lease back (immediately after extension of the Lien of the
Trust Indenture to the Aircraft) to Lessee hereunder, and Lessee hereby agrees
to sell to Lessor and to lease back (immediately after extension of the Lien of
the Trust Indenture to the Aircraft) from Lessor hereunder on the Delivery
Date, the Aircraft, which shall have been accepted by Lessor and Lessee
hereunder as evidenced by the execution by Lessor and Lessee of the Lease
Supplement conveying to Lessor and leasing to Lessee the Aircraft hereunder;
provided, however, that Lessor and Lessee shall have no further obligation
hereunder with respect to the Aircraft if the Delivery Date shall not have
occurred on or before April 30, 1995. The purchase price of the Aircraft shall
be paid by Lessor to Lessee on the Delivery Date in the manner specified in
Section 2 of the Participation Agreement.
(b) Lessor hereby authorizes each of Gary C. Kelly, John D. Owen
and Laura Wright, all of whom are employees of Lessee, as the authorized
representative or representatives of Lessor to accept delivery of the Aircraft
from Lessee pursuant hereto. Lessee hereby agrees that in the event delivery
of the Aircraft shall be accepted by an employee or employees of Lessee
pursuant to such authorization by Lessor, such acceptance of delivery by such
employee or employees on behalf of Lessor shall, without further act, also
irrevocably constitute (i) acceptance by such employee of such appointment and
(ii) acceptance by Lessee of the Aircraft for all purposes of this Agreement.
SALE AND LEASE AGREEMENT [N396SW]
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Section 3. Term and Rent.
3.1 General. Except as otherwise provided herein, the Term for
the Aircraft shall commence on the Delivery Date specified in the initial Lease
Supplement and shall terminate as herein provided.
3.2 Lease Term. Except as provided herein, the Aircraft shall be
leased hereunder for the Interim Lease Term, the Base Lease Term and each
Renewal Term, if any.
3.3 Basic Rent. No Basic Rent shall be paid during the Interim
Lease Term. Lessee hereby agrees to pay to Lessor Basic Rent for the Base
Lease Term with respect to the Aircraft on each Rent Payment Date set forth in
Part I of Exhibit C, in each case in an amount equal to the percentage of
Lessor's Cost of the Aircraft set forth in Part I of Exhibit C opposite such
Rent Payment Date, subject to the terms of the next succeeding paragraphs of
this Section 3.3 and Section 3.7. Each installment (or portion of an
installment) of Basic Rent under the heading "Advance" in Exhibit C payable on
a Rent Payment Date shall relate to the respective Lease Period immediately
following such Rent Payment Date, and each installment (or portion of an
installment) of Basic Rent under the heading "Arrears" in Exhibit C payable on
a Rent Payment Date shall relate to the respective Lease Period immediately
preceding such Rent Payment Date.
Although the Basic Rent amounts set forth in Exhibit C hereto have
been computed on the assumption that the amount of interest payable on the
Certificates on the Rent Payment Dates throughout the Base Lease Term will be
the Assumed Interest Amounts, Lessor and Lessee recognize that the actual
amount of interest payable on the Certificates may, from time to time during
the Base Lease Term, be different from the Assumed Interest Amounts.
Accordingly, Basic Rent shall be increased or decreased (but not below zero),
as the case may be, by the Rent Differential Amount (as defined herein). Any
increase in Basic Rent shall constitute additional arrears Rent on the date in
question, and any decrease in Basic Rent shall first decrease arrears Rent
before affecting advance Rent on the date in question. For purposes hereof,
"Rent Differential Amount" shall mean, as of any Rent Payment Date, the
absolute value of the difference between (i) the aggregate amount of interest
due and payable on such Rent Payment Date on the Certificates (or due and
payable on the next following or next preceding Business Day, as the case may
be, if such date shall not constitute a Business Day) and (ii) the Assumed
Interest Amount with respect to such Rent Payment Date. If, as of such Rent
Payment Date, the amount determined in accordance with clause (i) of the
immediately preceding sentence shall be greater than the amount determined in
accordance with clause (ii) of such sentence, the amount of Basic Rent payable
on such Rent Payment Date shall be increased by the Rent Differential Amount.
If, as of such Rent Payment Date, the amount determined in accordance with such
clause (ii) shall exceed the amount determined in accordance with such clause
(i), the amount of Basic Rent due on such Rent Payment Date shall be decreased
(but not below zero) by the Rent Differential Amount.
SALE AND LEASE AGREEMENT [N396SW]
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Anything contained in the Participation Agreement or this Lease or any
other Operative Agreement to the contrary notwithstanding, (a) each installment
of Basic Rent payable under this Lease, whether or not adjusted in accordance
with the immediately preceding paragraph or the provisions of Section 3.7,
shall be, under any circumstances and in any event, in an amount at least
sufficient to pay in full, on the Rent Payment Date on which such installment
is due and payable, any scheduled payments then required to be made on account
of the principal of and interest on the Certificates, and (b) Stipulated Loss
Value, Termination Value and, unless Lessee shall have assumed the Certificates
pursuant to Section 18.2(c) hereof, the Special Purchase Price and the initial
installment of the Special Purchase Price if paid in installments, in each case
whether or not adjusted in accordance with the provisions of Section 3.7, as of
any date of determination thereof, together with any amount of Basic Rent
required to be paid on such date and all other amounts payable on such date,
shall equal, under any circumstances and in any event, an amount at least
sufficient to pay in full any payments then required to be made on account of
the principal of and interest (including, without limitation, any interest on
overdue principal and, to the extent permitted by applicable law, interest),
Premium, if any, and Break Amount, if any, on the Certificates and all amounts
which would be payable prior thereto or on a parity therewith if Section 3.03
of the Trust Indenture were applicable at the time of such payment.
3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Break Amount (if any) or the Premium (if any) payable on the Certificates,
amounts due pursuant to Section 15.05 of the Trust Indenture and each other
amount required to be paid (other than principal and interest on the
Certificates) by Lessor as Owner Trustee under the Trust Indenture, on the same
date that such amounts are due under the Trust Indenture, and as provided in
Section 3.6.
3.5 Supplemental Rent. In addition to the amounts payable as
Supplemental Rent pursuant to Section 3.4, Lessee also agrees to pay (or cause
to be paid) to Lessor, or to whomsoever shall be entitled thereto, all
Supplemental Rent with respect to Stipulated Loss Value or Termination Value
when and as the same shall become due and owing and all other amounts of
Supplemental Rent (other than as covered by Section 3.4) within five days after
demand or such other relevant period as may be provided in any Operative
Agreement. Lessee will also pay to Lessor, or to whomsoever shall be entitled
thereto, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Overdue Rate on any part of any installment of Basic Rent or
Renewal Rent not paid when due for any period from and including the date on
which the same was due to but excluding the date of payment in full and (to the
extent permitted by applicable law) on any payment of Supplemental Rent not
paid when due to Lessor, or to whomsoever shall be entitled thereto, as the
case may be, for the period from the date on which the same was due to but
excluding the date of payment in full. The expiration or other termination of
Lessee's obligation to pay Basic Rent or Renewal Rent hereunder shall not limit
or modify the obligations of Lessee with respect to Supplemental Rent.
3.6 Payments. Payments of Rent and any and all other payments
payable to Lessor hereunder shall be paid in funds of the United States of
America which shall be immediately
SALE AND LEASE AGREEMENT [N396SW]
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available not later than 11:00 A.M., New York City time, on the date due at the
office of Lessor at 777 Main Street, Hartford, Connecticut 06115, Attention:
Corporate Trust Administration, Re: Southwest Airlines 1995 Trust N396SW, or
as otherwise directed by Lessor in writing at least five Business Days prior to
the date such payment is due; provided, that so long as the Trust Indenture
shall not have been terminated pursuant to Section 10.01 of the Trust
Indenture, Lessor hereby directs and Lessee agrees, that, unless the Indenture
Trustee shall otherwise direct, all Rent (other than Excluded Payments) shall
be paid prior to 11:00 A.M., New York City time, on the due date thereof
directly to Indenture Trustee to its account set forth in Schedule I to the
Participation Agreement. All payments of Supplemental Rent owing to Indenture
Trustee or to any Holder pursuant to the Participation Agreement shall be made
in immediately available funds prior to 11:00 A.M. New York City time, on the
due date thereof at the office of Indenture Trustee or at such other office of
such other financial institution located in the continental United States as
the party entitled thereto may so direct at least five Business Days prior to
the due date thereof. All payments of Supplemental Rent payable to Owner
Participant, to the extent that such amounts constitute Excluded Payments (as
defined in the Trust Indenture), shall be made by wire transfer prior to 11:00
A.M., New York City time, on the due date thereof, to its account set forth in
Schedule I to the Participation Agreement, with sufficient information to
identify the source and application of the funds. Except as otherwise
expressly provided herein, whenever any payment of Rent or other payment to be
made hereunder shall be due on a day which is not a Business Day, such payment
shall be made on the next succeeding day which is a Business Day and (provided
such payment is made on such next succeeding Business Day) no interest shall
accrue on the amount of such payment from and after such scheduled date.
3.7 Adjustment to Basic Rent, Stipulated Loss Value and
Termination Value.
3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a)
of the Participation Agreement paid by Owner Participant in connection
with the closing of this transaction on the Delivery Date are equal to
an amount which is other than 0.365% of Lessor's Cost, (b) the
Transaction Costs referred to in Section 16(a) of the Participation
Agreement paid by Owner Participant in connection with the initial
refinancing or refunding of the Certificates pursuant to Section 18 of
the Participation Agreement are equal to an amount which is other than
0.625% of Lessor's Cost, or no such refinancing or refunding shall
occur within two years of the Delivery Date, (c) the Delivery Date is
not April 3, 1995, (d) a refinancing or refunding of the Certificates
pursuant to Section 17 or 18 of the Participation Agreement occurs,
(e) any recalculation of Basic Rent, Stipulated Loss Value,
Termination Value and the Special Purchase Price is required by the
terms of the Tax Indemnity Agreement, or (f) the interest portion of
the Deferred Equity Amount is not equal to the Assumed Interest Amount
with respect to the Deferred Equity Date and there shall not have
occurred a refunding or refinancing pursuant to Section 17 or 18 of
the Participation Agreement prior to the first Rent Payment Date, then
in each case, the Basic Rent percentages set forth in Exhibit C, the
Stipulated Loss Value percentages set forth in Exhibit B-1 and the
Termination Value percentages set forth in
SALE AND LEASE AGREEMENT [N396SW]
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Exhibit B-2 shall be recalculated by Owner Participant (i) in the case
of a recalculation pursuant to clause (a) or (c), prior to April 1,
1996, (ii) in the case of a recalculation pursuant to clause (b), on
or prior to the later of April 3, 1997 and the second Rent Payment
Date next following the relevant Refinancing Date or Section 18
Refinancing Date, as the case may be, (iii) in the case of a
recalculation pursuant to clause (d), prior to the relevant
Refinancing Date or Section 18 Refinancing Date, as the case may be,
(iv) in the case of a recalculation pursuant to clause (e), prior to
the Rent Payment Date next following (by at least five Business Days)
the event described in clause (e), or (v) in the case of a
recalculation pursuant to clause (f), prior to the first Rent Payment
Date, in each case in order to: (A) maintain Net Economic Return and
(B) minimize the Net Present Value of Rents to the extent possible
consistent with clause (A). In addition, in the event of an
adjustment pursuant to this Section 3.7, the Special Purchase Price
(including any installments thereof) shall be recalculated in
accordance with the terms of Section 18.2(b).
3.7.2 Recalculation Procedures. Any recalculation of Basic
Rent, Stipulated Loss Value and Termination Value percentages and the
Special Purchase Price pursuant to this Section 3.7 shall be
determined by Owner Participant, and shall be subject to the
verification of Lessee and its advisors. Such recalculated Basic
Rent, Stipulated Loss Value and Termination Value percentages and
Special Purchase Price (including installments thereof) shall be set
forth in a Lease Supplement and, in the case of Basic Rent, shall
become effective as of the next succeeding Rent Payment Date and, in
the case of Stipulated Loss Value, Termination Value and the Special
Purchase Price, shall be retroactive to the inception of this Lease.
Such recalculated Basic Rent and, if applicable, the Special Purchase
Price shall be determined so as to conform, in the opinion of Owner
Participant's tax counsel, to all applicable tax constraints and
requirements, including the requirements of Section 467 of the Code
and Sections 4.(1)(B), 4.(6) and 5. of Revenue Procedure 75-21, 75-1
Cum. Bull. 715; provided, however, that notwithstanding the foregoing,
all adjustments provided for herein shall be based on the same
calculation methods and assumptions (including tax assumptions set
forth in Section 2 of the Tax Indemnity Agreement) as were used
initially by the Owner Participant in determining Basic Rent,
Stipulated Loss Values, Termination Values and the Special Purchase
Price for the Aircraft (except and only to the extent such assumptions
are required to be changed by virtue of the event giving rise to the
adjustment or any event giving rise to any prior adjustments pursuant
to the terms of this Lease) and shall take into account the amount and
timing of any contribution made by the Owner Participant to the Estate
subsequent to the Delivery Date. If, upon verification of the
percentages determined by Owner Participant pursuant to this Section
3.7, Lessee does not agree with the determination of Owner
Participant, then an independent accounting firm, to be selected by
Owner Participant and reasonably acceptable to Lessee, shall verify
the computations. Such accounting firm shall be requested to make its
determination within 30 days. Owner Participant shall provide to such
accounting firm such information as it may reasonably require,
including a description of the methodology of the calculations used in
computing such adjustments
SALE AND LEASE AGREEMENT [N396SW]
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and such other information as is necessary to determine whether the
computations are mathematically accurate. The accounting firm shall
hold in strict confidence such methodology and other information. The
computations of Owner Participant or the accounting firm selected as
provided above, whichever is applicable, shall be final, binding and
conclusive upon Lessee and Lessor, and Lessee shall have no right to
inspect the books, records, tax returns or other documents of or
relating to Owner Participant to verify such computations or for any
other purpose in connection with such adjustments. All fees and
expenses payable to the accounting firm selected above under this
Section 3.7.2 shall be borne by Lessee, except that such fees and
expenses shall be payable by Owner Participant if the computations
provided by Owner Participant are higher than those provided by the
accounting firm and the computations of such accounting firm causes
the present value of the Basic Rent (utilizing a semi-annual discount
rate that, on an annual basis, is equal to 8.60%) as computed by Owner
Participant to decrease by ten basis points or more.
Section 3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received (i) the Deferred
Equity Amount on the Deferred Equity Date, or such amount is insufficient to
pay all principal and interest on the Certificates due on such date, or (ii)
the payment to be made by the Owner Trustee pursuant to clause (5) of Section
18(a) of the Participation Agreement on the Section 18 Refinancing Date, or the
amount of such payment is insufficient to pay the Break Amount and all accrued
and unpaid interest on the Certificates, then Lessee shall pay to the Indenture
Trustee on behalf of the Owner Participant or the Owner Trustee, as the case
may be, on the Deferred Equity Date or the Section 18 Refinancing Date, as the
case may be, an amount equal to all amounts payable as principal or interest on
the Certificates on the Deferred Equity Date and/or as Break Amount and all
accrued and unpaid interest on the Certificates on the Section 18 Refinancing
Date, as the case may be, less any portion of either such amount so paid by the
Owner Participant or the Owner Trustee, as the case may be (such amount herein
referred to as an "Advance"). In the event Lessee makes any Advance pursuant
to this Section 3.8, then, notwithstanding any provision to the contrary herein
or in any other Operative Agreement, Lessee shall be entitled to demand
immediate repayment of such Advance from the Owner Participant to the extent of
the portion thereof that relates to a payment that the Owner Participant or
Owner Trustee failed to make as required by Section 8(dd) or 18(a)(5A) of the
Participation Agreement, and, in addition, shall be entitled to offset and
deduct (without duplication) against each succeeding payment (other than as
limited by the provisos to this sentence) due from Lessee to Persons other than
the Holders, the Indenture Trustee and Lessor in its individual capacity
(including, without limitation, Basic Rent, payments due under Sections 5, 9,
10, 15 and 18 hereof, and payments due to Persons other than the Holders, the
Indenture Trustee and Lessor in its individual capacity under Section 7 of the
Participation Agreement) the amounts (including interest at the rates provided
therein) due and owing by the Owner Participant to Lessee under Section 8(dd)
of the Participation Agreement until Lessee has been fully reimbursed for such
amounts; provided, that in the case of any payment due from Lessee which is
distributable under the terms of the Trust Indenture, Lessee's right of offset
and deduction shall be limited to amounts distributable to Lessor or the Owner
Participant
SALE AND LEASE AGREEMENT [N396SW]
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thereunder (and shall not include any amounts distributable to the Indenture
Trustee or the Holders); and provided, further, that in no event shall any such
offset or aggregate combined effect of separate offsets reduce the amount of
(i) any installment of Basic Rent to an amount that is insufficient to pay in
full the scheduled payments then required to be made on account of the
Certificates then Outstanding or (ii) any payment of Stipulated Loss Value,
Termination Value or Special Purchase Price (or installment thereof) to an
amount that, together with any other amounts then required to be paid by Lessee
hereunder in connection therewith, is insufficient to pay in full as of the
date of payment thereof, the aggregate unpaid principal of the Outstanding
Certificates, together with all unpaid interest, Premium (if any) and Break
Amount (if any) thereon. Notwithstanding any provision of this Section 3.8 to
the contrary, Lessee's obligation to make any Advance shall terminate at such
time as its obligation to pay Basic Rent terminates under this Lease (other
than by reason of a Lease Event of Default).
Section 4. Lessor's Representations and Warranties; DISCLAIMER;
Certain Agreements of Lessee.
4.1 Lessor's Representations and Warranties; DISCLAIMER. LESSEE
EXPRESSLY AGREES TO TAKE THE AIRCRAFT "AS IS", AND LESSEE HAS SELECTED THE
AIRCRAFT AND THE MANUFACTURER THEREOF (AND EACH PORTION THEREOF) AND ALL
MAINTENANCE FACILITIES REQUIRED FOR THE AIRCRAFT OR HEREUNDER. NEITHER LESSOR
(INDIVIDUALLY OR AS OWNER TRUSTEE) NOR THE INDENTURE TRUSTEE (INDIVIDUALLY OR
AS INDENTURE TRUSTEE) NOR ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO
HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS (OR, IF NOT A PARTY HERETO SHALL
BE DEEMED TO HAVE EXPRESSLY DISCLAIMED), ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Shawmut Bank
Connecticut, National Association, in its individual capacity (i) represents
and warrants that on the Delivery Date Lessor shall have received whatever
title thereto as was conveyed to it by the Lessee, (ii) represents and warrants
that on the Delivery Date the Aircraft shall be free of Lessor Liens
attributable to it, (iii) agrees that it will not directly or indirectly
create, incur, assume or suffer to exist any Lessor Lien attributable to it on
or with respect to the Airframe or any Engine or any other portion of the
Estate, and (iv) represents and warrants that it is a "citizen of the United
States" as defined in the Act. Lessor covenants that during the Term (so long
as no Lease Event of Default shall have occurred and be continuing) it will
not, through its own actions or breaches of any of its obligations under the
Operative Agreements, interfere in the quiet enjoyment of the Aircraft by
Lessee or any Permitted Sublessee.
SALE AND LEASE AGREEMENT [N396SW]
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Nothing in this Section 4.1 shall be deemed to modify or otherwise
affect the respective rights and obligations of Lessee and of Manufacturer
under the Purchase Agreement.
4.2 Certain Agreements of Lessee. All obligations of Lessee in
this Lease shall be done, performed or complied with at Lessee's cost and
expense, whether or not so expressed, unless otherwise expressly stated.
Lessee hereby agrees with Lessor for the benefit of the Participants that it
shall perform the agreements, covenants and indemnities set forth in the
Participation Agreement (including, without limitation, Sections 7(b) and 7(c)
of the Participation Agreement) which are incorporated herein, and hereby
restates Lessee's representations and warranties set forth in the Participation
Agreement and the Tax Indemnity Agreement, as fully and to the same extent and
with the same force and effect as if set forth in full in this Section 4.2.
Section 5. Return of Aircraft.
5.1 General Condition upon Return. Unless purchased by Lessee
pursuant to Section 18.2, and subject to Section 10, upon the expiration or
termination of this Lease, Lessee will return the Aircraft to Lessor by
delivering the same at any location in the continental United States at which
Lessee has maintenance facilities (and Section 5.7 shall apply). Lessee shall
give Lessor not less than 15 days prior notice of the return location. All
costs associated with the return flight shall be for the account of Lessee. At
the time of such return, the Airframe and Engines or engines installed thereon:
5.1.1 Airworthiness. Subject to the exception described in
clause (iii) of Section 8.1.1, shall be duly certificated as an
airworthy aircraft by the FAA under Part 121 of the Federal Aviation
Regulations or any successor provision; provided, that Lessee's
ability to satisfy such return condition shall not preclude the
occurrence of an Event of Loss pursuant to clause (iv) of the
definition thereof;
5.1.2 Free of Liens. Shall be free and clear of all Liens
(except Lessor Liens);
5.1.3 Operating Configuration and Condition. Shall be in a
configuration suitable for operation in regularly scheduled commercial
airline passenger service in the United States and shall be in as good
operating condition as when delivered new to Lessee by Manufacturer,
ordinary wear and tear excepted or, in the case of any such engines
not owned by Lessor, shall have a value, utility, airworthiness and
remaining useful life at least equal to, and shall be in as good
operating condition as required by the terms hereof with respect to,
Engines constituting part of the Aircraft but not then installed on
the Airframe. All Lessee or Permitted Sublessee exterior markings, as
the case may be, shall have been painted over in matching exterior
colors. In addition, any appliance, part, instrument, appurtenance,
accessory, furnishing or other equipment leased by Lessee from a third
party (other than Lessor) and incorporated in the Aircraft shall be
removed prior to the date of such return without any damage to the
Aircraft and without diminishing or impairing the value, utility,
remaining useful life or condition
SALE AND LEASE AGREEMENT [N396SW]
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which the Aircraft would have had at such time had such equipment not
been installed, and Lessee shall make all repairs which are required
as a result of such removal;
5.1.4 Cleanliness and Operability. Shall be clean by
United States commercial airline operating standards with all systems
and components operable; and
5.1.5 Parts and Equipment. Shall have installed thereon
all Engines and Parts installed thereon at the commencement of the
Term therefor or replacements therefor made in accordance with the
terms of this Lease.
5.2 Return of Other Engines. In the event that any engine not
owned by Lessor shall be installed on the Airframe returned in accordance with
Section 5.1, such engine shall be a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer, or an engine
of another manufacturer of at least equivalent utility, value, airworthiness
and remaining useful life in each case suitable for installation and use on the
Airframe and fully compatible with the other Engine or engine installed on the
Airframe). At the time of such replacement, such engine shall have performance
and durability characteristics and a value, condition, utility, airworthiness
and remaining useful life at least equal to the Engine it replaced hereunder,
assuming such Engine was maintained in accordance with the requirements of this
Lease, and at the time the Airframe is returned shall fully comply with all the
requirements of this Lease, including this Section 5, which are applicable to
Engines. Upon return of the Aircraft, Lessee shall duly convey to Lessor good
title to any such replacement engine, free and clear of (i) all rights of third
parties under any arrangement, including pooling, interchange, overhaul, repair
or other similar agreements or arrangements and (ii) Liens other than Lessor
Liens; and, upon such conveyance and as a condition thereto, Lessee will (a)
furnish Lessor with a full warranty (as to title) bill of sale, in form and
substance reasonably satisfactory to Lessor, with respect to each such
replacement engine, together with an opinion of counsel to the effect that such
bill of sale has been duly authorized and delivered and is enforceable in
accordance with its terms and that each such replacement engine is free and
clear of all Liens other than Lessor Liens, and (b) take such other action as
Lessor may reasonably request in order that title to such replacement engine
may be duly and properly vested in Lessor to the same extent as the Engine
replaced thereby. Upon compliance by Lessee with the foregoing, Lessor will,
so long as no Lease Event of Default has occurred and is continuing, comply
with the applicable provisions of the Trust Indenture and, upon Indenture
Trustee's release of the Engine from the Lien of the Trust Indenture Estate,
Transfer to Lessee any Engine not installed on the Airframe at the time of
return.
5.3 Return at End of Base Lease Term or Renewal Lease Term. Upon
return of the Aircraft at the expiration or termination of this Lease, Lessee
shall have caused all FAA Airworthiness Directives applicable to the Aircraft
and all mandatory service bulletins from Manufacturer, Engine Manufacturer or
other manufacturer of an engine then installed on the Airframe (in compliance
with Section 5.2) applicable to the Aircraft to have been complied with (except
for any such FAA Airworthiness Directives and bulletins that permit compliance
after the return date and would not, in the normal course of the Maintenance
Program, be complied
SALE AND LEASE AGREEMENT [N396SW]
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with on or prior to the return date). Lessee shall have treated the Aircraft,
including without limitation with respect to maintenance, additions and
modifications (including compliance with FAA Airworthiness Directives), during
the Term similarly to all other Boeing 737-300 aircraft in its fleet, without
in any way discriminating against the Aircraft, whether by reason of its leased
status or otherwise.
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of such return, the Airframe shall have remaining until the
next scheduled "C" check (which term, as used in this paragraph, shall include
a "C" check and any other check equivalent thereto) at least 50% of the
allowable hours between "C" checks permitted under the Maintenance Program then
used by Lessee (or such Permitted Sublessee, as the case may be), and the
condition set forth in Appendix A shall have been satisfied. In the event that
Lessee (or any Permitted Sublessee then in possession of the Aircraft) shall
then be using a continuous or "progressive" maintenance program with respect to
the Airframe, then the Airframe shall be current on such program. If the
conditions set forth in the first sentence of this paragraph shall be
applicable to the Airframe but shall not have been met at the time of such
return, Lessee shall perform (or cause to be performed) all maintenance work
necessary to meet such conditions or, if Lessee shall so elect, Lessee shall
pay or cause to be paid to Lessor an amount computed by multiplying (i) the
current market cost of a "C" check by (ii) a fraction of which (x) the
numerator shall be the excess of 50% of hours of operation allowable between
such "C" checks over the actual number of hours of operation remaining on the
Airframe to the next such "C" check, and (y) the denominator shall be the
number of hours of operation allowable between such "C" check in accordance
with such Maintenance Program.
Lessee further agrees that, whether or not the then-current engine
maintenance program is on-condition, the number of hours or cycles of operation
(whichever shall be applicable under the Maintenance Program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 3,000 allowable hours
or cycles (whichever shall be applicable), in the aggregate for both Engines or
engines; provided, that each life-limited Part within each Engine or engine
shall have a minimum of 1,200 allowable hours or cycles (whichever shall be
applicable) remaining until its next required replacement. If, at the time of
such return, the Engines or engines do not meet the aggregate 3,000 hour
condition specified in the previous sentence, Lessee shall perform (or cause to
be performed) all maintenance work necessary to meet such conditions or, if
Lessee shall so elect, Lessee shall pay or cause to be paid to Lessor an amount
computed by multiplying (i) the current market cost of performing for an engine
of the same model as such Engines or engines the scheduled engine refurbishment
under the Maintenance Program then used by Lessee (or such Permitted Sublessee,
as the case may be) for engines of such model by (ii) a fraction of which (x)
the numerator shall be the excess of 3,000 hours or cycles (whichever is
applicable) over the aggregate number of hours or cycles of operation on such
Engines or engines remaining until the next scheduled engine refurbishment, and
(y) the denominator shall be the number of hours or cycles allowable between
such scheduled engine refurbishments. If, at the time of such return, any
life-limited Part within such Engine or engine does not meet the
SALE AND LEASE AGREEMENT [N396SW]
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1,200 hour condition specified in the first sentence of this paragraph, Lessee
shall perform (or cause to be performed) all maintenance work necessary to meet
such conditions or, if Lessee shall so elect, Lessee shall pay or cause to be
paid to Lessor an amount computed by multiplying (i) the current market cost of
replacing such life-limited Part by (ii) a fraction of which (x) the numerator
shall be the excess of 1,200 hours or cycles (whichever is applicable) over the
number of remaining hours or cycles (whichever is applicable) of operation of
such life-limited Part, and (y) the denominator shall be the total number of
hours or cycles allowable on such life-limited Part.
5.4 Manuals; Service Bulletins, Etc. Upon return of the Aircraft
at the expiration or termination of this Lease, Lessee shall deliver or cause
to be delivered to Lessor all logs, manuals, drawings and data and inspection,
modification and overhaul records in respect of the Aircraft required to be
maintained under applicable rules and regulations of the FAA, updated through
the date of return (collectively, "Records"). All "no-charge" service bulletin
kits received by or on behalf of Lessee from Manufacturer, Engine Manufacturer
or vendors for the Aircraft and Engines or engines and not incorporated therein
shall be returned at no charge to Lessor as cargo on board the Aircraft at the
time of its return. At the time the Aircraft is returned, Lessor shall have
the option to purchase from Lessee, at Lessee's cost therefor, any "charge"
service bulletin kits purchased by Lessee which have not been incorporated in
the Aircraft. All such items shall thereupon become the property of Lessor.
5.5 Failure to Return Aircraft or Engines. If Lessee shall, for
any reason whatsoever, fail to return the Aircraft or any Engine at the time
specified herein, the obligations of Lessee as provided in this Lease
(including the obligation to pay Rent on the same basis as that applicable
immediately prior to such failure) shall continue in effect with respect to the
Aircraft or such Engine until the Aircraft or such Engine is returned to
Lessor; but this Section 5.5 shall not be construed as permitting Lessee to
fail to meet its obligation to return the Aircraft or such Engine in accordance
with the requirements of this Lease or constitute a waiver of a Lease Event of
Default.
5.6 Aid in Disposition. Lessee agrees that, unless Lessee shall
have elected to purchase the Aircraft pursuant to Section 18.2, during the last
six months of the Term it will cooperate in all reasonable respects with any
efforts of Lessor to lease or sell the Aircraft, including without limitation
(subject to the provisions of Section 12) permitting potential lessees or
purchasers to inspect the Aircraft and the records relating thereto.
5.7 Storage upon Return. Upon written request of Lessor or Owner
Participant received by Lessee at least 10 days prior to its return of the
Aircraft at the expiration or termination of this Lease, Lessee will attempt to
arrange for parking facilities for the Aircraft for a period not exceeding 60
days following return thereof by Lessee at the location of return pursuant to
Section 5.1; and Lessor shall bear or reimburse Lessee for Lessee's
out-of-pocket expenses of such storage (including maintenance and insurance
expenses).
SALE AND LEASE AGREEMENT [N396SW]
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Section 6. Liens. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, the Airframe or any Engine, title thereto or any interest therein or
in this Lease except: (a) the respective rights of the parties to the
Operative Agreements; (b) the rights of others under agreements or arrangements
to the extent expressly permitted by the terms of Sections 7.2 and 8.3; (c)
Lessor Liens; (d) Liens for taxes, assessments or other governmental charges
either not yet due or being contested in good faith (and for the payment of
which adequate reserves have been provided in accordance with generally
accepted accounting principles) by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture, loss or
loss of use of the Aircraft, the Airframe or any Engine or any interest
therein; (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 due or not overdue for a period of more than
60 days or is being contested in good faith (and for the payment of which
adequate reserves have been provided in accordance with generally accepted
accounting principles) by appropriate proceedings so long as such Liens do not
involve any material danger of the sale, forfeiture, loss or loss of use of the
Aircraft, the Airframe or any Engine or any interest therein; (f) Liens arising
out of any judgment or award against Lessee, unless the judgment secured shall
not, within 45 days after entry thereof, have been discharged or vacated or
execution thereof stayed pending appeal or shall not have been discharged,
vacated or reversed within 45 days after the expiration of such stay; and (g)
any other Lien with respect to which Lessee shall have provided a bond or other
security adequate in the reasonable judgment of Lessor. Lessee will promptly
take (or cause to be taken) such action at its own expense as may be necessary
duly to discharge any such Lien not excepted above if the same shall arise at
any time.
Section 7. Registration, Operation, Possession, Subleasing and
Records.
7.1 Registration and Operation.
7.1.1 Registration. Lessee shall forthwith upon the
delivery of the Aircraft hereunder cause the Aircraft to be duly
registered and at all times thereafter to remain duly registered in
the name of Lessor with the FAA pursuant to and as permitted by the
Act (it being understood that Lessee shall not be required to comply
with this covenant to the extent that Shawmut Bank Connecticut,
National Association's or Owner Participant's failure to comply with
its covenant set forth in Section 8(b) of the Participation Agreement
with regard to its citizenship makes such compliance by Lessee
impossible).
7.1.2 Nameplate. Lessee agrees to affix within 10 days of
the Delivery Date and thereafter to maintain in the cockpit of the
Airframe adjacent to the airworthiness certificate and on each Engine
a nameplate bearing the inscription "OWNED BY AND LEASED FROM SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND
LESSOR" and, so long as the Trust Indenture shall be in effect,
"SUBJECT TO A SECURITY INTEREST IN FAVOR OF WILMINGTON TRUST COMPANY,
AS INDENTURE TRUSTEE" (such nameplate to be replaced promptly, if
necessary, with a nameplate reflecting the name of any
SALE AND LEASE AGREEMENT [N396SW]
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successor Lessor or successor Indenture Trustee). Except as above
provided, Lessee will not allow the name of any person, association or
corporation to be placed on the Airframe or on any Engine as a
designation that might be interpreted as a claim of ownership;
provided, that nothing herein contained shall prohibit Lessee (or any
Permitted Sublessee) from placing its customary colors and insignia on
the Airframe or any Engine or displaying information concerning the
registration or manufacture of the Aircraft, the Airframe, any Engine
or Part.
7.1.3 Compliance with Laws. Lessee agrees that it will not
use or operate the Aircraft, the Airframe or any Engine in violation
of any law or any rule, regulation or order of any government or
governmental authority having jurisdiction (domestic or foreign) or in
violation of any airworthiness certificate, license or registration
relating to the Aircraft, the Airframe or any Engine issued by any
such authority, except to the extent Lessee is contesting in good
faith the validity or application of any such law, rule, regulation or
order in any reasonable manner which does not materially adversely
affect the Owner Participant or Lessor's title to or interest in the
Aircraft (but subject in any event to Section 5).
7.1.4 Insurance Requirements; Government Requisition;
Indemnity. Lessee agrees not to operate, use or locate the Aircraft,
the Airframe or any Engine, or permit any Permitted Sublessee to
operate, use or locate the Aircraft, the Airframe or any Engine, (i)
in any area excluded from coverage by any insurance required by the
terms of Section 11, except in the case of a requisition by the
Government where Lessee obtains indemnity (backed by the full faith
and credit of the United States of America) in lieu of such insurance
from the Government against the risks and in the amounts required by
Section 11 covering such area, or (ii) in any area where maintenance
of war-risk insurance is required by Section 11 unless fully covered
by war-risk insurance satisfying the terms of Section 11, or unless
the Aircraft, the Airframe or such Engine is operated or used under
contract with the Government under which contract the Government
assumes liability (backed by the full faith and credit of the United
States of America) in an amount not less than the amount of insurance
otherwise required by Section 11 for any damage, loss, destruction or
failure to return possession of the Aircraft, the Airframe or such
Engine at the end of the term of such contract or for injury to
persons or damage to property of others, or (iii) in any area referred
to in subclause 3(iv) immediately following Section 7.2.8.
7.2 Possession. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine or install
any Engine, or permit any Engine to be installed, on any airframe other than
the Airframe; provided, however, that so long as no Lease Default (of the type
described in Section 14.1 or 14.5) or Lease Event of Default shall have
occurred and be continuing, and so long as Lessee shall comply with the
provisions of Section 11, and all FAA approvals required for such purposes have
been obtained, Lessee may, without such prior written consent:
SALE AND LEASE AGREEMENT [N396SW]
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7.2.1 Interchange and Pooling. Subject or permit any
Permitted Sublessee to subject (i) the Aircraft, Airframe or any
Engine to normal interchange agreements customary in the airline
industry and entered into by Lessee or such Permitted Sublessee in the
ordinary course of its business with, in the case of the Airframe, a
U.S. Air Carrier or a Permitted Foreign Air Carrier, in either case
that is not then subject to bankruptcy or similar proceedings, and
(ii) any Engine to pooling agreements or arrangements customary in the
United States domestic commercial airline industry and entered into by
Lessee or such Permitted Sublessee in the ordinary course of its
business; but in either case (A) no transfer of the registration of
the Airframe or any Engine shall be effected in connection therewith
and the terms of this Lease and the Participation Agreement shall be
observed and (B) no such agreement or arrangement shall contemplate or
require the transfer of title to the Aircraft, Airframe or any Engine
and if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect thereto and Lessee shall comply with
Section 10.2 hereof;
7.2.2 Testing and Service. Deliver or permit any Permitted
Sublessee to deliver possession of the Aircraft, Airframe or any
Engine or Part, to the manufacturer thereof for testing or other
similar purposes, or to any organization for service, repair,
maintenance or overhaul work on the Aircraft, Airframe or any Engine
or Part, or for alterations or modifications in or additions to the
Aircraft, Airframe or any Engine to the extent required or permitted
by the terms of Section 8.4;
7.2.3 Civil Reserve Air Fleet Program. Transfer or permit
any Permitted Sublessee, if required by law to do so, to transfer
possession of the Aircraft, Airframe or any Engine to the Government
pursuant to the Civil Reserve Air Fleet Program or any similar or
substitute programs, so long as such transfer of possession does not
continue beyond the end of the Term and so long as Lessee shall (A)
promptly notify Lessor upon subjecting the Airframe or any Engine to
such program and provide Lessor with the name and address of the
appropriate party to whom notice must be given in connection with any
repossession of the Aircraft under Section 15.1.1, and (B) promptly
notify Lessor upon transferring possession of the Airframe or any
Engine to the Government pursuant to such program;
7.2.4 Installation of Engines. Install or permit any
Permitted Sublessee to install an Engine on an airframe owned by
Lessee or such Permitted Sublessee, as the case may be, free and clear
of all Liens, except (A) Permitted Liens and those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of air carriers under normal interchange
agreements which are customary in the airline industry and do not
contemplate, permit or require the transfer of title to the airframe
or engines installed thereon, and (C) mortgage liens or other security
interests, provided, that (as regards this clause (C)) such mortgage
liens or other security interests effectively provide
SALE AND LEASE AGREEMENT [N396SW]
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that such Engine shall not become subject to the lien of such mortgage
or security interest, notwithstanding the installation thereof on such
airframe, unless and until Lessee shall become the owner of such
Engine;
7.2.5 Installation of Engines on Other Airframes. Install
or permit any Permitted Sublessee to install an Engine on an airframe
leased to, or purchased by, Lessee or any Permitted Sublessee subject
to a lease, conditional sale, trust indenture or other security
agreement, but only if (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease, conditional
sale, trust indenture or other security agreement covering such
airframe, or their successors or assigns, and except Liens of the type
permitted by clauses (A) and (B) of Section 7.2.4, and (B) the lease,
conditional sale, trust indenture or other security agreement covering
such airframe effectively provides that such Engine will not become
subject to the Lien thereof at any time while such Engine is subject
to this Lease, notwithstanding the installation thereof on such
airframe;
7.2.6 Pooling of Parts. To the extent permitted by Section
8.3, subject any Parts owned by Lessor and removed from the Airframe
or any Engine to any pooling arrangement referred to in Section 8.3;
7.2.7 Wet Lease. Enter into a Wet Lease for the Airframe
and Engines or engines then installed thereon with any third party for
a term not to continue beyond the Term;
7.2.8 Sublease to Permitted Air Carriers. So long as the
proposed sublessee is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the date
the sublease is entered into, enter into a sublease of the Aircraft,
or the Airframe and Engines or engines then installed on the Airframe,
or any Engine, for use on the sublessee's regularly scheduled or
charter routes, with any U.S. Air Carrier or Permitted Foreign Air
Carrier, in any such case for a term not to continue beyond the
remaining Term.
Provided, further, with respect to this Section 7.2, that:
(1) the rights of any transferee who receives
possession by reason of a transfer permitted by this Section
7.2 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be effectively subject and subordinate
to, and any sublease permitted by this Section 7.2 shall be
made expressly subject and subordinate to, all the terms of
this Lease and the Lien of the Trust Indenture, and to
Lessor's rights, powers and remedies under this Lease,
including the rights to repossession pursuant to Section 15
and to terminate and avoid such sublease upon such
repossession and to require such sublessee to forthwith
deliver the Aircraft, Airframe and Engines subject to such
sublease upon such repossession;
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(2) Lessee shall remain primarily liable
hereunder for the performance of all the terms of this Lease
(including, without limitation, the payment of Supplemental
Rent representing any indemnities payable as a result of acts
or circumstances respecting a sublease or a sublessee's
operation of the Aircraft) to the same extent as if such
sublease, transfer or relinquishment of possession had not
occurred (it being understood that, without limitation of the
foregoing, any standards established under this Lease with
reference to Lessee's practices respecting other aircraft
owned or operated by it shall continue to refer to such
practices of Lessee rather than of any transferee); provided,
that performance of any such terms by any Permitted Sublessee
shall be as effective, for purposes of this Lease, as
performance thereof directly by Lessee;
(3) any such sublease shall (i) be consistent
with the requirements of this Lease and the applicable
requirements of the Participation Agreement, (ii) include
appropriate provisions for the continued maintenance in
accordance with applicable maintenance standards in the
appropriate jurisdiction, operation, insurance (appropriate
certificates as to which shall be furnished to Lessor and
Indenture Trustee prior to Lessee's entry into any such
sublease with any Permitted Foreign Air Carrier or within 10
days thereafter) and return of the subleased property as
required hereunder, (iii) provide that the sublessee may not
assign or further sublease the Aircraft, (iv) provide that the
Aircraft may not be operated into a country with which the
United States does not maintain diplomatic relations or in
which there is open warfare, whether or not declared, (v) not
provide for sublease rentals to be prepaid or assigned to a
third party; provided, however, that (x) up to six months'
rentals may be prepaid to Lessee and (y) this clause (v) shall
not preclude Lessee's establishing and holding appropriate
reserves for any obligations arising under such sublease, and
(vi) not require the sublessee to purchase the Aircraft or
grant the sublessee any purchase options, or any options for
the renewal of such sublease for a term beyond the Base Lease
Term, in each case on dates other than, or at amounts less
than, corresponding options granted to Lessee hereunder;
(4) no interchange agreement, transfer, sublease
or other relinquishment of possession permitted hereunder
shall affect the registration of the Aircraft or shall permit
any action not permitted to Lessee in this Lease; and
(5) no such interchange agreement, sublease,
transfer or other relinquishment of possession of the
Aircraft, Airframe or any Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or
under any other Operative Agreement or constitute a waiver of
Lessor's rights or remedies hereunder or under any other
Operative Agreement.
Lessee shall notify Lessor within 10 days after the commencement of
any sublease permitted hereunder and shall deliver to Lessor within such period
a duly executed copy of any
SALE AND LEASE AGREEMENT [N396SW]
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sublease or interchange or pooling agreement permitted hereunder. Upon request
of Lessor, Lessee shall promptly duly execute and deliver to Lessor an
assignment of any such sublease having a term in excess of 12 months in favor
of Lessor in form and substance reasonably satisfactory to Lessor. Lessor
hereby agrees, for the benefit of Lessee (and any Permitted Sublessee) and for
the benefit of each lessor, conditional seller, indenture trustee or secured
party of any airframe or engine leased to or purchased by Lessee (or any
Permitted Sublessee) subject to a lease, conditional sale, trust indenture or
other security agreement, that Lessor will not acquire or claim, as against
such lessor, conditional seller, indenture trustee or secured party, or any
successor or assign thereof, any right, title or interest in any engine as the
result of such engine being installed on the Airframe at any time while such
engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such indenture trustee or
secured party; provided, however, that such agreement of Lessor shall not be
for the benefit of any lessor or secured party of any airframe (other than the
Airframe) leased to Lessee (or any Permitted Sublessee) or purchased by Lessee
(or any Permitted Sublessee) subject to a conditional sale or other security
agreement or for the benefit of any mortgagee of or any other holder of a
security interest in an airframe owned by Lessee (or any Permitted Sublessee),
unless such lessor, conditional vendor, other secured party or mortgagee has
expressly agreed (which agreement may be contained in such lease, conditional
sale or other security agreement or mortgage) that neither it nor its
successors or assigns will acquire, as against Lessor, any right, title or
interest in an Engine as a result of such Engine being installed on such
airframe.
A consolidation, merger, conveyance, transfer, or lease permitted by
Section 11(f) of the Participation Agreement shall not be deemed to be a
transaction to which this Section 7.2 shall apply.
7.3 Records and Reports. Lessee shall:
7.3.1 Records. Maintain or cause to be maintained all
records, logs and other materials required by the FAA or any other
governmental authority having jurisdiction to be maintained in respect
of the Aircraft, the Airframe and each Engine;
7.3.2 Information and Reports. Upon request, promptly
furnish or cause to be furnished to Lessor (in sufficient number) such
information as may be required to enable Lessor or any Participant to
file any reports, including tax returns, required to be filed by
Lessor or such Participant with any governmental authority because of
Lessor's ownership of the Aircraft, Airframe or any Engine or because
of receipt of Rent or because of the interest of any Participant in
the Estate or Trust Indenture Estate; provided, however, that with
respect to any such information (other than with respect to income
taxes) which Lessee deems commercially sensitive or confidential, if
reasonably feasible, Lessor shall afford Lessee a reasonable
opportunity to seek from any such governmental authority a waiver of
Lessor's or such Participant's obligation to file any such information
or consent to the filing of such information directly by Lessee in
lieu
SALE AND LEASE AGREEMENT [N396SW]
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of filing by Lessor or such Participant and if any such waiver or
consent is evidenced to the reasonable satisfaction of Lessor, then
Lessee shall not be required to furnish such information to Lessor;
and
7.3.3 Financial Information. Promptly provide Lessor, the
Owner Participant, the Original Loan Participant and Indenture Trustee
with (i) such financial information concerning Lessee as is provided
from time to time to the public shareholders of Lessee, (ii) within 60
days after the end of each of the first three quarterly periods of
each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of such
period, together with the related consolidated statements of income
for such period, (iii) within 120 days after the close of each fiscal
year of Lessee, a consolidated balance sheet of Lessee and its
consolidated subsidiaries as of the close of such fiscal year,
together with the related consolidated statements of income for such
fiscal year, as certified by independent public accountants, (iv)
promptly upon the sending, making available or filing of the same, all
such reports (other than reports on Form 11-K or similar forms) as
Lessee shall file with the Securities and Exchange Commission, and (v)
from time to time such other information as to its financial condition
as Lessor, Indenture Trustee or any Participant may reasonably
request. In addition, Lessee shall promptly notify Lessor, Indenture
Trustee, the Original Loan Participant and the Owner Participant after
a Responsible Company Officer of Lessee shall acquire knowledge of a
Lease Default or Lease Event of Default.
Section 8. Maintenance; Replacement and Pooling of Parts;
Alterations; Modifications and Additions.
8.1 Maintenance.
8.1.1 Maintenance Program. Lessee shall maintain, service,
repair, overhaul, alter, modify, add to and test (or cause to be
maintained, serviced, repaired, overhauled, altered, modified, added
to and tested) the Aircraft, the Airframe and each Engine, and each
other engine installed from time to time on the Airframe, in
accordance with Lessee's FAA-approved maintenance program for the
Aircraft, Airframe and Engines (the "Maintenance Program"), (i) so as
to keep the Aircraft, the Airframe and each Engine in as good
operating condition as when delivered new to Lessee by the
Manufacturer, ordinary wear and tear excepted, (ii) in the same manner
and with the same care as used by Lessee with similar aircraft owned
or operated by Lessee, without in any way discriminating against the
Aircraft, whether by reason of its leased status or otherwise, and
(iii) so as to keep the Aircraft, the Airframe and each Engine in such
condition as required to enable the FAA certificate of airworthiness
for the Aircraft to be maintained in good standing at all times under
the Act, except when all comparable Boeing Model 737-300 series
aircraft registered in the United States of America have been grounded
by the FAA other than as a result of actions taken or omitted to be
taken by Lessee (or, if a sublease is then in effect, any Permitted
Sublessee).
SALE AND LEASE AGREEMENT [N396SW]
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8.1.2 Compliance with Government Requirements. Lessee will
comply with all service, inspection, maintenance, repair and overhaul
regulations, directives and instructions which are made mandatory by
the FAA or other applicable government authority upon operators of
Boeing Model 737-300 series aircraft and CFM International Model
CFM56-3-B1 engines (or any different model Replacement Engine) and
which require compliance during the Term and prior to return of the
Aircraft under this Lease.
8.2 Replacement of Parts. Lessee, at its own cost and expense,
will promptly replace (or cause to be replaced) all Parts which may from time
to time be incorporated in the Aircraft, Airframe or any Engine and which may
from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever, except as otherwise provided in Section 8.4. In
addition, Lessee may, at its own cost and expense, remove in the ordinary
course of maintenance, service, repair, overhaul or testing any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, however, Lessee, except
as otherwise provided in Section 8.4, at its own cost and expense, will replace
such Parts as promptly as possible. All replacement parts shall be free and
clear of all Liens (except for Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof. All Parts at any
time removed from the Aircraft, Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by parts which have been incorporated in the Aircraft,
Airframe or such Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement part becoming incorporated
in the Aircraft, Airframe or such Engine as above provided, without further
act, (i) unless the replacement property is temporarily installed on an
emergency basis, title to the replaced Part shall thereupon vest in Lessee free
and clear of all rights of Lessor, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement part shall thereupon
vest in Lessor (subject only to Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis), and (iii)
such replacement part shall become a Part subject to this Lease and be deemed
part of the Aircraft, Airframe or such Engine for all purposes hereof to the
same extent as the Parts originally incorporated in such Aircraft, Airframe or
Engine.
8.3 Pooling of Parts. Any Part removed from the Aircraft,
Airframe or any Engine as provided in Section 8.2 may be subjected by Lessee
(or a Permitted Sublessee) to a normal pooling arrangement customary in the
airline industry entered into in the ordinary course of business of Lessee or
such Permitted Sublessee, so long as a part replacing such removed Part shall
be incorporated in the Aircraft, Airframe or such Engine in accordance with
Section 8.2 as promptly as practicable after the removal of such removed Part.
In addition, any replacement part when incorporated in the Aircraft, Airframe
or any Engine in accordance with Section 8.2 may be owned by any third party
subject to such a normal pooling arrangement, so long as Lessee (or any
Permitted Sublessee), at its own cost and expense, as promptly thereafter
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as practicable either (i) causes title to such replacement part to vest in
Lessor in accordance with Section 8.2 by Lessee (or any Permitted Sublessee)
acquiring title thereto for the benefit of, and transferring such title to,
Lessor free and clear of all Liens (except Permitted Liens), or (ii) replaces
such replacement part by incorporating in the Aircraft, Airframe or such Engine
a further replacement part owned by Lessee (or any Permitted Sublessee) free
and clear of all Liens (except Permitted Liens) and by causing title to such
further replacement part to vest in Lessor in accordance with Section 8.2.
8.4 Alterations, Modifications and Additions.
8.4.1 Mandatory Alterations, Etc. Lessee shall make (or
cause to be made) such alterations and modifications in and additions
to the Aircraft, Airframe and each Engine as may be required from time
to time to meet the standards of the FAA or other governmental
authority having jurisdiction and to maintain the FAA certificate of
airworthiness for the Aircraft; provided, however, that, without
affecting in any manner Lessee's obligations in Section 7.1.3, Lessee
may contest in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect the Owner Participant or Lessor's title to
or interest in the Aircraft. All alterations and modifications made
pursuant to this Section 8.4.1 shall be made at the cost and expense
of Lessee.
8.4.2 Voluntary Alterations, Etc. Lessee, at its own cost
and expense, may, from time to time make (or cause to be made),
subject to the standards set forth in Section 8.1.1, such alterations
and modifications in and additions to the Aircraft, Airframe or any
Engine as Lessee may deem desirable in the proper conduct of its
business, including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine; provided, however, that no such
alteration, modification, addition or removal shall diminish the
value, remaining useful life, or utility of the Aircraft, Airframe or
such Engine, or impair the condition or airworthiness thereof, below
the value, remaining useful life, utility, condition and airworthiness
thereof immediately prior to such alteration, modification or addition
assuming the Aircraft, Airframe or such Engine was then of the value
and utility and in the condition and airworthiness required to be
maintained by the terms of this Lease. Title to all parts
incorporated in the Aircraft, Airframe or such Engine as the result of
such alteration, modification or addition shall remain vested in
Lessee and Lessee may, at any time during the Term, remove any such
part if (i) such part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated in the Aircraft,
Airframe or such Engine at the time of delivery thereof hereunder or
any Part in replacement of or substitution for any such Part, (ii)
such part is not required to be incorporated in the Aircraft, Airframe
or such Engine pursuant to the terms of this Section 8, (iii) such
part can be removed from the Aircraft, Airframe or such Engine without
diminishing or impairing the value, remaining useful life, utility,
condition or airworthiness required to be maintained by the terms of
this Lease which the Aircraft, Airframe or such Engine would have had
at such time had
SALE AND LEASE AGREEMENT [N396SW]
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such alteration, modification or addition not occurred, and (iv) no
Lease Event of Default or Lease Default shall have occurred and be
continuing. Title to all other such parts shall, without further act,
vest in Lessor and shall constitute "Parts" for all purposes
hereunder. Upon the removal of any part title to which is retained by
Lessee, Lessee shall promptly repair any damage to the Airframe or
Engine from which it was removed which resulted from such removal and
such part shall no longer be deemed part of the Airframe or such
Engine from which it was removed. Any part not removed by Lessee as
above provided prior to the return of the Aircraft, Airframe or such
Engine to Lessor hereunder shall, without further act, vest in Lessor
and shall constitute a "Part" for all purposes hereunder.
Section 9. Voluntary Termination.
9.1 Right of Termination upon Obsolescence. So long as no Lease
Event of Default or Lease Default shall have occurred and be continuing, Lessee
shall have the right at its option to terminate this Lease with respect to the
Aircraft during the Base Lease Term on the first day of any month (a
"Termination Date") occurring on or after the seventh anniversary of the
Delivery Date on at least three months' prior written notice to Lessor, each
Participant and Indenture Trustee specifying a proposed Termination Date;
provided, that such notice shall also include copies of resolutions of Lessee's
board of directors stating that such board of directors has determined, in good
faith, that the Aircraft either has become economically obsolete or is surplus
to Lessee's requirements. Lessee may revoke any notice of termination referred
to in this Section 9.1 by notice to Lessor, each Participant and the Indenture
Trustee not less than 30 days prior to the proposed Termination Date, if Lessor
shall not have received a bid to purchase the Aircraft for at least the
Termination Value thereof pursuant to Section 9.2 and if Lessor shall not have
furnished to Lessee the notice referred to in Section 9.3, and upon doing so,
shall reimburse Lessor and Owner Participant on an after-tax basis for all
reasonable out-of-pocket expenses incurred by them in contemplation of such
termination; provided, however, that Lessee may so revoke a notice of
termination no more than three times during the Term.
9.2 Sale of Aircraft. Lessee, as agent for Lessor, shall, from
the date of such notice of termination until no more than 30 days' prior to the
proposed Termination Date specified by Lessee, use its reasonable best efforts
to obtain bids (in the worldwide market) for the cash purchase of the Aircraft
and Lessor may, if it desires to do so, seek to obtain such bids and may itself
bid to retain the Aircraft. In the event Lessee receives any bid, Lessee shall
within 30 days of receiving such bid (and in any event no later than 30 days
prior to the proposed Termination Date), certify to Lessor in writing the
amount and terms of such bid, and the name and address of the Person submitting
such bid (who shall not be Lessee, an Affiliate of Lessee or a Person who shall
be a party to any arrangement for the further use of the Aircraft by Lessee or
any of its Affiliates (in each case a "Prohibited Person")). In the event
Lessor receives any bid, Lessor shall, at least five Business Days prior to the
proposed Termination Date, certify to Lessee in writing the amount and terms of
such bid and the name and address of the Person submitting such bid. Subject
to Section 9.3, on the Termination Date, (a) Lessee shall deliver the Airframe
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and Engines or engines constituting part of the Aircraft to the bidder, if any,
which shall have submitted the highest cash bid (net of any brokerage
commissions) prior to such date, in the same manner as if delivery were made to
Lessor pursuant to Section 5 and in full compliance with the terms thereof, and
shall duly transfer to Lessor under a full warranty (as to title) bill of sale
title to any such engines not owned by Lessor, all in accordance with the terms
of Section 5, and (b) unless Lessor is the successful bidder, Lessor shall
simultaneously therewith Transfer the Airframe and Engines or engines to such
bidder for cash paid to Lessor in the manner and in funds of the type specified
in Section 3.6, provided that no purchaser shall be a Prohibited Person without
the Owner Participant's written consent. The total sales price realized at
such sale shall be paid to and retained by Indenture Trustee, so long as the
Trust Indenture remains in effect, and otherwise shall be paid to and retained
by Lessor and, in addition, on such Termination Date, and as a condition
precedent to such sale and the delivery of the Aircraft and Engines or engines
to such bidder, Lessee shall pay to Indenture Trustee, so long as the Trust
Indenture remains in effect, and otherwise to Lessor the sum of (i) the excess,
if any, of (A) the Termination Value for the Aircraft, computed as of such
Termination Date, over (B) the sales price of the Airframe and Engines or
engines sold (or if the winning bidder is Lessor, the amount of such bid) after
deducting the reasonable fees and expenses incurred by Lessor, Indenture
Trustee and the Participants, if any, in connection with such termination and
sale, (ii) all unpaid Basic Rent due on or prior to the TV Determination Date
with reference to which the Termination Value is computed (it being understood
and agreed that Lessee shall not be required to pay the portion, if any, of
such Basic Rent designated in Exhibit C hereto as payable in advance on such TV
Determination Date, unless attributable to accrued interest on the
Certificates), and (iii) (without duplication) all other amounts (including,
without limitation, Break Amount, if any, or Premium, if any) owing by Lessee
under this Lease or under any other Operative Agreement. Upon such payment,
Lessor will comply with Section 10.01 of the Trust Indenture and, upon
Indenture Trustee's release of such Engines from the Lien of the Trust
Indenture Estate, Transfer to Lessee any Engines constituting part of the
Aircraft but which were not then installed on the Airframe and sold therewith.
If no sale shall have occurred on or as of the Termination Date specified in
such notice of termination, this Lease shall continue in full force and effect,
no Lease Event of Default shall be deemed to have occurred, Lessee shall pay
the reasonable expenses incurred by Lessee, Lessor, each Participant and
Indenture Trustee in connection with the proposed sale, and Lessee shall have
the right at any time to submit another notice of termination pursuant to, and
subject to the terms of, Section 9.1. In the event of any such sale and
receipt by Lessor or Indenture Trustee, as appropriate, of such sale price and
other amounts as provided herein, and upon compliance by Lessee with the
provisions of this Section 9.2, the obligation of Lessee to pay Basic Rent due
after the TV Determination Date with reference to which the Termination Value
is computed shall cease and the Base Lease Term shall end effective as of the
date of such sale. Lessor shall be under no duty to solicit bids, to inquire
into the efforts of Lessee to obtain bids or otherwise to take any action in
connection with any such sale other than to Transfer to the purchaser named in
the highest bid as referred to above the Airframe and Engines or engines
against receipt of the payments provided for herein.
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9.3 Retention by Lessor. Notwithstanding anything in this Section
9 to the contrary, Lessor may, by irrevocable notice to Lessee at least 45 days
prior to the proposed date of sale referred to in Section 9.1, reject all bids
and retain title to the Aircraft (and take possession thereof); provided, that
Lessor shall pay (and, by delivering such notice, Lessor shall be obligated to
pay) to Indenture Trustee on the proposed Termination Date an amount equal to
the unpaid principal amount of the Certificates, together with all interest due
thereon. Upon receipt of notice of such an election by Lessor, Lessee shall
cease any efforts to obtain bids as provided in Section 9.1 and shall reject
all bids theretofore or thereafter received for the Aircraft. In the event
Lessor elects to retain the Aircraft as provided in this Section 9.3, and upon
its payment to Indenture Trustee of such amount, Lessee shall deliver the
Aircraft and Engines to Lessor on the proposed Termination Date pursuant to
Section 5 and in full compliance with the terms thereof and upon such delivery
and payment in full of the amounts specified in the first sentence hereof and
the next following sentence and shall have no obligation to make any payment of
Termination Value. The foregoing shall in no way affect the obligation of
Lessee to make payment of any Basic Rent on or before the proposed Termination
Date and all other amounts of Rent and other amounts payable hereunder or under
the other Operative Agreements and due on or prior to such date, including,
without limitation, all other sums due and payable to the Holders under the
Certificates (including, without limitation, Break Amount or Premium, if any,
as of such TV Determination Date). If the amounts required to be paid pursuant
to this Section 9.3 shall not be received by the respective payees thereof on
the proposed Termination Date, this Lease shall continue in full force and
effect and no Lease Event of Default shall be deemed to have occurred.
9.4 Termination As to Engines. So long as no Lease Event of
Default or Lease Default shall have occurred and be continuing, Lessee shall
have the right, at its option at any time during the Term, on at least 30 days'
prior written notice to Lessor, Indenture Trustee, the Original Loan
Participant and the Owner Participant, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe. In such event,
and prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10.2 to the same extent as if
an Event of Loss had occurred with respect to such Engine, and, upon Indenture
Trustee's release of the replaced Engine from the Lien of the Trust Indenture
Estate, Lessor shall Transfer to Lessee the replaced Engine as provided in
Section 5.2.
Section 10. Loss, Destruction, Requisition, Etc.
10.1 Event of Loss with Respect to Airframe.
10.1.1 Lessee's Election. Upon the occurrence of an Event
of Loss with respect to the Aircraft, Lessee shall forthwith (and in
any event within 15 days after such occurrence) give Lessor, Indenture
Trustee and each Participant written notice of such Event of Loss and,
within 60 days after such occurrence, give Lessor, Indenture Trustee
and each Participant written notice of its election to comply either
with Section 10.1.2 or Section 10.1.3, and if Lessee shall not have
given notice of such election within 60
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days after such occurrence (or, if earlier, the last day of the Term
shall have occurred) Lessee shall be deemed to have elected to comply
with Section 10.1.3.
10.1.2 Replacement of Airframe and Engines. As promptly as
practicable, and in any event on or before the Business Day next
preceding the 180th day following the date of occurrence of such Event
of Loss, Lessee shall, in compliance with Section 10.1.6, convey or
cause to be conveyed to Lessor, to be leased by Lessee hereunder in
replacement thereof, a Replacement Airframe (which need not be a new
Replacement Airframe but shall have been placed in service not earlier
than January 1, 1994) together with the same number of Replacement
Engines as the Engines, if any, subject to such Event of Loss, such
Replacement Airframe and Replacement Engines to be free and clear of
all Liens (except Permitted Liens), to have a value, remaining useful
life and utility at least equal to, and to be in as good operating
condition as, the Airframe and Engines, if any, so replaced (for such
purpose, it shall be assumed that the Airframe and such Engines were
in the condition and repair required by the terms of this Lease). If
Lessee shall not effect such replacement hereunder on or before the
Business Day next preceding the 150th day following the date of the
occurrence of such Event of Loss, then Lessee shall immediately
deposit with Lessor, in the manner and in funds of the type specified
in Section 3.6, an amount equal to the excess of the Stipulated Loss
Value for the Aircraft over any funds then being held by Lessor or the
Indenture Trustee with respect to such Event of Loss. If Lessee shall
not perform its obligation to effect such replacement hereunder on or
before the Business Day next preceding the 180th day following the
date of the occurrence of such Event of Loss, then Lessee shall
immediately pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, the aggregate amount specified in clauses
(A), (B) and (C) of Section 10.1.3, net of any amount deposited with
Lessor pursuant to the next preceding sentence of this Section 10.1.2.
10.1.3 Payment of Stipulated Loss Value and Rent. On or
before the Business Day next preceding the earlier of (i) the 180th
day following the date of the occurrence of such Event of Loss, (ii)
the second Business Day next succeeding the last day of the Term, or
(iii) the later of 15 days following the receipt of insurance proceeds
with respect to such occurrence or the date Lessee shall have made or
shall be deemed to have made its election under Section 10.1.1 to
comply with Section 10.1.3, Lessee shall pay to Lessor, in the manner
and in funds of the type specified in Section 3.6, (A) the Stipulated
Loss Value for the Aircraft, determined as of the date of payment (as
described in the definition of Stipulated Loss Value), (B) all unpaid
Basic Rent due on or prior to the SLV Determination Date with
reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date, unless attributable
to accrued interest on the Certificates), and (C) (without
duplication) any other Rent which is due and payable through and
including the date of payment.
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10.1.4 Stipulated Loss Value Payment. In the event of
payment in full of the Stipulated Loss Value for the Aircraft pursuant
to Section 10.1.2 or 10.1.3 and, in either case, the amounts referred
to in clauses (B) and (C) of Section 10.1.3, (A) the obligation of
Lessee to pay Basic Rent due after the SLV Determination Date with
reference to which such Stipulated Loss Value is computed shall
terminate, (B) the Term for the Aircraft shall end, and (C) Lessor
will comply with the applicable provisions of Section 10.01 of the
Trust Indenture and, upon Indenture Trustee's release of the Aircraft
from the Lien of the Trust Indenture Estate, will Transfer to Lessee
the Aircraft.
10.1.5 Payment of Rent. In the event of an Event of Loss,
during the period between the occurrence of the Event of Loss and the
date of payment pursuant to Section 10.1.3 or replacement, the
obligation of Lessee to pay Basic Rent or Renewal Rent shall continue
unchanged, except that upon such replacement, it shall become an
obligation to pay such Rent in respect of the Replacement Aircraft.
10.1.6 Conditions to Replacement of Aircraft. Lessee's
right to exercise the replacement options contemplated by Section
10.1.1 with respect to the Aircraft shall be subject to the
fulfillment prior to or at the time of any such replacement, in
addition to the requirements contained in Section 10.1.2, of the
conditions precedent set forth below:
10.1.6.1 No Default. No Lease Event of Default or
Lease Default shall have occurred and be continuing.
10.1.6.2 Tax Loss. Owner Participant and Lessor
shall have received, at Lessee's and the Owner Participant's
joint and equal expense, a tax opinion of tax counsel selected
by the Owner Participant, to the effect that the Event of Loss
or the replacement of the Airframe or Aircraft in connection
therewith will not cause any adverse tax consequences to
Lessor or Owner Participant or its Affiliates (or, in lieu
thereof, Lessee shall have agreed to indemnify for such tax
risk), or if Owner Participant and Lessee shall have agreed
upon the amount, if any, payable and upon the manner of
payment thereof with respect to such replacement by Lessee
pursuant to the Tax Indemnity Agreement or Section 7(b) of the
Participation Agreement, then any such amount shall be paid.
10.1.6.3 Lessee's Obligations with Respect to
Replacement Aircraft. Lessee will promptly (all writings
referred to below to be reasonably satisfactory in form and
substance to Lessor):
(a) furnish Lessor with (i) a full
warranty bill of sale and FAA bill of sale duly
conveying to Lessor the Replacement Airframe and
Replacement Engines, if any, and (ii) an assignment
of the purchase agreement with respect to the
Replacement Airframe and Replacement
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Engines, if any (if Lessee shall have any rights
thereunder) substantially in the form of the Purchase
Agreement Assignment and a consent and agreement of
the manufacturer thereof substantially in the form of
the Manufacturer's Consent;
(b) cause a Lease Supplement subjecting
such Replacement Airframe and Replacement Engines, if
any, to this Lease, duly executed by Lessee, to be
delivered to Lessor for execution, and an Indenture
and Trust Supplement to be delivered to Lessor for
execution and, in each case upon such execution, to
be filed for recordation with the FAA pursuant to the
Act;
(c) furnish Lessor with such evidence of
compliance with (i) Section 5.01(b) of the Trust
Indenture (if the Trust Indenture shall be in effect
at such time) and (ii) the insurance provisions of
Section 11 hereof with respect to the Replacement
Airframe and Replacement Engines, if any, and the
payment of all premiums then due with respect to all
such insurance, as Lessor may reasonably request;
(d) furnish Lessor with an opinion or
opinions of counsel reasonably satisfactory to Lessor
to the effect that, upon such conveyance, Lessor will
acquire good and marketable title to the Replacement
Airframe and Replacement Engines, if any, free and
clear of all Liens other than Permitted Liens, the
Replacement Airframe and Replacement Engines, if any,
will be leased hereunder and subject to the Lien of
the Trust Indenture (if then in effect) to the same
extent as the Airframe and Engines replaced thereby,
Lessor and (assuming the Trust Indenture is still in
effect) the Indenture Trustee shall be entitled to
the benefit of Section 1110 of the Bankruptcy Code
with respect to the Replacement Aircraft to the same
extent as the Aircraft, and to such further effect as
Lessor may reasonably request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Airframe
which shall be identified by manufacturer,
model, FAA registration number and
manufacturer's serial number;
(ii) a description of the
Replacement Airframe to be received
(including the manufacturer, model, FAA
registration number and manufacturer's serial
number) as consideration for the Airframe to
be released;
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(iii) that on the date of the
Indenture and Trust Supplement and the Lease
Supplement relating to the Replacement
Airframe, Lessor will be the legal owner of
such Replacement Airframe free and clear of
all Liens (other than Permitted Liens), that
such Replacement Airframe will on such date
be in good working order and condition, and
that such Replacement Airframe has been or,
substantially concurrently with such
replacement, will be duly registered in the
name of Lessor under the Act and that an
airworthiness certificate has been duly
issued under the Act with respect to such
Replacement Airframe, and that such
registration and certificate are in full
force and effect, and that Lessee will have
the full right and authority to use such
Replacement Airframe;
(iv) that the insurance required by
Section 11 is in full force and effect with
respect to such Replacement Airframe and all
premiums then due thereon have been paid in
full;
(v) that the Replacement Airframe
is of the same or an improved model as the
Airframe requested to be released from the
Lien of the Trust Indenture;
(vi) that no Lease Default or Lease
Event of Default has occurred and is
continuing or would result from the making
and granting of the request for release and
the addition of a Replacement Airframe; and
(vii) if the Trust Indenture has not
theretofore been discharged, the release of
the Airframe so to be released will not
impair the security of the Trust Indenture or
be in contravention of any of the provisions
of the Trust Indenture;
(f) furnish Lessor with a certificate or
certification of qualified independent aircraft
appraisers reasonably satisfactory to Lessor
certifying that the Replacement Airframe and
Replacement Engines, if any, have a value, remaining
useful life and utility at least equal to, and are in
at least as good operating condition as, the Airframe
and Engines, if any, so replaced (assuming the
Airframe and Engines were in the condition and repair
required by the terms hereof immediately prior to the
occurrence of such Event of Loss); and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to
the financing statements filed on or
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before the Delivery Date) as Lessor or any Participant
may reasonably request to effect such replacement.
10.1.7 Recordation and Opinions. In the case of any
Replacement Airframe and/or Replacement Engines conveyed to Lessor
under this Section 10.l, promptly upon the registration of the
Replacement Aircraft and the recordation of the Lease Supplement and
Indenture and Trust Supplement covering the Replacement Airframe and
Replacement Engines, if any, pursuant to the Act, Lessee will cause to
be delivered to Lessor an opinion of Daugherty, Fowler & Peregrin or
other FAA counsel satisfactory to Lessor as to the due registration of
the Replacement Aircraft and the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.1.8 Conveyance. Upon compliance by Lessee with all of
the terms of this Section 10.1, (i) Lessor will comply with the
applicable provisions of Section 10.01 of the Trust Indenture and,
upon Indenture Trustee's release of the Aircraft and Engines (if
applicable) from the Lien of the Trust Indenture Estate, Transfer to
Lessee the replaced Airframe and Engines (if any), and (ii) Lessee
will be subrogated to all claims of Lessor, if any, against third
parties for damage to or loss of such Airframe and Engines to the
extent of the then insured value thereof in respect of any insurance
provided by Lessee.
10.2 Event of Loss with Respect to an Engine.
10.2.1 Event of Loss. Upon the occurrence of an Event of
Loss with respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe, Lessee
shall forthwith (and in any event within 15 days after such
occurrence) give Lessor, Indenture Trustee and each Participant
written notice thereof and shall, as promptly as possible and in any
event within 60 days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement for the
Engine with respect to which such Event of Loss occurred, title to a
Replacement Engine free and clear of all Liens, other than Permitted
Liens, and having a value, remaining useful life and utility at least
equal to, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such Engine was
of the value, remaining useful life and utility and in the condition
and repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss.
10.2.2 Conditions; Lessee's Obligations. Prior to or at the
time of any such conveyance, Lessee will promptly:
(a) furnish Lessor with a full warranty (as to
title) bill of sale duly conveying to Lessor such Replacement
Engine;
(b) cause a Lease Supplement subjecting such
Replacement Engine to this Lease, duly executed by Lessee, to
be delivered to Lessor for execution,
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and an Indenture and Trust Supplement to be delivered to Lessor
for execution and, in each case upon execution, to be filed for
recordation with the FAA pursuant to the Act;
(c) furnish Lessor with such evidence of
compliance with (i) Section 5.01(b) of the Trust Indenture (if
the Trust Indenture shall be in effect at such time) and (ii)
the insurance provisions of Section 11 hereof with respect to
such Replacement Engine and the payment of all premiums then
due with respect to such insurance, as Lessor may reasonably
request;
(d) furnish Lessor with an opinion or opinions of
Lessee's counsel, in form, substance and scope reasonably
satisfactory to Lessor, to the effect that, upon such
conveyance, Lessor will acquire good title to such Replacement
Engine free and clear of all Liens other than Permitted Liens,
and that such Replacement Engine will be leased hereunder and
subject to the Lien of the Trust Indenture (if then in effect)
to the same extent as the Engine replaced thereby and to such
further effect as Lessor or Indenture Trustee may reasonably
request;
(e) furnish Lessor with an Officer's Certificate
stating:
(i) a description of the Engine which
shall be identified by manufacturer's serial number;
(ii) a description of the Replacement
Engine (including the manufacturer's name, model and
serial number) as consideration for the Engine to be
released;
(iii) that on the date of the Lease
Supplement and the Indenture and Trust Supplement
relating to the Replacement Engine, Lessor will be
the legal owner of such Replacement Engine free and
clear of all Liens except Permitted Liens, that such
Replacement Engine will on such date be in good
working order and condition, and that such
Replacement Engine is the same or an improved or
equivalent model as the Engine to be released; and
(iv) if the Trust Indenture has not
theretofore been discharged, that the release of the
Engine so to be released will not impair the security
of the Trust Indenture or be in contravention of any
of the provisions of the Trust Indenture;
(f) furnish Lessor with a certificate of a
qualified aircraft engineer (who may be an employee of Lessee)
certifying that such Replacement Engine has a value, remaining
useful life and utility at least equal to, and is in at least
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as good operating condition as, the Engine so replaced assuming
such Engine was in the condition and repair required by the
terms hereof immediately prior to the occurrence of such Event
of Loss; and
(g) furnish such other certificates or documents
(including appropriate UCC-3 amendments to the financing
statements filed on or before the Delivery Date) as Lessor or
any Participant may reasonably request to effect such
replacement.
10.2.3 Recordation and Opinions. In the case of any
Replacement Engine conveyed to Lessor under this Section 10.2,
promptly upon the recordation of the Lease Supplement and the
Indenture and Trust Supplement covering such Replacement Engine
pursuant to the Act, Lessee will cause to be delivered to Lessor an
opinion of Daugherty, Fowler & Peregrin or other FAA counsel
satisfactory to Lessor as to the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.2.4 Conveyance; Replacement Engine. Upon compliance by
Lessee with the terms of this Section 10.2, Lessor will comply with
the provisions of the Trust Indenture applicable thereto and, upon
Indenture Trustee's release of the Engine with respect to which such
Event of Loss occurred from the Lien of the Trust Indenture Estate,
Transfer such Engine to Lessee, and Lessee will be subrogated to all
claims of Lessor, if any, against third parties for damage to or loss
of such Engine to the extent of the insured value thereof in respect
of any insurance provided by Lessee.
10.2.5 No Reduction of Rent. No Event of Loss with respect
to an Engine under the circumstances contemplated by the terms of this
Section 10.2 shall result in any reduction of Basic Rent or Renewal
Rent.
10.3 Application of Certain Payments. Any payments (other than
insurance proceeds, the application of which is provided for in Section 11)
received at any time by Lessor, Lessee or any Permitted Sublessee from any
governmental authority or other Person with respect to any Event of Loss, will
be applied as follows:
10.3.1 Replacement of Airframe and Engines. If such
payments are received with respect to the Airframe and/or the Engines
(or engines) installed on the Airframe that have been or are being
replaced by Lessee pursuant to Section 10.1 (other than Section
10.1.3), such payments shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect,
Lessor, and upon completion of such replacement be paid over to
Lessee, provided Lessee shall have fully performed or, concurrently
therewith will fully perform, the terms of Section 10.1 with respect
to the Event of Loss for which such payments are made.
10.3.2 Replacement of Engine. If such payments are received
with respect to an Engine that has been or is being replaced by Lessee
pursuant to Section 10.2, such
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payments shall be paid over to, or retained by, Indenture Trustee or,
if the Trust Indenture is no longer in effect, Lessor, and upon
completion of such replacement be paid over to Lessee, provided Lessee
shall have fully performed or, concurrently therewith will fully
perform, the terms of Section 10.2 with respect to the Event of Loss
for which such payments are made.
10.3.3 Nonreplacement. If such payments are received with
respect to the Airframe and/or the Engines or engines installed on the
Airframe that has not or have not been and are not being replaced
pursuant to Section 10.1 or 10.2, such payments shall be paid over to,
or retained by, Indenture Trustee, or, if the Trust Indenture is no
longer in effect, Lessor, and so much of such payments remaining after
reimbursement of Lessor, Indenture Trustee and each Participant for
costs and expenses shall be applied in reduction of Lessee's
obligation to pay Stipulated Loss Value and other amounts required to
be paid by Lessee hereunder, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for its
payment of such Stipulated Loss Value and other amounts. The balance,
if any, of such payment remaining thereafter shall be divided between
Lessor and Lessee in proportion to their relative interests in the
Aircraft.
10.4 Requisition of Aircraft for Use by Governmental Authorities.
In the event of the requisition for use of the Airframe and the Engines or
engines installed on such Airframe during the Term by any governmental
authority, Lessee shall notify Lessor promptly of such requisition, and all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred. All
payments received by Lessor or Lessee from such governmental authority for the
use of such Airframe and Engines or engines prior to the time such requisition
becomes an Event of Loss shall be paid over to, or retained by, Lessee (or, if
directed by Lessee, any Permitted Sublessee); and all payments received by
Lessor or Lessee from such governmental authority for the use of such Airframe
and Engines or engines after such time shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect, Lessor,
and upon the performance by Lessee of the terms of Section 10.1 with respect to
such Event of Loss, shall be paid over to Lessee.
10.5 Requisition of an Engine for Use by Governmental Authorities.
In the event of the requisition for use by any governmental authority (other
than in circumstances contemplated by Section 10.4) of any Engine but not the
Airframe, Lessee will replace such Engine hereunder by complying with the terms
of Section 10.2 to the same extent as if an Event of Loss had occurred with
respect to such Engine, and any payments received from such governmental
authority with respect to such requisition shall be paid over to, or retained
by, Indenture Trustee, or if the Trust Indenture is no longer in effect,
Lessor, and upon the performance by Lessee of the terms of Section 10.2 to the
same extent as if an Event of Loss had occurred with respect to such
requisitioned Engine, shall be paid over to Lessee.
10.6 Application of Payments During Existence of Default. Any
amount referred to in this Section 10 which is payable or creditable to or
retainable by Lessee shall not be paid or
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credited to or retained by Lessee if, at the time of such payment, credit or
retention, a Lease Event of Default or Lease Default of the type specified in
Section 14.1 or 14.5 shall have occurred and be continuing hereunder but shall
be paid to and held by Indenture Trustee and applied by it as provided in the
Trust Indenture, or, if the Trust Indenture is no longer in effect, held by
Lessor as security for the obligations of Lessee under this Lease and applied
against Lessee's obligations hereunder as and when due; at such time as there
shall not be continuing any such Lease Event of Default or Lease Default, any
remaining balance of such amount shall be paid to Lessee to the extent not
previously applied in accordance with the preceding clause of this sentence.
Section 11. Insurance.
11.1 Public Liability and Property Damage Insurance. Lessee shall
at all times maintain, or cause to be maintained, at its or any Permitted
Sublessee's expense, public liability (including without limitation contractual
liability, passenger legal liability and property damage, but excluding
manufacturer's product liability coverage) insurance which shall:
11.1.1 Type, Form and Amount. Be of a type and form carried
by similarly situated United States commercial air carriers generally,
and carried in amounts not less than that carried by Lessee on similar
equipment owned or leased by Lessee and not less than the minimum
amount of $350,000,000 (per occurrence) combined single limit (or such
greater amount as Lessee may carry from time to time on other 737-300
series aircraft in its fleet);
11.1.2 Coverage. Include, but not be limited to, public
liability insurance, contractual liability insurance, passenger
liability insurance and property damage liability insurance (including
cargo and baggage liability insurance); and
11.1.3 Additional Insureds. Name as additional insureds
Lessor (in its individual and trust capacities), Indenture Trustee,
USL Capital Corporation (so long as it is an Affiliate of the Owner
Participant), each Participant and each other Indemnified Party, as
their interests may appear.
In addition to the other insurance required by this Section
11.1, the Lessee shall at all times cause the Owner Participant, the
Original Loan Participant and USL Capital Corporation (so long as it
is an Affiliate of the Owner Participant) to be named as additional
insureds on any umbrella or excess liability coverage policy carried
and maintained by Lessee.
11.2 Insurance Against Loss of or Damage to Aircraft and Engines.
Lessee shall at all times maintain, or cause to be maintained, at its or any
Permitted Sublessee's expense, insurance against loss of or damage to the
Aircraft, Airframe and Engines as follows:
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11.2.1 Type, Form and Amount. "All-risk" ground and flight
aircraft hull insurance on the Aircraft and "all-risk" coverage on
each Engine and on Parts while removed from the Aircraft or Engines,
which is of the type and form, and in an amount not less than that,
carried by Lessee on similar equipment owned or leased by Lessee and
in an amount not less than that usually carried by similarly situated
United States commercial air carriers generally; and, to the extent so
usually carried, at all times that the Aircraft or any Engine is not
covered by the insurance described in Section 11.2.2, coverage against
the perils of (i) strikes, riots, civil commotions or labor
disturbances, (ii) any malicious act or act of sabotage, and (iii)
hijacking, or any unlawful seizure or wrongful exercise of control of
the Aircraft or crew in flight (including any attempt at such seizure
or control) made by any person or persons on board the Aircraft acting
without the consent of the insured other than hijacking committed by
persons engaged in a program of irregular warfare for terrorist
purposes. Such insurance shall at all times be for an amount not less
than the Stipulated Loss Value of the Aircraft.
11.2.2 War-Risk Insurance. If at any time (a) war-risk
insurance is maintained by Lessee or any Permitted Sublessee
subleasing the Aircraft or any Engine with respect to other aircraft
operated by Lessee or such Permitted Sublessee on the same or similar
routes, (b) the Aircraft is operated on routes where the custom in the
United States commercial airline industry is to carry war-risk
insurance, (c) the Aircraft is operated by a Permitted Foreign Air
Carrier as a Permitted Sublessee in any recognized or threatened area
of hostilities, or (d) the Aircraft is operated on any route where no
other aircraft is regularly operated by a United States commercial
airline and such route is within any such area of hostilities, then
war-risk and allied perils insurance of the type carried by similarly
situated United States commercial air carriers operating the same or
comparable models of aircraft on the same or similar routes shall be
maintained on the Aircraft in an amount not less than that specified
in Section 11.2.l.
11.2.3 Certain Requirements. The insurance policies
required by this Section 11.2 shall:
11.2.3.1 Additional Insureds. Be endorsed to name
Lessor (in its individual and trust capacities), USL Capital
Corporation (so long as it is an Affiliate of the Owner
Participant), each Participant, the Indenture Trustee and each
other Indemnified Party as additional insureds, as their
interests may appear.
11.2.3.2 Payment of Proceeds. Provide that proceeds
thereunder shall be paid directly to Indenture Trustee, so
long as the Trust Indenture shall be in effect, and thereafter
to Lessor, in either case, as exclusive loss payee; provided,
however, that any proceeds payable as a result of any property
damage to the Airframe or any Engine, which property damage
does not exceed $4,000,000 and does not constitute an Event of
Loss with respect to the Aircraft or such Engine, shall be
paid to Lessee unless Lessor or Indenture Trustee, prior to
such
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payment, shall have notified the insurer making such payment
that a Lease Default (of the type described in Section 14.1 or
14.5) or Lease Event of Default has occurred and is
continuing.
11.2.3.3 Waiver of Subrogation. Provide that the
insurers shall waive any rights of subrogation against Lessor,
Indenture Trustee, each Participant and each other Indemnified
Party except for claims arising out of gross negligence or
willful misconduct of such Person; provided, that the exercise
by insurers of rights of subrogation, if any, permitted by
this Section 11.2 shall not, in any way, delay payment of any
claim that would otherwise be payable by such insurers but for
the existence of such rights of subrogation or entitle such
insurers to exercise or to assert any setoff, recoupment,
counterclaim or any other deduction in respect of any amounts
payable under such policies.
11.2.4 Deductibles. The insurance required by this Section
11.2 may, subject to Section 11.8, provide for standard deductibles
which are from time to time in effect in the aviation insurance
industry generally and which are customarily maintained by similarly
situated United States commercial air carriers generally; provided,
however, such deductibles shall not be more than the deductibles
generally maintained by Lessee (and which Lessee is under no
compulsion to maintain pursuant to any indenture, mortgage, lease or
other agreement) with respect to its fleet of Boeing Model 737-300
series aircraft and CFM International Model CFM56-3 engines generally.
11.2.5 Government Indemnity. In the case of a contract with
the Government in respect of the Aircraft or Engines, a valid
agreement by the Government to indemnify Lessee, Lessor, each
Participant, Indenture Trustee and each other Indemnified Party
against the same risks which are required hereunder to be insured
against in amounts at least equal to the amounts required hereunder
from time to time (such indemnity to be backed by the full faith and
credit of the United States of America), shall be considered adequate
insurance with respect to the Aircraft, Airframe and any Engine
subject to such contract to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
11.3 General Policy Provisions. Each insurance policy to be
procured and maintained hereunder shall:
11.3.1 Primary Insurance. Be primary and without right of
contribution from other insurance which may provide coverage to
Lessor, Indenture Trustee, or any Participant or any other Indemnified
Party with respect to its interest in the Aircraft, Airframe or any
Engine or its liabilities with respect to or arising out of the
transactions contemplated by the Operative Agreements;
11.3.2 Coverage for Each Insured. Expressly provide that
all the provisions thereof, except the agreed values and the limits of
the liability of the insurer under such
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policy, shall operate in the same manner as if there were a separate
policy covering each insured;
11.3.3 Waiver of Certain Rights. Waive any right of the
insurers to any setoff, recoupment, counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
liability of Lessee, Lessor, Indenture Trustee, any Participant or any
other Indemnified Party;
11.3.4 Breach of Warranty. Provide that, in respect of
Lessor, Indenture Trustee, each Participant and each other Indemnified
Party, such insurance shall not be invalidated by any action or
inaction by Lessee, any Indemnified Party or other Person and shall
insure the interests of Lessor, Indenture Trustee, each Participant
and each other Indemnified Party regardless of any breach or violation
by Lessee, any Indemnified Party or other Person of any
representation, warranty, declaration or condition contained in such
policy;
11.3.5 Notice of Termination or Changes. Provide for not
less than 30 days' prior written notice to be received by Lessor,
Indenture Trustee and each Participant before any lapse, alteration,
termination or cancellation of the insurance evidenced thereby shall
be effective as to Lessor, Indenture Trustee, each Participant and
each other Indemnified Party, except that war-risk and allied perils
policies may provide for not less than seven days' prior written
notice or such lesser or greater notice as shall at the time be
customary in the aviation insurance industry generally, and which are
customarily in effect with respect to major United States commercial
air carriers generally from time to time;
11.3.6 Nonliability for Premiums. Provide that neither
Lessor, Indenture Trustee, any Participant nor any other Indemnified
Party shall be liable for any insurance premium;
11.3.7 Identity of Insurers. Be with insurance companies,
underwriters or funds of recognized responsibility; and
11.3.8 Fifty-fifty Clause. Contain a fifty-fifty clause per
AVS 103 or its equivalent, but only in the event that such clause is
customarily included in such policies maintained by similarly situated
United States commercial air carriers generally.
11.4 Application of Insurance Proceeds. As between Lessor and
Lessee, all insurance proceeds received under policies required to be
maintained (or to be caused to be maintained) by Lessee pursuant to Section
11.2 as a result of the occurrence of an Event of Loss with respect to the
Aircraft, Airframe or any Engine will be applied in accordance with Section
10.3.1, 10.3.2 or 10.3.3, as the case may be (except that the balance referred
to in Section 10.3.3 shall be paid over to, or retained by, Lessee). All
insurance proceeds received under such policies in respect of any property
damage loss not constituting an Event of Loss
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with respect to the Airframe or an Engine will be applied in payment for
repairs or for replacement property in accordance with the terms of Section 8,
if not already paid for by Lessee, and any balance remaining after compliance
with such Section with respect to such loss shall be paid to Lessee. In the
case of a loss with respect to an engine (other than an Engine) installed on
the Airframe, Lessor shall hold any payment to it of any insurance proceeds in
respect of such loss for the account of Lessee or any other third party that is
entitled to receive such proceeds. The provisions of Section 10.6 shall apply
to amounts referred to in this Section 11.4.
11.5 Certificates; Reports, Etc. With respect to any policy
required hereunder, Lessee shall cause to be furnished to Lessor, Indenture
Trustee and each Participant on or prior to the Delivery Date of the Aircraft
and on or prior to expiration of such policy, certificates of the insurer or
insurers (or their authorized representatives) providing insurance pursuant to
the requirements of this Section 11. On or before the Delivery Date of the
Aircraft, and annually thereafter on or before the renewal date of such policy,
Lessee shall cause to be furnished to Lessor, Indenture Trustee, the Original
Loan Participant and Owner Participant a report signed by Willis Corroon
Aerospace (or any other firm of independent aircraft insurance brokers,
appointed by Lessee, reasonably satisfactory to the Original Loan Participant
and Owner Participant) describing in reasonable detail the insurance then
carried and maintained with respect to the Aircraft and stating the opinion of
such firm that the insurance then carried and maintained on the Aircraft
complies with the terms hereof. Lessee agrees that it will cause such firm to
advise Lessor, Indenture Trustee, the Original Loan Participant and Owner
Participant in writing promptly of any default in the payment of any premium or
any other act or omission on the part of Lessee or any Permitted Sublessee of
which they have knowledge and which might invalidate or render unenforceable,
in whole or in part, the insurance on the Aircraft.
11.6 Lessor's Right to Maintain Insurance. In the event that
Lessee shall fail to maintain or cause to be maintained insurance as herein
provided, Lessor, Indenture Trustee or any Participant may at its option (but
shall not be obligated to) provide such insurance and in such event, Lessee
shall, upon demand, reimburse such Person, as Supplemental Rent, for the cost
thereof. No such payment, performance or compliance shall be deemed to cure
any Lease Default hereunder or otherwise relieve Lessee of its obligations with
respect thereto.
11.7 Insurance for Own Account. Nothing in Section 11 shall limit
or prohibit Owner Participant (directly or through Lessor) from obtaining
insurance for its own account, and any proceeds payable thereunder shall be
payable as provided in the insurance policy relating thereto; provided,
however, that no such insurance may be obtained which would limit or otherwise
adversely affect the availability or coverage or cost of any insurance required
to be obtained or maintained pursuant to this Section 11. Nothing in this
Section 11 shall limit or prohibit Lessor, Indenture Trustee or any Holder from
obtaining insurance for its own account, and any proceeds payable thereunder
shall be payable as provided in the insurance policy relating thereto;
provided, however, that no such insurance may be obtained which would limit or
otherwise adversely affect the availability or coverage or cost of any
insurance required to be
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obtained or maintained pursuant to this Section 11 or obtained by Owner
Participant pursuant to the preceding sentence.
11.8 Self-Insurance. Notwithstanding the foregoing provisions of
this Section 11, Lessee may, from time to time so long as no Lease Event of
Default has occurred and is continuing, self-insure with respect to the
Aircraft to the same extent as it does with respect to, or maintain policies
with deductibles or premium adjustment provisions consistent with similar
provisions applicable to, other comparable aircraft operated by Lessee;
provided, however, that in the case of public liability insurance, such
self-insurance shall in no event exceed $50,000,000; and provided, further,
that if at any time Lessee's unsecured senior long-term debt securities are not
rated Investment Grade, such self-insurance (inclusive of any such public
liability insurance and without derogation from the preceding proviso) shall in
no case be in amounts greater than 4% of Lessee's tangible net worth. As used
in this Agreement, the term "Investment Grade" means a rating of "Baa3" or
higher from Moody's Investors Service or a rating from any other nationally
recognized bond rating service equivalent to or better than such a rating.
Section 12. Inspection. At all reasonable times, and upon
reasonable notice, Lessor, Indenture Trustee or any Participant or its
authorized representatives may inspect the Aircraft and inspect and copy
(subject to any confidentiality agreements, copyright restrictions and the
like) the books and records of Lessee relative thereto. Any such inspection of
the Aircraft shall be without out-of-pocket expense or risk to Lessee and shall
be a visual, walk-around inspection and may not include opening any panels,
bays or the like; provided, that no exercise of such inspection right shall
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee (or any Permitted Sublessee). Subject to the proviso in
the preceding sentence, upon receipt by Lessee of a written request from the
Owner Participant or the Indenture Trustee specifying that the Owner
Participant or the Indenture Trustee desires to have an authorized
representative observe the major overhaul to be performed on the Aircraft next
following receipt of any such request, Lessee shall permit such authorized
representative to observe such overhaul. Neither Lessor, Indenture Trustee nor
any Participant shall have any duty to make any such inspection or shall incur
any liability or obligation by reason of not making any such inspection.
Section 13. Assignment.
13.1 In General. Except as otherwise expressly permitted in
Section 7.2 or Section 11(f) of the Participation Agreement, or as required in
the case of any requisition by the Government referred to in Section 7.1,
Lessee will not, without the prior or written consent of Lessor, assign or
transfer any of its rights or obligations under this Lease or any other
Operative Agreement. Lessor may assign or convey any of its right, title and
interest in and to this Lease, any of the other Operative Agreements or the
Aircraft in accordance with the Participation Agreement, the Trust Agreement or
the express provisions of this Lease. The terms and provisions of the Lease
shall be binding upon and inure to the benefit of Lessor and Lessee and their
respective permitted successors and assigns.
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13.2 Security for Lessor's Obligations. In order to secure the
indebtedness evidenced by the Certificates, the Trust Indenture provides, among
other things, for the assignment by Lessor to Indenture Trustee of its right,
title and interest in, to and under this Lease and any Permitted Sublease, to
the extent set forth in the Trust Indenture, and for the creation of a first
mortgage lien on and perfected security interest in the Aircraft in favor of
Indenture Trustee. Lessee hereby consents to such assignment and to the
creation of such mortgage and security interest and acknowledges receipt of
copies of the Trust Agreement and the Trust Indenture, it being understood that
such consent shall not affect any requirement or the absence of any requirement
for any consent under any other circumstances. So long as the Trust Indenture
shall be in effect, Lessee will furnish to Indenture Trustee counterparts of
all writings of any kind required to be delivered hereunder by Lessee to
Lessor. Until the Lien of the Trust Indenture has been released, as provided
in the Trust Indenture, certain rights of Lessor with respect to this Lease,
the Aircraft, the Airframe or any Engine (or any Part thereof) or any other
part of the Trust Indenture Estate are exercisable by Indenture Trustee.
Section 14. Events of Default. The following events shall
constitute Lease Events of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body), and each such
Lease Event of Default shall continue so long as, but only so long as, it shall
not have been remedied or waived:
14.1 Failure to Pay Rent. Lessee shall fail to make any payment of
Basic Rent, Stipulated Loss Value, Termination Value or Special Purchase Price
or any amount due pursuant to Section 3.4 within seven Business Days from the
due date thereof; or Lessee shall fail to make any other payments required to
be made by it under the Operative Agreements within ten Business Days after the
receipt of written demand therefor delivered to Lessee by Lessor after such
payments were required to have been made (provided, that any failure to pay any
amount owed by Lessee under the Tax Indemnity Agreement or any failure of
Lessee to pay when due any Excluded Payments shall not constitute a Lease Event
of Default unless written notice is given by the Owner Participant to Lessee
and the Indenture Trustee that such failure shall constitute a Lease Event of
Default); or
14.2 Specific Defaults. Lessee shall fail to carry and maintain
(or cause to be carried and maintained) insurance on or with respect to the
Aircraft in accordance with the provisions of Section 11; provided, that any
such failure shall not constitute a Lease Event of Default so long as such
failure is for a period of not more than 30 days, Lessee shall not operate the
Aircraft at a time when such insurance is not in effect and the Aircraft
continues to be covered by such insurance as is required when the Aircraft is
on the ground, or Lessee shall fail to comply with Section 7.1.1; or
14.3 General Default. Lessee shall fail to perform or observe any
other covenant, condition or agreement to be performed or observed by it
hereunder or under any other Operative Agreement (except the Tax Indemnity
Agreement), and such failure shall continue
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unremedied for a period of 30 days after written notice thereof to Lessee,
unless Lessee shall be diligently proceeding to correct such failure and such
failure is cured within 180 days after such notice or by the end of the Term,
whichever first occurs; or
14.4 Misrepresentation and Breach of Warranty. Any representation
or warranty made by Lessee herein or in the Participation Agreement or in any
other Operative Agreement (other than the Tax Indemnity Agreement) or in any
document or certificate furnished by Lessee in connection with any thereof,
shall prove to have been incorrect in any material respect at the time made,
shall remain material at the time of discovery and shall, if curable, remain
incorrect in any material respect after 30 days after written notice thereof to
Lessee;
14.5 Bankruptcy, Etc. Lessee shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official or agency in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to authorize
any of the foregoing; or an involuntary case or other proceeding shall be
commenced against Lessee seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official or agency of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 90 days.
Section 15. Remedies.
15.1 Default; Remedies. Upon the occurrence of a Lease Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, so long as any such Lease Event of Default shall be
continuing, exercise one or more of the following remedies as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect
which have not been effectively waived by Lessee:
15.1.1 Return; Repossession. Lessor may cause Lessee, upon
written demand by Lessor and at Lessee's expense, to return promptly,
and Lessee shall return promptly, all or any part of the Aircraft,
Airframe or Engines as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with
all the provisions of, Section 5 as if the Aircraft, Airframe or
Engines were being returned at the end of the Term; or Lessor, at its
option, may enter upon the premises where the Aircraft, Airframe or
any Engine, or part thereof is located and take immediate possession
of and remove the same by summary proceedings or otherwise, all
subject to receipt of notice delivered pursuant to Section 7.2.3 (if
applicable) and
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without liability accruing to Lessor for or by reason of such entry or
taking of possession, whether for the restoration of damage to
property caused by such taking or otherwise, and Lessee expressly
waives any right it may have under applicable law to a hearing prior
to repossession of the Aircraft, Airframe or any Engine or part
thereof; or
15.1.2 Sale; Use Etc. Lessor may sell all or any part of
the Aircraft, Airframe or any Engine, at public or private sale, at
such times and places, to such Persons (including Lessor, Indenture
Trustee or any Participant) as Lessor may determine, or otherwise
dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, Airframe or any Engine or part thereof, as Lessor, in its
sole discretion, may determine, all free and clear of any rights of
Lessee except as hereinafter set forth in this Section 15 and without
any duty to account to Lessee with respect to such action or inaction
or for any proceeds with respect thereto; or
15.1.3 Certain Liquidated Damages.
15.1.3.1 Liquidated Damages--Fair Market Rental
Value. Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under
Section 15.1.1 or 15.1.2 with respect to the Aircraft,
Airframe or any Engine or part thereof, Lessor, by written
notice to Lessee specifying a payment date (which shall be an
SLV Determination Date) not earlier than ten days from the
date of such notice, may cause Lessee to pay to Lessor, and
Lessee shall pay to Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Basic Rent or Renewal Rent,
as the case may be, due after the date specified for payment
in such notice), any unpaid Basic Rent or Renewal Rent, as the
case may be, due on or prior to such SLV Determination Date
(it being understood and agreed that Lessee shall not be
required to pay the portion, if any, of such Basic Rent
designated in Exhibit C hereto as payable in advance on such
SLV Determination Date, unless the same is attributable to
accrued interest on the Certificates) plus an amount equal to
the excess, if any, of the Stipulated Loss Value for the
Aircraft, computed as of such SLV Determination Date, over the
fair market rental value (determined as hereafter provided in
this Section 15) of the Aircraft for the remainder of the
Term, after discounting such fair market rental value
semiannually (effective on each Rent Payment Date) by a rate
equal to the Certificate Rate to present worth as of the date
specified for payment in such notice, together with interest,
if any, on such amount and unpaid Basic Rent or Renewal Rent,
as the case may be, at the Overdue Rate from the due date
thereof to the date of payment in full; or
15.1.3.2 Liquidated Damages--Fair Market Sales
Value. If Lessor shall not have sold the Aircraft, Lessor, by
written notice to Lessee specifying a payment date (which
shall be an SLV Determination Date) not earlier than ten days
from the date of such notice, may cause Lessee to pay to
Lessor, and Lessee
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shall pay to Lessor, on the payment date specified in such
notice, as liquidated damages for loss of a bargain and not as
a penalty (in lieu of the Basic Rent or Renewal Rent, as the
case may be, due after the date specified for payment in such
notice), any unpaid Basic Rent or Renewal Rent, as the case may
be, due on or prior to such SLV Determination Date (it being
understood and agreed that Lessee shall not be required to pay
the portion, if any, of such Basic Rent designated in Exhibit C
hereto as payable in advance on such SLV Determination Date,
unless the same is attributable to accrued interest on the
Certificates) plus an amount equal to the excess, if any, of
the Stipulated Loss Value for the Aircraft, computed as of such
SLV Determination Date, over the fair market sales value of the
Aircraft (determined as hereafter provided in this Section 15
as of the date specified for payment in such notice), together
with interest, if any, on such amount and unpaid Basic Rent or
Renewal Rent, as the case may be, at the Overdue Rate from the
due date thereof to the date of payment in full; or
15.1.4 Liquidated Damages upon Sale. If Lessor,
pursuant to Section 15.1.2 or applicable law, shall have sold
the Aircraft, Lessor, in lieu of exercising its rights under
Section 15.1.3 with respect to the Aircraft, may, if Lessor
shall so elect, upon giving written notice to Lessee, cause
Lessee to pay Lessor, and Lessee shall pay to Lessor, on the
date of such sale, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Basic Rent or Renewal
Rent, as the case may be, due after the date of such sale),
any unpaid Basic Rent or Renewal Rent, as the case may be, due
on or prior to the SLV Determination Date (it being understood
and agreed that Lessee shall not be required to pay the
portion, if any, of such Basic Rent designated in Exhibit C
hereto as payable in advance on such SLV Determination Date,
unless the same is attributable to accrued interest on the
Certificates) on or immediately preceding such date of sale
plus the amount of any deficiency between the net proceeds of
such sale or (if such sale is a private sale and is made to
Lessor, Indenture Trustee, a Participant or any Affiliate
thereof) between the fair market sales value of the Aircraft,
determined as of the date of such sale as hereinafter provided
in this Section 15, and the Stipulated Loss Value of the
Aircraft, computed as of the date of such sale, together with
interest, if any, on such amount and such unpaid Basic Rent or
Renewal Rent at the Overdue Rate from the due date thereof to
the date of payment in full; or
15.1.5 Termination and Other Remedies. Lessor may
terminate this Lease, or may exercise any other right or
remedy which may be available to it under applicable law or
proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof, including
without limitation Lessee's agreement to lease the Aircraft
for the Term and to pay Rent.
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In addition to the foregoing remedies, Lessee shall be liable (except
as otherwise provided above and without duplication of amounts otherwise
payable hereunder) for any and all unpaid Rent due hereunder before, during or
after the exercise of any of the foregoing remedies and for all legal fees and
other costs and expenses (including the fees and expenses of all appraisers
required by this Section 15) of Lessor, Indenture Trustee and Participants,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all insurance and
storage costs and all costs and expenses incurred in connection with the return
of the Aircraft, Airframe or any Engine or part thereof, in accordance with the
terms of Section 5 or in placing the Aircraft, Airframe or any Engine or part
thereof, in the condition and airworthiness required by Section 5.
Lessor agrees to give Lessee at least 15 days' prior written notice of
the date fixed for any public sale of the Aircraft, the Airframe or any Engine
or part thereof, and of the date on or after which will occur the execution of
any contract providing for any private sale.
15.2 Determination of Fair Market Rental Value and Fair Market
Sales Value. For the purpose of this Section 15, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession, as the case may
be, and in each case shall be determined on an "as is, where is" basis pursuant
to an appraisal by a recognized independent aircraft appraiser chosen by Lessor
and approved by Lessee, which approval shall not be unreasonably withheld or
delayed and shall be deemed granted if such choice is not rejected within 10
days after Lessee's receipt of notice of Lessor's choice.
15.3 No Waiver, Etc. No remedy referred to in this Section 15 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. No express or implied waiver by
Lessor of any Lease Event of Default shall in any way be, or be construed to
be, a waiver of any earlier or subsequent Lease Event of Default. To the
extent permitted by applicable law, Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use the Aircraft, Airframe or any Engine, or part thereof,
in mitigation of Lessor's damages as set forth in this Section 15 or which may
otherwise limit or modify any of Lessor's rights or remedies under this Section
15.
Section 16. Notices. All notices required under the terms and
provisions hereof shall be in writing and shall be given by certified mail,
telecopy or any other customary means of written communication, addressed:
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If to Lessee, at 2702 Love Field Drive, P.O. Box 36611, Dallas, Texas
75235-1611 (telecopy no. 214/904-4022), Attention: Treasurer, or at such other
address as Lessee shall from time to time designate in writing;
If to Lessor, at 777 Main Street, Hartford, Connecticut 06115
(telecopy no. 203/240-7920), Attention: Corporate Trust Administration, or at
such other address as Lessor shall from time to time designate in writing;
If to any Participant or Indenture Trustee, at the applicable address
set forth in the signature pages of the Participation Agreement or Schedule I
thereto, or at such other address as any such Participant or Indenture Trustee,
as the case may be, shall from time to time designate in writing.
The effective date of any such notice shall be, if sent by mail, three
Business Days after mailing and otherwise the date on which it is received by
the addressee. Lessee shall furnish to Lessor for transmission to Indenture
Trustee and Participants a sufficient number of copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished hereunder, except in any case where Lessee shall have transmitted the
same directly to any such person.
Section 17. Net Lease; Lessee's Obligations; No Setoff,
Counterclaim, Etc. This is a net lease and it is hereby recognized that Lessor
is the owner of the Aircraft (except that Owner Participant will be the owner
for income tax purposes) and Lessee is the lessee thereof. It is the intent of
the parties hereto that this Lease be a "true lease". Lessee's obligation to
pay all Rent payable hereunder as and when due and to the Person entitled
thereto shall, subject to Section 3.8, be absolute and unconditional and shall
not be affected by any circumstance, including without limitation: (a) any
setoff, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor (in its individual or trust capacity), Indenture Trustee (in its
individual or trust capacity), any Participant, Manufacturer, any Indemnified
Party or any other Person for any reason whatsoever; (b) any defect in the
title, airworthiness, condition, design, operation or fitness for use of, or
any damage to or loss, theft, taking, requisition, condemnation, confiscation
or destruction of, the Aircraft, Airframe or any Engine, or any interruption
or cessation in the use or possession thereof by Lessee, any sublessee or any
other Person for any reason whatsoever; (c) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee or any other Person;
(d) any restriction, prevention or curtailment of or interference with any use
of the Aircraft or part thereof; (e) any invalidity or unenforceability or
disaffirmance of this Lease or any provision hereof or any of the other
Operative Agreements or any provision thereof, in each case whether against or
by Lessee or otherwise; or (f) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided, that
nothing in this sentence shall be construed to modify or limit in any way
Lessee's rights under Section 3.8.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees,
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subject to Section 3.8, to pay an amount equal to each Basic Rent, Renewal Rent
and Supplemental Rent payment at the time such payment would have become due
and payable in accordance with the terms hereof had this Lease not been
terminated in whole or in part. All Rent payable by Lessee shall be paid
without notice or demand (except as otherwise expressly provided) and, subject
to Section 3.8, without abatement, suspension, deferment, deduction, diminution
or proration by reason of any circumstance or occurrence whatsoever. Lessee
hereby waives, to the extent permitted by applicable law, any and all rights
which it may now have or which at any time hereafter may be conferred upon it,
by statute or otherwise, to terminate, cancel, quit or surrender this Lease or
any part hereof, or to any abatement, suppression, deferment, diminution,
reduction or proration of Rent except in accordance with the express terms
hereof. Each payment of Rent made by Lessee shall, subject to Section 3.8, be
final as to Lessor and Lessee. Lessee will not, subject to Section 3.8, seek
to recover all or any part of any such payment of Rent for any reason
whatsoever. Lessee covenants that it will remain obligated under this Lease in
accordance with its terms and will take no action to terminate, rescind or
avoid this Lease whether or not as a result of the bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding-up
or other similar proceeding affecting Lessor or Owner Participant or any other
action with respect to this Lease which may be taken in any such proceeding by
any trustee or receiver of Lessor or Owner Participant or by any court (it
being understood that nothing in this sentence shall prevent Lessee from taking
any action to which it would have been entitled had such bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding-up or other similar proceeding not occurred).
Section 18. Renewal and Purchase Options.
18.1 Renewal Options. At the end of the Base Lease Term and any
Renewal Term (other than any Renewal Term ending four years after the end of
the Base Lease Term), so long as no Lease Event of Default or Lease Default (of
the type described in Section 14.1 or 14.5) has occurred and is continuing,
Lessee shall have the option to renew this Lease for a Renewal Term. In order
to exercise the option to renew, Lessee shall notify Lessor thereof in writing
not more than nine months nor less than six months prior to the commencement of
the applicable Renewal Term (which notice shall be irrevocable and shall
specify the length of such Renewal Term). Renewal Rent shall be payable in
arrears for each Lease Period occurring during any Renewal Term. The Renewal
Rent payable for any Renewal Term hereunder shall be the fair market rental
value of the Aircraft (as defined below) calculated as of the commencement of
such Renewal Term. Such fair market rental value shall be determined not later
than three months prior to the commencement of such Renewal Term by mutual
consent of Owner Participant and Lessee or, if they shall be unable so to
agree, by three recognized independent aircraft appraisers, one chosen and paid
for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market rental value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two
SALE AND LEASE AGREEMENT [N396SW]
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appraisals, then the appraisal of such appraiser shall be excluded, the
remaining appraisals shall be averaged and such average shall be deemed to be
the fair market rental value of the Aircraft for all purposes hereof. If
either Owner Participant or Lessee shall fail to appoint an appraiser by the
date which is two months prior to the commencement of such Renewal Term or if
such two appraisers cannot agree on the amount of such appraisal and fail to
appoint a third appraiser by the date which is one month before the
commencement of such Renewal Term, then either Owner Participant or Lessee may
apply to any court having jurisdiction (including, without limitation, the
courts referred to in Section 13(b) of the Participation Agreement) to make
such appointment. For purposes of this Section 18.1, fair market rental value
shall be the cash rental obtainable in an arm's-length lease between an
informed and willing lessee (under no compulsion to lease) and an informed and
willing lessor (under no compulsion to lease) and shall be determined on the
assumptions that the Aircraft is in the United States of America, available for
use by Lessee, unencumbered by any renewal or purchase option contained in this
Lease, in the return condition required by Section 5 of this Lease and
otherwise in compliance with and subject to the terms and requirements of this
Lease. Stipulated Loss Value amounts that are payable during any such Renewal
Term shall be calculated as of the date of commencement of such Renewal Term
and shall be determined in the same manner referred to above based on the fair
market sales value of the Aircraft on such date determined in accordance with
Section 18.2(a).
18.2 Purchase Options. (a) Lessee shall have the option to
purchase the Aircraft at the end of the Base Lease Term and each Renewal Term,
so long as (i) no Lease Default (of the type described in Section 14.1 or 14.5)
or Lease Event of Default shall have occurred and be continuing on the date of
notice of exercise of such option and (ii) no Lease Event of Default of the
type described in Section 14.5 or Lease Default of such type shall have
occurred and be continuing on the purchase date. In order to exercise such
option, Lessee shall notify Lessor thereof in writing not more than nine months
nor less than six months prior to the end of the Base Lease Term or such
Renewal Term, as applicable (which notice shall be irrevocable). In such case,
Lessee shall purchase the Aircraft on the last Business Day of the Base Lease
Term or such Renewal Term, as applicable, at a purchase price equal to the fair
market sales value thereof as of such last Business Day. Such fair market
sales value shall be determined not later than three months prior to such last
Business Day by mutual consent of Owner Participant and Lessee or, if they
shall be unable so to agree, by three recognized independent aircraft
appraisers, one chosen and paid for by Owner Participant, one chosen and paid
for by Lessee and the third appraiser chosen by the mutual consent of the first
two appraisers and paid for equally by Owner Participant and Lessee, the
appraisals of which three appraisers shall be averaged and such average shall
be deemed to be the fair market sales value of the Aircraft for all purposes
hereof; provided, however, that if the appraisal of one appraiser is more
disparate from the average of all three appraisals than each of the other two
appraisals, then the appraisal of such appraiser shall be excluded, the
remaining appraisals shall be averaged and such average shall be deemed to be
the fair market sales value of the Aircraft for all purposes hereof. If either
Owner Participant or Lessee shall fail to appoint an appraiser by the date
which is two months prior to such last Business Day or if such two appraisers
cannot agree on the amount of such appraisal and fail to appoint a third
appraiser by the date which
SALE AND LEASE AGREEMENT [N396SW]
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is one month before such last Business Day, then either Owner Participant or
Lessee may apply to any court having jurisdiction to make such appointment.
For purposes of this Section 18.2, fair market sales value shall be the cash
price obtainable in an arm's-length sale between an informed and willing buyer
(under no compulsion to buy) and an informed and willing seller (under no
compulsion to sell) and shall be determined on the assumptions that the
Aircraft is in the United States of America, available for use by the buyer,
unencumbered by any renewal or purchase option contained in this Lease, in the
return condition required by Section 5 of this Lease and otherwise in
compliance with the requirements of this Lease. At the time of payment to
Lessor, in funds of the type specified in Section 3.6, of the full amount of
the purchase price pursuant to this Section 18.2(a), Lessee shall also pay to
Lessor all unpaid Basic Rent due on or prior to the last day of the Term and
(without duplication) any other Rent which is due and payable through and
including the date of payment.
(b) So long as (i) no Lease Default (of the type described in
Section 14.1 or 14.5) or Lease Event of Default shall have occurred and be
continuing on the date of notice of exercise of such option and (ii) no Lease
Event of Default of the type described in Section 14.5 or Lease Default of such
type shall have occurred and be continuing on the Special Purchase Option Date,
Lessee shall have the option to purchase the Aircraft on January 1, 2014 or, if
such date is not a Business Day, on the next succeeding Business Day (the
"Special Purchase Option Date") at a purchase price equal to 57.72866546% of
Lessor's Cost (the "Special Purchase Price"); provided, that if there has been
an adjustment prior to the Special Purchase Option Date pursuant to Section
3.7, the Special Purchase Price (including any installments thereof) shall be
at all times calculated to preserve the Owner Participant's Special Purchase
Price After- Tax Yield, but in any event subject to Section 3.7.2. Such option
to purchase the Aircraft shall be exercised upon written notice from Lessee to
Lessor given not more than nine months nor less than six months prior to the
Special Purchase Option Date. Such notice shall be irrevocable and shall
contain the statement that this Lease will terminate upon the consummation of
such purchase. On the Special Purchase Option Date, Lessee shall pay to
Lessor, in funds of the type specified in Section 3.6, the full amount of the
Special Purchase Price pursuant to this Section 18.2(b), together with all
unpaid Basic Rent due on or prior to the Special Purchase Option Date (it being
understood and agreed that Lessee shall not be required to pay the portion, if
any, of such Basic Rent designated in Exhibit C hereto as payable in advance on
such Special Purchase Option Date, unless the same is attributable to accrued
interest on the Certificates) and (without duplication) any other Rent
(including Premium, if any, and Break Amount, if any, payable in respect of the
Certificates) which is due and payable through and including the date of
payment; provided, that, if no Lease Default (of the type specified in Section
14.1 or 14.5) or Lease Event of Default exists on the Special Purchase Option
Date and subject to the other conditions herein set forth, Lessee may elect, by
notice to Lessor given at least ten days prior to the Special Purchase Option
Date, to pay the Special Purchase Price in installments as Supplemental Rent,
secured as provided herein, in which case Lessee shall pay to Lessor, on each
EBO Installment Payment Date, the amount determined by multiplying Lessor's
Cost by the percentage set forth opposite such EBO Installment Payment Date in
Part II of Exhibit C.
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(c) In connection with any purchase pursuant to Section 18.2(b),
Lessee may, at its option, as part or all, as the case may be, of the
applicable purchase price, assume all of the rights and obligations of Lessor
under the Trust Indenture in respect of the Certificates (including, without
limitation, any scheduled payment of principal of or accrued interest on the
Certificates due and payable on such date of purchase but only to the extent
that any Basic Rent installment payable by Lessee on any such date of purchase
does not cover such scheduled payment of principal or accrued interest on the
Certificates and excluding any obligations or liabilities of Lessor in its
individual capacity incurred on or prior to such date of purchase, which
obligations and liabilities shall remain the sole responsibility of Lessor in
its individual capacity) in accordance with Section 7.03 of the Trust Indenture
and simultaneously shall pay to Lessor, in funds of the type specified in
Section 3.6, an amount equal to (i) the excess, if any, of the applicable
purchase price over an amount equal to the sum of the principal of, and accrued
and unpaid interest on, the Outstanding Certificates on such date of purchase,
after taking into account any payments of principal and interest made in
respect of the Outstanding Certificates on or before such date of purchase,
plus (ii) all unpaid Basic Rent due and owing by Lessee hereunder on or prior
to such date of purchase and (without duplication) any other Rent which is due
and payable through and including the date of payment (it being understood and
agreed that Lessee shall not be required to pay the portion, if any, of such
Basic Rent designated in Exhibit C hereto as payable in advance on such date of
purchase, unless the same is attributable to accrued interest on the
Certificates); provided, that, if no Lease Default (of the type specified in
Section 14.1 or 14.5) or Lease Event of Default exists on the Special Purchase
Option Date and subject to the other conditions herein set forth or referred to
in Section 8(aa) of the Participation Agreement, Lessee may elect, by notice to
Lessor concurrently with notice of its election to assume such obligations of
Lessor, to pay the amount of the excess calculated pursuant to clause (i) above
in installments as Supplemental Rent, in which case (I) Lessee shall pay to
Lessor on the first EBO Installment Payment Date, the excess, if any, of (x)
the amount determined by multiplying Lessor's Cost by the percentage set forth
opposite such EBO Installment Payment Date in Part II of Exhibit C hereto, over
(y) the principal amount of the Certificates outstanding on such date, and
shall pay to Lessor on each subsequent EBO Installment Payment Date the amount
determined by multiplying Lessor's Cost by the percentage set forth opposite
such EBO Installment Payment Date in Part II of Exhibit C hereto, and (II)
Section 8(aa) of the Participation Agreement shall apply.
(d) Upon full payment to Lessor of the applicable purchase price
for the Aircraft as set forth in this Section 18.2, or the portion thereof due
on the Special Purchase Option Date if Lessee shall have elected to pay the
Special Purchase Price in installments, together with the other amounts
specified above to be paid by Lessee concurrently with such purchase, Lessor
will Transfer to Lessee all of the Lessor's right, title and interest in and to
the Aircraft, this Lease will terminate and, if Lessee shall not have assumed
the rights and obligations of the Owner Trustee under the Trust Indenture in
respect of the Certificates as provided for above, Lessor will request the
Indenture Trustee to execute and deliver to Lessee an appropriate instrument
releasing the Airframe and Engines with respect to which title is transferred
from the lien of the Trust Indenture and releasing the Purchase Agreement, the
Purchase Agreement Assignment, the Engine Purchase Agreement and the Engine
Purchase Agreement Assignment
SALE AND LEASE AGREEMENT [N396SW]
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from the assignment and pledge, if any, thereunder; provided, that if Lessee
elects to pay the Special Purchase Price in installments, but not to assume the
rights and obligations of Lessor under the Trust Indenture in respect of the
Certificates, as provided for above (and shall have paid in full the
installment thereof due on the Special Purchase Option Date), the following
provisions shall also be applicable (and, as a condition to Lessee's payment of
the Special Purchase Price in installments, the following clauses (a)-(f) shall
have been given effect in one or more amendments to the Operative Agreements,
in each case in form and substance reasonably satisfactory to Lessor): (a)
this Lease shall continue in full force and effect (except as hereinafter
provided) but shall constitute then and thereafter a lease intended for
security securing the payment of such installments (and any appropriate UCC
financing statements or amendments to UCC financing statements shall be filed
in order to indicate that this Lease is intended for security purposes), (b)
Lessor shall permit re-registration of the Aircraft in the name of Lessee or a
Sublessee on the Special Purchase Option Date (it being understood that in all
other respects the registration provisions of the Operative Agreements shall
remain fully applicable), (c) no Basic Rent shall be payable after the Special
Purchase Option Date, except to the extent theretofore accrued, (d) the
Stipulated Loss Value of the Aircraft determined at any time after the Special
Purchase Option Date shall be equal to the aggregate amount of the installments
of the Special Purchase Price which have not been paid at the time of such
determination, (e) the reference to Basic Rent in Section 14.1 shall be deemed
to refer to installments of the Special Purchase Price and (f) in the event of
the occurrence and continuance of a Lease Event of Default after the Special
Purchase Option Date, Lessor shall be entitled to accelerate the unpaid
installments and exercise all the remedies available under applicable law to a
secured creditor with respect thereto.
In connection with, and as a condition to, Lessee's election to pay
the Special Purchase Price in installments pursuant to Section 18.2, but not to
assume the rights and obligations of Lessor under the Trust Indenture in
respect of the Certificates, on the Special Purchase Option Date Lessee shall,
at its sole cost and expense, (a) deliver to Lessor and the Owner Participant
an opinion of Vinson & Elkins L.L.P. or other counsel selected by Lessee and
reasonably satisfactory to Lessor to the effect that this Lease (alone or in
conjunction with other instruments delivered on the Special Purchase Option
Date) creates a valid security interest in the Aircraft securing the payment of
such installments prior to any Liens other than Permitted Liens (except for
those described in Section 6(f)), (b) execute and deliver to Lessor and cause
to be duly filed and recorded such other and further instruments as Lessor may
reasonably request to establish and perfect such a security interest (subject
to no other Liens other than Permitted Liens (except for those described in
clause (f) of Section 6)) in the Aircraft securing the payment by Lessee to
Lessor of such installments and (c) provide to Lessor such other evidence as
Lessor may reasonably request to establish the due authorization and
consummation of the transactions contemplated by this Section 18.2; provided,
that in lieu of satisfying the conditions specified in the foregoing clauses
(a)-(c) of this paragraph, Lessee may deliver to Lessor in support of its
obligation to pay the installments of the Special Purchase Price due after the
Special Purchase Option Date, an irrevocable direct-pay letter of credit issued
by a Qualified Issuing Bank, in form and substance reasonably satisfactory to
Lessor and the Owner
SALE AND LEASE AGREEMENT [N396SW]
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Participant and in an amount at any time equal to the aggregate amount of such
installments plus an amount equal to 20 days of interest thereon calculated at
the Past Due Rate.
Section 19. Successor Owner Trustee. Lessee agrees that in the
case of the appointment of any successor Owner Trustee pursuant to the terms of
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft for all purposes hereof without the necessity of any consent or
approval by Lessee (but such successor Owner Trustee shall qualify under the
terms of Section 8(b) of the Participation Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Trust Agreement, and such right may be exercised repeatedly as
long as this Lease shall be in effect.
Section 20. Right to Perform for Lessee. If Lessee fails to make
any payment of Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, Lessor (subject to the
terms of the Trust Indenture) or Indenture Trustee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or
Indenture Trustee incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
Section 21. Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred, and be continuing, during the Term, Lessor will
not, through its own actions or inactions, interfere in the quiet enjoyment of
the Aircraft by Lessee or any Permitted Sublessee.
Section 22. Investment of Security Funds; Miscellaneous;
Amendment.
22.1 Investment of Security Funds. Subject always to the terms of
the Trust Indenture for so long as the Trust Indenture shall remain in effect,
any moneys required to be paid to or retained by Lessor which are not required
to be paid to Lessee pursuant to Section 10.6 or 11.4 solely because a Lease
Event of Default or Lease Default shall have occurred and be continuing, or
which are held by Lessor pending payment to Lessee pursuant to Section 11.4 or
which are required to be paid to Lessee pursuant to Section 10.3 or 11.4 after
completion of a replacement to be made pursuant to Section 10.1 or 10.2, shall,
until paid to Lessee as provided in Section 10 or 11 or applied as provided
herein or in the Trust Indenture or Trust Agreement, be invested by Lessor from
time to time as directed in writing by Lessee and at the expense and risk of
Lessee in the following securities (which shall mature within 91 days of the
date of purchase thereof): (a) direct obligations of the Government; (b)
obligations fully guaranteed by the Government; (c) open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any State thereof rated P-1 or its equivalent by Moody's Investors
Service and A-l or its equivalent by Standard & Poor's
SALE AND LEASE AGREEMENT [N396SW]
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Rating Group, a division of McGraw-Hill, Inc.; or (d) certificates of deposit
issued by, or bankers' acceptances of, or time deposits or a deposit account
with (i) the Owner Trustee or Indenture Trustee (in their individual
capacities) or (ii) any bank, trust company or national banking association
incorporated or doing business under the laws of the United States of America
or any state thereof having a combined capital and surplus of at least
$100,000,000. There shall be promptly remitted to Lessee or its order any gain
(including interest received) realized as the result of any such investment
(net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) unless a Lease Event of Default or a Lease
Default (of the type described in Section 14.1 or 14.5) shall have occurred and
be continuing. Lessee will promptly pay to Lessor, on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other expenses, including Taxes, if any, incurred in connection
with such investment), such amount to be disposed of in accordance with the
terms of the Trust Indenture or the Trust Agreement.
22.2 Miscellaneous; Amendment. Lessee shall do, execute,
acknowledge and deliver, or shall cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances and assurances as Owner Trustee,
Indenture Trustee or any Participant shall reasonably require for accomplishing
the purposes of this Agreement and the other Operative Agreements. Any
provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. This Lease shall constitute an
agreement of lease, and nothing herein shall be construed as conveying to
Lessee any right, title or interest in or to the Aircraft, Airframe or Engines
except as a lessee only. The section and paragraph headings in this Lease and
the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN, AND EACH LEASE SUPPLEMENT AND
AMENDMENT HERETO IS INTENDED TO BE, DELIVERED IN THE STATE OF NEW YORK AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY
RESIDENTS THEREOF AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease and each Lease
Supplement and amendment hereto may be executed in several counterparts, each
of which shall be deemed an original, and all such counterparts shall
constitute one and the same instrument; provided, that no security interest in
Lessor's right, title and interest in and to this Agreement may be created
through the transfer or possession of any counterpart other than the
counterpart identified, for
SALE AND LEASE AGREEMENT [N396SW]
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purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart on the cover hereof.
Section 23. Permitted Foreign Air Carriers. Lessor may, in the
exercise of its reasonable business judgment, by written notice to Lessee,
remove any foreign air carrier from Exhibit D and Lessee may, by written notice
to Lessor, request that any foreign air carrier be added to Exhibit D, subject
to Lessor's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no deletion of an airline from the
list of Permitted Foreign Air Carriers pursuant hereto shall (i) affect any
existing sublease or other agreement providing for transfer of possession of
the Aircraft, Airframe, any Engine or Part which was permitted hereunder at the
time entered into, or (ii) preclude any subsequent renewal or extension of such
sublease or other agreement to which the Permitted Foreign Air Carrier under a
sublease is entitled by the terms thereof as originally in effect.
SALE AND LEASE AGREEMENT [N396SW]
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IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed and delivered as of the day and year first above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity except as expressly stated
herein, and otherwise solely as Owner Trustee
under the Trust Agreement
By: /s/ Pablo de la Canal
-----------------------------------
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By: /s/ John D. Owen
-----------------------------------
Treasurer
SALE AND LEASE AGREEMENT [N396SW]
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EXHIBIT A TO
LEASE AGREEMENT
SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____
THIS SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____, dated
______________, _____ between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner Trustee under that certain
Trust Agreement, dated as of April 1, 1995 (the "Trust Agreement"), between the
Owner Participant named therein and such Bank ("Lessor"), and SOUTHWEST
AIRLINES CO., a Texas corporation ("Lessee"),
RECITALS.
A. On December 9, 1994 an AC Form 8050-2 Bill of Sale from
Manufacturer (as defined in the Sale and Lease Agreement hereinbelow referred
to) in favor of Lessee covering the Aircraft hereinbelow described was recorded
by the Federal Aviation Administration as Conveyance Number S093890;
B. Lessor and Lessee have heretofore entered into that certain
Sale and Lease Agreement dated as of April 1, 1995, as supplemented and amended
from time to time (herein called the "Lease Agreement" and the defined terms
therein being herein used with the same meaning), which Lease Agreement
provides in Section 2 for the execution of a Lease Supplement substantially in
the form hereof for the purpose of Lessee's selling to Lessor, and Lessor's
leasing back to Lessee, the Aircraft under the Lease Agreement as and when
delivered by Lessor to Lessee in accordance with the terms thereof; and
C. The Lease Agreement relates to the airframe and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation with the FAA on the date hereof as
one document.
______________________
All of the right, title and interest of Lessor in and to this Sale and
Lease Agreement Supplement has been assigned to and is subject to a security
interest in favor of Wilmington Trust Company, as Indenture Trustee. This Sale
and Lease Agreement Supplement has been executed in several counterparts. No
security interest in Lessor's right, title and interest in and to this Sale and
Lease Agreement Supplement may be created through the transfer or possession of
any counterpart other than the counterpart identified, for purposes of
perfection of a security interest in chattel paper (as such term is defined in
the UCC), as the original counterpart. [This is not the original counterpart.]
A-1
<PAGE> 72
In consideration of the premises and other good and sufficient
consideration, and pursuant to Section 2 of the Lease Agreement, Lessor and
Lessee hereby agree as follows:
1. Lessee hereby delivers and sells to Lessor and Lessor hereby
accepts and purchases from Lessee and in turn delivers and leases back to
Lessee, and Lessee hereby accepts and leases back from Lessor, under the Lease
Agreement, as herein supplemented, the following-described Boeing Model 737-3H4
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date
hereof consists of the following:
Airframe: U.S Registration Number N396SW and Manufacturer's Serial
No. 27690; and
Engines: Two CFM International Model CFM56-3-B1 Engines installed
thereon bearing Engine Manufacturer's Serial Numbers as follows: 856995 and
857982.
Each of the Engines described above has 750 or more rated takeoff
horsepower or the equivalent of such horsepower.
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms to Lessor that the Delivered Aircraft
has been or will be duly marked in accordance with the terms of Section 7.l.2
of the Lease and that Lessee has accepted the Delivered Aircraft for all
purposes hereof and of the Lease Agreement, including its being airworthy, in
accordance with specifications, in good working order and repair and without
defect or inherent vice in title, condition, design, operation or fitness for
use, whether or not discoverable by Lessee as of the date hereof, and free and
clear of all Liens except Permitted Liens; provided, however, that this Section
3 is without prejudice to the rights of Lessee or Lessor against Manufacturer
or any supplier of the Aircraft, Engines or any Part.
4. Lessor's Cost for the Delivered Aircraft is $31,650,000.
5. All the provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement, on and as of the date of
this Lease Supplement, to the same extent as if fully set forth herein.
6. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW
YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
A-2
<PAGE> 73
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered as of the date and year first
above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By
-----------------------------------
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By
-----------------------------------
Treasurer
A-3
<PAGE> 74
EXHIBIT B-1 TO
LEASE AGREEMENT
STIPULATED LOSS VALUE SCHEDULE
<TABLE>
<CAPTION>
SLV
Determination Stipulated Loss Value
Date (% of Lessor's Cost)
------------------ ---------------------
<S> <C>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
</TABLE>
_________________________
* NOTE: If the event giving rise to an obligation to pay any Stipulated
Loss Value occurs and the actual date of the loss of tax benefits
resulting from such event shall be earlier or later than the date
assumed in calculating the Federal income tax consequences reflected
in the applicable Stipulated Loss Value, such Stipulated Loss Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-1-1
<PAGE> 75
EXHIBIT B-2 TO
LEASE AGREEMENT
TERMINATION VALUE SCHEDULE
<TABLE>
<CAPTION>
TV
Determination Termination Value
Date (% of Lessor's Cost)
-------------- --------------------
<S> <C>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
</TABLE>
_________________________
* NOTE: If the event giving rise to an obligation to pay any
Termination Value occurs and the actual date of the loss of tax
benefits resulting from such event shall be earlier or later than the
date assumed in calculating the Federal income tax consequences
reflected in the applicable Termination Value, such Termination Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-2-1
<PAGE> 76
EXHIBIT C TO
LEASE AGREEMENT
PART I
RENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Percentage of
Lessor's Cost
----------------------------------------------------------------------------
Rent Payment
Date Total Advance Arrears
-------------- ----- ------- -------
<S> <C> <C> <C>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
</TABLE>
C-1
<PAGE> 77
EXHIBIT C TO
LEASE AGREEMENT
PART II
EBO INSTALLMENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
EBO Installment Percentage of
Payment Date Lessor's Cost
---------------- ---------------
<S> <C>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
</TABLE>
C-2
<PAGE> 78
EXHIBIT D TO
LEASE AGREEMENT
PERMITTED FOREIGN AIR CARRIERS
<TABLE>
<S> <C>
Aer Lingus Icelandair
Aerolineas Argentinas Interflug
Air Afrique Japan Air Lines
Air Canada Japan Air Lines System
Air Europa Japan TransOcean Air
Air France JAT
Air Inter KLM
Air Jamaica Korean Air
Air New Zealand LAN Chile
Air UK Lauda Air
Alitalia Lufthansa
All Nippon Airways Luxair
ALM Maersk
Ansett Airlines of Australia Malaysian Airline System
Australian Airlines Martinair
Austrian Airlines Monarch Airlines
AVENSA Nordair
Bahamasair Olympic Airlines
Braathens S.A.F.E. Philippine Airlines
Britannia QANTAS Airways
British Airways Quebecair
British Midland Ryanair
BWIA Sabena
CAAC SAS
Canadian Airlines International Saudi Arabian Airlines
Cathay Pacific Airways Singapore Airlines
Cayman Airways Swissair
China Airlines TAP
Condor Flugdienst Thai Airways
DanAir Trans Australia Airlines
Egyptair Transavia Holland
El Al Transbrasil
Finnair VARIG
Garuda VIASA
Hopag Lloyd VIVA Air
Iberia
</TABLE>
D-1
<PAGE> 79
EXHIBIT E TO
LEASE AGREEMENT
ASSUMED INTEREST AMOUNTS
<TABLE>
<CAPTION>
Rent Payment
Date or Assumed Interest
Deferred Equity Date Amount
-------------------- ----------------
<S> <C>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
</TABLE>
E-1
<PAGE> 80
APPENDIX A TO
LEASE AGREEMENT
CERTAIN RETURN CONDITIONS
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of its return of the Aircraft pursuant to Section 5.3, the
Airframe shall have at least one year remaining until the next scheduled "D"
check (which term, as used in this paragraph, shall refer to a "full D" check
accomplished at ten year intervals, rather than to any "quarter D" or "half D"
check which may be scheduled under the Maintenance Program then used by Lessee
or any Permitted Sublessee, as the case may be).
* * *
APP-1
<PAGE> 1
EXHIBIT 4.10
FIRST AMENDMENT TO
SALE AND LEASE AGREEMENT
dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
_______________________
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N396SW)
All right, title and interest of Lessor in and to the Sale and Lease
Agreement, as amended, and the Aircraft (including the Engines), has been
assigned to and is subject to a security interest in favor of WILMINGTON TRUST
COMPANY, as Indenture Trustee. This First Amendment to Sale and Lease
Agreement has been executed in several counterparts. No security interest in
Lessor's right, title and interest in and to this First Amendment to Sale and
Lease Agreement may be created through the transfer or possession of any
counterpart other than the counterpart identified, for purposes of perfection
of a security interest in chattel paper (as such term is defined in the UCC),
as the original counterpart. This is not the original counterpart.
<PAGE> 2
THIS FIRST AMENDMENT TO SALE AND LEASE AGREEMENT, dated as of October
1, 1995 (this "Amendment"), between SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee under that certain Trust Agreement establishing the
Southwest Airlines 1995 Trust N396SW and dated as of April 1, 1995 ("Lessor"),
and SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), amends that certain
related Sale and Lease Agreement dated as of April 1, 1995 (the "Original
Lease") between Lessee and Lessor (the Original Lease, as supplemented by Sale
and Lease Agreement Supplement No. 1 thereto relating to the Aircraft referred
to below dated April 3, 1995 ("Lease Supplement No. 1") between Lessor and
Lessee, being referred to herein as the "Lease"),
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor, the
Aircraft, which consists of the following components: (i) Airframe: One (1)
Boeing 737-3H4, FAA Registration No. N396SW, Manufacturer's serial no. 27690;
and (ii) Engines: Two (2) CFM International Model CFM56-3-B1 Engines bearing,
respectively, Manufacturer's serial numbers 856995 and 857982; and
WHEREAS, a counterpart of the Original Lease, to which was attached
and made a part thereof a counterpart of Lease Supplement No. 1, was recorded
by the Federal Aviation Administration on April 5, 1995 and assigned Conveyance
No. JJ13610; and
WHEREAS, the Indenture Trustee received the Deferred Equity Amount in
full on the Deferred Equity Date from the Owner Participant; and
WHEREAS, in connection with the refinancing of the Certificates
pursuant to Section 18 of the Participation Agreement, the parties wish to
recalculate Basic Rent, Stipulated Loss Value percentages, Termination Value
percentages and Special Purchase Price; and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to Exhibits B-1, B-2, C and E. Exhibits
B-1, B-2 and C to the Lease are hereby deleted in their entirety and replaced
with Exhibits B-1, B-2 and C, respectively, to this Amendment. Exhibit E to
the Lease is hereby deleted in its entirety.
Section 2. Amendments to Section 1. Section 1 of the Lease is
hereby amended in the following manner:
SALE AND LEASE AMENDMENT [N396SW]
-1-
<PAGE> 3
(a) The following defined terms are hereby added to
Section 1 in alphabetical order:
"`First Amendment to Sale and Lease Agreement' means that certain
First Amendment to Sale and Lease Agreement dated as of October 1, 1995 by and
between Lessee and Lessor relating to the Aircraft."
"`First Amendment to Participation Agreement' means that certain First
Amendment to Participation Agreement dated as of October 1, 1995 by and among
Lessee, Owner Participant, Owner Trustee, Indenture Trustee and Pass Through
Trustee relating to the Aircraft."
"`First Amendment to Trust Indenture' means that certain First
Amendment to Trust Indenture and Security Agreement, dated as of October 1,
1995 between Owner Trustee and Indenture Trustee relating to the Aircraft."
"`Pass Through Certificates' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trust Agreements' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trustee' is defined in Section 1.01(b) of the Trust
Indenture."
"`Pass Through Trust Supplement' means each of the four separate Trust
Supplements Nos. 1995-A1, 1995-A2, 1995- A3 and 1995-A4 dated as of October 1,
1995 between Lessee and Pass Through Trustee."
"`Refinancing Agreement' means that certain Refinancing Agreement
relating to the Aircraft dated as of October 1, 1995 by and among Lessee, Owner
Participant, Original Loan Participant, Owner Trustee, Indenture Trustee and
Pass Through Trustee."
(b) The definition of "Indemnified Parties" is hereby
amended to be and read in its entirety as follows:
"`Indemnified Parties' means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N396SW
Certificate (including without limitation the Pass Through Trustee), (v) the
Estate and the Trust Indenture Estate, (vi) the Original Loan Participant,
(vii) the respective Affiliates, successors and assigns of the foregoing and
(viii) the respective directors, officers, employees, agents, partners and
servants of the foregoing."
(c) The definition of "Lease", "this Lease", "this
Agreement", "hereby", "herein", "hereof", and "hereunder" is hereby amended to
be and read in its entirety as follows:
"`Lease', `this Lease', `this Agreement', `hereby', `herein',
`hereof', `hereunder' or other words mean this Sale and Lease Agreement as
amended by the First Amendment to Sale
SALE AND LEASE AMENDMENT [N396SW]
-2-
<PAGE> 4
and Lease Agreement, and as supplemented by one or more Lease Supplements and
as may be further amended from time to time."
(d) The definition of "Operative Agreements" is hereby
amended to be and read in its entirety as follows:
"`Operative Agreements' means this Lease, each Lease Supplement, the
Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement,
the Manufacturer's Consent and the Refinancing Agreement, including any
consents included in or attached to any thereof."
(e) The definition of "Participant" is hereby amended to
be and read in its entirety as follows:
"`Participant' means Owner Participant and its successors and
permitted assigns."
(f) The definition of "Participation Agreement" is hereby
amended to be and read in its entirety as follows:
"`Participation Agreement' means the Participation Agreement relating
to the Aircraft, dated as of April 1, 1995, among Lessee, Owner Participant,
Original Loan Participant, Lessor and Indenture Trustee as amended by the First
Amendment to Participation Agreement and as may be further amended from time to
time."
(g) The definition of "Special Purchase Price After-Tax
Yield" means the after-tax economic yield, total aggregate after-tax cash flow
and general pattern of book earnings expected by the Owner Participant with
respect to the Aircraft through the Special Purchase Option Date if the Special
Purchase Option were exercised and the Special Purchase Option Price paid in
installments, utilizing the multiple investment sinking fund method of analysis
and the same assumptions as used by Owner Participant (including the Tax
Assumptions set forth in Section 2 of the Tax Indemnity Agreement) in its
economic analysis of the transaction as of the Delivery Date.
(h) The definition of "Stipulated Loss Value" is hereby
amended to be and read in its entirety as follows:
"`Stipulated Loss Value' means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment. Stipulated Loss
Value may be subject to adjustment in accordance with Section 3.7 and Section
18.2(d) of this Agreement."
SALE AND LEASE AMENDMENT [N396SW]
-3-
<PAGE> 5
(i) The definition of "Termination Value" is hereby
amended to be and read in its entirety as follows:
"`Termination Value' means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined. Termination Value may be subject to adjustment in accordance with
Section 3.7 of this Agreement."
(j) The definition of "Trust Indenture" is hereby amended
to be and read in its entirety as follows:
"`Trust Indenture' means the Trust Indenture and Security Agreement,
dated as of April 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft, as supplemented by the Trust Agreement and Trust
Indenture and Security Agreement Supplement, dated April 3, 1995, and as
amended by the First Amendment to Trust Indenture and as may be further amended
or supplemented from time to time."
(k) The definitions of "Advance," "Assumed Interest
Rate," "Assumed Interest Amount" and "Rent Differential Amount" are hereby
deleted in their entirety.
Section 3. Amendments to Section 3. Section 3 of the Lease is
hereby amended in the following manner:
(a) Section 3.3 is hereby amended to be and read in its
entirety as follows:
"3.3 Basic Rent. No Basic Rent shall be paid during the
Interim Lease Term. Lessee hereby agrees to pay to Lessor Basic Rent for the
Base Lease Term with respect to the Aircraft on each Rent Payment Date set
forth in Part I of Exhibit C, in each case in an amount equal to the percentage
of Lessor's Cost of the Aircraft set forth in Part I of Exhibit C opposite such
Rent Payment Date, subject to the terms of the next succeeding paragraph of
this Section 3.3. Each installment (or portion of an installment) of Basic
Rent under the heading `Advance' in Part I of Exhibit C payable on a Rent
Payment Date shall relate to the respective Lease Period immediately following
such Rent Payment Date, and each installment (or portion of an installment) of
Basic Rent under the heading `Arrears' in Part I of Exhibit C payable on a Rent
Payment Date shall relate to the respective Lease Period immediately preceding
such Rent Payment Date.
"Anything contained in the Participation Agreement or this
Lease or any other Operative Agreement to the contrary notwithstanding, (a)
each installment of Basic Rent payable under this Lease, whether or not
adjusted in accordance with the provisions of Section 3.7 hereof, shall be,
under any circumstances and in any event, in an amount at least sufficient to
pay in full, on the Rent Payment Date on which such installment is due and
payable, any scheduled payments then required to be made on account of the
principal of and interest on the Certificates, and (b) Stipulated Loss Value,
Termination Value and, unless Lessee shall have assumed the Certificates
pursuant to Section 18.2(c) hereof, the Special Purchase Price and the initial
installment of the Special Purchase Price if paid in installments, in each case
whether or
SALE AND LEASE AMENDMENT [N396SW]
-4-
<PAGE> 6
not adjusted in accordance with the provisions of Section 3.7, as of the date
of determination thereof, together with any amount of Basic Rent required to be
paid on such date and all other amounts payable on such date, shall equal under
any circumstances and in any event, an amount at least sufficient to pay in
full any payments then required to be made on account of the principal of and
interest (including, without limitation any interest on overdue principal and,
to the extent permitted by applicable law, interest), and Premium, if any, on
the Certificates and all amounts which would be payable prior thereto or on a
parity therewith if Section 3.03 of the Trust Indenture were applicable at the
time of such payment."
(b) Section 3.4 of the Lease is hereby amended to be and
read in its entirety as follows:
"3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Premium (if any) payable on the Certificates, amounts due pursuant to
Section 15.05 of the Trust Indenture and each other amount required to be paid
(other than principal and interest on the Certificates) by Lessor as Owner
Trustee under the Trust Indenture, on the same date that such amounts are due
under the Trust Indenture, and as provided in Section 3.6."
(c) Section 3.7.1 of the Lease is hereby amended to be
and read in its entirety as follows:
"3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a) of the
Participation Agreement paid by Owner Participant in connection with the
closing of this transaction on the Delivery Date are equal to an amount which
is other than 0.354142% of Lessor's Cost, (b) the Transaction Costs referred to
in Section 16(a) of the Participation Agreement paid by Owner Participant in
connection with the initial refinancing or refunding of the Certificates
pursuant to Section 18 of the Participation Agreement are equal to an amount
which is other than 0.623076% of Lessor's Cost, (c) a refinancing or refunding
of the Certificates pursuant to Section 17 of the Participation Agreement
occurs, or (d) any recalculation of Basic Rent, Stipulated Loss Value,
Termination Value and the Special Purchase Price is required by the terms of
the Tax Indemnity Agreement, then in each case, the Basic Rent percentages set
forth in Exhibit C, the Stipulated Loss Value percentages set forth in Exhibit
B-1 and the Termination Value percentages set forth in Exhibit B-2 shall be
recalculated by Owner Participant (i) in the case of a recalculation pursuant
to clause (a) or (b), on or prior to October 4, 1996, (ii) in the case of a
recalculation pursuant to clause (c), prior to the relevant Refinancing Date or
(iii) in the case of a recalculation pursuant to clause (d), prior to the Rent
Payment Date next following (by at least five Business Days) the event
described in clause (d), in each case in order to: (A) maintain Net Economic
Return and (B) minimize the Net Present Value of Rents to the extent possible
consistent with clause (A). In addition, in the event of an adjustment
pursuant to this Section 3.7, the Special Purchase Price (including any
installments thereof) shall be recalculated in accordance with the terms of
Section 18.2(b)."
SALE AND LEASE AMENDMENT [N396SW]
-5-
<PAGE> 7
(d) Section 3.8 is hereby deleted in its entirety, and all
provisions of the Lease (including, without limitation, the proviso to the
second sentence of Section 17) and of any other Operative Agreement referring
to Section 3.8 shall have no further force or effect.
Section 4. Amendment to Section 7. Section 7.3.3 of the Lease
is hereby amended to delete all references therein to the Original Loan
Participant.
Section 5. Amendment to Section 10. Section 10.1.3 of the Lease
is hereby amended to be and read in its entirety as follows:
"10.1.3 Payment of Stipulated Loss Value and Rent. On any Business
Day designated by Lessee upon 30 days' irrevocable notice to Lessor and the
Indenture Trustee, but in no event later than the Business Day next preceding
the earliest of (i) the 180th day following the date of the occurrence of such
Event of Loss, (ii) the second Business Day next succeeding the last day of the
Term or (iii) the later of 15 days following receipt of insurance proceeds with
respect to such occurrence or the date Lessee shall have made or shall have
deemed to have made its election under Section 10.1.1 to comply with Section
10.1.3, Lessee shall pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, (A) the Stipulated Loss Value for the Aircraft,
determined as of the date of payment (as described in the definition of
Stipulated Loss Value), (B) all unpaid Basic Rent due on or prior to the SLV
Determination Date with reference to which the Stipulated Loss Value is
computed (it being understood and agreed that Lessee shall not be required to
pay the portion, if any, of such Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date, unless attributable to
accrued interest on the Certificates), and (C) (without duplication) any other
Rent which is due and payable through and including the date of payment."
Section 6. Amendments to Section 11.
(a) Section 11.5 of the Lease is hereby amended to delete
all references therein to the Original Loan Participant.
(b) Section 11.6 of the Lease is hereby amended to be and
read in its entirety as follows:
"11.6 Lessor's Right to Maintain Insurance. In the event that Lessee
shall fail to maintain or cause to be maintained insurance as herein provided,
Lessor, Indenture Trustee, Owner Participant or, so long as Pass Through
Trustee is a Holder, Pass Through Trustee, may at its option (but shall not be
obligated to) provide such insurance and in such event, Lessee shall, upon
demand, reimburse such Person, as Supplemental Rent, for the cost thereof. No
such payment, performance or compliance shall be deemed to cure any Lease
Default hereunder or otherwise relieve Lessee of its obligations with respect
thereto."
Section 7. Amendment to Section 18. Section 18.2(b) of the
Lease is hereby amended by changing the Special Purchase Price specified
therein to 53.12877977% of Lessor's Cost.
SALE AND LEASE AMENDMENT [N396SW]
-6-
<PAGE> 8
Section 8. Ratification. Except as amended hereby, the Lease
continues and shall remain in full force and effect in all respects.
Section 9. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same instrument.
SALE AND LEASE AMENDMENT [N396SW]
-7-
<PAGE> 9
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Sale and Lease Agreement to be duly delivered in the State of New
York and executed as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By: /s/ Philip G. Kane, Jr.
Title: Vice President
SOUTHWEST AIRLINES CO., Lessee
By: /s/ John D. Owen
Treasurer
Approved and Consented to:
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services Officer
SALE AND LEASE AMENDMENT [N396SW]
-8-
<PAGE> 10
EXHIBIT B-1 TO
SALE AND LEASE AGREEMENT
Stipulated Loss Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N396SW]
B-1
<PAGE> 11
EXHIBIT B-2 TO
SALE AND LEASE AGREEMENT
Termination Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N396SW]
B-2
<PAGE> 12
EXHIBIT C TO
SALE AND LEASE AGREEMENT
Part I
Rent Payment Schedule
Part II
EBO Installment Payment Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N396SW]
C-1
<PAGE> 1
EXHIBIT 4.11
- --------------------------------------------------------------------------------
TRUST AGREEMENT
dated as of April 1, 1995
between
FORD MOTOR CREDIT COMPANY
Owner Participant
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N396SW
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01 Authority to Execute Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.01 Purchase of Certain Rights in the Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.02 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.01 Distribution of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Payments to the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Payments to Owner Trustee; Other Parties . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Certain Distributions to the Owner Participant . . . . . . . . . . . . . . . . . . . . . 5
(d) Excluded Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Legal Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.02 Method of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V
DUTIES OF THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.01 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.02 Action Upon Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.03 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.04 No Duties Except as Specified in Trust Agreement or Instructions . . . . . . . . . . . . . . . 7
SECTION 5.05 No Action Except Under Specified Documents or Instructions . . . . . . . . . . . . . . . . . . 7
SECTION 5.06 No Power to Reinvest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI
THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.01 Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.02 Absence of Certain Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.03 No Representations or Warranties as to Certain Matters . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.04 No Segregation of Monies; Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.05 Reliance Upon Certificates, Counsel and Agents . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.06 Not Acting in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.07 Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.08 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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<TABLE>
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ARTICLE VII
INDEMNIFICATION OF SBC
BY OWNER PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7.01 Owner Participant to Indemnify SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST . . . . . . . . . . . . . . . . . 12
SECTION 8.01 Transfer of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES . . . . . . . . . . . . . . . . . . 12
SECTION 9.01 Resignation of Owner Trustee: Appointment of Successor . . . . . . . . . . . . . . . . . . . . 12
(a) Resignation or Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Execution and Delivery of Documents, Etc. . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 9.02 Co-Trustees and Separate Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . 15
SECTION 10.01 Supplements and Amendments and Delivery Thereof . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Delivery of Amendments and Supplements to Certain Parties . . . . . . . . . . . . . . . 15
SECTION 10.02 Discretion as to Execution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.03 Distribution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.04 Absence of Requirement as to Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.01 Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.02 Owner Participant Has No Legal Title in Trust Estate . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.03 Assignment, Sale, Etc. of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.04 Trust Agreement for Benefit of Certain Parties Only . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.05 [Intentionally reserved for potential future use] . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.08 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.10 Binding Effect, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.11 Headings; References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.13 Performance by the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
TRUST AGREEMENT [N396SW]
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TRUST AGREEMENT
This TRUST AGREEMENT, dated as of April 1, 1995, is between
FORD MOTOR CREDIT COMPANY, a Delaware corporation, and SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its
individual capacity, together with its successors and permitted assigns, "SBC",
and otherwise not in its individual capacity but solely as trustee hereunder
with its permitted successors and assigns, the "Owner Trustee").
W I T N E S S E T H:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01 Certain Definitions. Unless the context
shall otherwise require and except as contained in this Section 1.01, the
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings assigned thereto in the Lease (as hereinafter defined) or,
if not defined in the Lease, in the Trust Indenture (as defined in the Lease),
for all purposes hereof. All definitions contained in this Section 1.01 shall
be equally applicable to both the singular and plural forms of the terms
defined. For all purposes of this Trust Agreement the following terms shall
have the following meanings:
"Commitment" has the meaning ascribed to such term in Section
1 of the Participation Agreement.
"Excluded Payments" has the meaning ascribed to such term in
the Trust Indenture.
"Indenture Event of Default" has the meaning ascribed to such
term in the Trust Indenture.
"Lease" means that certain Sale and Lease Agreement, dated as
of the date hereof, relating to that certain Boeing 737-3H4 aircraft bearing
U.S. Registration No. N396SW and Manufacturer's serial number 27690, to be
entered into by the Owner Trustee and Lessee concurrently with the execution
and delivery of this Trust Agreement, as said Sale and Lease Agreement may from
time to time be supplemented or amended, or the terms thereof waived or
modified, to the extent permitted by, and in accordance with, the terms of this
Trust Agreement. The term "Lease" shall also include said Sale and Lease
Agreement as supplemented by each Lease Supplement from time to time entered
into pursuant to the terms of the Lease.
"Lease Event of Default" has the meaning ascribed to such term
in the Lease.
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"Lessee" means Southwest Airlines Co., a Texas corporation,
and its permitted successors and assigns under the Lease and the Participation
Agreement.
"Owner Participant" means and includes (i) Ford Motor Credit
Company, a Delaware corporation, as the original Owner Participant, and (ii)
the successors and permitted assigns of Ford Motor Credit Company.
"Trust Estate" means all estate, right, title and interest of
the Owner Trustee in and to the Aircraft, the Participation Agreement, the
Lease, any Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Bills of Sale and the other Operative Agreements including,
without limitation, all amounts of Basic Rent and Supplemental Rent including,
without limitation, insurance proceeds (other than insurance proceeds payable
to or for the benefit of the Owner Trustee, for its own account or in its
individual capacity, the Owner Participant, the Holders or the Indenture
Trustee), all payments and proceeds as a result of the sale, lease or other
disposition of the Aircraft, the Airframe, any Engine or any Part thereof, and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (except amounts owing to the Owner Participant, to the Indenture
Trustee, to the Owner Trustee, in its individual capacity, or to a Holder, or
to any of their respective directors, officers, employees, servants and agents,
pursuant to Section 7 of the Participation Agreement) including, without
limitation, any and all payments and proceeds received by the Owner Trustee
after the termination of the Lease with respect to the Aircraft resulting from
the sale, lease or other disposition thereof, subject, however to the
provisions of and the Lien created by the Trust Indenture. Notwithstanding the
foregoing, "Trust Estate" shall (i) not include any Excluded Payment and (ii)
include all property and rights purported to be included in the Trust Indenture
Estate.
"Trust Indenture Estate" has the meaning ascribed to the term
"Indenture Estate" in the Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the
Trust Indenture.
"Trust Supplement" means a supplement to this Trust Agreement
and to the Trust Indenture in substantially the form of Exhibit C to the Trust
Indenture.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST
SECTION 2.01 Authority to Execute Documents. The Owner
Participant hereby authorizes and directs the Owner Trustee to, and the Owner
Trustee agrees for the benefit of the Owner Participant that it will, on or
before the Delivery Date, execute and deliver the Operative Agreements to which
it is a party and any other agreements, instruments or documents to which the
Owner Trustee is a party in the respective forms thereof which are delivered
from time to time by the Owner Participant to the Owner Trustee for execution
and delivery and, subject to the terms hereof, to exercise its rights (upon
instructions received from
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the Owner Participant) and perform its duties under said Operative Agreements
in accordance with the terms thereof.
SECTION 2.02 Declaration of Trust. SBC hereby declares
that it will hold as Owner Trustee the Trust Estate upon the trusts hereinafter
set forth for the use and benefit of the Owner Participant, subject, however,
to the Lien created by the Trust Indenture.
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES
SECTION 3.01 Purchase of Certain Rights in the Aircraft.
The Owner Participant hereby authorizes and directs the Owner Trustee to, and
the Owner Trustee agrees for the benefit of the Owner Participant that it will,
on the Delivery Date, subject to due compliance with the terms of Section 3.02
hereof:
(a) purchase the Aircraft pursuant to the Lease;
(b) accept from Lessee the Lessee Warranty Bill of Sale
and the Lessee FAA Bill of Sale and the invoice furnished pursuant to
the Participation Agreement;
(c) execute and deliver a Lease Supplement covering the
Aircraft;
(d) execute and deliver each of the other Operative
Agreements to which the Owner Trustee is to be a party including,
without limitation, a Trust Supplement covering the Aircraft;
(e) execute, issue and deliver to the Original Loan
Participant one or more authenticated Certificates in the amounts and
otherwise as provided in Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred
to in Section 4(a)(vi) of the Participation Agreement, together with
all other agreements, documents and instruments referred to in Section
4 of the Participation Agreement to which the Owner Trustee is to be a
party;
(g) effect the registration of the Aircraft in the name
of the Owner Trustee by filing or causing to be filed with the FAA:
(i) the Lessee FAA Bill of Sale; (ii) an application for registration
of the Aircraft in the name of the Owner Trustee (including, without
limitation, an affidavit from the Owner Trustee in compliance with the
provisions of 14 C.F.R. Section 47.7(c)(2)(ii)); and (iii) this Trust
Agreement;
(h) authorize a representative or representatives of the
Owner Trustee (who shall be an employee or employees of Lessee) to
accept delivery of the Aircraft pursuant to the Participation
Agreement; and
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(i) execute and deliver all such other instruments,
documents or certificates and take all such other actions in
accordance with the directions of the Owner Participant, as the Owner
Participant may deem necessary or advisable in connection with the
transactions contemplated hereby.
SECTION 3.02 Conditions Precedent. The rights and
obligations of the Owner Trustee to take the actions required by Section 3.01
hereof with respect to the Aircraft shall be subject to the following
conditions precedent: (a) the Owner Participant shall have made the full
amount of its Commitment with respect to the Aircraft available to the Owner
Trustee, in immediately available funds, in accordance with Sections 1 and 2 of
the Participation Agreement; and (b) the Owner Participant shall have notified
the Owner Trustee that the terms and conditions of Section 4 of the
Participation Agreement, insofar as they relate to conditions precedent to
performance by the Owner Participant of its obligations thereunder, shall have
been either fulfilled to the satisfaction of or waived by the Owner
Participant. The Owner Participant shall, by instructing the Owner Trustee to
release the funds then held by the Owner Trustee as provided in Section 2 of
the Participation Agreement, be deemed to have found satisfactory to it, or
waived, all such conditions precedent.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.01 Distribution of Payments.
(a) Payments to the Indenture Trustee. Until the Trust
Indenture shall have been discharged pursuant to Section 10.01 thereof or
defeased pursuant to Section 10.05 thereof, all Rent, insurance proceeds and
requisition or other payments of any kind included in the Trust Estate (other
than Excluded Payments and other than payments received from the Indenture
Trustee under the Trust Indenture) payable to the Owner Trustee shall be
payable directly to the Indenture Trustee (and any of the same which are
received by the Owner Trustee shall upon receipt be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind) for distribution
in accordance with the provisions of Article III of the Trust Indenture;
provided, however, that any payments received by the Owner Trustee from (i) the
Lessee with respect to the Owner Trustee's fees and disbursements, or (ii) the
Owner Participant pursuant to Article VII hereof shall not be paid over to the
Indenture Trustee but shall be retained by the Owner Trustee and applied toward
the purpose for which such payments were made.
(b) Payments to Owner Trustee; Other Parties. After the
Trust Indenture shall have been discharged pursuant to Section 10.01 thereof or
defeased pursuant to Section 10.05 thereof, any payment of the type referred to
in Section 4.01(a) hereof (other than Excluded Payments) received by the Owner
Trustee, any payments received from the Indenture Trustee other than as
specified in Section 4.01(c) or (d) hereof and any other amount received as
part of the Trust Estate and for the application or distribution of which no
provision is made herein, shall be distributed forthwith upon receipt by the
Owner Trustee in the following order
TRUST AGREEMENT [N396SW]
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of priority: first, so much of such payment as shall be required to reimburse
the Owner Trustee for any expenses not otherwise reimbursed as to which the
Owner Trustee is entitled to be so reimbursed by the Owner Participant pursuant
to the provisions hereof shall be retained by the Owner Trustee; second, so
much of the remainder for which provision as to the application thereof is
contained in the Lease or any of the other Operative Agreements shall be
applied and distributed in accordance with the terms of the Lease or such other
Operative Agreement; and third, the balance, if any, shall be paid to the Owner
Participant.
(c) Certain Distributions to the Owner Participant. All
amounts from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the Trust Indenture shall, if paid to the Owner
Trustee, be distributed by the Owner Trustee to the Owner Participant in
accordance with the provisions of Article III of the Trust Indenture.
(d) Excluded Payments. Any Excluded Payments received by
the Owner Trustee shall be paid by the Owner Trustee to the Person to whom such
Excluded Payments are payable under the provisions of the Participation
Agreement, the Tax Indemnity Agreement or the Lease.
(e) Legal Title. The Owner Participant shall have no
legal title to the Aircraft or any other portion of the Trust Estate.
SECTION 4.02 Method of Payments. The Owner Trustee shall
make distributions or cause distributions to be made to (i) the Owner
Participant pursuant to this Article IV by transferring by wire transfer in
immediately available funds on the day received (or on the next succeeding
Business Day if the funds to be so distributed shall not have been received by
the Owner Trustee by 3:00 p.m., New York City time), the amount to be
distributed as provided in Schedule I to the Participation Agreement or to such
account or accounts of the Owner Participant as the Owner Participant may
designate from time to time in writing to the Owner Trustee and (ii) the
Indenture Trustee pursuant to this Article IV by transferring the amount to be
distributed to the Indenture Trustee in the manner specified in the Trust
Indenture.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01 Notice of Event of Default. If the Owner
Trustee shall have knowledge of a Lease Event of Default or Indenture Event of
Default (or an event which with the passage of time or the giving of notice or
both would constitute a Lease Event of Default or an Indenture Event of
Default), the Owner Trustee shall give to the Owner Participant and Lessee
prompt telephonic or facsimile notice thereof followed by prompt written
confirmation thereof by certified mail, postage prepaid, provided, that (i) in
the case of an event which with the passage of time would constitute an
Indenture Event of Default referred to in paragraph (b) of Section 8.01 of the
Trust Indenture, such notice shall in no event be furnished later than ten (10)
days after the Owner Trustee shall first have knowledge of such event and (ii)
in the case of a misrepresentation by the Owner Trustee which with the passage
of time would constitute
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an Indenture Event of Default referred to in paragraph (c) of Section 8.01 of
the Trust Indenture, such notice shall in no event be furnished later than ten
(10) days after the Owner Trustee shall first have knowledge of such event.
The notice shall set forth in reasonable detail the facts or circumstances
known to it with respect to such Lease Event of Default or Indenture Event of
Default. Subject to the terms of Section 5.03 hereof, the Owner Trustee shall
take such action or shall refrain from taking such action, not inconsistent
with the provisions of the Trust Indenture or the other Operative Agreements,
with respect to such Lease Event of Default, Indenture Event of Default or
other event as the Owner Trustee shall be directed in writing by the Owner
Participant. For all purposes of this Trust Agreement, the Lease and the other
Operative Agreements, in the absence of actual knowledge by a responsible
officer of the Trust Office of the Owner Trustee in his or her capacity as
such, the Owner Trustee shall not be deemed to have knowledge of a Lease Event
of Default, Indenture Event of Default or other event referred to in this
Section 5.01 unless notified in writing thereof by the Indenture Trustee, the
Owner Participant or Lessee.
SECTION 5.02 Action Upon Instructions. Subject to the
terms of Sections 5.01 and 5.03 hereof and to the terms of the other Operative
Agreements, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following
actions, not inconsistent with the provisions of the Lease and the Trust
Indenture, as may be specified in such instructions: (i) give such notice or
direction or exercise such right, remedy or power hereunder or take such other
actions under any of the Operative Agreements to which the Owner Trustee is a
party or in respect of all or any part of the Trust Estate as shall be
specified in such instructions; (ii) take such action to preserve or protect
the Trust Estate (including the discharge of Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Agreements to be satisfactory to the
Owner Trustee, it being understood that without written instructions of the
Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it; (iv) subject to the rights of Lessee under the Operative
Agreements, after the expiration or earlier termination of the Lease, convey
all of the Owner Trustee's right, title and interest in and to the Aircraft for
such amount, on such terms and to such purchaser or purchasers as shall be
designated in such instructions, or net lease the Aircraft to such lessee or
lessees and on such terms as shall be designated in such instructions or
deliver the Aircraft to the Owner Participant in accordance with such
instructions; and (v) take such other action as is requested by the Owner
Participant, which action is not inconsistent with the terms of the Operative
Agreements.
SECTION 5.03 Indemnification. The Owner Trustee shall not
be required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof unless the Owner Trustee shall have
been indemnified by the Owner Participant, in manner and form satisfactory to
the Owner Trustee, against any liability, cost or expense (including reasonable
counsel fees and disbursements) which may be incurred in connection therewith
other than that which results from the willful misconduct or gross negligence
of the Owner Trustee; and, if the Owner Participant shall have directed the
Owner Trustee to take any such action or refrain from taking any action, the
Owner Participant agrees to furnish such indemnity as shall be required and, in
addition to the extent not otherwise paid pursuant to the provisions of the
Lease or of the Participation Agreement, to pay the reasonable fees and
TRUST AGREEMENT [N396SW]
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charges of the Owner Trustee for the services performed or to be performed by
it pursuant to such direction. The Owner Trustee shall not be required to take
any action under Section 5.01 (other than the giving of the notices referred to
therein) or 5.02 hereof if the Owner Trustee shall reasonably determine, or
shall have been advised by counsel, that such action is contrary to the terms
of any of the Operative Agreements to which the Owner Trustee is a party, or is
otherwise contrary to law and the Owner Trustee shall have delivered to the
Owner Participant written notice of the basis of its refusal to act.
SECTION 5.04 No Duties Except as Specified in Trust
Agreement or Instructions. The Owner Trustee shall not have any duty or
obligation to manage, control, use, sell, dispose of or otherwise deal with the
Aircraft or any other part of the Trust Estate, or to otherwise take or refrain
from taking any action under, or in connection with any of the Operative
Agreements to which the Owner Trustee is a party, except (i) as expressly
required by the terms of any of the Operative Agreements to which the Owner
Trustee is a party, or (ii) (to the extent not inconsistent with the provisions
of the Trust Indenture), as expressly provided by the terms hereof or as
expressly provided in a written instruction from the Owner Participant received
pursuant to the terms of Section 5.01 or 5.02 hereof, and no implied duties or
obligations shall be read into this Trust Agreement against the Owner Trustee.
SBC agrees that it will, in its individual capacity and at its own cost or
expense (but without any right of indemnity in respect of any such cost or
expense under Section 5.03 or 7.01 hereof), promptly take such action as may be
necessary to duly discharge and satisfy in full all Lessor Liens attributable
to it in its individual capacity which it is required to discharge pursuant to
Section 8(g) of the Participation Agreement and otherwise comply with the terms
of said Section binding upon it.
SECTION 5.05 No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall have no power, right or authority to,
and the Owner Trustee agrees that it will not, manage, control, use, sell,
dispose of or otherwise deal with the Aircraft or any other part of the Trust
Estate except (i) as expressly required by the terms of any of the Operative
Agreements to which the Owner Trustee is a party, (ii) as expressly provided by
the terms hereof, or (iii) as expressly provided in written instructions from
the Owner Participant pursuant to Section 5.01 or 5.02 hereof, but subject
always to the provisions of and Lien created by the Trust Indenture.
SECTION 5.06 No Power to Reinvest. Notwithstanding
anything contained in Section 5.01, 5.02, 5.04 or 5.05 to the contrary, the
Owner Trustee shall not be authorized and shall have no power to reinvest the
proceeds of the Trust Estate or to otherwise "vary the investment" of the Owner
Participant within the meaning of Treasury Regulations Section
301.7701-4(c)(1); provided, however, that nothing contained in this Section
5.06 shall limit the indemnity provided in Section 5.03 hereof or any
requirement pertaining to the investment of funds in the Operative Agreements.
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ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01 Acceptance of Trusts and Duties. SBC accepts
the trusts hereby created and agrees to perform the same but only upon the
terms hereof applicable to it. The Owner Trustee also agrees to receive and
disburse all monies received by it constituting part of the Trust Estate upon
the terms hereof. SBC shall not be answerable or accountable under any
circumstances, except for (a) its or the Owner Trustee's own willful misconduct
or gross negligence, (b) its failure to perform its obligations under the last
sentence of Section 5.04 hereof and the first sentence of Section 5.01 hereof,
(c) its or the Owner Trustee's failure to use ordinary care in handling and
disbursing funds, (d) any Tax based on or measured by any fees, commissions or
compensation received by it for acting as trustee in connection with any of the
transactions contemplated by the Operative Agreements, and (e) liabilities that
may result from the inaccuracy of any representation or warranty of it (or from
the failure by it to perform any covenant) in Section 6.03 hereof or in any of
the other Operative Agreements (including, without limitation, covenants of SBC
contained in the Participation Agreement and the Trust Indenture).
SECTION 6.02 Absence of Certain Duties. Except in
accordance with written instructions furnished pursuant to Section 5.01 or 5.02
hereof and except as provided in, and without limiting the generality of,
Sections 3.01, 5.04 and 5.05 hereof and the last sentence of Section 9.01(b)
hereof, neither the Owner Trustee nor SBC shall have any duty (i) to see to any
recording or filing of any Operative Agreement or of any supplement to any
thereof or to see to the maintenance of any such recording or filing or any
other filing of reports with the Federal Aviation Administration or other
governmental agencies, except that SBC in its individual capacity agrees to
comply with the Federal Aviation Administration reporting requirements set
forth in 14 CFR Section 47.45 and 14 CFR Section 47.51, and the Owner Trustee
shall, to the extent that information for that purpose is timely supplied by
Lessee and approved by the Owner Participant pursuant to any of the Operative
Agreements, complete and timely submit (and furnish the Owner Participant with
a copy of) any and all reports relating to the Aircraft which may from time to
time be required by the Federal Aviation Administration or any government or
governmental authority having jurisdiction, (ii) to see to any insurance on the
Aircraft or to effect or maintain any such insurance, whether or not Lessee
shall be in default with respect thereto, other than to forward to the Owner
Participant copies of all reports and other written information which the Owner
Trustee receives from Lessee pursuant to Section 11 of the Lease, (iii) to see
to the payment or discharge of any tax, assessment or other governmental charge
or any lien or encumbrance of any kind owing with respect to, assessed or
levied against any part of the Trust Indenture Estate or the Trust Estate,
except as provided in Section 5.04 hereof, Section 4.01(ii) or 4.02 of the
Trust Indenture or Section 8(g) of the Participation Agreement, or (iv) to
inspect Lessee's books and records with respect to the Aircraft at any time
permitted pursuant to the Lease. Notwithstanding the foregoing, the Owner
Trustee will furnish to the Indenture Trustee and the Owner Participant,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to the Owner Trustee under the Lease or
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any other Operative Agreement to the extent that any of the same shall not
state on its face or otherwise that it has been so distributed.
SECTION 6.03 No Representations or Warranties as to
Certain Matters. NEITHER THE OWNER TRUSTEE NOR SBC MAKES OR SHALL BE DEEMED TO
HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF,
AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR
ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
AIRCRAFT OR ANY PART THEREOF WHATSOEVER, except that SBC in its individual
capacity warrants that (i) on the Delivery Date, the Owner Trustee shall have
received whatever title was conveyed to it by Lessee, (ii) on the Delivery
Date, the Owner Trustee shall be in compliance with the last sentence of
Section 5.04 hereof, and (iii) the Aircraft shall during the Term of the Lease
be free of Lessor Liens attributable to SBC, or (b) any representation or
warranty as to the validity, legality or enforceability of this Trust Agreement
or any other Operative Agreement to which the Owner Trustee is a party, or any
other document or instrument, or as to the correctness of any statement
contained in any thereof except to the extent that any such statement is
expressly made herein or therein by such party as a representation by SBC or by
the Owner Trustee, as the case may be, and except that SBC hereby represents
and warrants that this Trust Agreement has been, and (assuming due
authorization, execution and delivery by the Owner Participant of this Trust
Agreement) the other Operative Agreements to which it or the Owner Trustee is a
party have been (or at the time of execution and delivery of any such
instrument by it or the Owner Trustee hereunder or pursuant to the terms of the
Participation Agreement that such an instrument will be) duly executed and
delivered by one of its officers who is or will be, as the case may be, duly
authorized to execute and deliver such instruments on behalf of SBC or the
Owner Trustee, as the case may be, and that this Trust Agreement constitutes
the legal, valid and binding obligation of SBC or the Owner Trustee, as the
case may be, enforceable against SBC or the Owner Trustee, as the case may be,
in accordance with its terms.
SECTION 6.04 No Segregation of Monies; Interest. Monies
received by the Owner Trustee hereunder need not be segregated in any manner
except to the extent required by law and the Owner Trustee shall not be liable
for any interest thereon.
SECTION 6.05 Reliance Upon Certificates, Counsel and
Agents. The Owner Trustee shall incur no liability to anyone in acting in
reliance upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper reasonably
believed by it in good faith to be genuine and reasonably believed by it in
good faith to be signed by the proper party or parties. Unless other evidence
in respect thereof is specifically prescribed herein, any request, direction,
order or demand of the Owner Participant or Lessee mentioned herein or in any
of the other Operative Agreements to which the Owner Trustee is a party shall
be sufficiently evidenced by written instruments signed by the Chairman of the
Board, the President, any Vice President, the Treasurer or any other duly
authorized officer or representative and in the name of any such Owner
Participant or Lessee,
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as the case may be. The Owner Trustee may accept a copy of a resolution of the
Board of Directors or Executive Committee of Lessee or the Owner Participant,
as the case may be, certified by the Secretary or an Assistant Secretary of
Lessee or the Owner Participant, as the case may be, as duly adopted and in
full force and effect, as conclusive evidence that such resolution has been
duly adopted by said Board or Committee and that the same is in full force and
effect. As to any fact or matter the manner of ascertainment of which is not
specifically described herein, the Owner Trustee may for all purposes hereof
rely on a certificate signed by the Chairman of the Board, the President, any
Vice President, the Treasurer or any other duly authorized officer or
representative of Lessee or the Owner Participant, as the case may be, as to
such fact or matter, and such certificate shall constitute full protection to
the Owner Trustee for any action taken or omitted to be taken by it in good
faith in reliance thereon. In the administration of trusts hereunder, the
Owner Trustee may execute any of the trusts or powers hereof and perform its
powers and duties hereunder directly or through agents or attorneys and may, at
the expense of the Trust Estate, consult with counsel, accountants and other
skilled persons to be selected and employed by it. The Owner Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion, within the scope of such person's
competence, of any such counsel, accountants or other skilled persons and the
Owner Trustee shall not be liable for the negligence of any such counsel,
accountant or other skilled person appointed by it with due care hereunder.
SECTION 6.06 Not Acting in Individual Capacity. In
executing the trusts accepted by SBC hereunder, the Owner Trustee acts solely
as trustee and not in its individual capacity except as otherwise expressly
provided herein; and, except as may be otherwise expressly provided in this
Trust Agreement, the Lease, the Participation Agreement and the Trust
Indenture, all persons, other than the Owner Participant, as provided herein,
having any claim against the Owner Trustee by reason of the transactions
contemplated hereby shall look only to the Trust Estate for payment or
satisfaction thereof except to the extent the Owner Trustee shall expressly
agree otherwise in writing.
SECTION 6.07 Fees and Compensation. The Owner Trustee
shall be entitled to receive compensation, reasonable as regards its
responsibilities hereunder, together with reimbursement within three (3) months
of its request for all reasonable expenses incurred or made by it in accordance
with any of the provisions of this Trust Agreement or any other Operative
Agreement (including the reasonable compensation of the expenses of its
counsel, accountants or other skilled persons and of all other persons not
regularly in its employ). If a Lease Event of Default or Indenture Event of
Default shall occur and be continuing, the Owner Trustee shall be entitled to
receive compensation, reasonable as regards its additional responsibilities
hereunder, and payment or reimbursement for its expenses as provided above.
Pursuant to Section 7(c) of the Participation Agreement and subject to Section
16 thereof, Lessee shall be required to pay the reasonable fees and expenses of
the Owner Trustee comprising the compensation and reimbursement of expenses to
which the Owner Trustee is entitled under this Section 6.07. Except as
otherwise expressly provided in Section 5.03 or Section 7.01 of this Trust
Agreement, neither the Owner Participant nor the Trust Estate shall have any
liability for any such fees and expenses; provided, however, the Owner
Participant shall be liable for such additional compensation of the Owner
Trustee if the same is attributable to
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an Indenture Event of Default which is caused solely by the actions or
inactions of the Owner Participant.
SECTION 6.08 Tax Returns. The Owner Trustee shall be
responsible for the keeping of all appropriate books and records relating to
the receipt and disbursement of all monies received by it under this Trust
Agreement or any other Operative Agreement. The Owner Participant shall be
responsible for causing to be prepared and filed all income tax returns
required to be filed by the Owner Participant. The Owner Trustee shall be
responsible for causing to be prepared, at the request of the Owner
Participant, all income tax returns required to be filed with respect to the
trust created hereby and shall execute and, with the approval of the Owner
Participant, file such returns. The Owner Trustee and the Owner Participant,
upon request, will furnish each other with all such information as may be
reasonably required in connection with the preparation of such income tax
returns. The Owner Trustee will give to the Owner Participant, upon request,
such periodic information concerning receipts and disbursements by it with
respect to the Trust Estate as would be helpful to the Owner Participant in
preparing its tax returns.
ARTICLE VII
INDEMNIFICATION OF SBC
BY OWNER PARTICIPANT
SECTION 7.01 Owner Participant to Indemnify SBC. The
Owner Participant hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and hereby
indemnifies, protects, saves and keeps harmless SBC in its individual capacity
and its successors, assigns, legal representatives and agents, from and against
any and all Losses indemnified against by Lessee pursuant to Section 7(b) or
7(c) of the Participation Agreement, disregarding those exclusions contained in
clause (3) of Section 7(b)(ii) and in clauses (A) and (B) of Section 7(c)(ii),
and, to the extent that SBC acts in its capacity as Owner Trustee and in
accordance with instructions received from the Owner Participant, clause (E) of
Section 7(c)(ii), and except (a) in the case of willful misconduct or gross
negligence on the part of the Owner Trustee or SBC in the performance or
nonperformance of its duties hereunder or under any of the other Operative
Agreements to which the Owner Trustee is a party, (b) those claims resulting
from the inaccuracy of any representation or warranty of SBC (or from the
failure of SBC to perform any of its covenants) in Section 6.03 hereof or in
any of the other Operative Agreements, (c) as may result from a breach by SBC
of its covenant in the last sentence of Section 5.04 hereof or a breach by SBC
of any other of its covenants contained herein or (d) in the case of the
failure to use ordinary care on the part of the Owner Trustee or SBC in the
receipt or disbursement of funds; provided, however, that the exception set
forth in clause (a) of this Section 7.01 shall not apply to any action taken or
omission made by the Owner Trustee pursuant to and in accordance with written
directions given to the Owner Trustee by the Owner Participant. The
indemnities contained in this Section 7.01 extend to SBC only in its individual
capacity and shall not be construed as indemnities of the Trust Indenture
Estate or the Trust Estate (except to the extent, if any, that SBC has been
reimbursed by the Trust Indenture Estate or the Trust Estate for amounts
covered by the indemnities contained in this Section 7.01). The indemnities
contained
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in this Section 7.01 shall survive the termination of this Trust Agreement. In
addition, if necessary, SBC shall be entitled to indemnification from the Trust
Estate, subject to the provisions of Section 4.01 hereof and the Lien of the
Trust Indenture, for any liability, obligation, loss, damage, penalty, tax,
claim, action, suit, cost, expense or disbursement indemnified against pursuant
to this Section 7.01 to the extent not reimbursed by Lessee, the Owner
Participant or others, but without releasing any of them from their respective
agreements of reimbursement; and, to secure the same, SBC shall have a lien on
the Trust Estate, subject to the provisions of Section 4.01 hereof and the Lien
of the Trust Indenture, which shall be prior to any interest therein of the
Owner Participant. The payor of any indemnity under this Article VII shall be
subrogated to any right of the person indemnified in respect of the matter as
to which such indemnity was paid. Notwithstanding the foregoing, SBC shall not
make any claim under this Section 7.01 for any claim, loss, tax or other
liability indemnified against by the Lessee under the Participation Agreement
without first making demand on the Lessee for payment of such claim, loss, tax
or other liability, and pursuing such demand on a reasonable basis for a
reasonable length of time.
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01 Transfer of Interest. All provisions of
Section 8(l) of the Participation Agreement shall (with the same force and
effect as if set forth, mutatis mutandis, in full in this Section 8.01) be
applicable to any assignment, conveyance or other transfer by the Owner
Participant of its right, title or interest in and to the Participation
Agreement, the Trust Estate or this Trust Agreement.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01 Resignation of Owner Trustee: Appointment of
Successor.
(a) Resignation or Removal. The Owner Trustee or any
successor Owner Trustee (i) shall resign if required to do so pursuant to
Section 8(b) of the Participation Agreement and (ii) may resign at any time
without cause by giving at least 60 days' prior written notice to the Owner
Participant, the Indenture Trustee and Lessee, such resignation to be effective
upon the acceptance of appointment by the successor Owner Trustee under Section
9.01(b) hereof. In addition, the Owner Participant may at any time remove the
Owner Trustee with or without cause by a notice in writing delivered to the
Owner Trustee, the Holders, the Indenture Trustee and Lessee, such removal to
be effective upon the acceptance of appointment by the successor Owner Trustee
under Section 9.01(b) hereof. In the case of the removal or resignation of the
Owner Trustee, the Owner Participant may, after consultation in good faith with
Lessee, appoint a successor Owner Trustee by an instrument signed by the Owner
Participant. If a successor Owner Trustee shall not have been appointed within
30 days after such notice of resignation or removal, the Owner Trustee, the
Owner Participant, Lessee or the Indenture Trustee may apply to any court of
competent jurisdiction to appoint a
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successor Owner Trustee to act until such time, if any, as a successor shall
have been appointed as above provided. Any successor Owner Trustee so
appointed by such court shall immediately and without further act be superseded
by any successor Owner Trustee appointed as above provided.
(b) Execution and Delivery of Documents, Etc. Any
successor Owner Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee an instrument accepting such appointment, and
thereupon such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor Owner Trustee in the trusts hereunder with like effect as if
originally named the Owner Trustee herein; but nevertheless, upon the written
request of such successor Owner Trustee, such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner Trustee,
upon the trusts herein expressed, all the estates, properties, rights, powers
and trusts of such predecessor Owner Trustee, and such predecessor Owner
Trustee shall duly assign, transfer, deliver and pay over to such successor
Owner Trustee all monies or other property then held by such predecessor Owner
Trustee upon the trusts herein expressed. Upon the appointment of any
successor Owner Trustee hereunder, the predecessor Owner Trustee will complete,
execute and deliver such documents as are provided to it by such successor
Owner Trustee and will take such further actions as are requested of it by such
successor Owner Trustee as are reasonably required to cause registration of the
Aircraft included in the Trust Estate to be transferred upon the records of the
Federal Aviation Administration, or other governmental authority having
jurisdiction, into the name of the successor Owner Trustee.
(c) Qualifications. Any successor Owner Trustee, however
appointed, shall be a "citizen of the United States" within the meaning of the
Act and shall also be a bank or trust company organized under the laws of the
United States or any state thereof having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
or customary terms.
(d) Merger, Etc. Any corporation into which SBC may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which SBC shall be a
party, or any corporation to which substantially all the corporate trust
business of SBC may be transferred, shall, subject to the terms of Section
9.01(c) hereof, be the Owner Trustee hereunder without further act.
SECTION 9.02 Co-Trustees and Separate Trustees. If at any
time it shall be necessary or prudent in order to conform to any law of any
jurisdiction in which all or any part of the Trust Estate is located, or make
any claim or bring any suit with respect to the Trust Estate or the Lease, or
in the event that the Owner Trustee shall have been requested to do so by the
Owner Participant or the Owner Trustee being advised by counsel shall determine
that it is so necessary or prudent in the interest of the Owner Participant or
the Owner Trustee, or the Owner Trustee shall have been directed to do so by
the Owner Participant, the Owner Trustee and Owner Participant shall execute
and deliver an agreement supplemental hereto and all other instruments and
agreements necessary or proper to constitute another bank or trust
TRUST AGREEMENT [N396SW]
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company or one or more persons (any and all of which shall be a "citizen of the
United States" as defined in 49 U.S.C. Section 40102(a)(15)(C) approved by the
Owner Trustee and the Owner Participant, either to act as co-trustee, jointly
with the Owner Trustee, or to act as separate trustee hereunder (any such
co-trustee or separate trustee being herein sometimes referred to as an
"additional trustee").
Every additional trustee hereunder shall, to the extent
permitted by law, be appointed and act, and the Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
(A) all powers, duties, obligations and rights conferred
upon the Owner Trustee in respect of the custody, control and
management of monies, the Aircraft or documents authorized to be
delivered hereunder or under the Participation Agreement shall be
exercised solely by the Owner Trustee;
(B) all other rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee and any limitations
thereon shall be conferred or imposed upon and exercised or performed
by the Owner Trustee and such additional trustee jointly, except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (including the holding of
title to the Trust Estate) the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be exercised and performed by
such additional trustee;
(C) notwithstanding anything to the contrary contained
herein, no power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised hereunder
by such additional trustee, except jointly with, or with the consent
in writing of, the Owner Trustee;
(D) no trustee hereunder shall be personally liable by
reason of any action or omission of any other trustee hereunder;
(E) the Owner Participant, at any time, by an instrument
in writing may remove any such additional trustee; and
(F) no appointment of, or action by, any additional
trustee will relieve the Owner Trustee of any of its obligations
under, or otherwise affect any of the terms of, the Trust Indenture or
affect the interests of the Indenture Trustee or the Holders in the
Trust Indenture Estate.
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ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS
SECTION 10.01 Supplements and Amendments and Delivery
Thereof.
(a) Supplements and Amendments. This Trust Agreement may
not be amended, supplemented or otherwise modified except by an instrument in
writing signed by the Owner Trustee and (except in the case of a Trust
Supplement) the Owner Participant. Subject to Section 10.02 hereof, Section 10
of the Participation Agreement and, until the Trust Indenture shall have been
satisfied and discharged pursuant to Section 10.01 thereof, Section 11.06 of
the Trust Indenture, the Owner Trustee will execute any amendment, supplement
or other modification of this Trust Agreement or of any other Operative
Agreement to which the Owner Trustee is a party which it is requested to
execute by the Owner Participant except that the Owner Trustee shall not
execute any such amendment, supplement or other modification which, by the
express provisions of any of the above documents, requires the consent of any
other party unless such consent shall have been obtained.
(b) Delivery of Amendments and Supplements to Certain
Parties. A signed copy of each amendment or supplement referred to in Section
10.01(a) hereof shall be delivered promptly by the Owner Trustee to Lessee and,
until the Trust Indenture shall have been satisfied and discharged pursuant to
Section 10.01 thereof, the Indenture Trustee.
SECTION 10.02 Discretion as to Execution of Documents.
Prior to executing any document required to be executed by it pursuant to the
terms of Section 10.01 hereof, the Owner Trustee shall be entitled to receive
an opinion of its counsel to the effect that the execution of such document is
authorized hereunder. If in the opinion of the Owner Trustee any document
required to be executed by the Owner Trustee pursuant to the terms of Section
10.01 hereof adversely affects any right, duty, immunity or indemnity in favor
of the Owner Trustee hereunder or under any other Operative Agreement to which
the Owner Trustee is a party, the Owner Trustee may in its discretion decline
to execute such document.
SECTION 10.03 Distribution of Documents. Promptly after
the execution by the Owner Trustee of any document entered into pursuant to
Section 10.01 hereof, the Owner Trustee shall mail, by certified mail, postage
prepaid, a conformed copy thereof to the Owner Participant, but the failure of
the Owner Trustee to mail such conformed copy shall not impair or affect the
validity of such document.
SECTION 10.04 Absence of Requirement as to Form. It shall
not be necessary for any written request furnished pursuant to Section 10.01 to
specify the particular form of the proposed documents to be executed pursuant
to such Section, but it shall be sufficient if such request shall indicate the
substance thereof.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Termination of Trust Agreement. This Trust
Agreement and the trusts created hereby shall terminate and this Trust
Agreement shall be of no further force or effect upon the earlier of (a) the
later of (x) the final satisfaction and discharge of the Trust Indenture
pursuant to Section 10.01 thereof and the sale or other final disposition by
the Owner Trustee of all property constituting part of the Trust Estate and the
final distribution by the Owner Trustee of all monies or other property or
proceeds constituting part of the Trust Estate in accordance with Article IV
hereof, provided, that at such time Lessee shall have fully complied with all
of the terms of the Lease and the Participation Agreement and (y) the
expiration or termination of the Lease in accordance with its terms, (b)
twenty-one years less one day after the death of the last survivor of all of
the descendants of Robert E. Lee, late General in Chief of the Armies of the
Confederate States, living on the date of the earliest execution of this Trust
Agreement by any party hereto or (c) the date of revocation of such trusts by
the Owner Participant (in which case the Trust Estate, subject to the Trust
Indenture, shall be distributed in accordance with the terms hereof); otherwise
this Trust Agreement and the trusts created hereby shall continue in full force
and effect in accordance with the term hereof.
SECTION 11.02 Owner Participant Has No Legal Title in Trust
Estate. The Owner Participant shall not have legal title to any part of the
Trust Estate. No transfer, by operation of law or otherwise, of any right,
title and interest of the Owner Participant in and to the Trust Estate
hereunder shall operate to terminate this Trust Agreement or the trusts
hereunder or entitle any successors or transferees of the Owner Participant to
an accounting or to the transfer of legal title to any part of the Trust
Estate.
SECTION 11.03 Assignment, Sale, Etc. of Aircraft. Any
assignment, sale, transfer or other conveyance of the Aircraft, any Engine or
any interest therein by the Owner Trustee made in accordance with the express
terms hereof or of the Lease or the Participation Agreement shall bind the
Owner Participant and shall be effective to transfer or convey all right, title
and interest of the Owner Trustee and the Owner Participant in and to the
Aircraft, such Engine or interest therein. No purchaser or other grantee shall
be required to inquire as to the authorization, necessity, expediency or
regularity of such assignment, sale, transfer or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.
SECTION 11.04 Trust Agreement for Benefit of Certain
Parties Only. Except for the terms of Section 8(l) of the Participation
Agreement incorporated in Article VIII hereof and except as otherwise provided
in Articles V and IX and Sections 2.02, 3.01, 4.01, 6.07, 10.01, 10.02 and
11.01 hereof, nothing herein, whether expressed or implied, shall be construed
to give any person other than the Owner Trustee and the Owner Participant any
legal or equitable right, remedy or claim under or in respect of this Trust
Agreement; but this Trust Agreement shall be held to be for the sole and
exclusive benefit of the Owner Trustee and the Owner Participant.
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SECTION 11.05 [Intentionally reserved for potential future
use].
SECTION 11.06 Notices. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by telecopier, or by prepaid
courier service, and shall be deemed to be given for purposes of this Trust
Agreement on the day that such writing is delivered or, if sent by registered
or certified mail, three Business Days after being deposited in the mails
addressed to the intended recipient thereof in accordance with the provisions
of this Section 11.06. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section 11.06,
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telecopier numbers) as follows: (A) if to
Lessee, the Owner Trustee, the Indenture Trustee or the Owner Participant, to
the respective addresses set forth on Schedule I to the Participation Agreement
or (B) if to any Holder, addressed to such Holder at its address as set forth
in the Register maintained pursuant to the Trust Indenture.
SECTION 11.07 Severability. Subject to Section 11.12
hereof, any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.08 Waivers, Etc. No term or provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing entered into in compliance with the terms of Article X
hereof; and any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.
SECTION 11.09 Counterparts. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10 Binding Effect, Etc. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Owner Trustee and its successors and assigns, and the Owner Participant,
its successors and, to the extent permitted by Article VIII hereof, its
assigns. Any request, notice, direction, consent, waiver or other instrument
or action by an Owner Participant shall bind its successors and permitted
assigns.
SECTION 11.11 Headings; References. The headings of the
various Articles and Sections herein are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof. The trust
created hereby, together with the trust created by the Trust Indenture, may for
convenience of reference be referred to, collectively, as "Southwest Airlines
1995 Trust N396SW."
SECTION 11.12 Governing Law. THIS TRUST AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
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THE INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS TRUST AGREEMENT HAS BEEN
DELIVERED IN THE STATE OF NEW YORK.
SECTION 11.13 Performance by the Owner Participant. Any
obligation of SBC in its individual capacity or as Owner Trustee hereunder or
under any other Operative Agreement or other document contemplated herein, may
be performed by the Owner Participant and any such performance shall not be
construed as a revocation of the trust created hereby.
SECTION 11.14 Authorization to Owner Trustee for Trust
Indenture. Notwithstanding any contrary provision in this Trust Agreement, the
Owner Trustee is hereby authorized and instructed to enter into and perform
fully the Trust Indenture. This provision is for the benefit of the Owner
Trustee and the Indenture Trustee and the Holders from time to time of the
Certificates and shall not be changed prior to the termination of the Trust
Indenture pursuant to Section 10.01 thereof.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
FORD MOTOR CREDIT COMPANY
By: /s/ Hurley D. Smith
-----------------------------------
Title: Secretary
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By: /s/ Pablo de la Canal
-----------------------------------
Corporate Trust Officer
TRUST AGREEMENT [N396SW]
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EXHIBIT 4.12
- --------------------------------------------------------------------------------
TRUST INDENTURE
AND SECURITY AGREEMENT
dated as of April 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly
set forth herein and otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N397SW
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Southwest Airlines Co.
Series SWA 1995 Trust N397SW-I and N397SW Certificates
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 2
THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.01. Certificates; Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05. Holder Lists; Ownership of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 17
Section 2.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.08. Payment on Certificates; Defaulted Principal and Interest . . . . . . . . . . . . . . . . 17
Section 2.09. Payment from Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.10. Execution, Delivery and Dating of Certificates upon Issuance . . . . . . . . . . . . . . 20
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE . . . . . . . . . . . . . . . . . . . . 20
Section 3.01. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.02. Payment in Case of Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.03. Application When No Indenture Event of Default Is
Continuing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.04. Application of Certain Payments in Case of Requisition or Event
of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.05. Payments During Continuance of Indenture Event of Default . . . . . . . . . . . . . . . . 22
Section 3.06. Payments for Which Application Is Provided in Other
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.07. Payments for Which No Application Is Otherwise Provided . . . . . . . . . . . . . . . . . 23
Section 3.08. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4
COVENANTS OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 24
Section 4.01. Covenants of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.02. Covenants of Shawmut Bank Connecticut, National
Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.01. Disposition, Substitution and Release of Property Included in the
Indenture Estate During Continuation of Lease . . . . . . . . . . . . . . . . . . . 26
Section 5.02. Certificates in Respect of Replacement Aircraft and Engines . . . . . . . . . . . . . . . 27
ARTICLE 6
REDEMPTION OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . 27
Section 6.01. Redemption of Certificates upon Certain Events . . . . . . . . . . . . . . . . . . . . . 27
Section 6.02. Redemption or Purchase of Certificates Upon Certain Indenture
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.03. Notice of Redemption to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.04. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.05. Certificates Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.06. Selection of Certificates to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.07. Certificates Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 7
MATTERS CONCERNING THE COMPANY . . . . . . . . . . . . . . . . . . . . 31
Section 7.01. Repayment of Monies for Certificate Payments Held by the
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.03. Assumption of Obligations of Owner Trustee by the Company . . . . . . . . . . . . . . . . 31
ARTICLE 8
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.01. Indenture Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.02. Acceleration; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.03. Other Remedies Available to Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.04. Waiver of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.05. Waiver of Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.06. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.07. Limitation on Suits by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.08. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.09. Indenture Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . 43
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ARTICLE 9
INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.06. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.07. Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.08. Successor Indenture Trustee, Agents by Merger, Etc. . . . . . . . . . . . . . . . . . . . 48
Section 9.09. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.10. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.11. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.12. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.13. Certain Rights of Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . . . 49
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 50
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance;
Termination of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.02. Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.03. Monies to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.04. Monies to Be Returned to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.05. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 11
AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.01. Amendments to this Agreement Without Consent of Holders . . . . . . . . . . . . . . . . . 54
Section 11.02. Amendments to this Agreement with Consent of Holders . . . . . . . . . . . . . . . . . . 55
Section 11.03. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.04. Notation on or Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.05. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.06. Amendments, Waivers, Etc. of Other Operative Agreements . . . . . . . . . . . . . . . . . 56
Section 11.07. Trust Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.03. Successors and Assigns; Agreement of Holders . . . . . . . . . . . . . . . . . . . . . . 61
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Section 12.04. Rules by Indenture Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.05. Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.06. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.07. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.09. Applicability Only to Original Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE . . . . . . . . . . . . . . . . 62
Section 13.01. Actions to Be Taken upon Termination of Lease . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE] . . . . . . . . . . . . . . . . . . . 63
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N397SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N397SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N397SW-I
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.01. Conditions Precedent to Issuance of Series SWA 1995 Trust
N397SW Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.02. Payment upon Issuance of Series SWA 1995 Trust N397SW
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.03. Special Provision Governing Refinancing of the Series SWA 1995
Trust N397SW-I Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 15.04. Special Provision for Payments in Respect of the Series SWA
1995 Trust N397SW-I Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 15.05. Increased Costs, Break Amount, Additional Interest, Taxes,
Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
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EXHIBITS
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Exhibit A - Form of Series SWA 1995 Trust N397SW-I Certificate
Exhibit A-1 - Form of Series SWA 1995 Trust N397SW Installment Certificates
Exhibit A-2 - Form of Series SWA 1995 Trust N397SW Serial Certificates
Exhibit B - Maturity Dates, Principal Amounts and Interest Rates on Series SWA 1995 Trust N397SW
Certificates
Exhibit B-1 - Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 - Issuance of Series SWA 1995 Trust N397SW Certificates
Exhibit C - [FORM OF] Trust Agreement and Trust Indenture and Security Agreement Supplement
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TRUST INDENTURE AND SECURITY AGREEMENT
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of April
1, 1995, is between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association organized under the laws of the United States, in its
individual capacity only as expressly provided herein and otherwise solely as
Owner Trustee under the Trust Agreement (capitalized terms used herein having
the respective meanings specified therefor in Article 1), and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as Indenture Trustee hereunder.
W I T N E S S E T H:
WHEREAS, the Owner Participant and the Owner Trustee in its
individual capacity have entered into the Trust Agreement whereby, among other
things, (i) the Owner Trustee has established a certain trust, the Southwest
Airlines 1995 Trust N397SW, for the use and benefit of the Owner Participant,
subject, however, to the Indenture Estate created pursuant hereto for the use
and benefit of, and with the priority of payment to, the holders of the
Certificates issued hereunder, and (ii) the Owner Trustee has been authorized
and directed to execute and deliver this Agreement;
WHEREAS, the parties desire by this Agreement, among other
things, (i) to provide for the issuance by the Owner Trustee of the Series SWA
1995 Trust N397SW-I Certificates and for the potential issuance by the Owner
Trustee of the Series SWA 1995 Trust N397SW Certificates in respect of the
refinancing and redemption of the Series SWA 1995 Trust N397SW-I Certificates
and (ii) to provide for the assignment, mortgage and pledge by the Owner
Trustee to the Indenture Trustee, as part of the Indenture Estate hereunder,
among other things, of certain of the Owner Trustee's right, title and interest
in and to the Aircraft and the Operative Agreements and certain payments and
other amounts received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's obligations to
the Indenture Trustee, for the ratable benefit and security of the Holders; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner Trustee and the Indenture
Trustee, for the uses and purposes herein set forth, in accordance with its
terms, have been done and performed and have happened;
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GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND SECURITY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal of, Premium, if
any, and interest on, Break Amount, if any, and all other amounts due with
respect to, all Certificates from time to time Outstanding and all other
amounts due to the Holders hereunder and under the Participation Agreement and
the performance and observance by each of the Company and the Owner Trustee of
all the agreements, covenants and provisions contained herein and in the
Operative Agreements to which it is a party, for the benefit of Indenture
Trustee and the Holders, and for the uses and purposes hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of the sum of $1 paid to the
Owner Trustee by the Indenture Trustee at or before the delivery hereof, the
receipt whereof is hereby acknowledged, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time, a
security interest in and mortgage lien on all estate, right, title and interest
of the Owner Trustee in, to and under the following described property, rights,
interests and privileges, other than Excluded Payments (which collectively,
including all property hereafter specifically subjected to the lien of this
Agreement by any instrument supplemental hereto, but excluding the Excluded
Payments, are herein called the "Indenture Estate"):
(1) the Aircraft (including the Airframe and the
Engines originally installed thereon on the Delivery Date), and all
replacements thereof and substitutions therefor in which the Owner
Trustee shall from time to time acquire an interest in accordance with
the Lease, as more particularly described in the Trust Supplement and
the Lease Supplement executed and delivered with respect to the
Aircraft or any such replacements or substitutions therefor, as
provided in this Agreement, and all Records maintained with respect to
the foregoing property;
(2) the Lease and all Rent thereunder, including,
without limitation, all amounts of Basic Rent, Supplemental Rent,
payments of any kind required to be made by the Company thereunder
(including the purchase price for the Aircraft pursuant to Section
18.2 of the Lease) and any sales proceeds of the Aircraft sold
pursuant to Section 9 of the Lease or otherwise; the Purchase
Agreement (to the extent assigned by the Purchase Agreement
Assignment); the Purchase Agreement Assignment; all subleases of the
Airframe and the Engines and all rent thereunder to the extent
assigned to the Owner Trustee by Lessee; the Bills of Sale; and the
Manufacturer's Consent; including, without limitation, in respect of
each of the foregoing documents and instruments, all rights of the
Owner Trustee to receive any payments or other amounts or to exercise
any election or option or to make any decision or determination or to
give or receive any notice, consent, waiver or approval or to take any
other action under or in respect of any such document or to accept
surrender or redelivery of the Aircraft or any part thereof, as well
as all the rights, powers and remedies on the part of the Owner
Trustee, whether acting under any such document or by statute or at
law or in equity, or otherwise, arising out of any Lease Event of
Default;
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(3) all rents, issues, profits, revenues and
other income of the property subjected or required to be subjected to
the Lien of this Agreement;
(4) all requisition proceeds with respect to the
Aircraft or any part thereof and all insurance proceeds with respect
to the Aircraft or any part thereof;
(5) all moneys and securities now or hereafter
paid or deposited or required to be paid or deposited to or with the
Indenture Trustee by or for the account of the Owner Trustee pursuant
to any term of any Operative Agreement and held or required to be held
by the Indenture Trustee hereunder; and
(6) all proceeds of the foregoing.
Concurrently with the delivery hereof, the Owner Trustee is
delivering to the Indenture Trustee an executed chattel paper original
counterpart of each of the Lease and the Lease Supplement covering the
Aircraft, together with executed copies of the Trust Agreement and each of the
other Indenture Documents received by it (other than the Purchase Agreement,
the Participation Agreement and the FAA bills of sale). All property
constituting part of the Indenture Estate referred to in this Granting Clause,
whenever acquired by the Owner Trustee, shall secure all obligations under and
with respect to the Certificates at any time Outstanding. Any and all
properties constituting part of the Indenture Estate referred to in this
Granting Clause which are hereafter acquired by the Owner Trustee, shall,
without further conveyance, assignment or act by the Owner Trustee or the
Indenture Trustee thereby become and be subject to the security interest hereby
granted as fully and completely as though specifically described herein.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Indenture Trustee and the Holders from time to
time, without any priority of any one Certificate over any other, and for the
uses and purposes and subject to the terms and provisions set forth in this
Agreement.
The Owner Trustee agrees that this Agreement is intended to
and shall create and grant a security interest in the Aircraft to the Indenture
Trustee, which security interest shall attach on the Delivery Date. The
security interest created by this Agreement and granted to the Indenture
Trustee hereunder in the Indenture Estate other than in the Aircraft shall
attach in the case of each other item of property included in the Indenture
Estate upon the delivery thereof or upon the Owner Trustee's acquiring rights
in such property.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Agreements to which it is a party, to perform all of the
obligations assumed by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Indenture Trustee
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and the Holders shall have no obligation or liability under any of the
Operative Agreements to which the Owner Trustee is a party by reason of or
arising out of the assignment hereunder, nor shall the Indenture Trustee or the
Holders be required or obligated in any manner to perform or fulfill any
obligations of the Owner Trustee under any of the Operative Agreements to which
the Owner Trustee is a party, or, except as herein expressly provided, to make
any payment, or to make any inquiry as to the nature or sufficiency of any
payment received by it, or present or file any claim, or take any action to
collect or enforce the payment of any amounts which may have been assigned to
it or to which it may be entitled at any time or times.
The Owner Trustee does hereby constitute the Indenture Trustee
the true and lawful attorney of the Owner Trustee, irrevocably, with full power
(in the name of the Owner Trustee or otherwise) to ask, require, demand,
receive and, to the extent permitted by Article 8 hereof (if an Event of
Default shall have occurred and be continuing), give acquittance for any and
all moneys and claims for moneys due and to become due to the Owner Trustee
(other than Excluded Payments) under or arising out of any Indenture Document
and all other property which now or hereafter constitutes part of the Indenture
Estate, to endorse any checks or other instruments or orders in connection
therewith and, to file any claims or take any action or institute any
proceedings which the Indenture Trustee may deem to be necessary or advisable
in the premises. The Owner Trustee has directed the Company to make all
payments of Rent (other than Excluded Payments) payable to the Owner Trustee by
the Company and all other amounts which are required to be paid to or deposited
with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee
at its address set forth in Schedule I to the Participation Agreement, for
application as provided in this Agreement. The Owner Trustee agrees that
promptly on receipt thereof, it will transfer to the Indenture Trustee at such
address any and all moneys from time to time received by it constituting part
of the Indenture Estate, for distribution by the Indenture Trustee pursuant to
this Agreement, except that the Owner Trustee shall accept for distribution
pursuant to the Trust Agreement any amounts distributed to it by the Indenture
Trustee as expressly provided in this Agreement and any Excluded Payments.
The Owner Trustee agrees that at any time and from time to
time, upon the written request of the Indenture Trustee, the Owner Trustee will
promptly and duly execute and deliver or cause to be duly executed and
delivered any and all such further instruments and documents as the Indenture
Trustee may reasonably deem desirable in obtaining the full benefits of the
assignment hereunder and of the rights and powers herein granted.
The Owner Trustee does hereby warrant and represent that it
has not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of its
right, title or interest hereby assigned, to anyone other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement
amending or supplementing any of the Operative Agreements, execute any waiver
or modification of, or consent under the terms of any of the Operative
Agreements, settle or compromise any claim (other than claims in respect of
Excluded Payments) against the Company arising under any of the Operative
Agreements, or submit or consent to the submission of any dispute, difference
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or other matter arising under or in respect of any of the Operative Agreements,
to arbitration thereunder.
The Owner Trustee does hereby ratify and confirm the Indenture
Documents to which it is a party and does hereby agree that (except as
permitted herein) it will not take or omit to take any action, the taking or
omission of which would result in an alteration or impairment of any of the
Indenture Documents or of any of the rights created by any thereof or the
assignment hereunder.
Notwithstanding the Granting Clause, any of the preceding
paragraphs or any other provision of this Indenture, there are hereby expressly
excluded from the foregoing grant, bargain, sale, assignment, transfer,
conveyance, mortgage, pledge and security interest all Excluded Payments.
Further, nothing in the Granting Clause or any of the preceding paragraphs
shall impair in any respect the rights of the Owner Trustee or the Owner
Participant under Section 9.13 or 11.06.
IT IS HEREBY COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article 1 have the
meanings assigned to them in this Article 1, and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(3) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision; and
(4) unless otherwise specified, all references in
this Agreement to Articles, Sections and Exhibits refer to Articles,
Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified
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Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Bankruptcy Code" means the United States Bankruptcy Code of
1978, as amended, or any successor statute.
"Basis Point" shall have the meaning specified therefor in
Exhibit A.
"Break Amount" shall have the meaning specified therefor in
Section 15.05(b).
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in the
City of Dallas, Texas; New York, New York; San Francisco, California; the city
and state in which (i) so long as any Certificates shall be Outstanding, the
Indenture Trustee and (ii) thereafter, the Owner Trustee, has its principal
place of business; and the city and state in which the Indenture Trustee or the
Owner Trustee, as the case may be, receives and disburses funds; provided,
however, that so long as the Series SWA 1995 Trust N397SW-I Certificates are
Outstanding, such day must also be a day on which dealings are carried on in
the applicable offshore dollar interbank market.
"Certificate" or "Certificates" means any certificate or other
debt instrument issued under this Agreement, including the Series SWA 1995
Trust N397SW-I Certificates and the Series SWA 1995 Trust N397SW Certificates,
if any, issued hereunder.
"Company" means Southwest Airlines Co., a Texas corporation,
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company
executed on its behalf by a Responsible Company Officer of the Company.
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Debt" means any liability for borrowed money, or any
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
"Debt Rate" shall have the meaning specified therefor in
Exhibit A.
"Defaulted Installment" shall have the meaning specified
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
in Section 2.08.
"Defeasance Trustee" shall have the meaning specified therefor
in Section 10.05.
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"Deferred Equity Amount" shall have the meaning specified in
Section 8(dd) of the Participation Agreement.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System or
any governmental authority which is the successor thereto, as in effect from
time to time.
"Eurocurrency Reserve Percentage" for any day means the
reserve percentage applicable in respect of such day under Regulation D of the
Board of Governors of the Federal Reserve System (or any governmental authority
which is the successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for the Original Holder with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities.
"Excluded Payments" means (i) any right, title or interest of
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or their respective, successors, permitted assigns,
directors, officers, employees, servants, partners, and agents to any indemnity
payment, including, but not limited to, any payment which by the terms of
Section 7(b), 7(c), 7(f), 16, 17 or 18 of the Participation Agreement, Section
5.03 or 7.01 of the Trust Agreement or any section of the Tax Indemnity
Agreement or any corresponding payment under Section 3.5 of the Lease shall be
payable to the Owner Trustee in its individual capacity, the Owner Participant
or any such other Person, as the case may be, pursuant to the terms of the
Operative Agreements, (ii) any insurance proceeds payable under insurance
maintained by the Owner Trustee in its individual or trust capacity or the
Owner Participant (whether directly or through the Owner Trustee), or to their
respective Affiliates, successors, permitted assigns, directors, officers,
employees, servants, partners, and agents, (iii) any insurance proceeds (or
proceeds of governmental indemnities in lieu thereof) payable to the Owner
Trustee in its individual capacity or to the Owner Participant or to their
respective Affiliates, successors, permitted assigns, directors, officers,
employees, servants, partners, and agents, under any liability insurance
maintained by the Company pursuant to Section 11 of the Lease or by any other
Person (or proceeds of governmental indemnities in lieu thereof), (iv) payments
to the Owner Participant by the Owner Trustee pursuant to Section 2 of the
Participation Agreement and any funds held by the Owner Trustee or payable to
the Owner Participant pursuant to any funding letter entered into in lieu of
the provisions of Section 2 of the Participation Agreement, (v) amounts paid or
payable to the Owner Trustee from Lessee pursuant to Section 18.2(b) or (c) of
the Lease, (vi) Transaction Costs or other amounts or expenses paid or payable
to, or for the benefit of, the Owner Trustee or the Owner Participant pursuant
to the Participation Agreement, (vii) any portion of Rent attributable to a
payment by the Company in respect to the Tax Indemnity Agreement, (viii) the
respective rights of the Owner Trustee in its individual or trust capacity, the
Owner Participant or any other Person referred to in the foregoing clause (i)
to the proceeds of the foregoing, and (ix) any right to demand, collect, sue or
otherwise receive and enforce the payment of any amount described in clauses
(i) through (viii) above.
"Federal Aviation Act" means Subtitle VII of Title 49, U.S.C.,
as amended.
"Fixed Period" means the period after the Floating Period.
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"Floating Period" means the period any Series SWA 1995 Trust
N397SW-I Certificate is Outstanding.
"Government Obligations" shall have the meaning specified
therefor in Section 10.05.
"Holder" or "Certificate Holder" means a Person in whose name
a Certificate is registered on the Register including, so long as it holds a
Series SWA 1995 Trust N397SW-I Certificate, the Original Holder.
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Documents" means each and every document or
instrument referred to in the Granting Clause hereof.
"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Section 8.01.
"Indenture Trustee" means Wilmington Trust Company, and each
other Person which may from time to time be acting as Indenture Trustee in
accordance with the provisions of this Agreement.
"Independent" when used with respect to an engineer, appraiser
or other expert, means an engineer, appraiser or other expert who (i) is in
fact independent, (ii) does not have any direct financial interest or any
material indirect financial interest in the Company or any Affiliate of the
Company and (iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"Independent Investment Banker" means an Independent
investment banking institution of national standing appointed by the Company on
behalf of the Owner Trustee (and reasonably acceptable to the Owner
Participant, which acceptance shall not be unreasonably withheld after notice
to the Owner Participant); provided, that if the Indenture Trustee shall not
have received written notice of such an appointment at least 10 days prior to
the relevant Redemption Date or if a Lease Event of Default shall have occurred
and be continuing, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
"Installment Certificate" means a Certificate, other than a
Series SWA 1995 Trust N397SW-I Certificate, should any such Certificate be
issued hereunder which shall provide for the payments of principal in
installments.
"Installment Payment Amount" means, with respect to each
Installment Certificate, the amount of the installment payment of principal due
and payable on each
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Installment Payment Date, which amount shall be equal to the product of the
original principal amount of such Certificate and the Installment Payment
Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an
installment payment of principal is due and payable on the Certificates, as set
forth in Exhibit B-l as completed in accordance with Article 15.
"Installment Payment Percentage" means, with respect to each
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-l as completed in accordance with Article 15.
The term "interest" payable, or to be payable, on any date
during the Floating Period in respect of the Series SWA 1995 Trust N397SW-I
Certificates shall include, without limitation, any and all accrued and unpaid
compounded interest thereon.
"Interest Payment Date" means each July 1 and January 1
commencing on July 1, 1995.
"Interest Period" shall have the meaning specified therefor in
Exhibit A.
"Lease" means the Sale and Lease Agreement, dated as of the
date hereof, between the Owner Trustee, as lessor, and the Company, as lessee,
relating to the Aircraft as such Sale and Lease Agreement may from time to time
be supplemented, amended or modified in accordance with the terms thereof and
this Agreement. The term "Lease" shall also include each Lease Supplement
entered into pursuant to the terms of the Lease.
"Lease Loss Payment Date" means the date on which Stipulated
Loss Value is payable pursuant to Section 10.1.4 of the Lease in connection
with an Event of Loss in respect of the Aircraft.
"Lease Termination Date" means the date the Lease terminates
pursuant to Section 9 of the Lease.
"Lending Office" of any Holder of a Series SWA 1995 Trust
N397SW-I Certificate means the office through which such Holder makes and/or
books and maintains the loan evidenced by its Certificate, which, in the case
of the Original Holder, is Concord, California, as of the date hereof.
"Maturity Date" means, with respect to the Series SWA 1995
Trust N397SW Certificates, each of the dates specified in Exhibit B as a
maturity date of such Certificates and shall have, in respect of the Series SWA
1995 Trust N397SW-I Certificates, the meaning specified therefor in Exhibit A.
"New Debt" shall have the meaning specified in Section
17(a)(2) of the Participation Agreement.
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"Officers' Certificate" means a certificate signed in the case
of the Company, by (i) the Chairman of the Board of Directors, the President,
or any Executive or Senior Vice President of the Company, signing alone, or
(ii) any Vice President signing together with the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer or the Controller of the
Company or, in the case of the Owner Trustee, a Responsible Officer of the
Owner Trustee.
"Offshore Rate" shall have the meaning specified therefor in
Exhibit A.
"Opinion of Counsel" means a written opinion of legal counsel,
who in the case of counsel for the Company may be (i) the senior corporate
attorney employed by the Company, (ii) Vinson & Elkins L.L.P. or (iii) other
counsel designated by the Company and who shall be reasonably satisfactory to
the Indenture Trustee or, in the case of legal counsel for the Owner Trustee,
may be (x) Shipman & Goodwin or (y) other counsel designated by the Owner
Trustee and who shall be reasonably satisfactory to the Indenture Trustee.
"Original Holder" means Bank of America National Trust and
Savings Association, as the original holder of the loan evidenced by the Series
SWA 1995 Trust N397SW-I Certificate and any branch or agency thereof to which
the Series SWA 1995 Trust N397SW-I Certificate held by it may be transferred.
"Outstanding", when used with respect to Certificates, means,
as of the date of determination, all Certificates theretofore executed and
delivered under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation
pursuant to Section 2.07 or otherwise;
(ii) Certificates for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates; provided, that
if such Certificates are to be redeemed, notice of such redemption has
been duly given pursuant to this Agreement or provision therefor
satisfactory to the Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant to this
Agreement;
provided, however, that in determining whether the Holders of the requisite
aggregate principal amount of Certificates Outstanding have given any request,
demand, authorization, declaration, direction, notice, consent or waiver
hereunder, Certificates owned by or pledged to the Company or any Affiliate of
the Company or the Owner Trustee or the Owner Participant or any Affiliate
thereof, shall (unless all Certificates are then owned thereby) be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, declaration, direction, notice, consent or waiver, only
Certificates which the Indenture Trustee knows to be so owned or so pledged
shall be disregarded. Certificates owned by the Company, or the Owner Trustee
or the Owner Participant, which have been pledged in good faith may be regarded
as Outstanding if the Company, or the Owner Trustee or the Owner Participant,
as the case may be, establishes to the satisfaction of the Indenture Trustee
the pledgee's right to act with respect
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to such Certificates and that the pledgee is not the Company, or the Owner
Trustee or the Owner Participant or any Affiliate thereof.
"Owner Trustee" means Shawmut Bank Connecticut, National
Association, not in its individual capacity, except as expressly provided
herein, but solely as trustee under the Trust Agreement, and each other Person
which may from time to time be acting as Owner Trustee in accordance with the
provisions of the Operative Agreements.
"Past Due Rate" means, in respect of any Certificate, the rate
of interest applicable pursuant to the provisions of such Certificate to any
amount of principal or interest payable thereunder not paid when due.
"Paying Agent" means any person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means any Installment Payment Date, Interest
Payment Date or Maturity Date.
"Permitted Investment" means any of the investments permitted
by Section 22.1 of the Lease.
"Premium" means, with respect to each Series SWA 1995 Trust
N397SW Certificate to be redeemed, purchased or otherwise prepaid pursuant to
Article 6, an amount determined as of the Business Day next preceding the
applicable Redemption Date which an Independent Investment Banker determines to
be equal to an excess, if any, of (i) the present values of all remaining
scheduled payments of such principal amount or portion thereof and interest
thereon (excluding interest accrued from the immediately preceding Interest
Payment Date to such Redemption Date) to the Maturity Date of such Certificate
in accordance with generally accepted financial practices assuming a 360-day
year consisting of twelve 30-day months at a discount rate equal to the
Treasury Yield, all as determined by the Independent Investment Banker over
(ii) the unpaid principal amount of such Certificate. Premium shall never be
below zero.
"Premium Termination Date" means, with respect to each Series
SWA 1995 Trust N397SW Certificate, the date set forth as the "Premium
Termination Date" in Exhibit B hereto completed in accordance with Article 15
for Certificates of the Maturity Date of such Certificate.
"Principal Payment Date" shall have the meaning specified
therefor in Exhibit A.
"Record Date" for the interest or Installment Payment Amount
payable on any Interest Payment Date or Installment Payment Date (other than
the Maturity Date of the Certificates), as the case may be, means the calendar
day (whether or not a Business Day) which is 15 calendar days prior to the
related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are
to be redeemed or purchased pursuant to Section 6.01 or 6.02.
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"Redemption Price" means the price at which any or all of the
Certificates (as the context may require) are to be redeemed or purchased,
determined as of the applicable Redemption Date, pursuant to Section 6.01, 6.02
or 15.03, as the case may be.
"Refinancing Date" means the date designated by the Company as
the date for a refinancing of the Certificates in accordance with Section 17 of
the Participation Agreement.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Remaining Weighted Average Life" means, for any Installment
Certificate, at the Redemption Date of such Certificate, the number of days
equal to the quotient obtained by dividing (a) the sum of the products obtained
by multiplying (i) the amount of each then remaining scheduled payment of
principal, including the payment due on the Maturity Date of such Certificate,
by (ii) the number of days from and including the Redemption Date to but
excluding the regularly scheduled date of such scheduled payment of principal;
by (b) the then unpaid principal amount of such Certificate.
"Responsible Company Officer" means, with respect to the
Company or Owner Participant, its Chairman of the Board, its President, the
Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (a) working under the direct supervision of such Chairman
of the Board, President, Chief Financial Officer, Vice President or Treasurer
and (b) whose responsibilities include the administration of the transactions
and agreements, including the Lease, contemplated by the Participation
Agreement.
"Responsible Officer", with respect to Shawmut Bank
Connecticut, National Association, the Owner Trustee or the Indenture Trustee,
means any officer in its Corporate Trust Administration Department or any
officer of the Owner Trustee or the Indenture Trustee, as the case may be,
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of his knowledge of and familiarity with a
particular subject, and in each case whose responsibilities include the
administration of the transactions and agreements, including the Lease,
contemplated by the Participation Agreement.
"SEC" means the Securities and Exchange Commission.
"Second Payment Amount" shall have the meaning specified in
Section 8(dd) of the Participation Agreement.
"Section 18 Refinancing Date" means the date specified by the
Company for the refinancing of the Series SWA 1995 Trust N397SW-I Certificates
in accordance with Section 18 of the Participation Agreement.
"Series SWA 1995 Trust N397SW Certificate" means any
certificate of such designation issued by the Owner Trustee under this
Agreement substantially in the form of
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Exhibit A-1 or A-2, should any of such certificates be issued hereunder, and
any such certificate issued in replacement or exchange thereof in accordance
with the provisions hereof.
"Series SWA 1995 Trust N397SW-I Certificate" means any
certificate issued by the Owner Trustee under this Agreement, substantially in
the form of Exhibit A, and any such certificate issued in replacement or
exchange thereof in accordance with the provisions hereof.
"Treasury Rate" shall have the meaning specified therefor in
Exhibit A.
"Treasury Yield" means (i) In the case of a Certificate having
a Maturity Date within one year after the Redemption Date the average yield to
maturity on a government bond equivalent basis of the applicable United States
Treasury Bill due the week of Maturity Date of such Certificate and (ii) in the
case of a Certificate having a Maturity Date one year or more after the
Redemption Date, the average yield of the most actively traded United States
Treasury Notes (as reported by Cantor Fitzgerald Securities Corp. on page 5 of
Telerate Systems, Inc., a financial news service, or if such report is not
available, a source deemed comparable by the Independent Investment Banker
selected to determine the Premium and reasonably acceptable to the Company and
the Owner Participant) corresponding in maturity (x) for any Certificate issued
in serial form, the Maturity Date or (y) for any Certificate issued in
installment form, to the Average Life Date, in each case, of such Certificate
(or, if there is no corresponding maturity, an interpolation of maturities by
the Independent Investment Banker), in each case determined by the Independent
Investment Banker selected to determine the Premium based on the average of the
yields to stated maturity determined from the bid prices as of 10:00 A.M. and
2:00 P.M. New York time, on the second Business Day preceding the Redemption
Date. "Average Life Date" means, with respect to the redemption of an
Installment Certificate, the date which follows the Redemption Date by a period
equal to the Remaining Weighted Average Life of such Certificate.
"Trust Estate" shall have the meaning specified therefor in
the Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Security Agreement", "this Indenture" or
"this Agreement" means this Trust Indenture and Security Agreement, as the same
may from time to time be supplemented, amended or modified, including by any
Trust Supplement.
"Trust Office" means the principal corporate trust office of
the Owner Trustee located at 777 Main Street, Hartford, Connecticut 06115,
Attention: Corporate Trust Administration, or at such other office at which the
Owner Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to the Company, the Indenture
Trustee and each Holder.
"Trust Supplement" means a supplement to the Trust Agreement
and this Agreement substantially in the form of Exhibit C.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
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Section 1.02 Other Definitions. For all purposes of this
Agreement, terms defined in the heading and recitals of this Agreement are used
as so defined and capitalized terms used but not defined have the meanings
attributed thereto in the Lease.
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. One or more
Series SWA 1995 Trust N397SW-I Certificates in the aggregate face amount equal
to the Original Holder's Commitment under Section 1(b) of the Participation
Agreement shall be issued on the Delivery Date as provided in Section 3(e) of
the Participation Agreement in substantially the form set forth, and shall bear
interest as provided, in Exhibit A. In the event more than one such Certificate
is so issued, all references in this Indenture to a single Series SWA 1995
Trust N397SW-I Certificate shall be deemed to include each other such
Certificate. The Series SWA 1995 Trust N397SW-I Certificate shall be dated the
Delivery Date and shall be payable in installments on each Principal Payment
Date as set forth in Annex A to the Series SWA 1995 Trust N397SW-I Certificate.
In connection with a refinancing of the Series SWA 1995 Trust
N397SW-I Certificate in accordance with Section 18 of the Participation
Agreement and Section 15.01 hereof, an additional series of Certificates may be
issued hereunder. Such additional series of Certificates shall be designated as
Series SWA 1995 Trust N397SW Certificates. The Series SWA 1995 Trust N397SW
Certificates shall be substantially in the form set forth in Exhibit A-l or
A-2. The Series SWA 1995 Trust N397SW Certificates shall be dated the Delivery
Date, shall be issued in the maturities and principal amounts, and shall bear
the interest rates per annum (subject to Section 2.10 hereof), in each case as
specified in Exhibit B to be delivered in connection with such refinancing of
the Series SWA 1995 Trust N397SW-I Certificate in accordance with Section 15.01
of this Agreement. The principal of each Certificate, other than Installment
Certificates, shall be payable in full on the Maturity Date for such
Certificate. The principal of each Installment Certificate shall be payable in
installments, on each Installment Payment Date, in amounts equal to the
Installment Payment Amount for such Installment Payment Date.
The Series SWA 1995 Trust N397SW Certificates shall be issued
in denominations of $1,000 and integral multiples thereof, except that one of
such Certificates may be issued in any denomination. The Series SWA 1995 Trust
N397SW-I Certificates may be issued in any denomination.
The Certificates shall be issued in registered form only. The
Certificates are not redeemable prior to maturity except as provided in this
Agreement. Interest accrued on the Certificates shall be calculated on the
basis set forth therein.
The principal of, Break Amount, if any, Premium, if any, and
interest on the Certificates shall be payable at the principal corporate trust
office of the Indenture Trustee or at any office or agency maintained for such
purpose pursuant to Section 2.03, provided, that subject to Section 15.04, all
such amounts (other than those payable on the Maturity Date of the Installment
Certificates) may be payable at the option of the Indenture Trustee or the
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Paying Agent by check mailed on or before the due date by the Indenture Trustee
or the Paying Agent to the address of the Holder entitled thereto as such
address shall appear in the Register.
All payments in respect of the Certificates shall be made in
Dollars. Any payment due on any Certificate on a day that is not a Business
Day shall be made on the next succeeding day which is a Business Day and
(provided such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date.
Section 2.02. Execution and Authentication. (a)
Certificates shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its president, a senior vice president, a vice
president, an assistant vice president, its treasurer, its secretary, an
assistant secretary or an assistant treasurer.
(b) If any officer of the Owner Trustee executing the
Certificates by facsimile signature no longer holds that office at the time the
Certificate is executed on behalf of the Owner Trustee, the Certificate shall
be valid nevertheless.
(c) At any time and from time to time after the execution
of the Certificates, the Owner Trustee may deliver such Certificates to the
Indenture Trustee for authentication and, subject to the provisions of Section
2.10, the Indenture Trustee shall authenticate the Certificates by manual
signature upon written orders of the Owner Trustee. Certificates shall be
authenticated on behalf of the Indenture Trustee by any authorized officer or
signatory of the Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for
any purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner Trustee by the manual or facsimile signature of the officer
of the Owner Trustee specified in the first sentence of Section 2.02(a) and
until authenticated on behalf of the Indenture Trustee by the manual signature
of the officer or signatory of the Indenture Trustee specified in the second
sentence of Section 2.02(c). Such signatures shall be conclusive evidence that
such Certificate has been duly executed, authenticated and issued under this
Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
Trustee shall maintain an office or agency where the Certificates may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where (subject to Sections 2.04 and 2.08) the Certificates may
be presented for payment or for exchange (the "Paying Agent"). The Registrar
shall keep a register (the "Register") with respect to the Certificates and to
their transfer and exchange and the payments of Installment Payment Amounts
thereon, if any. The Indenture Trustee may appoint one or more co-registrars
(the "Co-Registrars") and one or more additional Paying Agents for the
Certificates and the Indenture Trustee may terminate the appointment of any
Co-Registrar or Paying Agent at any time upon written notice. The term
"Registrar" includes any Co-Registrar. The term "Paying Agent" includes any
additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and
Paying Agent.
Section 2.04. Transfer and Exchange. At the option of the
Holder thereof and subject to its compliance with Section 8(bb) of the
Participation Agreement, Series SWA 1995
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Trust N397SW-I Certificates or Series SWA 1995 Trust N397SW Certificates may be
exchanged for an equal aggregate initial principal amount of other Series SWA
1995 Trust N397SW-I Certificates or Series SWA 1995 Trust N397SW Certificates
of the same maturity and type, dated the Delivery Date, and of any authorized
denominations or transferred upon surrender of the Series SWA 1995 Trust
N397SW-I Certificates or Series SWA 1995 Trust N397SW Certificates to be
exchanged or transferred at the principal corporate trust office of the
Indenture Trustee, or at any office or agency maintained for such purpose
pursuant to Section 2.03. Whenever any Series SWA 1995 Trust N397SW-I
Certificate or Series SWA 1995 Trust N397SW Certificate is so surrendered for
exchange, the Owner Trustee shall execute, and the Indenture Trustee shall
authenticate and deliver, the replacement Series SWA 1995 Trust N397SW-I
Certificate or Series SWA 1995 Trust N397SW Certificate which the Holder making
the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Owner Trustee,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Certificates surrendered upon such registration of
transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Holder or any transferee
for any registration of transfer or exchange of Certificates, but the Registrar
may, as a condition to any transfer or exchange hereunder require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of such transfer or exchange of
Certificates.
The Registrar shall not be required to register the transfer
of or to exchange any Certificate called for redemption or purchase pursuant to
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates. (a)
The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semiannually on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders.
(b) Ownership of the Certificates shall be proved by the
Register kept by the Registrar. Prior to due presentment for registration of
transfer of any Certificate, the Owner Trustee, the Owner Participant, the
Company, the Indenture Trustee, the Paying Agent and the Registrar may deem and
treat the Person in whose name any Certificate is registered as the absolute
owner of such Certificate for the purpose of receiving payment of principal
(including, subject to the provisions herein regarding the applicable record
dates, Installment Payment
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Amounts) of, Premium, if any, and (subject to the provisions herein regarding
the applicable record dates), interest on such Certificate and for all other
purposes whatsoever, whether or not such Certificate is overdue, and none of
the Owner Trustee, the Owner Participant, the Company, the Indenture Trustee,
the Paying Agent or the Registrar shall be affected by notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen
Certificates. If any Certificate shall become mutilated, destroyed, lost or
stolen, the Owner Trustee shall, upon the written request of the Holder of such
Certificate, issue and execute, and the Indenture Trustee shall authenticate
and deliver, in replacement thereof, as applicable, a new Series SWA 1995 Trust
N397SW-I Certificate or a new Series SWA 1995 Trust N397SW Certificate of the
same type and having the same maturity, payable to the same Holder in the same
principal amount and dated the same date as the Certificate so mutilated,
destroyed, lost or stolen. If the Certificate being replaced has become
mutilated, such Certificate shall be surrendered to the Indenture Trustee. If
the Certificate being replaced has been destroyed, lost or stolen, the Holder
of such Certificate shall furnish to the Owner Trustee and the Indenture
Trustee such security or indemnity as may be required by it to save the Owner
Trustee and the Indenture Trustee harmless and evidence satisfactory to the
Owner Trustee and the Indenture Trustee of the destruction, loss or theft of
such Certificate and of the ownership thereof; provided, however, that if the
affected Holder is the Original Holder, the written notice of such destruction,
loss or theft and such ownership and the written undertaking of such Holder
delivered to the Owner Trustee and the Indenture Trustee to hold harmless the
Owner Trustee and the Indenture Trustee in respect of the execution,
authentication and delivery of such new Certificate shall be sufficient
evidence, security and indemnity.
Section 2.07. Cancellation. The Registrar and any Paying
Agent shall forward to the Indenture Trustee all Certificates surrendered to
them for replacement, redemption, registration of transfer, exchange or
payment. The Indenture Trustee shall cancel all Certificates surrendered for
replacement, redemption, registration of transfer, exchange, payment or
cancellation and shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal
and Interest. (a) The Indenture Trustee will arrange directly with any Paying
Agent for the payment, or the Indenture Trustee will make payment, all pursuant
to Section 2.09, of the principal of, the Break Amount, if any, Premium, if
any, and interest on, and any other amounts payable on or in respect of each
Certificate or to the Holder thereof hereunder. Interest, principal and other
amounts payable on or in respect of the Series SWA 1995 Trust N397SW-I
Certificate shall be paid as provided for therein and in Article 15. Payment on
Series SWA 1995 Trust N397SW Certificates in respect of interest and
Installment Payment Amounts, if any, payable on an Interest Payment Date or
Installment Payment Date, respectively (other than the Maturity Date of the
Series SWA 1995 Trust N397SW Certificates) shall be paid in Dollars on each
Interest Payment Date or Installment Payment Date (other than the Maturity Date
of such Series SWA 1995 Trust N397SW Certificates), as the case may be, to the
Holder thereof at the close of business on the relevant Record Date; provided,
however, that the Paying Agent will, at the request of the Indenture Trustee
and may, at its option, pay such interest and Installment Payment Amounts
(other than those payable on the Maturity Date of the Installment Certificate)
by check mailed on or before the due date to such Holder's address as it
appears on the Register. Otherwise, principal of Series SWA 1995 Trust N397SW
Certificates and Premium, if any, with respect
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thereto, shall be payable only against presentation and surrender thereof at
the principal corporate trust office of the Indenture Trustee or at the office
of the Paying Agent maintained for such purpose pursuant to Section 2.03.
A Holder shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal amount of,
Premium, if any, Break Amount, if any, and interest on all Certificates held by
such Holder and all other sums payable to such Holder hereunder, under such
Certificates and under the Participation Agreement shall have been paid in
full.
(b) Any Installment Payment Amount payable on an
Installment Payment Date (other than the Maturity Date with respect to a
Certificate) or any interest payable on an Interest Payment Date on any Series
SWA 1995 Trust N397SW Certificate which is not punctually paid on such
Installment Payment Date or such Interest Payment Date, as the case may be
(herein called, respectively, a "Defaulted Installment" and "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Record Date by virtue of his having been such Holder; and such Defaulted
Installment or Defaulted Interest may be paid by the Indenture Trustee, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Indenture Trustee may elect to make
payment of any Defaulted Installment or Defaulted Interest, as the
case may be, to the Person in whose name any Series SWA 1995 Trust
N397SW Certificate is registered at the close of business on a special
record date for the payment of such Defaulted Installment or Defaulted
Interest, as the case may be, which shall be fixed in the following
manner. The Indenture Trustee shall notify the Paying Agent in writing
of the amount of Defaulted Installment or Defaulted Interest, as the
case may be, proposed to be paid on each such Certificate and the date
of the proposed payment, and at the same time the Indenture Trustee
shall make arrangements to set aside an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Installment or Defaulted Interest, as the case may be, prior to the
date of the proposed payment, to be held in trust for the benefit of
the Persons entitled to such Defaulted Installment or Defaulted
Interest, as the case may be, as this clause provides and shall fix a
special record date for the payment of such Defaulted Installment or
Defaulted Interest, as the case may be, which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment. The Indenture Trustee shall promptly notify the Owner
Trustee, the Company and the Registrar of such special record date and
shall cause notice of the proposed payment of such Defaulted
Installment or Defaulted Interest, as the case may be, and the special
record date therefor to be mailed, first class postage prepaid, to
each Holder of a Series SWA 1995 Trust N397SW Certificate at its
address as it appears in the Register, not less than 10 days prior to
such special record date. Notice of the proposed payment of such
Defaulted Installment or Defaulted Interest, as the case may be, and
the special record date therefor having been mailed, as aforesaid,
such Defaulted Installment or Defaulted Interest, as the case may be,
shall be paid to the Persons in whose names the applicable Series SWA
1995 Trust N397SW Certificates are registered on such special record
date and shall no longer be payable pursuant to the following clause
(2).
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(2) The Indenture Trustee may make, or cause to
be made, payment of any Defaulted Installment or Defaulted Interest,
as the case may be, in any other lawful manner not inconsistent with
the requirements of any securities exchange on which Series SWA 1995
Trust N397SW Certificates may be listed, and upon such notice as may
be required by such exchange, if such payment shall be deemed
practicable by the Indenture Trustee.
Any interest, principal or other amount payable on the Series
SWA 1995 Trust N397SW-I Certificates which is not punctually paid when due
shall be paid as provided in such Certificates.
(c) The Indenture Trustee shall require each Paying Agent
to agree in writing that such Paying Agent will hold in trust, for the benefit
of the Holders and the Indenture Trustee, all money held by such Paying Agent
for the payment of the principal of, Break Amount, if any, Premium, if any, or
interest or any other amounts payable to any Holder hereunder or under the
Participation Agreement and shall give to the Indenture Trustee notice of any
default in the making of any such payment upon the Certificates. The Indenture
Trustee at any time may require a Paying Agent to repay to the Indenture
Trustee all money held by it. Upon so doing the Paying Agent shall have no
further liability for the money so paid.
Section 2.09. Payment from Indenture Estate Only. All
amounts payable by the Indenture Trustee and the Owner Trustee under the
Certificates and this Agreement shall be made only from the income and proceeds
of the Indenture Estate and from the other amounts specified in Section 3.03.
Each Holder of a Certificate, by its acceptance of such Certificate, agrees
that (a) it will look solely to the income and proceeds of the Indenture Estate
and from the other amounts specified in Section 3.03 for the payment of such
amounts, to the extent available for distribution to it as herein provided, and
(b) none of the Owner Trustee, the Owner Participant or the Indenture Trustee
is or shall be personally liable to any Holder of any Certificate for any
amount payable under such Certificate or this Agreement (including in respect
of the Deferred Equity Amount or Second Payment Amount) or, except as expressly
provided in this Agreement in the case of the Owner Trustee and the Indenture
Trustee, for any liability thereunder.
Shawmut Bank Connecticut, National Association is entering
into this Agreement solely as Owner Trustee under the Trust Agreement and not
in its individual capacity, and in no case whatsoever shall Shawmut Bank
Connecticut, National Association (or any entity acting as successor trustee
under the Trust Agreement) be personally liable for, or for any loss in respect
of, any statements, representations, warranties, agreements or obligations
hereunder or thereunder; provided, that Shawmut Bank Connecticut, National
Association shall be liable hereunder in its individual capacity, (i) for the
performance of its agreements in its individual capacity hereunder and under
Section 8 of the Participation Agreement, and (ii) for its own willful
misconduct or gross negligence. If a successor Owner Trustee is appointed in
accordance with the terms of the Trust Agreement and the Participation
Agreement, such successor Owner Trustee shall, without any further act, succeed
to all of the rights, duties, immunities and obligations hereunder, and its
predecessor Owner Trustee and Shawmut Bank Connecticut, National Association
shall be released from all further duties and obligations hereunder, without
prejudice to any claims against Shawmut Bank Connecticut, National Association
or such predecessor Owner Trustee for any default by Shawmut Bank Connecticut,
National Association
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or such predecessor Owner Trustee, respectively, in the performance of its
obligations hereunder prior to such appointment.
Section 2.10. Execution, Delivery and Dating of
Certificates upon Issuance. The Owner Trustee shall issue and execute, and the
Indenture Trustee shall authenticate and deliver, the Certificates for original
issuance upon payment of an amount equal to the aggregate original principal
amount of the Series SWA 1995 Trust N397SW-I Certificates to be issued at such
time in the manner contemplated by Section 2 of the Participation Agreement.
Each Certificate issued hereunder shall be dated the Delivery Date, and the
Indenture Trustee shall note thereon, if issued after the Delivery Date, the
date through which has been paid interest thereon. Interest shall accrue on
the Series SWA 1995 Trust N397SW Certificates only from the date of issuance of
such Certificate pursuant to Section 17 or 18.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption of
Certificates. (a) Except as otherwise provided in Section 3.05, in the event
the Certificates are redeemed in accordance with the provisions of Section
6.01(a) or (b), the Indenture Trustee will apply on the Redemption Date any
amounts then held by it in the Indenture Estate and received by it from or on
behalf of the Owner Trustee or, as assignee of the Owner Trustee, from the
Company, including, without limitation, pursuant to Section 9, 10, 11 or
(subject to Section 7.03) 18.2 of the Lease in the following order of priority:
first, so much thereof as was received by the Indenture
Trustee with respect to the amounts due to it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Outstanding
Certificates pursuant to Section 6.01(a) or (b), as the case may be,
on the Redemption Date shall be applied to the redemption of the
Certificates on the Redemption Date; and
third, the balance, if any, thereof remaining thereafter shall
be distributed to the Owner Trustee to be held or distributed to the
Owner Participant in accordance with the terms of the Trust Agreement.
(b) In the case of any refinancing or purchase of the
Certificates pursuant to Section 6.01(c) or 6.02, the Indenture Trustee will
apply on the Redemption Date the amounts received by it from or on behalf of
the Owner Trustee, or as assignee of the Owner Trustee, from the Company, to
the payment of the Redemption Price of the Outstanding Certificates pursuant to
Section 6.01(c) or 6.02, as the case may be, on the Redemption Date; it being
understood that any such payment shall be a refinancing or purchase of the
indebtedness
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represented by the Outstanding Certificates and is not, and shall not be
construed so as to be, a redemption thereof or payment or prepayment thereon.
Section 3.03. Application When No Indenture Event of
Default Is Continuing. Except as otherwise provided in Section 3.02, 3.04, 3.05
or 3.06, each amount of Basic Rent or Advance (as defined in Section 3.8 of the
Lease) received by the Indenture Trustee from the Owner Trustee or, as assignee
of the Owner Trustee, from the Company, any payment of interest payable on any
Interest Payment Date on overdue installments of Basic Rent, any amount
received by the Indenture Trustee pursuant to Section 8(dd) or 18 of the
Participation Agreement as the Deferred Equity Amount or the Second Payment
Amount, together with any amount received by the Indenture Trustee pursuant to
Section 8.03(e)(i), shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be required
to pay in full the interest, principal of, Premium, if any, Break
Amount, if any, and any other amounts then due on, all Outstanding
Certificates shall be distributed to the Persons entitled thereto; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Premium, if any, Break Amount, if any, such other
amounts payable to the Holders, and without any preference or priority
of one Certificate over another, ratably according to the aggregate
amount so due for interest, principal, Premium, if any, Break Amount,
if any, and such other amounts at the date fixed by the Indenture
Trustee for the distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall be
required to pay any amount due the Indenture Trustee pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such
amounts; and
third, the balance, if any, of such aggregate amount remaining
thereafter shall be distributed to the Owner Trustee to be held or
distributed to the Owner Participant in accordance with the terms of
the Trust Agreement; provided, however, that if an Indenture Default
shall have occurred and be continuing, then such balance shall not be
distributed as provided in this clause "third" but shall be held by
the Indenture Trustee as part of the Indenture Estate until whichever
of the following shall first occur: (i) all Indenture Events of
Default shall have been cured, in which event such balance shall, to
the extent not theretofore distributed as provided herein, be
distributed as provided in this clause "third", or (ii) Section 3.04
or Section 3.05 shall be applicable, in which event such balance shall
be distributed in accordance with the provisions of said Section 3.04
or Section 3.05, as the case may be, or (iii) such installment or
payment shall have been held for a period in excess of 183 days
(during which no Indenture Event of Default which is not a Lease Event
of Default shall have occurred and be continuing and during which
period the Indenture Trustee and the Holders shall not have been
stayed or otherwise precluded by operation of law from taking action
to accelerate the Certificates or to exercise remedies hereunder or
under the Lease), in which event such balance shall, to the extent not
theretofore applied as provided herein, be distributed as provided in
this clause "third".
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Section 3.04. Application of Certain Payments in Case of
Requisition or Event of Loss. Except as otherwise provided in Section 3.05, any
amounts received directly or otherwise pursuant to the Lease from any
governmental authority or other Person pursuant to Section 10 of the Lease with
respect to the Airframe or the Airframe and the Engines or engines then
installed on the Airframe as the result of an Event of Loss, to the extent that
such amounts are not required to be paid to the Company pursuant to said
Section 10, and any amounts of insurance proceeds for damage to the Indenture
Estate received directly or otherwise pursuant to the Lease (and not
constituting Excluded Payments) from any insurer pursuant to Section 11 of the
Lease with respect thereto as the result of an Event of Loss, to the extent
such amounts are not required to be paid to the Company pursuant to said
Section 11, shall, except as otherwise provided in the next sentence, be
applied by the Indenture Trustee on behalf of, and as assignee of, the Owner
Trustee in reduction of the Company's obligations to pay Stipulated Loss Value
and the other amounts payable by the Company pursuant to Section 10 of the
Lease and the remainder, if any, shall, except as provided in the next
sentence, be distributed to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease and the Trust Agreement. Any portion of
any such amount referred to in the preceding sentence which is not required to
be so paid to the Company pursuant to the Lease, solely because a Lease Default
of the type referred to in Section 14.1 or 14.5 of the Lease or Lease Event of
Default shall have occurred and be continuing, shall, subject to Section 10.04
hereof, be held by the Indenture Trustee on behalf of the Owner Trustee as
security for the obligations of the Company under the Lease and at such time as
there shall not be continuing any Lease Default of the type referred to in
Section 14.1 or 14.5 of the Lease or Lease Event of Default or such earlier
time as shall be provided for in the Lease, or upon satisfaction and discharge
of this Indenture as provided herein, such portion shall be paid to the Owner
Trustee to be held or distributed in accordance with the terms of the Lease,
unless the Indenture Trustee (as assignee from the Owner Trustee of the Lease)
shall have theretofore commenced to exercise remedies pursuant to Section 15
thereof, in which event such portion shall be distributed in accordance with
the provisions of Section 3.05 hereof.
Section 3.05. Payments During Continuance of Indenture
Event of Default. All payments (except Excluded Payments) received and amounts
held or realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and so long as such an Indenture Event of Default shall be
continuing, and after the Indenture Trustee shall foreclose or enforce this
Indenture or after the Certificates shall have become due and payable as
provided in Section 8.02 (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as
all payments or amounts then held or thereafter received by the Indenture
Trustee as part of the Indenture Estate while such Indenture Event of Default
shall be continuing, shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such payments or amounts as shall be
required to pay the Indenture Trustee all amounts then due it pursuant
to Section 9.06 shall be applied to pay the Indenture Trustee such
amounts;
second, so much of such payments or amounts remaining as shall
be required to (i) pay the expenses incurred (including unbilled
expenses in respect of property delivered or contracted for or
services rendered or contracted for if the amount of such expenses is
liquidated) in using, operating, storing, leasing, controlling or
managing the
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
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Indenture Estate, and of all maintenance, insurance, repairs,
replacements, alterations, additions and improvements of and to the
Indenture Estate and to make all payments which the Indenture Trustee
may be required or may elect to make, if any, for taxes, assessments,
insurance or other proper charges upon the Indenture Estate or any
part thereof (including the employment of engineers and accountants to
examine and make reports upon the properties, books and records of the
Owner Trustee and, to the extent permitted under the Lease, the
Company), all in accordance with Section 8.03(c), shall be applied for
such purposes and (ii) reimburse the Holders in full for payments made
pursuant to Section 9.01(c) (to the extent not previously reimbursed)
shall be distributed to such Holders, and if the aggregate amount
remaining shall be insufficient to reimburse all such payments in
full, it shall be distributed ratably, without priority of any
Certificate over any other, in the proportion that the aggregate
amount of the unreimbursed payments made by each such Holder pursuant
to Section 9.01(c) bears to the aggregate amount of the unreimbursed
payments made by all Holders pursuant to Section 9.01(c);
third, so much of such payments or amounts remaining as shall
be required to pay the principal of, Break Amount, if any, and accrued
interest on all Certificates Outstanding and all other amounts payable
to the Holders hereunder or under the Participation Agreement and then
due and payable, whether by declaration of acceleration pursuant to
Section 8.02 or otherwise, shall be applied to the payment of such
interest, principal, Break Amount, if any, and such other amounts; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Break Amount, if any, such other amounts and
interest, without any preference or priority of one Certificate over
another, ratably according to the aggregate amount so due for
interest, principal, Break Amount, if any, and such other amounts at
the date fixed by the Indenture Trustee for the distribution of such
payments or amounts; and
fourth, the balance, if any, of such payments or amounts
remaining thereafter shall be distributed to the Owner Trustee to be
held or distributed to the Owner Participant in accordance with the
terms of the Trust Agreement.
Section 3.06. Payments for Which Application Is Provided in
Other Documents. Except as otherwise provided in this Agreement, any payment
received by the Indenture Trustee for which provision as to the application
thereof is made in the Lease or the Participation Agreement shall be
distributed to the Person for whose benefit such payments were made in
accordance with, and subject to the terms, thereof and hereof. The Indenture
Trustee shall be obligated to distribute any Excluded Payments received by the
Indenture Trustee promptly upon receipt thereof by the Indenture Trustee to the
Person entitled thereto.
Section 3.07. Payments for Which No Application Is
Otherwise Provided. Except as otherwise provided in Section 3.05:
(a) any payment received by the Indenture Trustee for
which no provision as to the application thereof is made elsewhere in
this Agreement, and
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(b) any payment received and amounts realized by the
Indenture Trustee with respect to the Aircraft to the extent received
or realized at any time after the conditions set forth in Article 10
for the satisfaction and discharge of this Agreement or for the
defeasance of the Certificates shall have been duly satisfied, as well
as any other amounts remaining as part of the Indenture Estate after
such satisfaction shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance, if any, of such aggregate amount
remaining thereafter shall be distributed to the Owner Trustee
to be held or distributed to the Owner Participant in
accordance with the terms of the Trust Agreement.
Section 3.08. Application of Payments. Each payment of
principal and interest or other amounts due hereunder to the Indenture Trustee
or any Holder or in respect of each Certificate shall, except as otherwise
expressly provided herein, be applied, first, to the payment of any amount
(other than the principal of or Premium, Break Amount or interest on such
Certificate) due hereunder or in respect of such Certificate, second, to the
payment of Premium or Break Amount, if any, and interest on such Certificate
(as well as any interest on overdue principal and, to the extent permitted by
law, interest and other amounts payable hereunder and thereunder) due
thereunder, third, to the payment of the principal of such Certificate then due
and fourth, the balance, if any, remaining thereafter, to the payment of the
principal of such Certificate remaining unpaid (provided, that such Certificate
shall not be subject to prepayment or purchase without the consent of the
affected Holder except as expressly permitted hereby). The amounts paid
pursuant to clause fourth above shall be applied to the installments of
principal of such Certificate in inverse order of maturity.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner
Trustee hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually
perform its obligations under the Lease and will duly and punctually
pay the principal of, Premium, if any, Break Amount, if any, and
interest on and other amounts due hereunder and under the Certificates
and all other amounts payable by it to the Holders under the
Participation Agreement and the other Operative Agreements;
(ii) the Owner Trustee will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it with respect to any of the properties or assets of
the Indenture Estate and shall, at its own cost and expense, promptly
take such action as may be necessary to discharge duly any such Lessor
Lien, and the Owner Trustee will cause restitution to be made to the
Indenture Estate in the
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amount of any diminution of the value thereof as the result of any
Lessor Liens attributable to it;
(iii) in the event a Responsible Officer of the
Owner Trustee shall have actual knowledge of an Indenture Event of
Default or Indenture Default or an Event of Loss, the Owner Trustee
will give prompt written notice of such Indenture Event of Default or
Indenture Default or Event of Loss to the Indenture Trustee, the Owner
Participant, the Company and, so long as the Series SWA 1995 Trust
N397SW-I Certificate shall be Outstanding, the Original Holder;
(iv) except as contemplated by the Operative
Agreements, the Owner Trustee will not contract for, create, incur,
assume or permit to exist any Debt, and will not guarantee (directly
or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so
doing, or otherwise), endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the Debt of any
other Person;
(v) the Owner Trustee will not enter into any
activity other than owning the Aircraft, the leasing thereof to the
Company and the carrying out of the transactions contemplated hereby
and by the Participation Agreement, the Trust Agreement and the other
Operative Agreements;
(vi) the Owner Trustee will furnish to the
Indenture Trustee, and the Indenture Trustee will furnish to each
Holder at the time outstanding, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to
the Owner Trustee under the Lease, including, without limitation, a
copy of each report or notice received pursuant to Section 11 of the
Lease, to the extent that the same shall not have been furnished
directly to such Holder or the Indenture Trustee pursuant to the
Lease; and
(vii) the Owner Trustee will not (except as
permitted herein) assign or pledge or otherwise dispose of, so long as
this Indenture shall remain in effect and shall not have been
terminated pursuant to Section 10.01, any of its right, title or
interest hereby assigned to anyone other than the Indenture Trustee,
and, with respect to such right, title and interest hereby assigned,
will not, except as provided in this Indenture, (1) accept any payment
that is subjected to the Lien of this Indenture from the Lessee or any
sublessee, enter into any agreement amending or supplementing any of
the Indenture Documents, execute any waiver or modification of, or
consent under, the terms of any of the Indenture Documents, (2)
exercise any rights with respect to the Indenture Estate, (3) settle
or compromise any claim arising under any of the Indenture Documents,
or (4) submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Indenture
Documents to arbitration thereunder.
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Section 4.02. Covenants of Shawmut Bank Connecticut,
National Association. Shawmut Bank Connecticut, National Association, hereby
covenants and agrees that it will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Liens attributable to it with respect to
any of the properties or assets of the Indenture Estate and it shall, at its
own cost and expense, promptly take such action as may be necessary to
discharge duly any such Lessor Lien. Shawmut Bank Connecticut, National
Association, will cause restitution to be made to the Indenture Estate in the
amount of any diminution of the value thereof as the result of any Lessor Liens
thereon attributable to it.
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of
Property Included in the Indenture Estate During Continuation of Lease. So
long as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the lien of this
Agreement and be leased to the Company under the Lease; provided, that
to the extent permitted by and as provided in the Lease, the Company
shall have the right, at any time and from time to time, without any
release from or consent by the Owner Trustee or the Indenture Trustee,
to remove, replace and pool Parts and to make alterations,
improvements and modifications in, and additions to, the Aircraft. The
Indenture Trustee agrees that, to the extent permitted by and as
provided in the Lease, title to any such Part shall vest in the
Company. The Indenture Trustee shall from time to time execute an
appropriate written instrument or instruments to confirm the release
of the security interest of the Indenture Trustee in any Part as
provided in this Section 5.01, in each case upon receipt by the
Indenture Trustee of a Company Request stating that said action was
duly taken by the Company in conformity with this Section 5.01 and
that the execution of such written instrument or instruments is
appropriate to evidence such release of a security interest under this
Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
Occurring to Airframe or Engines or upon Voluntary Termination of
Lease with Respect to Engines. Upon (i) the occurrence of an Event of
Loss occurring to the Airframe or an Engine, or (ii) a voluntary
termination of the Lease with respect to an Engine, the Company, in
accordance with the Lease, may, in the case of an Event of Loss which
has occurred to the Airframe, or shall, except as provided in Section
10.2 of the Lease, in the case of an Event of Loss which has occurred
to or termination of the Lease with respect to an Engine, substitute
an airframe or engine, as the case may be, in which case, upon due
satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of
its right, interest and lien in and to the Airframe or such Engine in
accordance with the provisions of the following sentence. The
Indenture Trustee shall execute and deliver to the Owner Trustee an
instrument releasing its lien in and to the Airframe or such Engine
and shall execute for recording in public offices, at the expense of
the Owner Trustee (if requested by the Owner
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Trustee) or the Company (if requested by the Company), such
instruments in writing as the Owner Trustee or the Company shall
reasonably request and as shall be reasonably acceptable to the
Indenture Trustee in order to make clear upon public records that such
lien has been released under the laws of the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and
all rights existing or that may be acquired to any penalties, forfeit or
damages from or against the Indenture Trustee for failure to execute and
deliver any document in connection with the release of a lien or to file any
certificate in compliance with any law or statute requiring the filing of the
same in connection with the release of a lien, except for failure by the
Indenture Trustee to execute and deliver any document or to file any
certificate as may be specifically requested in writing by the Owner Trustee or
the Company and with respect to which the Owner Trustee or the Company shall be
duly entitled.
Section 5.02. Certificates in Respect of Replacement
Aircraft and Engines. Upon the execution and delivery of a Trust Supplement
covering a Replacement Airframe and/or Replacement Engine, as contemplated by
Section 5.01(b), each Certificate shall be deemed to have been issued in
connection with such Replacement Airframe and/or Replacement Engine and each
Certificate issued thereafter upon a transfer or exchange of, or as a
replacement for, a Certificate, shall be designated as having been issued in
connection with such Replacement Airframe and/or Replacement Engine, but
without any other change therein.
ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain
Events. (a) If there shall be an Event of Loss to the Aircraft and the
Aircraft is not replaced pursuant to Section 10.1.2 of the Lease, each
Outstanding Certificate shall be redeemed in whole at a Redemption Price equal
to 100% of the outstanding principal amount of such Certificate plus accrued
and unpaid interest thereon to but excluding the applicable Redemption Date
plus, in the case of the Series SWA 1995 Trust N397SW-I Certificates, Break
Amount, if any, and all other amounts payable to the Holders hereunder or under
the Participation Agreement. The Redemption Date for Certificates to be
redeemed pursuant to this Section 6.01(a) shall be the Lease Loss Payment Date.
No Premium shall be paid in the case of a redemption pursuant to any provision
of this Section 6.01(a).
(b) The Certificates shall be redeemed on the Lease
Termination Date or upon the purchase of the Aircraft by the Company at its
option on the Special Purchase Option Date pursuant to Section 18.2(b) of the
Lease (unless the Company shall have elected to assume the rights and
obligations of the Owner Trustee hereunder to the extent and as provided for in
Section 7.03). In the case of any Series SWA 1995 Trust N397SW-I Certificate,
the Redemption Price therefor shall be equal to the unpaid principal amount of
such Certificate as at such date plus accrued and unpaid interest thereon to
but excluding the Redemption Date, the Break Amount, if any, and all other
amounts payable to the Holder thereof hereunder or under any other Operative
Agreement, but without any other premium or penalty. In the case of any Series
SWA 1995 Trust N397SW Certificate, such Redemption Price therefor shall be
equal to the unpaid principal amount of such Certificate as at such Redemption
Date together
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with an amount equal to the accrued but unpaid interest thereon and, in the
case of each Certificate redeemed prior to the Premium Termination Date
applicable to such Certificate, the Premium, if any. The Redemption Date for
Certificates to be redeemed shall be (A) in the case of a termination of the
Lease pursuant to Section 9 thereof, on the Lease Termination Date or (B) in
the case of purchase of the Aircraft by the Company pursuant to Section 18.2(b)
of the Lease, on the Special Purchase Option Date.
(c) (i) The Series SWA 1995 Trust N397SW-I
Certificates may be refinanced in whole in accordance with the provisions of
Article 15 hereof and Sections 17 and 18 of the Participation Agreement and
(ii) the Series SWA 1995 Trust N397SW Certificates may be refinanced, in whole
or in part, if all the conditions to such refunding or refinancing set forth in
Section 17 of the Participation Agreement shall have been satisfied. In any
such event, each Outstanding Certificate may be so refinanced at a Redemption
Price determined in accordance with the procedures described above in Section
6.01(b); provided, however, that the applicable Redemption Date for the Series
SWA 1995 Trust N397SW-I Certificates to be refinanced pursuant to clause (i) of
this Section 6.01(c) shall be the applicable Refinancing Date under Section 17
of the Participation Agreement or the Section 18 Refinancing Date under Section
18 of the Participation Agreement, as the case may be, and the applicable
Redemption Date for Certificates to be redeemed pursuant to clause (ii) of this
Section 6.01(c) shall be the applicable Refinancing Date under Section 17 of
the Participation Agreement.
Section 6.02. Redemption or Purchase of Certificates Upon
Certain Indenture Events of Default. If the Owner Trustee shall have given
notice of redemption or purchase to the Indenture Trustee pursuant to Section
8.03(e)(ii), each Outstanding Certificate shall be redeemed or purchased in
whole at a Redemption Price equal to 100% of its principal amount plus accrued
and unpaid interest thereon (including, without limitation, interest on overdue
interest) to but excluding the applicable Redemption Date as determined below
and all other amounts payable to the Holders hereunder or under the
Participation Agreement and, in the case of the Series SWA 1995 Trust N397SW-I
Certificate, the Break Amount, if any, and, in the case of the Series SWA 1995
Trust N397SW Certificates, if to be purchased or redeemed pursuant to Section
8.03(e)(ii)(A) prior to the 181st day after the first occurrence of the
relevant Lease Event of Default, the Premium, if any. The Redemption Date for
Certificates to be redeemed or purchased pursuant to this Section 6.02 shall be
the date specified in the notice given by the Owner Trustee to the Indenture
Trustee pursuant to Section 8.03(e)(ii) (provided, however, that in the case of
the Series SWA 1995 Trust N397SW-I Certificates, if such date is the last day
of the then current Interest Period therefor, no Break Amount shall be
payable). If the Owner Trustee elects to purchase the Certificates under
Section 8.03(e)(ii), nothing herein, including use of the terms "Redemption
Date" and "Redemption Price", shall be deemed to result in a redemption of the
Certificates.
Section 6.03. Notice of Redemption to Holders. (a) Notice
of redemption or purchase with respect to the Series SWA 1995 Trust N397SW
Certificates shall be given by first-class mail, postage prepaid, mailed not
less than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of such Certificates to be redeemed or purchased, at such Holder's address
appearing in the Register; provided, that in the case of a redemption pursuant
to Section 6.01(b) related to Lessee's exercise of its option pursuant to
Section 9 of the Lease, such notice shall be revocable and shall be deemed
revoked in the event the Lease does not in fact terminate on the related Lease
Termination Date.
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All notices of redemption or purchase shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption
Price,
(3) if less than all the Outstanding Certificates are to
be redeemed, the identification (and, in the case of partial
redemption of any Certificates, the principal amounts) of the
particular Certificates to be redeemed, and that on and after the
Redemption Date, upon surrender of Certificates, new Certificates in
principal amount equal to the unredeemed part thereof will be issued,
(4) that on the Redemption Date, the Redemption Price
will become due and payable upon each Certificate to be redeemed, and
that interest on Certificates shall cease to accrue on and after such
Redemption Date, and
(5) the place or places where such Certificates are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
(b) Notice of redemption of the Series SWA 1995 Trust
N397SW-I Certificate shall be given by the Owner Trustee (or by the Company on
behalf of the Owner Trustee) not less than three Business Days prior to the
Redemption Date, shall be irrevocable and shall be given by telephone, telex,
telecopy, cable or other customary means of communication by the Owner Trustee
or the Company, as the case may be, to the other and to the Indenture Trustee
and to the Original Holder at each such Person's address designated in Section
12.01(a); provided, that in the case of redemption pursuant to Section 6.01(b)
related to Lessee's exercise of its option pursuant to Section 9 of the Lease,
such notice shall be revocable and shall be deemed revoked in the event the
Lease does not in fact terminate on the related Lease Termination Date.
Notwithstanding any provision to the contrary contained in this Article 6, the
Series SWA 1995 Trust N397SW-I Certificate shall be redeemable as set forth in
this Article 6 and in Article 15 without any premium, prepayment penalty or
other cost or expense except for the Break Amount, if any, and the payment of
all other amounts payable to the Holders thereof hereunder and under the
Participation Agreement.
Section 6.04. Deposit of Redemption Price. On or before
the Redemption Date, the Owner Trustee (or any Person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 Noon in immediately available
funds (i) the Redemption Price of the Certificates to be redeemed, refinanced
or purchased, as the case may be, on the Redemption Date and (ii) all other
amounts due and payable hereunder, including any amounts payable to the
Indenture Trustee pursuant to Section 9.06.
Section 6.05. Certificates Payable on Redemption Date.
Notice of redemption, refinancing or purchase having been given as aforesaid
(and not deemed revoked as contemplated in the proviso to Section 6.03(a) or
(b)), the Certificates so to be redeemed (or
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the purchase or refinancing price therefor) shall, on the applicable Redemption
Date, become due and payable at the Redemption Price therefor at the principal
corporate trust office of the Indenture Trustee or at any office or agency
maintained for such purposes pursuant to Section 2.03, and from and after such
Redemption Date (unless there shall be a default in the payment of the
Redemption Price) any such Certificates then Outstanding shall cease to bear
interest. Unless payment prior to surrender is expressly provided for herein
or in the Participation Agreement, upon surrender of any such Certificate for
redemption or purchase in accordance with said notice such Certificate shall be
paid at the Redemption Price. The Certificates shall not be subject to
prepayment, redemption, refunding or refinancing except as provided in this
Article 6 and in Section 8.02 hereof.
If any Certificate called for redemption or purchase shall not
be so paid upon surrender thereof for redemption or purchase, the principal
amount thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
Section 6.06. Selection of Certificates to Be Redeemed. If
less than all the Outstanding Series SWA 1995 Trust N397SW Certificates are to
be redeemed the particular Certificates to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Indenture Trustee, from
the Outstanding Certificates not previously called for redemption, by such
method as the Indenture Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Certificates or any integral multiple thereof) of
the principal amount of Certificates of a denomination larger than the minimum
authorized denomination for Certificates.
The Indenture Trustee shall promptly notify the Owner Trustee and the
Company in writing of the Certificates selected for redemption and, in the case
of any Certificates selected for partial redemption, the principal amount
thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Certificates shall
relate, in the case of any Certificates redeemed or to be redeemed only in
part, to the portion of the principal amount of such Certificates which has
been or is to be redeemed.
Section 6.07. Certificates Redeemed in Part. Any Certificate
which is to be redeemed only in part shall be surrendered at a place of payment
thereof (with, if the Indenture Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Owner Trustee and
the Indenture Trustee duly executed by, the Holder thereof or its attorney duly
authorized in writing), and the Owner Trustee shall execute, and the Indenture
Trustee shall authenticate and deliver to the Holder of such Certificate
without service charge, a new Certificate of like tenor, of any authorized
denomination as requested by such Holder, in principal amount equal to and in
exchange for the unredeemed portion of the principal of the Certificate so
surrendered.
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ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments
Held by the Indenture Trustee. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Premium, if any, or
interest on any Series SWA 1995 Trust N397SW Certificate, including without
limitation any money deposited pursuant to Article 10 and remaining unclaimed
for two years and eleven months after the due date for such payment, shall be
paid to the Owner Trustee; and the Holders of any Outstanding Certificates
shall thereafter, as unsecured general creditors, look only to the Owner
Participant (to the extent the Owner Trustee distributed any such trust money
to the Owner Participant and the Owner Participant did not distribute such
trust money to the Company) and to the Company on behalf of the Owner Trustee
for payment thereof, and all liability of the Indenture Trustee or any such
Paying Agent with respect to such trust money shall thereupon cease; provided,
that the Indenture Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be mailed to
each such Holder notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
mailing, any unclaimed balance of such money then remaining will be repaid to
the Owner Trustee as provided herein.
Section 7.02. [Reserved for Potential Future Use]
Section 7.03. Assumption of Obligations of Owner Trustee by
the Company. In the event that the Company shall have elected to assume all of
the rights and obligations of the Owner Trustee under this Agreement in respect
of the Certificates pursuant to Section 8(r) of the Participation Agreement in
connection with the purchase by the Company of the Aircraft on the Special
Purchase Option Date, and if on or prior to the Special Purchase Option Date
(the "Assumption Date") the Indenture Trustee shall have received:
(a) an instrument of assumption (the "Assumption
Agreement") pursuant to which the Company irrevocably and unconditionally
assumes and undertakes, with full recourse to the Company, the Owner Trustee's
obligations with respect to principal, interest, Break Amount, Premium and all
other amounts payable to the Holders or the Indenture Trustee under the
Certificates then Outstanding, this Agreement, and the Participation Agreement
and which incorporates therein events of default substantially similar in scope
and effect to those set forth in the Lease and covenants substantially similar
to the covenants of the Company under the Lease and the Participation
Agreement;
(b) a supplement to this Agreement and/or such other
instruments and documents (including, without limitation, Uniform Commercial
Code financing statement(s)) covering all of the security interests created by
or pursuant to this Indenture that are not covered by the recording system
established by the Federal Aviation Act as may be necessary (or reasonably
requested by the Indenture Trustee) for the security interest of the Indenture
Trustee in the Aircraft and in the other rights, property and interests
included in the Indenture Estate (other than those rights, property and
interests that depend on the existence of the Trust Estate and the
participation of the Owner Trustee and Owner Participant in the transactions
contemplated by the Participation Agreement and this Indenture) to continue to
be perfected and duly recorded with the Federal Aviation Administration and in
all other places necessary
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or, in the reasonable opinion of the Indenture Trustee, advisable under the
Uniform Commercial Code;
(c) an insurance report dated the Assumption Date of the
independent insurance broker referred to in Section 11.5 of the Lease and the
certificates of insurance, each in form and substance reasonably satisfactory
to the Indenture Trustee as to the due compliance as of the Assumption Date
with the terms of Section 11 of the Lease (as it relates to the Holders and the
Indenture Trustee) relating to the insurance with respect to the Aircraft;
(d) evidence that as of the Assumption Date, and after
giving effect to the transactions contemplated hereby, the Company has good
title to the Aircraft free and clear of all Liens other than the Lien of, and
the security interest created by, this Indenture and other Permitted Liens
(other than Lessor Liens);
(e) a copy of the application that was filed with the FAA
on the Assumption Date regarding the registration of the Aircraft in the name
of the Company;
(f) a certificate from a Responsible Company Officer of
the Company that no Lease Default of the type referred to in Section 14.1 or
14.5 of the Lease or Lease Event of Default shall have occurred and be
continuing as of the Assumption Date;
(g) an opinion of the General Counsel of the Company (or
other counsel reasonably satisfactory to the Indenture Trustee) in form and
substance reasonably satisfactory to the Indenture Trustee, addressed to the
Indenture Trustee and dated the Assumption Date, to the effect that (i) the
execution, delivery and performance of the Assumption Agreement and the
supplement to this Indenture referred to in paragraph (b) of this Section 7.03
(and all other instruments and documents the execution of which are necessary
for and directly related to the assumption of the obligations contemplated by
this Section 7.03 or the continued perfection of the security interests
referred to in paragraph (b) of this Section 7.03) have been duly authorized by
the Company by all necessary action; (ii) the Assumption Agreement, such
supplement to this Indenture, all such other documents and instruments referred
to above and the security interests arising therefrom are legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, and except as limited by
applicable laws which may affect the remedies provided for in this Indenture,
which laws, however, do not in the opinion of such counsel make the remedies
provided for in this Indenture inadequate for the practical realization of the
rights and benefits purported to be provided thereby; (iii) the Assumption
Agreement, such supplement and all such other documents and instruments
referred to above do not and will not contravene any provision of the Company's
articles of incorporation or by-laws or any law or regulation applicable to the
Company or any agreement, mortgage or instrument to which the Company is a
party or by which the Company is bound; and (iv) the Indenture Trustee (on
behalf of the Certificate Holders) should continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft
upon and after the assumption of the obligations by the Company, provided, that
the opinion referred to in this clause (iv) need not be delivered to the extent
that the benefits of Section 1110 of the Bankruptcy Code were not, by reason of
a change of law or governmental
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interpretation thereof, available to the Indenture Trustee with respect to the
Aircraft immediately prior to such assumption;
(h) an opinion of Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City (or other counsel reasonably satisfactory to the
Indenture Trustee), in form and substance reasonably satisfactory to the
Indenture Trustee, addressed to the Indenture Trustee and dated the Assumption
Date, (i) to the effect that all documents executed in connection with the
assumption of the obligations contemplated by this Section 7.03 and required to
be filed with the Federal Aviation Administration are in proper form, and all
steps necessary have been taken, for the Aircraft to be duly registered in the
name of the Company and for the Lien of this Agreement with respect to the
Aircraft and Engines to continue to be duly perfected and of first priority;
and
(i) such other documentation reasonably requested by the
Indenture Trustee (in form and substance reasonably satisfactory to the
Indenture Trustee) to amend the Operative Agreements to give effect to the
foregoing;
then, automatically and without the requirement of further action by any
Person, effective as of the Assumption Date, the Owner Trustee shall be
released from all of its obligations under this Agreement in respect of the
Certificates or otherwise (other than any obligations or liabilities of the
Owner Trustee in its individual capacity incurred on or prior to the Assumption
Date or arising out of or based upon events occurring on or prior to the
Assumption Date, which obligations and liabilities shall remain the sole
responsibility of the Owner Trustee in such capacity). Promptly upon the
filing and recording of the documents referred to in the opinion of counsel
specified in Section (h) above with the FAA, the Company shall cause such
counsel to deliver to the Indenture Trustee an opinion addressed to the
Indenture Trustee, in form and substance reasonably satisfactory to the
Indenture Trustee, as to due recording of said documents with the FAA.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following
events shall constitute "Indenture Events of Default" under this Agreement
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Indenture Event of Default
shall be deemed to exist so long as, but only so long as, it shall not be
waived or remedied:
(a) the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any payment of principal
of or Premium or Break Amount, if any, or interest on any Certificate
and such failure shall have continued unremedied for seven Business
Days, or the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any other amount due and
payable hereunder, or under any Certificate, and such failure shall
have continued unremedied for 10 Business Days after notice thereof to
the Owner Trustee; or
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(b) any Lessor Lien required to be discharged by Shawmut
Bank Connecticut, National Association, pursuant to Section 4.02 or
required to be discharged by the Owner Trustee pursuant to Section
4.01(ii) or required to be discharged or bonded (in a manner
reasonably satisfactory to the Indenture Trustee) by the Owner
Participant pursuant to Section 8(g) of the Participation Agreement
shall remain undischarged for a period of 30 calendar days after a
Responsible Officer or Responsible Company Officer, as the case may
be, of Shawmut Bank Connecticut, National Association, the Owner
Trustee or the Owner Participant, as the case may be, shall have
actual knowledge of such Lessor Lien; or
(c) any representation or warranty made by the Owner
Trustee or the Owner Participant or Shawmut Bank Connecticut, National
Association, herein or in the Participation Agreement, or made by any
Person guaranteeing or supporting the obligations of the Owner
Participant under the Operative Agreements in its guarantee or support
agreement, shall prove to have been false or incorrect when made in
any material respect to the Certificate Holders, is material at the
time of discovery and, if curable, is not cured within 30 days of
notice thereof to the Owner Participant and the Owner Trustee from the
Indenture Trustee; or
(d) [Reserved for Potential Future Use]
(e) any failure by the Owner Trustee or Shawmut Bank
Connecticut, National Association, to observe or perform any other
covenant or obligation of the Owner Trustee or Shawmut Bank
Connecticut, National Association, as the case may be, contained in
this Indenture or in the Participation Agreement or any failure by the
Owner Participant to observe or perform any other covenant or
obligation of the Owner Participant contained in the Participation
Agreement or any failure by any Person guaranteeing or supporting the
obligations of the Owner Participant under the Operative Agreements to
perform any covenant or obligation of such Person under its guarantee
or support agreement which, in any case, is not remedied within a
period of 30 calendar days after notice thereof has been given to the
Owner Trustee and the Owner Participant or such Person, as the case
may be (provided that such period shall be extended to 180 days if the
Owner Trustee, the Owner Participant or such other Person shall, on or
prior to the expiration of such 30 days, have provided a bond (to the
reasonable satisfaction of the Indenture Trustee) in respect of the
consequences of such failure); or
(f) there shall be a Lease Event of Default other than,
without the consent of the Owner Trustee in its sole discretion, a
Lease Event of Default arising by reason of nonpayment when due of any
Excluded Payments; or
(g) either the Trust Estate or the Owner Trustee with
respect thereto (and not in its individual capacity) or the Owner
Participant or any Person guaranteeing or supporting the obligations
of the Owner Participant under the Operative Agreements
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shall (i) file, or consent by answer or otherwise to the filing
against it of a petition for relief or reorganization or arrangement
or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction,
(ii) make an assignment for the benefit of its creditors, or (iii)
consent to the appointment of a custodian, receiver, trustee or other
officer with similar powers of itself or any substantial part of its
property; provided, that an event referred to in this Section 8.01(g)
with respect to the Owner Participant shall not constitute an
Indenture Event of Default if (A) an order, judgment or decree shall
be entered in a proceeding by a court or a trustee, custodian,
receiver or liquidator which is either final and non-appealable or has
not been stayed pending any appeal, or (B) an opinion of counsel
satisfactory to the Indenture Trustee shall be provided by the Owner
Participant, in each case to the effect that no part of the Trust
Estate created by the Trust Agreement (except for the Owner
Participant's beneficial interest in such Trust Estate) and no right,
title or interest under the Indenture Estate shall be included in, or
be subject to, any declaration or adjudication of, or proceedings with
respect to, the bankruptcy, insolvency or liquidation of the Owner
Participant referred to in this Section 8.01(g); or
(h) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Trust Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant or any Person
guaranteeing or supporting the obligations of the Owner Participant
under the Operative Agreements, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Trust Estate or the
Owner Trustee with respect thereto (and not in its individual
capacity) or the Owner Participant or any Person guaranteeing or
supporting the obligations of the Owner Participant under the
Operative Agreements and any such order or petition is not dismissed
or stayed within 90 days after the earlier of the entering of any such
order or the approval of any such petition; provided, that an event
referred to in this Section 8.01(h) with respect to the Owner
Participant shall not constitute an Event of Default if (A) an order,
judgment or decree shall be entered in a proceeding by a court or a
trustee, custodian, receiver or liquidator which is either final and
non-appealable or has not been stayed pending any appeal, or (B) an
opinion of counsel satisfactory to the Indenture Trustee shall be
provided by the Owner Participant, in each case to the effect that no
part of the Trust Estate created by the Trust Agreement (except for
the Owner Participant's beneficial interest in such Trust Estate) and
no right, title or interest under the Indenture Estate shall be
included in, or be subject to, any declaration or adjudication of, or
proceedings with respect to, the bankruptcy, insolvency or liquidation
of the Owner Participant referred to in this Section 8.01(h).
Section 8.02. Acceleration; Rescission and Annulment. If an
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee and the Owner Trustee may declare the
principal of all the Certificates to be due and payable, whereupon the
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same shall be accelerated and be and become due and payable; provided, that if
an Indenture Event of Default referred to in clause (g) or (h) of Section 8.01
shall have occurred or a Lease Event of Default of the type referred to in
clause (g) or (h) of said Section 8.01 shall have occurred with respect to the
Company, then and in every such case the unpaid principal of all Certificates
then Outstanding shall, unless the Indenture Trustee acting upon instructions
of at least 25% in aggregate principal amount of Outstanding Certificates shall
otherwise direct, immediately and without further act become due and payable,
without presentment, demand, protest or notice, all of which are hereby waived.
Upon such declaration (or automatic acceleration, as the case may be), the
principal of all Certificates together with accrued interest thereon from the
date in respect of which interest was last paid hereunder to the date payment
of such principal has been made or duly provided for, plus, in the case of the
Series SWA 1995 Trust N397SW-I Certificates, the Break Amount, if any, and all
other amounts payable to the Holders hereunder as at such date of payment shall
be immediately due and payable (but not including any Premium). At any time
after such declaration and prior to the sale or disposition of the Indenture
Estate, the Holders of a majority in aggregate principal amount of all of the
Outstanding Certificates, by notice to the Indenture Trustee, the Company and
the Owner Trustee, may rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal of, and, in the
case of the Series SWA 1995 Trust N397SW-I Certificates, the Break Amount, if
any, on any Certificates which have become due otherwise than by such
declaration and any interest thereon and interest due or past due, if any, and
all sums due and payable to the Indenture Trustee have been deposited with the
Indenture Trustee, (ii) the rescission would not conflict with any judgment or
decree and (iii) all existing Indenture Defaults and Indenture Events of
Default under this Agreement have been cured or waived except nonpayment of
principal of, or interest on, the Certificates that has become due solely
because of such acceleration.
Section 8.03. Other Remedies Available to Indenture
Trustee. (a) After an Indenture Event of Default shall have occurred and so
long as such Indenture Event of Default shall be continuing, then and in every
such case the Indenture Trustee, as trustee of an express trust and as assignee
hereunder of the Lease or as holder of a security interest in the Aircraft or
Engines or otherwise, may, and when required pursuant to the provisions of
Article 9 shall, exercise, subject to Sections 8.03(b) and 8.03(e), any or all
of the rights and powers and pursue any and all of the remedies accorded to the
Owner Trustee pursuant to Section 15 of the Lease and this Article 8 (other
than in respect of Excluded Payments), may recover judgment in its own name as
Indenture Trustee against the Indenture Estate and may take possession of all
or any part of the Indenture Estate and may exclude the Owner Trustee and the
Owner Participant and all Persons claiming under any of them wholly or partly
therefrom. The Indenture Trustee shall have and may exercise all of the rights
and remedies of a secured party under the Uniform Commercial Code as in effect
in any applicable jurisdiction.
(b) After an Indenture Event of Default, subject to
Section 8.03(e), the Indenture Trustee may, if at the time such action may be
lawful and always subject to compliance with any mandatory legal requirements,
either with or without taking possession, and either before or after taking
possession, and without instituting any legal proceedings whatsoever, and
having first given notice of such sale to the Owner Trustee, the Owner
Participant and the Company at least 10 days prior to the date of such sale,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public or private auction, in one
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lot as an entirety or in separate lots, and either for cash or on credit and on
such terms as the Indenture Trustee may determine, and at any place (whether or
not it be the location of the Indenture Estate or any part thereof) and time
designated in the notice above referred to; provided, however, that
notwithstanding any provision herein to the contrary, the Indenture Trustee may
not provide the notice provided for above of its intention to sell any of the
Indenture Estate or exercise other remedies against the Indenture Estate
seeking to deprive the Owner Trustee or the Owner Participant of its rights
therein unless a declaration of acceleration has been made pursuant to Section
8.02 or the Certificates have otherwise theretofore become due and payable
through redemption or otherwise. Any such sale or sales may be adjourned from
time to time by announcement at the time and place appointed for such sale or
sales, or for any such adjourned sale or sales, without further notice, and the
Indenture Trustee and the Holder or Holders of any Certificates, or any
interest therein, may bid and become the purchaser at any such sale, and each
Holder shall be entitled, at any such sale, to credit against the purchase
price bid thereby all or any part of the unpaid obligations owing to such
Holder and secured by the Lien of this Agreement. The Indenture Trustee may
exercise such right without possession or production of the Certificates or
proof of ownership thereof, and as representative of the Holders may exercise
such right without notice to the Holders or including the Holders as parties to
any suit or proceeding relating to foreclosure of any property in the Indenture
Estate. The Owner Trustee hereby irrevocably constitutes the Indenture Trustee
the true and lawful attorney-in-fact of the Owner Trustee (in the name of the
Owner Trustee or otherwise) for the purpose of effectuating any sale,
assignment, transfer or delivery for enforcement of the Lien created under this
Agreement, whether pursuant to foreclosure or power of sale or otherwise, to
execute and deliver all such bills of sale, assignments and other instruments
as the Indenture Trustee may consider necessary or appropriate, with full power
of substitution, the Owner Trustee hereby ratifying and confirming all that
such attorney or any substitute shall lawfully do by virtue hereof.
Nevertheless, if so requested by the Indenture Trustee or any purchaser, the
Owner Trustee shall ratify and confirm any such sale, assignment, transfer or
delivery, by executing and delivering to the Indenture Trustee or such
purchaser all bills of sale, assignments, releases and other proper instruments
to effect such ratification and confirmation as may be designated in any such
request.
(c) Subject to Sections 8.03(b) and 8.03(e), if an
Indenture Event of Default has occurred and is continuing, the Owner Trustee
shall, at the request of the Indenture Trustee, promptly execute and deliver to
the Indenture Trustee such instruments of title or other documents as the
Indenture Trustee may deem necessary or advisable to enable the Indenture
Trustee or an agent or representative designated by the Indenture Trustee, at
such time or times and place or places as the Indenture Trustee may specify, to
obtain possession of all or any part of the Indenture Estate. If the Owner
Trustee shall for any reason fail to execute and deliver such instruments and
documents after such request by the Indenture Trustee, the Indenture Trustee
shall be entitled to a judgment for specific performance of the covenants
contained in the foregoing sentence, conferring upon the Indenture Trustee the
right to immediate possession and requiring the Owner Trustee to execute and
deliver such instruments and documents to the Indenture Trustee. The Indenture
Trustee shall also be entitled to pursue all or any part of the Indenture
Estate wherever it may be found and may enter any of the premises of the Owner
Trustee or any other Person wherever the Indenture Estate may be or be supposed
to be and search for the Indenture Estate and take possession of any item of
the Indenture Estate pursuant to this Section 8.03(c). The Indenture Trustee
may, from time to
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time, at the expense of the Indenture Estate, make all such expenditures for
maintenance, insurance, repairs, replacements, alterations, additions and
improvements to and of the Indenture Estate, as it may deem proper. In each
such case, the Indenture Trustee shall have the right to use, operate, store,
lease, control or manage the Indenture Estate, and to exercise all rights and
powers of the Owner Trustee relating to the Indenture Estate as the Indenture
Trustee shall deem appropriate, including the right to enter into any and all
such agreements with respect to the use, operation, storage, leasing, control
or management of the Indenture Estate or any part thereof; and the Indenture
Trustee shall be entitled to collect and receive directly all tolls, rents
(including Rent), issues, profits, products, revenues and other income of the
Indenture Estate and every part thereof, without prejudice, however, to the
right of the Indenture Trustee under any provision of this Agreement to collect
and receive all cash held by, or required to be deposited with, the Indenture
Trustee hereunder. In accordance with the terms of this Section 8.03(c), such
tolls, rents (including Rent), issues, profits, products, revenues and other
income shall be applied to pay the expenses of using, operating, storing,
leasing, controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect
to make, if any, for taxes, assessments, insurance or other proper charges upon
the Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine, inspect and make reports upon the properties and
books and records of the Owner Trustee and, to the extent permitted by the
Lease, the Company), and all other payments which the Indenture Trustee may be
required or authorized to make under any provision of this Agreement, including
this Section 8.03(c), as well as just and reasonable compensation for the
services of the Indenture Trustee, and of all persons properly engaged and
employed by the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and
the Indenture Trustee shall have obtained possession of or title to the
Aircraft, the Indenture Trustee shall not be obligated to use or operate the
Aircraft or cause the Aircraft to be used or operated directly or indirectly by
itself or through agents or other representatives or to lease, license or
otherwise permit or provide for the use or operation of the Aircraft by any
other Person unless (i) the Indenture Trustee shall have been able to obtain
insurance in kinds, at rates and in amounts satisfactory to it in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all liability for loss or damage to
the Aircraft and for public liability and property damage resulting from use or
operation of the Aircraft and (ii) funds are available in the Indenture Estate
to pay for all such insurance or, in lieu of such insurance, the Indenture
Trustee is furnished with indemnification from the Holders or any other Person
upon terms and in amounts satisfactory to the Indenture Trustee in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all such liabilities.
(d) Subject to Sections 8.03(b) and 8.03(e), the
Indenture Trustee may proceed to protect and enforce this Agreement and the
Certificates by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Indenture Estate or any part thereof, or for the recovery of judgment
for the indebtedness secured by the
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Lien created under this Agreement or for the enforcement of any other power,
legal or equitable remedy available under applicable law.
(e) (i) If the Company shall fail to make any payment
of Basic Rent under the Lease and such failure shall have become a Lease Event
of Default then as long as no other Indenture Event of Default shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the expiration of
a period of ten Business Days (the "10-Day Period") after such failure shall
have become a Lease Event of Default (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee), notwithstanding any provision hereof to the contrary,
exercise any of the rights, powers or remedies pursuant to Section 15 of the
Lease or this Article 8), an amount equal to the full amount of such payment of
Basic Rent, together with any interest due thereon under the Lease on account
of the delayed payment thereof to the date of such payment, and such payment by
the Owner Participant or the Owner Trustee shall be deemed to cure any
Indenture Event of Default which arose from such failure of the Company as of
such date of payment (but such cure shall not relieve the Company of any of its
obligations). If the Company shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under the Lease (other
than its obligation to pay Basic Rent), and if (but only if) the performance or
observance thereof can be effected by the payment of money alone (it being
understood that actions such as the obtaining of insurance and the procurement
of maintenance services can be so effected), then as long as no other Indenture
Event of Default (other than those arising from a Lease Event of Default) shall
have occurred and be continuing, the Owner Participant or the Owner Trustee may
(but need not) pay to the Indenture Trustee (or to such other Person as may be
entitled to receive the same), at any time prior to the expiration of a period
of ten Business Days after the expiration of the grace period, if any, provided
with respect to such failure on the part of the Company in Section 14 of the
Lease (prior to the expiration of which 10-Day Period the Indenture Trustee
shall not (without the prior written consent of the Owner Trustee),
notwithstanding any provision hereof to the contrary, exercise any of the
rights, powers or remedies pursuant to Section 15 of the Lease or this Article
8), all sums necessary to effect the performance or observance of such covenant
or agreement of the Company, together with any interest due thereon under the
Lease on account of the delayed payment thereof to the date of such payment,
and such payment by the Owner Participant or the Owner Trustee shall be deemed
to cure any Indenture Event of Default which arose from such failure of the
Company as of such date of payment (but such cure shall not relieve the Company
of any of its obligations). If, on the basis specified in the preceding
sentences, any Lease Events of Default shall have been remedied, then any
declaration pursuant to this Indenture that the Certificates are due and
payable or that an Indenture Event of Default exists hereunder, based solely
upon such Lease Events of Default, shall be deemed to be rescinded, and, in the
case of the first and second sentences of this Section 8.03(e)(i), the Owner
Participant or the Owner Trustee shall (to the extent of any such payments made
by it) be subrogated to the rights of the Holders of the Certificates under
Section 3.03, to receive from the Indenture Trustee such payment of overdue
Basic Rent or other amount (and the payment of interest on account of such
Basic Rent or other amount being overdue) and shall be entitled, so long as no
other Indenture Event of Default or Indenture Default shall have occurred and
be continuing or would result therefrom, to receive, subject to the provisions
of this Indenture, such payment upon receipt thereof by the Indenture Trustee;
provided, that the Owner Participant shall not otherwise attempt to recover any
such amount paid by it on behalf of the Company pursuant to this Section
8.03(e)(i) except by demanding of payment of such amount or by commencing
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an action at law against the Company for the payment of such amount; and
provided, further, that:
(x) this Section 8.03(e)(i) shall not apply with respect
to any default in the payment of Basic Rent due under the Lease if the
Lessee itself shall have theretofore failed to pay Basic Rent in the
manner required under the Lease (after giving effect to any applicable
grace period) (i) due on each of the two Rent Payment Dates
immediately preceding the date of such default, or (ii) due on a total
of four Rent Payment Dates; and
(y) neither the Owner Trustee nor the Owner Participant
shall have the right to cure any Lease Event of Default except as
specified in this Section 8.03(e)(i).
(ii) In the event that (A) at any time one or more
Lease Events of Default shall have occurred and be continuing or (B) the
Certificates shall have been accelerated pursuant to Section 8.02, the Owner
Trustee or the Owner Participant may, at its option, give at least 30 days'
prior irrevocable notice to the Indenture Trustee that the Owner Trustee or the
Owner Participant will redeem (except subsequent to the establishment of the
Redemption Date in respect of the Certificates) or purchase all Certificates
then Outstanding on a date determined consistently with the applicable
provisions of Article 6 and, concurrently with such notice, the Owner Trustee
or the Owner Participant will deposit with the Indenture Trustee an amount
sufficient to redeem (except subsequent to the establishment of the Redemption
Date in respect of the Certificates) or purchase at the applicable Redemption
Price determined in accordance with Article 6 all Certificates then Outstanding
(including, when applicable, an estimate of the Premium to be paid on the
Redemption Date computed using the Treasury Yield determined as if the
Redemption Date were the date of such notice) and to pay the Indenture Trustee
all amounts then due it hereunder, which funds shall be held by the Indenture
Trustee as provided in Section 9.04. Subject to the subsequent satisfaction by
the Owner Trustee of its obligations pursuant to the next following sentence,
upon the giving of such notice and the receipt by the Indenture Trustee of such
deposit, the Indenture Trustee shall deem all instructions received from the
Owner Trustee as having been given by the Holders of 100% of the Outstanding
principal amount of Certificates for all purposes of this Indenture. If such
notice is given, the Owner Trustee further agrees that it will deposit or cause
to be deposited with the Indenture Trustee, on or prior to the applicable
Redemption Date, whether or not an Indenture Event of Default is then
continuing, funds sufficient, when added to the funds already held by the
Indenture Trustee for such purpose, to redeem or purchase at the applicable
Redemption Price (including the Break Amount or Premium (if the Redemption
Price includes Premium) actually payable in respect thereof, if any, and all
other amounts payable to the Holders hereunder or under any other Operative
Agreement on such Redemption Date) all Certificates then Outstanding and to pay
the Indenture Trustee all amounts then due it hereunder. Whenever the Owner
Trustee or the Owner Participant shall be entitled to purchase Certificates
pursuant to this Section 8.03(e)(ii), each Holder shall sell its Certificates
to the Owner Trustee or the Owner Participant, as the case may be, in
compliance herewith.
(iii) Anything in this Agreement to the contrary
notwithstanding, the Indenture Trustee shall not be entitled to exercise any
remedy hereunder as a result of an
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Indenture Event of Default which arises solely by reason of one or more events
or circumstances which constitute a Lease Event of Default unless the Indenture
Trustee as security assignee of the Owner Trustee shall have exercised or
concurrently be exercising one or more of the remedies provided for in Section
15 of the Lease with respect to the Aircraft, provided, that the requirement to
exercise such remedies under the Lease shall not apply in circumstances where
the Indenture Trustee is involuntarily stayed or otherwise prohibited by
applicable law or court order from exercising such remedies under the Lease
after the Section 1110 Period. The "Section 1110 Period" shall mean the period
commencing on the date of such stay or prohibition and ending on the earlier of
(x) the 60th day thereafter (or such longer period (A) as may be specified in
Section 1110(a)(1) of the Bankruptcy Code, (B) equal to the period of an
extension with the consent of the Indenture Trustee of the 60-day period
specified therein pursuant to Section 1110(b) of the Bankruptcy Code, or (C)
resulting from the Indenture Trustee's own failure to give any requisite notice
to any Person) and (y) the date of repossession of the Aircraft. References in
this sentence to particular sections of the Bankruptcy Code as in effect on the
date hereof shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to
the contrary, including, without limitation, Sections 8.03(b), 8.03(c) and
8.03(d), as long as no Lease Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee shall take any
action in violation of the Company's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Company's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Subject to Sections 8.03(b) and 8.03(e), each and
every right, power and remedy herein given to the Indenture Trustee
specifically or otherwise in this Agreement shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or
now or hereafter existing at law, in equity or by statute, and each and every
right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and as often in such order as may be deemed
expedient by the Indenture Trustee, and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Indenture Trustee in the exercise of any
right, remedy or power or in pursuing any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of
the Owner Trustee or the Company or to be an acquiescence therein.
Section 8.04. Waiver of Owner Trustee. To the extent now
or at any time hereafter enforceable under applicable law, the Owner Trustee
covenants that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Indenture
Estate or any part thereof, prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or prior to any applicable decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute now or hereafter made
or enacted by any state or otherwise to redeem the property so sold or any part
thereof, and hereby expressly waives for itself and on behalf of each and
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every Person, except decree or judgment creditors of the Owner Trustee
acquiring any interest in or title to the Indenture Estate or any part thereof
subsequent to the date of this Agreement, all benefit and advantage of any such
law or laws, and covenants that it will not invoke or utilize any such law or
laws, but will suffer and permit the execution of every such power as though no
such law or laws had been made or enacted. Nothing in this Section 8.04 shall
be deemed to be a waiver by the Owner Trustee of its rights under Section
8.03(e).
The Indenture Trustee may maintain such a pleading, or in any
manner whatsoever claim or take any benefit or advantage of or from any law now
or hereafter in force even if it does not possess any of the Certificates or
does not produce any of them in the proceeding. A delay or omission by the
Indenture Trustee or any Holder in exercising any right or remedy accruing upon
an Indenture Event of Default under this Agreement shall not impair the right
or remedy or constitute a waiver of or acquiescence in such Indenture Event of
Default.
Section 8.05. Waiver of Existing Defaults. The Holders of
a majority in aggregate principal amount of the Outstanding Certificates by
notice to the Indenture Trustee may waive on behalf of the Holders an existing
Indenture Default or Indenture Event of Default and its consequences except (i)
an Indenture Default or Indenture Event of Default in the payment of the
principal of or interest on any Certificate or (ii) in respect of a covenant or
provision hereof which pursuant to Section 11.02 cannot be amended or modified
without the consent of the Holder affected.
Section 8.06. Control by Majority. The Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee or exercising any trust or power conferred
on it by this Agreement. However, the Indenture Trustee may refuse to follow
any direction that conflicts with law or this Agreement, that is unduly
prejudicial to the rights of the Holders so affected, or that would, without
satisfactory indemnity from the Holders, subject the Indenture Trustee to
personal liability.
Section 8.07. Limitation on Suits by Holders. A Holder of
a Certificate may pursue a remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written
notice of a continuing Indenture Event of Default under this
Agreement;
(2) the Holders of at least 25% in aggregate principal
amount of the Outstanding Certificates make a written request to the
Indenture Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss,
liability or expense to be, or which may be, incurred by the Indenture
Trustee in pursuing the remedy;
(4) the Indenture Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
indemnity; and
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(5) during such 60-day period the Holders of a majority
in aggregate principal amount of the Outstanding Certificates do not
give the Indenture Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Agreement the right of any Holder
to receive payment of principal of, Premium or Break Amount, if any, and
interest on such Holder's Certificate on or after the respective due dates
expressed in such Certificate, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
Section 8.09. Indenture Trustee May File Proofs of Claim.
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Holders allowed in any judicial proceedings
relating to any obligor on the Certificates, its creditors, or its property.
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee.
(a) The Indenture Trustee will furnish to each
Certificate Holder promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and
other instruments furnished to the Indenture Trustee under any Operative
Agreement or received from the Owner Trustee pursuant to Section 4.01(vi) to
the extent the same shall not have been otherwise directly distributed to the
Holders pursuant to the express provision of any other Operative Agreement.
(b) Subject to the terms of Sections 8.03(e), 8.05, 8.06,
9.01(c), 11.02 and 11.06, upon the written instructions at any time and from
time to time of Holders of a majority in aggregate principal amount of the
Outstanding Certificates, the Indenture Trustee shall take such of the
following actions as may be specified in such instructions: (i) exercise such
election or option, or make such decision or determination, or give such
notice, consent, waiver or approval or exercise such right, remedy or power or
take such other action hereunder or under any other Operative Agreement or in
respect of any part or all of the Indenture Estate as shall be specified in
such instructions; (ii) take such action with respect to, or to preserve or
protect, the Indenture Estate (including the discharge of Liens) as shall be
specified in such instructions and as are consistent with this Indenture; and
(iii) take such other action in respect of the subject matter of this Indenture
as is consistent with the terms hereof and the other Indenture Documents. The
Indenture Trustee will execute and the Owner Trustee will file or cause to be
filed such continuation statements with respect to financing statements
relating to the security interest created hereunder in the Indenture Estate as
may be specified from time to time in written instructions of Holders of a
majority in aggregate principal amount of the Outstanding
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Certificates (which instructions may, by their terms, be operative only at a
future date and which shall be accompanied by the execution form of such
continuation statement so to be filed).
(c) The Indenture Trustee shall not be required to take
any action or refrain from taking any action under Section 8.06 or 9.01(b)
unless the Indenture Trustee shall have been indemnified by the Holders against
any liability, cost or expense (including counsel fees) which may be incurred
in connection therewith. The Indenture Trustee shall not be under any
obligation to take any action under this Agreement and nothing in this
Agreement contained shall require the Indenture Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. The Indenture Trustee shall not be required to take any action under
Section 8.06 or 9.01(b), nor shall any other provision of this Indenture be
deemed to impose a duty on the Indenture Trustee to take any action, if the
Indenture Trustee shall have been advised by counsel that such action is
contrary to the terms hereof or is otherwise contrary to law.
(d) The Indenture Trustee shall not have any duty or
obligation to use, operate, store, lease, control, manage, sell, dispose of or
otherwise deal with the Aircraft or any other part of the Indenture Estate, or
to otherwise take or refrain from taking any action under, or in connection
with, this Indenture or any part of the Indenture Estate, except as expressly
provided by the terms of this Indenture or as expressly provided in written
instructions from Holders as provided in this Indenture; and no implied duties
or obligations shall be read into this Indenture against the Indenture Trustee.
(e) The Owner Trustee and the Indenture Trustee agree
that they will not use, operate, store, lease, control, manage, sell, dispose
of or otherwise deal with the Aircraft or any other part of the Indenture
Estate except (i) in accordance with the terms of the Lease or the
Participation Agreement, or (ii) in accordance with the powers granted or
reserved to, or the authority conferred upon, the Owner Trustee and the
Indenture Trustee pursuant to this Indenture and in accordance with the express
terms hereof.
(f) Subject to the provisions of Section 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Agreement. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to be
extent required by law.
Section 9.02. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may consult with counsel or require an Officer's Certificate or an
Opinion of Counsel from the Company or the Owner Trustee after which it will
take such action or refrain from acting as it deems appropriate. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith and in accordance herewith in reliance on a resolution of the Board of
Directors
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of the Company, the written advice of counsel acceptable to the Owner Trustee,
the Company and the Indenture Trustee, officer's certificates or opinions of
counsel provided by the Company or the Owner Trustee.
(c) The Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care; provided, that so long as no Indenture Event of
Default shall have occurred and be continuing no such agents shall be appointed
by the Indenture Trustee without the consent of the Company and the Owner
Trustee, which consent shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) If an Indenture Event of Default under this Agreement
has occurred and is continuing, the Indenture Trustee shall exercise its rights
and powers under this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
Section 9.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates and may otherwise deal with the Owner Trustee, the
Company or an Affiliate of the Owner Trustee or the Company or a subsidiary of
the Owner Trustee or the Company with the same rights it would have if it were
not the Indenture Trustee. Any Agent may do the same with like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or
Paying Agent; Investments. Any monies (including without limitation for
purposes of this Section 9.04 Permitted Investments constituting the proceeds
of the maturity, sale or other disposition of any Permitted Investment) held by
the Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its account
with any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
States thereof having combined capital and surplus and retained earnings of at
least $100,000,000, and neither the Indenture Trustee nor the Paying Agent
shall have any liability for interest upon any such monies except as otherwise
agreed in writing or (ii) at any time and from time to time, so long as no
Lease Default (of the type described in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, at the request
(given directly by the Company to the Indenture Trustee) of the Company acting
as the agent of the Owner Trustee, shall be invested and reinvested in
Permitted Investments as specified in such request (if such investments are
reasonably available for purchase) and sold, in any case at such prices,
including accrued interest or its equivalent, as are set forth in such request,
and such Permitted Investments shall be held by the Indenture Trustee in trust
as part of the Indenture Estate until so sold; provided, that the Company, on
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity,
sale or other disposition of any such Permitted Investment and, so long as no
Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be
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continuing, be entitled to receive from the Indenture Trustee, and the
Indenture Trustee on behalf of the Owner Trustee, shall promptly pay to the
Company pursuant to Section 22.1 of the Lease, any profit, income, interest,
dividend or gain realized upon maturity, sale or other disposition of any
Permitted Investment. If any Lease Default (of the type referred to in Section
14.1 or 14.5 of the Lease) or Lease Event of Default shall have occurred and be
continuing, any net income, profit, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment shall be held
as part of the Indenture Estate and shall be applied by the Indenture Trustee
at the same time, on the same conditions and in the same manner as the amounts
in respect of which such income, profit, interest, dividend or gain was
realized are required to be distributed in accordance with the provisions
hereof or of the Lease pursuant to which such amounts were required to be held.
The Indenture Trustee shall not be responsible for any losses on any
investments or sales of Permitted Investments made pursuant to the procedure
specified in this Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event of
Default under this Agreement occurs and is continuing and the Indenture Trustee
has actual knowledge of same, the Indenture Trustee shall (i) promptly send
written notice thereof to the Company, the Owner Trustee and the Owner
Participant and, so long as the Series SWA 1995 Trust N397SW-I Certificates
shall be Outstanding, the Holders thereof and (ii) within 90 days after it
occurs, mail to each other Holder notice of all uncured Indenture Events of
Default under this Agreement. Except in the case of a default in the payment of
the principal of, Premium, if any, or interest on any Certificates or during
any period when the Series SWA 1995 Trust N397SW-I Certificate shall be
Outstanding, Break Amount, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii) above if and so long as the
executive committee or trust committee of directors of the Indenture Trustee
and/or Responsible Officers thereof in good faith determines that withholding
such notice is in the interest of the Holders. In addition, if an Indenture
Default under this Agreement occurs and is continuing and if the Indenture
Trustee has actual knowledge of same, the Indenture Trustee shall promptly send
written notice thereof to the Company, the Owner Trustee and the Owner
Participant and, so long as the Series SWA 1995 Trust N397SW-I Certificates
shall be Outstanding, the Holders thereof.
Section 9.06. Compensation and Indemnity. (a) The Owner
Trustee shall pay to the Indenture Trustee from time to time (i) reasonable
compensation for its services, which compensation shall not be limited by any
law on compensation of a trustee of an express trust, (ii) reimbursement for
all reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the reasonable compensation and expenses of the Indenture Trustee's counsel and
any agent appointed in accordance with Section 9.02(c)), and (iii)
indemnification against any loss or liability incurred by it arising out of or
in connection with its acceptance or administration of the trust or trusts
hereunder except (A) as such expenses or loss or liability might result from
the gross negligence or willful misconduct of the Indenture Trustee or the
inaccuracy of any representation or warranty of the Indenture Trustee in its
individual capacity in Section 8 of the Participation Agreement or failure by
the Indenture Trustee to perform its payment and investment obligations
hereunder, (B) as otherwise provided in Section 9.10 and (C) as otherwise
excluded by the terms of Sections 7(b) and 7(c) of the Participation Agreement
from the Company's indemnities under said Sections; provided, that the
Indenture Trustee shall not make any claim
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under this Section 9.06(a) for any claim or expense indemnified against by the
Company under the Participation Agreement without first making demand on, and
pursuing such demand on a reasonable basis for a reasonable length of time, the
Company for payment of such claim or expense. The Indenture Trustee shall
notify the Owner Trustee and the Company promptly of any claim for which it is
entitled to be indemnified hereunder. The Indenture Trustee may have separate
counsel and the Owner Trustee shall pay the reasonable fees and expenses of
such counsel. The Owner Trustee need not pay for any settlement made without
its and the Company's consent.
(b) To secure the payment obligations of the Owner
Trustee pursuant to this Section 9.06, the Indenture Trustee shall have a lien
prior to that of the Holders of the Certificates on all money or property
constituting a part of the Indenture Estate held or collected by the Indenture
Trustee, except that held in trust to pay the principal of, and interest on,
the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least
30 days' prior written notice to the Company, the Owner Trustee and the Holders
of a majority in aggregate principal amount of the Outstanding Certificates.
The Holders of a majority in aggregate principal amount of the Outstanding
Certificates may remove the Indenture Trustee by giving at least 30 days' prior
written notice to the Indenture Trustee, the Owner Trustee and the Company and
may appoint a successor Indenture Trustee with the Owner Trustee's and the
Company's consent. At such time as Series SWA 1995 Trust N397SW Certificates
are Outstanding, the Owner Trustee may remove the Indenture Trustee if:
(1) the Indenture Trustee fails to comply with
Section 9.09, fails to perform its payment obligations hereunder or
otherwise fails to perform any of its material obligations hereunder;
(2) the Indenture Trustee is adjudged a bankrupt
or an insolvent;
(3) a receiver or public officer takes charge of
the Indenture Trustee or its property; or
(4) the Indenture Trustee becomes incapable of
acting.
(c) If the Indenture Trustee resigns or is removed, or if
a vacancy exists in the office of Indenture Trustee for any reason, Holders of
a majority in aggregate principal amount of the Certificates or, at such time
as Series SWA 1995 Trust N397SW Certificates are Outstanding, the Owner
Trustee, shall promptly appoint a successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the
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Company, the Owner Trustee or the Holders of a majority in aggregate principal
amount of the Outstanding Certificates may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Holder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Company
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the lien provided for in Section 9.06. The successor
Indenture Trustee shall give notice of each appointment of a successor
Indenture Trustee if there are Certificates Outstanding, by mailing written
notice of such event by first-class mail to the Holders.
(g) All provisions of this Section 9.07 except
subparagraphs (b)(l) and (e) and the words "subject to the lien provided for in
Section 9.06" in subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by
Merger, Etc. If the Indenture Trustee or any Agent consolidates with, merges
or converts into, or transfers all or substantially all of its corporate trust
business assets to, another corporation, the successor corporation, without any
further act, shall be the successor Indenture Trustee or Agent, as the case may
be.
Section 9.09. Eligibility; Disqualification. This
Agreement shall at all times have an Indenture Trustee which shall have a
combined capital and surplus of at least $100,000,000 and shall be a "citizen
of the United States" as defined in the Federal Aviation Act. If such
corporation publishes reports of conditions at least annually, pursuant to law
or to the requirements of Federal, State, Territorial, or District of Columbia
supervising or examining authority, then for the purposes of this Section 9.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
conditions so published.
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in
its individual capacity agrees that it will at its own cost and expense
promptly take such action as may be necessary to duly discharge and satisfy in
full all Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
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unrelated to the transactions contemplated by the Operative Agreements, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting.
Without limitation of subsections 15.05(d) and 15.05(e), the Indenture Trustee
shall exclude and withhold from each distribution of principal, Premium, if
any, Break Amount, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect to the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders, that
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to
each Holder appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such Holders may reasonably
request from time to time. The Indenture Trustee agrees to file any other
information reports as it may be required to file under United States law. Such
withholding by the Indenture Trustee shall in no event give rise to an
Indenture Event of Default and shall be deemed to constitute payment in full of
the amount withheld.
Section 9.12. [Reserved for Potential Future Use]
Section 9.13. Certain Rights of Owner Trustee and Owner
Participant. Notwithstanding any other provisions of this Indenture, including
the Granting Clause, the following rights shall be reserved to the Owner
Trustee or the Owner Participant, as the case may be (as separate and
independent rights) to the extent described herein:
(a) at all times the Owner Trustee and the Owner
Participant shall have the right, together with the Indenture Trustee,
to receive from the Lessee all notices, certificates, reports,
filings, opinions of counsel and other documents and all information
which the Company is permitted or required to give or furnish to the
Owner Participant, the Owner Trustee or the Lessor pursuant to any
Indenture Document;
(b) at all times (unless otherwise specified) the Owner
Trustee shall have the right (1) to the exclusion of the Indenture
Trustee but subject to and without affecting the provisions of Section
11.06, (i) to exercise the rights, elections and options of the Lessor
to make any decision or determination and to give any notice, consent,
waiver or approval with respect to any adjustments under Section 3.7
of the Lease or the identification of Permitted Foreign Air Carriers
pursuant to Section 23 of the Lease, Sections 17 and 18 of the
Participation Agreement, the Tax Indemnity Agreement and any provision
of the Operative Agreements related to Excluded Payments, (ii) to
exercise the rights, elections and options of the Lessor and to
approve the purchase or other acquisition of the Aircraft by a
Prohibited Person with respect to the termination of the Lease and
solicitations of bids and appraisals pursuant to Section 9 of the
Lease, or with respect to renewals or purchase options and
terminations to take effect upon or after the payment in full (or
assumption by the Company) of the obligations secured hereby,
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(iii) without limiting the terms of Section 8.03(e)(i), to effect
cures pursuant to Section 20 of the Lease, and (iv) to maintain and
exercise all rights regarding separate insurance with respect to the
Aircraft for its own account pursuant to Section 11.7 of the Lease
(provided, that no such insurance impairs or reduces coverage under
any insurance required to be maintained by the Company under Section
11 of the Lease) and (2) so long as no Indenture Event of Default
shall have occurred and be continuing, (x) during the Floating Period,
together with the Indenture Trustee (agreement of both being required)
and (y) during the Fixed Period, to the exclusion of the Indenture
Trustee (i) to approve as satisfactory any other accountants,
inspectors, engineers or counsel to render services for or issue
opinions to the Owner Trustee, together with the contents of any
certificates and opinions to be delivered by such Persons, in each
case pursuant to express provisions of the Operative Agreements and
(ii) to grant such consents, approvals and waivers as may be requested
under the Indenture Documents and (3) together with the Indenture
Trustee (each acting separately), to request all certificates and
documents of Lessee, to request assignment of any sublease of the
Aircraft and to exercise inspection rights pursuant to Section 12 of
the Lease;
(c) at all times, the Owner Trustee shall have the
non-exclusive right, as Lessor, to seek specific performance of the
covenants of the Company under the Lease relating to the protection,
insurance, maintenance, possession and use of the Aircraft and to
obtain performance by Lessee under Sections 11(a) and (b) of the
Participation Agreement; and
(d) at all times each of the Owner Trustee (as Owner
Trustee, individually and as Lessor) and the Owner Participant shall
have the right, to the exclusion of the Indenture Trustee, to demand,
collect, sue for or receive the payment of, and waive, modify or
otherwise deal with Excluded Payments due and payable to it, and, in
the case of the Owner Participant, to give the written notice referred
to in the proviso to Section 14.1 of the Lease.
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement;
Defeasance; Termination of Obligations. Subject to Section 10.02, this
Agreement shall cease to be of further effect, and the Owner Trustee and the
Indenture Trustee shall, except as herein provided, be deemed to have been
discharged from their respective obligations hereunder and with respect to the
Certificates (and the Indenture Trustee, on demand and at the expense of the
Owner Trustee, shall execute proper instruments acknowledging satisfaction and
discharge of this Agreement in respect of the Certificates), when
(a) (i) all Certificates theretofore executed and
delivered (other than (A) Certificates which have been mutilated, destroyed,
lost or stolen and which have been replaced or exchanged as provided in Section
2.06 and (B) Certificates for the payment of which money
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held in trust hereunder has been paid and discharged from such trust, as
provided in Section 7.01) have been delivered to the Indenture Trustee for
cancellation; or
(ii) all Certificates not theretofore delivered to
the Indenture Trustee for cancellation have become due and payable (whether
upon stated maturity or as a result of redemption or upon acceleration), or
will become due and payable (including as a result of redemption in respect of
which irrevocable notice has been given to the Indenture Trustee on or prior to
the date of such deposit) at maturity within one year, and there has been
deposited with the Indenture Trustee in trust for the purpose of paying and
discharging the entire indebtedness on the Certificates not theretofore
canceled by the Indenture Trustee or delivered to the Indenture Trustee for
cancellation, an amount of cash and/or Government Obligations sufficient to
discharge such indebtedness, including the principal of, Premium, if any, and
interest on the Certificates to the date of such deposit (in the case of
Certificates which have become due and payable), or to the maturity thereof, as
the case may be and, in the case of the Series SWA 1995 Trust N397SW-I
Certificate, Break Amount, if any, and all other amounts payable to the
Original Holder hereunder or under any other Operative Agreement; or
(iii) the Certificates shall have been defeased as
provided in Section 10.05; provided, however, that upon the making of the
deposit referred to in subsection A of Section 10.05, the right of the Owner
Trustee or the Company to cause the redemption of Certificates (except a
redemption in respect of which irrevocable notice has theretofore been given)
shall terminate;
(b) all other amounts then due and payable hereunder have
been paid; and
(c) the Owner Trustee or the Company on behalf of the
Owner Trustee has delivered to the Indenture Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
for or relating to the satisfaction and discharge of this Agreement
contemplated by this Section 10.01 have been complied with.
Section 10.02. Survival of Certain Obligations.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, 2.10, Article III
(other than Section 3.05), Section 7.01, Section 9.11, Section 10.03 and
Section 10.04, and the rights, duties, immunities and privileges hereunder of
the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All money and
Government Obligations deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment in the case
of the Series SWA 1995 Trust N397SW-I Certificates, as provided for in Section
15.04 or, in the case of the Series SWA 1995 Trust N397SW Certificates, either
directly or through any Paying Agent as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, Premium,
if any, interest, and, in the case of the Series SWA 1995 Trust N397SW-I
Certificates, Break Amount, if any, and all other amounts payable to the
Holders hereunder or under any other Operative Agreement, but such money need
not be segregated from other funds except to the extent required by law.
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Section 10.04. Monies to Be Returned to Owner Trustee. The
Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or Government
Obligations held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Certificates for which
money or Government Obligations have been deposited pursuant to Section 10.01,
and the Holders shall have no claim in respect of any money or Government
Obligations so paid or returned.
Section 10.05. Defeasance. The Owner Trustee may, at any
time, defease the interest of the Indenture Trustee in the Indenture Estate in
whole, but not in part, through the deposit with the Defeasance Trustee, in
accordance with the provisions of this Section 10.05, of cash and/or Government
Obligations; provided, however, that such defeasance shall not be applicable in
respect of the Series SWA 1995 Trust N397SW-I Certificates. Such deposit shall
be made pursuant to a declaration or other appropriate instrument of trust
satisfactory in form and substance to the Defeasance Trustee and the Indenture
Trustee; such deposit shall be absolute and irrevocable and the instrument of
trust shall expressly provide that the Owner Trustee shall have no further
title to or interest in or power to direct the use or application of the cash
and/or Government Obligations so deposited or any of the proceeds arising
therefrom; such instrument shall state that the trust created thereby and the
cash and/or Government Obligations deposited pursuant thereto are for the sole
and exclusive benefit of the Holders and shall expressly provide that the
Defeasance Trustee shall apply such cash and payments of principal and/or
interest on such Government Obligations to, and only to, the punctual payment
of the principal and interest on the Certificates as and when such payments
become due (such declaration or instrument to contain appropriate provisions
for the recording of transfers of Certificates and the names and addresses of
the Holders); and the Owner Trustee shall agree to pay, as the same shall
become due and payable, all fees, costs and charges of the Defeasance Trustee
under such instrument of trust, including those which may become payable after
the date the conditions hereinbelow specified have been met. Upon compliance
with the following conditions, and provided, that no Indenture Event of Default
or Indenture Default shall have occurred and be continuing on a date 91 days
after the date of the deposit of Government Obligations and/or cash with the
Defeasance Trustee as provided in Subsection A below, the Owner Trustee's
obligations with respect to the Certificates will be discharged and this
Indenture shall terminate as provided in Section 10.01:
A. the Owner Trustee shall have deposited with the
Defeasance Trustee absolutely and irrevocably (irrespective of whether
the conditions in Subsections B, C, D and E of this Section 10.05 have
been satisfied) (1) cash and/or (2) Government Obligations which
through the payment of principal and interest in respect thereof in
accordance with their terms, without any reinvestment or further
investment of the principal of or interest earned on such Government
Obligations, will absolutely and unconditionally provide in any and
all circumstances not later than one day before each Payment Date an
amount sufficient to pay and discharge the payment of principal and
interest to be due and payable on such Payment Date;
B. no Indenture Event of Default or Indenture Default
shall have occurred and be continuing on the date of the deposit of
cash and/or Government Obligations as contemplated hereby;
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C. the Owner Trustee shall have delivered to the
Defeasance Trustee and to the Certificate Holders written confirmation
by a nationally recognized firm of independent public accountants
(other than the accounting firm then serving as Shawmut Bank
Connecticut, National Association's or the Owner Participant's regular
auditors) selected by the Owner Trustee, the form and substance of
which confirmation and the identity of such accounting firm shall be
satisfactory to the Indenture Trustee, that the Government Obligations
deposited for payment of the Certificates, together with any cash
deposited by the Owner Trustee, are sufficient to satisfy the
requirements of Subsection A hereof;
D. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate Holders
an opinion of counsel in form and substance satisfactory to the
Indenture Trustee to the effect that (1) the trust declaration or
other instrument, as the case may be, is legal, valid, binding and
enforceable in accordance with its terms for the sole benefit and use
of the Holders, is irrevocable and the Government Obligations and/or
cash deposited thereunder and the proceeds thereof and therefrom are
held by the Defeasance Trustee thereunder in trust solely for the
benefit of the Holders and will not be subject to any valid interest,
lien, claim or encumbrance of any other Person, including the Owner
Trustee or the Owner Participant or any Person claiming by, through,
under or in the name or on behalf of the Owner Trustee or the Owner
Participant or any creditor or beneficiary of the Owner Trustee or the
Owner Participant, or by any court or trustee in bankruptcy and (2)
such deposit will not constitute a preferential transfer or a
fraudulent conveyance under any bankruptcy or other similar law and
shall cover such other matters as the Indenture Trustee may reasonably
require in connection with such final deposit and matters relating
thereto;
E. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate Holders
an Officers' Certificate and an Opinion of Counsel (1) to the effect
that there has been published by the Internal Revenue Service a
ruling, or (2) since the date of this Agreement that there has been a
change in or clarification of the applicable Federal income tax law,
in either case to the effect that Holders will not recognize income,
gain or loss for Federal income tax purposes as a result of the
exercise by the Owner Trustee of its option under Section
10.01(a)(iii) and will be subject to Federal income tax on the same
amounts and in the same manner and at the same times, as would have
been the case if such option had not been exercised; and
F. the Owner Trustee shall have (1) taken such further
action and executed such further documents as may be reasonably
required by any Holder, the Indenture Trustee or the Defeasance
Trustee and (2) delivered to the Defeasance Trustee, the Indenture
Trustee and to the Holders a certificate of a Responsible Officer of
the Owner Trustee stating that all conditions precedent herein to the
defeasance of the Certificates contemplated by this Section 10.05 have
been satisfied.
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The Owner Trustee will pay all expenses (including, without
limitation, reasonable legal fees) incident to the implementation of the
transactions contemplated by this Section 10.05.
For the purpose of this Article 10, the following terms have
the following definitions:
"Defeasance Trustee" shall mean an institution authorized to
transact in the State of New York the business of a trust company
selected by the Owner Trustee and approved by the Indenture Trustee;
provided, that at the time of the delivery of cash and/or Government
Obligations pursuant to this Section 10.05, the institution selected
shall have a combined capital and surplus of at least $500,000,000 and
shall not be an Affiliate of the Company, the Owner Participant or
Shawmut Bank Connecticut, National Association.
"Government Obligations" shall mean direct U.S. Dollar
obligations of the United States of America which are not callable,
redeemable or prepayable, directly or indirectly, by any Person.
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent
of Holders. The Owner Trustee and the Indenture Trustee may enter into one or
more agreements supplemental hereto without the consent of any Holder for any
of the following purposes:
(1) to correct any mistake or cure any ambiguity,
defect or inconsistency herein or in the Certificates or to make any
change not inconsistent with the provisions hereof; provided, that
such change does not adversely affect the interests of any Holder;
(2) to evidence the succession of another party
as the Owner Trustee in accordance with the terms of the Trust
Agreement or to evidence (in accordance with Article 9) the succession
of a new trustee hereunder, the removal of the trustee hereunder or
the appointment of any co-trustee or co-trustees or any separate or
additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee or to make any
other provisions with respect to matters or questions arising
hereunder so long as such action shall not adversely affect the
interests of the Holders;
(4) to correct or amplify the description of any
property at any time subject to the Lien of this Agreement or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subject to the Lien of this Agreement or to
subject to the Lien of this Agreement the Airframe or Engines or
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airframe or engines substituted for the Airframe or Engines in
accordance herewith or with the Lease; provided, that Trust
Supplements entered into for the purpose of subjecting to the Lien of
this Agreement the Airframe or Engines (or the Replacement Airframe or
any Replacement Engines) in accordance with the Lease need only be
executed by the Owner Trustee;
(5) to add to the covenants of the Owner Trustee,
for the benefit of the Holders, or to surrender any rights or power
herein conferred upon the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
(7) to provide for the assumption by the Company
of the obligations of the Owner Trustee hereunder in accordance with
the terms and conditions applicable thereto specified in Section 7.03;
(8) to provide for the redemption of (i) the
Series SWA 1995 Trust N397SW-I Certificate and the issuance of the
Series SWA 1995 Trust N397SW Certificates in accordance with the terms
and conditions applicable thereto specified in Article 15 or (ii) any
Series SWA 1995 Trust N397SW Certificates issued hereunder and the
issuance of the New Debt in accordance with the terms and conditions
applicable thereto specified in Section 17 of the Participation
Agreement; or
(9) to include on the Certificates any legend as
may be required by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
Holders. (a) With the written consent of the Holders of a majority of the
aggregate principal amount of the Outstanding Certificates, the Owner Trustee
and the Indenture Trustee may enter into such supplemental agreements to add
any provisions to or to change or eliminate any provisions of this Agreement or
of any such supplemental agreements or to modify the rights of the Holders;
provided, however, that without the consent of each Holder affected thereby, an
amendment under this Section 11.02 may not:
(1) reduce the principal amount of, Premium or
Break Amount, if any, or any installment of interest on, any
Certificate; or
(2) change the date on which any principal amount
of, any Installment Payment Amount payable with respect to, Premium or
Break Amount, if any, or interest on any Certificate, is due or
payable; or
(3) create any Lien on the Indenture Estate prior
to or pari passu with the Lien thereon under this Agreement except such
as are permitted by this Agreement, or deprive any Holder of the
benefit of the Lien on the Indenture Estate created by this Agreement;
or
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(4) reduce the percentage in principal amount of
the Outstanding Certificates, the consent of whose holders is required
for any such supplemental agreement, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of
this Agreement or of certain defaults hereunder or their consequences)
provided for in this Agreement; or
(5) make any change in Section 8.05, 8.08, or
(but only for so long as the Series SWA 1995 Trust N397SW-I
Certificates shall be Outstanding) Article 15, or this Section
11.02(a).
(b) It is not necessary under this Section 11.02 for the
Holders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and
the Indenture Trustee of any supplemental agreement pursuant to the provisions
of this Section 11.02, the Indenture Trustee shall transmit by first-class mail
a notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of such Holders appear on
the Register. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental agreement.
Section 11.03. Revocation and Effect of Consents. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder, even if notation
of the consent is not made on any Certificate. However, any such Holder or
subsequent Holder may revoke the consent as to his Certificate if the Indenture
Trustee receives the notice of revocation before the date the amendment or
waiver becomes effective. After an amendment or waiver becomes effective, it
shall bind every Holder affected by such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates. The
Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Certificate thereafter executed. The Indenture Trustee in
exchange for such Certificates may execute new Certificates that reflect the
amendment or waiver.
Section 11.05. Indenture Trustee Protected. The Indenture
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, Etc. of Other Operative
Agreements. (a) Subject to Section 11.01, without the consent of the Holders
of a majority in principal amount of Outstanding Certificates, the respective
parties to the Participation Agreement, the Lease and the Trust Agreement may
not modify, amend or supplement any of said agreements, or give any consent,
waiver, authorization or approval thereunder, for any purpose, including adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or modifying in any manner the rights of the respective
parties thereunder; provided, however, that the actions specified in subsection
(b) of this Section 11.06 may be taken without the consent of the Indenture
Trustee or any Holder.
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(b) Subject to the provisions of subsection (c) of this
Section 11.06, the respective parties to the Participation Agreement, the Lease
and the Trust Agreement, at any time and from time to time without the consent
of the Indenture Trustee or of any Holder may:
(1) so long as no Indenture Event of Default
shall have occurred and be continuing, modify, amend or supplement the
Lease, or give any consent, waiver, authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 (except as specifically provided below) the parties
to the Lease shall not modify, amend or supplement, or give any
consent, waiver, authorization or approval for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the
respective parties thereunder, with respect to the following
provisions of the Lease as originally executed: Sections 2, 3.1, 3.2
(if the result thereof would be to shorten the Term of the Lease to a
period shorter than the period ending with the final Principal Payment
Date, Installment Date or Maturity Date of the Certificates), 3.3,
3.4, 3.5 (except to the extent such Section relates to Excluded
Payments and amounts payable to the Indenture Trustee in its
individual capacity), 3.6 (except insofar as it relates to the address
or account information of the Owner Trustee or the Indenture Trustee),
the first sentence of Section 3.8 or any proviso in said Section, 4, 5
(but only insofar as it relates to return condition upon termination
of the Lease pursuant to Section 15), 6, 7 (except that further
restrictions may be imposed on the Company), 9, 10 (except that
additional requirements may be imposed on the Company), 11 (except for
Section 11.6 insofar as such Section relates to the Owner Participant
and the Lessor and except that additional insurance requirements may
be imposed on the Company), 12 (except in order to increase the
Company's liabilities or enhance the Lessor's rights thereunder), 13
(except in the case of an assignment by the Lessor in circumstances
where the Aircraft shall remain registrable under the Federal Aviation
Act), 14 (except to impose additional or more stringent Lease Events
of Default), 15 (except to impose additional remedies), 16, 17,
18.2(b) (except to impose additional requirements on the Company), 19,
20, 21 and 22, and (i) any definition of terms used in the Lease, to
the extent that any modification of such definition would result in a
modification of the Lease not permitted pursuant to this subsection
(b) and (ii) any other provision of the Lease not hereinabove referred
to if the modification, amendment or supplement thereto, or consent,
waiver, authorization or approval in respect thereof would adversely
affect the Indenture Trustee's interest in the Trust Estate, reduce
Lessee's obligations in respect of maintaining the Aircraft or
otherwise impair the value of the Trust Estate; provided, that in the
event an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as Lessor under the Lease to modify, amend or supplement the
Lease or give any consent, waiver, authorization or approval
thereunder, for any purpose, including, adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or
of modifying in any manner the rights of the Lessor thereunder;
provided, further, that without the prior consent of the Owner
Trustee, and whether or not an Indenture Event of Default shall have
occurred and be continuing, no such action shall be taken with respect
to any of the provisions of Sections 1 (to the extent any modification
of a definition contained therein would result in a modification of
the Lease not permitted by this proviso), 3.4 (to the extent any
modification would result in amounts payable by
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Lessor under the Indenture not also being payable by Lessee to Lessor
under the Lease), 3.7, 3.8, 4, 5 (to the extent not related to return
upon termination of the Lease pursuant to Section 15 of the Lease), 6
(to the extent such action would reduce the Company's obligations), 7,
8, 9, 10, 11, 12, 13, 14, 15, 16 (insofar as it relates to the
Lessor), 17, 18, 19, 20, 21 and 22 of the Lease, or any other Section
of the Lease to the extent such action shall affect any Excluded
Payment or the amount or timing of any amounts payable by the Company
under the Lease as originally executed (or as subsequently modified
with the consent of the Owner Trustee) which, absent the occurrence
and continuance of an Indenture Event of Default, will be
distributable to the Owner Trustee under Article 3; and provided,
further, that the parties to the Lease may take any such action
without the consent of the Indenture Trustee or any Holder to the
extent such action relates to the payment of amounts constituting, or
the Owner Trustee's, the Owner Participant's or the Company's rights
or obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, in each case only to the extent any such action shall
not adversely affect the interests of the Holders;
(3) modify, amend or supplement the Participation
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 the parties to the Participation Agreement shall
not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to the following provisions of the
Participation Agreement as originally executed: Sections 1(b), 7
(insofar as such Section 7 relates to the Indenture Trustee and the
Holders), 8, 11, 13, 17, 18 and 19 and (i) any definition of terms
used in the Participation Agreement, to the extent that any
modification of such definition would result in a modification of the
Participation Agreement not permitted pursuant to this subsection (b)
and (ii) any other provision of the Participation Agreement not
hereinabove referred to if the modification, amendment or supplement
thereto, or consent, authorization or approval in respect thereof
would adversely affect the Indenture Trustee's interest in the Trust
Estate or otherwise impair the value of the Trust Estate; and
(4) modify, amend or supplement any of said
agreements in order to cure any ambiguity, to correct or supplement
any provisions thereof which may be defective or inconsistent with any
other provision thereof or of any provision of this Indenture, or to
make any other provision with respect to matters or questions arising
thereunder or under this Agreement which shall not be inconsistent
with the provisions of this Agreement, provided the making of any such
other provision shall not adversely affect the interests of the
Holders.
(c) No modification, amendment, supplement, consent,
waiver, authorization or approval with respect to the Lease or the
Participation Agreement, whether effected pursuant to subsection (a) or
pursuant to subsection (b) of this Section 11.06 and anything in such
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subsections or elsewhere in this Agreement to the contrary notwithstanding,
shall, without the consent of the holder of each Outstanding Certificate
affected thereby,
(1) modify, amend or supplement the Lease in such
a way as to extend the time of, or the manner of making any, payment
of any Advance or Basic Rent, or Stipulated Loss Value or any other
amounts payable to the Indenture Trustee for its own account or for
the account of the Holders (subject in any event to the last paragraph
of Section 3.3 of the Lease) upon the occurrence of an Event of Loss
or Termination Value and any other amounts payable to the Indenture
Trustee for its own account or for the account of the Holders (subject
in any event to the last paragraph of Section 3.3 of the Lease) upon
termination of the Lease with respect to the Aircraft, payable under,
or as provided in, the Lease as originally executed, or reduce the
amount of any installment of any Advance or Basic Rent or Supplemental
Rent so that the same is less than the payment of principal of,
Premium, if any, Break Amount, if any, and interest on the
Certificates, as the case may be, to be made from such installment of
any Advance or Basic Rent or Supplemental Rent, or reduce the
aggregate amount of Stipulated Loss Value, or any other amounts
payable under, or as provided in, the Lease as originally executed
upon the occurrence of an Event of Loss so that the same is less than
the accrued interest on and the principal as of the Lease Loss Payment
Date, and Break Amount, if any, of the Certificates at the time
Outstanding or reduce the amount of Termination Value or Special
Purchase Price and any other amounts payable under, or as provided in,
the Lease as originally executed upon termination of the Lease so that
the same is less than the accrued interest on and principal as of the
date of any such termination and Premium, if any, and Break Amount, if
any of Certificates at the time Outstanding, or
(2) modify, amend or supplement the Lease in such
a way as to, or consent to any assignment of the Lease or give any
consent, waiver, authorization or approval which would, release the
Company from its obligations in respect of payment of Basic Rent or
Supplemental Rent, or Stipulated Loss Value and any other amounts
payable to the Indenture Trustee for its own account or the account of
the Holders (subject in any event to the last paragraph of Section 3.3
of the Lease) upon the occurrence of any Event of Loss, or Termination
Value or Special Purchase Price and any other amounts payable to the
Indenture Trustee for its own account or the account of the Holders
(subject in any event to the last paragraph of Section 3.3 of the
Lease), payable under, or as provided in, the Lease as originally
executed, except for any such assignment pursuant to Section 8(s) of
the Participation Agreement, and except as provided in the Lease as
originally executed.
Section 11.07. Trust Supplement. The Owner Trustee and the
Indenture Trustee hereby confirm and agree that upon execution and delivery of
any Trust Supplement covering the Aircraft by the Owner Trustee substantially
in the form attached hereto as Exhibit C or any trust supplement covering a
sublease of the Aircraft, this Agreement shall be supplemented by such Trust
Supplement or such trust supplement without further action by the Owner Trustee
or Indenture Trustee.
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ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically
provided herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by courier service, telegram, telex, telemessage, telecopy, telefax, cable or
facsimile (confirmed by telephone or in writing in the case of notice by
telegram, telex, telemessage, telecopy, telefax, cable or facsimile) or any
other customary means of written communication, and any such notice shall be
effective when delivered,
if to the Indenture Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telex: 835437 WILM TR
Facsimile: (302) 651-8882
Telephone: (302) 651-1000
if to the Owner Trustee, to:
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telex: 221086 CTNB-HFD
Facsimile: (203) 240-7920
Telephone: (203) 722-9079
or if to any other Person, addressed to such Person as provided in the
Participation Agreement.
(b) The Company, the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Original Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Holders of the Series
SWA 1995 Trust N397SW Certificates shall be mailed by first-class mail to the
addresses for Holders shown on the Register kept by the Registrar and to
addresses filed with the Indenture Trustee for other Holders. Failure so to
mail a notice or communication or any defect in such notice or
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communication shall not affect its sufficiency with respect to other Holders of
such Certificates of that or any other series entitled to receive notice.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) Notwithstanding the foregoing, all communications or
notices to the Indenture Trustee shall be deemed to be given only when received
by a Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. Successors and Assigns; Agreement of Holders.
All covenants and agreements contained herein shall be binding upon, and inure
to the benefit of, each of the parties hereto and the successors and assigns of
each, whether so expressed or not. Any request, notice direction, consent,
waiver or other action by any Certificate Holder shall bind the successors and
assigns of such Certificate Holder. Each Certificate Holder, by its acceptance
of a Certificate, agrees to be bound by all provisions of this Indenture and
the Participation Agreement applicable to it.
Section 12.04. Rules by Indenture Trustee and Agents. The
Indenture Trustee may make reasonable rules for action by or a meeting of the
Holders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
Section 12.05. Non-Business Days. With respect to the
Series SWA 1995 Trust N397SW Certificates only, if a payment date is not a
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for
the intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
Section 12.07. No Recourse Against Others. No director,
officer, employee or stockholder, as such, of the Company, the Owner Trustee or
the Owner Participant, as the case may be, shall have any liability for any
obligations of the Company, the Owner Trustee or the Owner Participant, as the
case may be, under any Operative Agreement or for any claim based on, in
respect of or by reason of such obligations or their creation. Each Holder by
accepting a Certificate waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute but one instrument.
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Section 12.09. Applicability Only to Original Holder.
Notwithstanding any provision to the contrary herein, Sections 15.03 through
15.05 shall only be applicable to the Holders of Series SWA Trust N397SW-I
Certificates.
Section 12.10. Severability. Any provision of this
Indenture which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of
Lease. Upon any of:
(a) the voluntary termination of the Lease by the Company
pursuant to Section 9 thereof on the Lease Termination Date, and upon payment
to the Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its
option pursuant to Section 18.2 of the Lease on the Special Purchase Option
Date (unless the Company shall have elected to assume all of the rights and
obligations of the Owner Trustee hereunder as provided for in Section 8(r) of
the Participation Agreement), and upon payment to the Indenture Trustee of an
amount equal to the Redemption Price as at the applicable Redemption Date of
all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss
Payment Date, following an Event of Loss suffered by the Airframe under
circumstances where the Company does not exercise its option to substitute a
Replacement Airframe therefor pursuant to Section 10.1.2 of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price as
at the Redemption Date of all Outstanding Certificates, or
(d) the satisfaction, discharge, defeasance and
termination of obligations under this Agreement in accordance with Section
10.01,
the Lien of this Agreement on the Indenture Estate shall terminate (except for
the Lien on funds held by the Indenture Trustee to pay the Certificates and the
Lien on amounts due from the Company under the Lease necessary to pay the
Certificates or the Indenture Trustee) and the Indenture Trustee shall execute
such instruments as may be requested by the Company or the Owner Trustee to
evidence such termination (at the Company's or the Owner Trustee's expense).
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ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE]
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N397SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N397SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N397SW-I
CERTIFICATES
Section 15.01. Conditions Precedent to Issuance of Series
SWA 1995 Trust N397SW Certificates. The issuance of the Series SWA 1995 Trust
N397SW Certificates pursuant to Section 18 of the Participation Agreement is
subject to all conditions specified in such section.
Simultaneously with the satisfaction of such conditions, the
Owner Trustee shall deliver to the Indenture Trustee a completed version of
Exhibits B, B-l and B-2 with respect to the Series SWA 1995 Trust N397SW
Certificates, which completed Exhibits B, B-l and B-2 shall specify the
maturities and principal amounts of the Series SWA 1995 Trust N397SW
Certificates and the applicable interest rates, together with the reference
dates for purposes of determining the Owner Trustee's rights to redeem such
Certificates as provided for in the Operative Agreements. Such completed
Exhibits B, B-l and B-2 shall be deemed upon such delivery automatically to
have been incorporated herein without further action of the parties hereto.
Section 15.02. Payment upon Issuance of Series SWA 1995
Trust N397SW Certificates. Simultaneously with the receipt of the proceeds of
the issuance of the Series SWA 1995 Trust N397SW Certificates, the Indenture
Trustee, on behalf of the Owner Trustee, shall apply an amount equal to the
Redemption Price of the Series SWA 1995 Trust N397SW-I Certificates to the
redemption of the Series SWA 1995 Trust N397SW-I Certificates in accordance
with Section 15.03.
Section 15.03. Special Provision Governing Refinancing of
the Series SWA 1995 Trust N397SW-I Certificate. Notwithstanding any other
provision of this Agreement, as long as any Series SWA 1995 Trust N397SW-I
Certificate is Outstanding, if a refinancing shall be effected pursuant to
Section 17 or 18 of the Participation Agreement and if all the conditions to
such refinancing set forth herein and in such Section 17 or 18 shall have been
satisfied, the Series SWA 1995 Trust N397SW-I Certificates may be refinanced in
whole at a Redemption Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to, but excluding, the applicable
Redemption Date plus the Break Amount, if any, and any other amounts payable to
the Holders thereof hereunder or under the Participation Agreement,
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but without any other premium or penalty; provided, however, that the
applicable Redemption Date for the redemption of the Series SWA 1995 Trust
N397SW-I Certificates pursuant to this Section 15.03 shall be the applicable
Refinancing Date or Section 18 Refinancing Date, as the case may be.
Section 15.04. Special Provision for Payments in Respect of
the Series SWA 1995 Trust N397SW-I Certificate. Notwithstanding any other
provision of this Agreement, all amounts payable in respect of the Series SWA
1995 Trust N397SW-I Certificates shall be paid by the Indenture Trustee (i) if
to the Original Holder by FedWire transfer in immediately available funds in
Dollars through the Federal Reserve Bank of San Francisco for the account of
Bank of America National Trust and Savings Association ABA #121000358, for
credit to GPO Account Administration #5693, Account No. 12331-83980, ref:
Southwest Airlines Interim Debt, or (ii) if to any other Holder of such
Certificates (or as may otherwise be directed by the Original Holder), to such
account maintained by such Holder with any bank located in the United States
and designated by such Holder to the Indenture Trustee, in any case without
presentment or surrender of any Certificate, except that in the case of any
final payment with respect to any Series SWA 1995 Trust N397SW-I Certificate,
such Certificate shall be surrendered promptly thereafter to the Indenture
Trustee by the Holder thereof for cancellation. Such payment shall be made by
the Indenture Trustee, in the case of any such designated account in New York,
New York, prior to 2:00 P.M., New York time, on the due date thereof if such
payment is received by the Indenture Trustee by 1:00 P.M., New York time, or by
12:00 Noon, New York time on the next succeeding Business Day if such payment
is received after 1:00 P.M., New York time. In the event the Indenture Trustee
shall fail to make any such payment as provided in the immediately foregoing
sentence after its receipt of funds at the place and prior to the time
specified above, the Indenture Trustee, in its individual capacity and not as
trustee, agrees to compensate the Certificate Holders for loss of use of funds
in a commercially reasonable manner.
Section 15.05. Increased Costs, Break Amount, Additional
Interest, Taxes, Etc. (a) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements which are provided for in subsection (c), below) after the
Delivery Date in any law or regulation or in the interpretation thereof by any
government or central bank or other governmental department, agency, board,
service or governmental body charged with responsibility for the administration
or interpretation thereof or (ii) the compliance with any guideline or request
made after the Delivery Date by any government or central bank or other
governmental department, agency, board, service or other governmental body
(whether or not having the force of law), there shall be any increase in the
cost to, or any reduction of the rate of return on assets or equity of, any
Holder (or any of its Affiliates) of the Series SWA 1995 Trust N397SW-I
Certificate of agreeing to make or making, funding or maintaining the loan
evidenced by its Series SWA 1995 Trust N397SW-I Certificate in respect of (x)
any period as to which the applicable Debt Rate is determined by reference to
the Offshore Rate and (y) capital adequacy requirements, then the Owner Trustee
shall from time to time pay to such Holder such amount as shall be necessary to
reimburse such Holder for such increase in cost within 10 Business Days after
delivery to the Owner Trustee, the Indenture Trustee and the Company of a
certificate of an officer of such Holder setting forth in reasonable detail the
event by reason of which it claims such increase in cost and the basis for the
determination of the amount of such increase in cost; provided, however, that
the
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
-64-
<PAGE> 71
Original Holder shall not be entitled to assert any claim under this subsection
15.05(a) in respect of taxes (including Taxes (as defined in the Participation
Agreement) and the taxes referred to in subsections (d) and (e) of this Section
15.05). Such certificate shall, in the absence of manifest error, be binding
and conclusive. Such Holder shall notify the Owner Trustee, the Indenture
Trustee and the Company as soon as possible of the occurrence of any event by
reason of which it is entitled to make a claim as described in this subsection
(a), but the failure to give such notice shall not affect the obligations of
the Owner Trustee hereunder.
(b) In the event that any Holder of the Series SWA 1995
Trust N397SW-I Certificate incurs any Break Amount (as defined below) in
connection with any payment, prepayment, acceleration, redemption, refinancing
or purchase, in whole or in part, of the principal of its Series SWA 1995 Trust
N397SW-I Certificate in accordance with the provisions of this Agreement or
otherwise on a date other than the last day of an Interest Period, then the
Owner Trustee shall pay to such Holder such Break Amount on the date of such
payment, prepayment, acceleration, redemption, refinancing or purchase, as the
case may be.
For the purposes hereof, "Break Amount" means an amount equal
to the net funding loss or additional expense which any Holder of a Series SWA
1995 Trust N397SW-I Certificate sustains or incurs or will sustain or incur as
a result of any payment, prepayment, acceleration, redemption, refinancing or
purchase (whether by mandatory or voluntary prepayment, optional purchase,
acceleration or otherwise) of any principal of its Series SWA 1995 Trust
N397SW-I Certificate on a date other than the last day of an Interest Period,
as reasonably determined by such Holder and set forth in a certificate of such
Holder which includes in reasonable detail the basis or the calculations of the
amount being claimed.
(c) The Owner Trustee agrees to pay to any Holder of a
Series SWA 1995 Trust N397SW-I Certificate, to the extent that such Holder
shall require, due to either (i) the introduction of or any change after the
Delivery Date in any law or regulation or in the interpretation thereof by the
Federal Reserve Board (or any governmental authority succeeding thereto) or
(ii) compliance with any guideline or request made after the Delivery Date by
the Federal Reserve Board (whether or not having the force of law), to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
the loan evidenced by its Series SWA 1995 Trust N397SW-I Certificate, in
respect of any period to which such reserve maintenance requirement is so
applicable and the applicable Debt Rate is determined by reference to the
Offshore Rate, in an amount as to any such period equal to the amount obtained
by applying to the outstanding principal amount of such loan during such period
an interest rate equal at all times to the remainder obtained by subtracting
(A) the applicable Offshore Rate from (B) the rate obtained by dividing such
Offshore Rate by a percentage equal to 100% minus the Eurocurrency Reserve
Percentage, if any, applicable from time to time to such Holder. Such
additional interest shall be paid by the Owner Trustee to any Holder of a
Series SWA 1995 Trust N397SW-I Certificate from time to time as and when
interest is payable under such Holder's Certificate, subject to receipt of
notice of the amount of such additional interest for such Holder.
(d) Should any Holder of a Series SWA 1995 Trust N397SW-I
Certificate fail to qualify for a complete exemption from withholding of United
States Federal income tax
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
-65-
<PAGE> 72
because of a change in the provisions of the Code or other relevant laws from
those in effect on the Delivery Date, and the Indenture Trustee is required by
law to deduct or withhold United States Federal income tax from amounts paid to
such Holder, the amounts payable hereunder and under its Series SWA 1995 Trust
N397SW-I Certificate shall be increased as may be necessary so that, after all
required deductions and withholdings for United States Federal income tax
resulting from any such change in the Code, such Holder receives an amount
equal to the excess of (i) the amount it would have received had no such
deduction or withholding been made over (ii) the additional amount of United
States Federal income tax that would have been payable by it under Section 882
of the Code in the absence of such change in the Code.
(e) Each Holder of a Series SWA 1995 Trust N397SW-I
Certificate by its acceptance of such Series SWA 1995 Trust N397SW-I
Certificate, agrees that it will, promptly after it becomes aware of any event
or the existence of a condition that would give rise to reimbursement or
payment pursuant to subsection 15.05(a), 15.05(c) or 15.05(d) or to increased
payment hereunder and under the Series SWA 1995 Trust N397SW-I Certificate
pursuant to subsection 15.05(d), to the extent not inconsistent with such
Holder's internal policies, use reasonable efforts to make, fund or maintain
the loan evidenced by the Series SWA 1995 Trust N397SW-I Certificate through a
different Lending Office if, as a result thereof, the amount of such
reimbursement or payment or increased payment, as the case may be, which would
otherwise be required to be made would be materially reduced and if, as
determined by such Holder in its reasonable discretion the making, funding or
maintaining of such loan through such different Lending Office would not
otherwise adversely affect such loan or such Holder. Each Holder agrees that it
will consult with the Owner Trustee in connection with any relocation of its
Lending Office. The Owner Trustee hereby agrees to pay all reasonable expenses
incurred by each such Holder in considering or taking action pursuant to this
subsection (e).
(f) Amounts payable to the Holder of any Series SWA 1995
Trust N397SW-I Certificate pursuant to this Article 15 that are not paid when
due shall bear interest from the due date thereof to, but excluding the date
paid, at the Past Due Rate.
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
-66-
<PAGE> 73
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided
herein and otherwise solely as Owner Trustee
By: /s/ Pablo de la Canal
-----------------------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity, except as otherwise
expressly provided herein, but solely as Indenture
Trustee
By: /s/ David A. Vanaskey, Jr.
-----------------------------------------------
Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
-67-
<PAGE> 74
Exhibit A
to Trust Indenture
and Security Agreement
Form of Series SWA 1995 Trust N397SW-I Certificate
THIS CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS CERTIFICATE MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
$________________ No. ________________
SERIES SWA 1995 TRUST N397SW-I CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but solely as Owner Trustee under a
Trust Agreement
Dated as of April 1, 1995
Issued in Connection with Aircraft N397SW
Leased to
SOUTHWEST AIRLINES CO.
Date: _________ ___, 1995
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement, dated as of April 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (such agreement as the same
may be modified, amended or supplemented being referred to herein as the "Trust
Agreement"), for value received hereby promises to pay to BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank"), the principal sum of
________________ Dollars on or before _____________________ (the "Maturity
Date"), together with interest on such principal amount remaining unpaid from
time to time from the date hereof until such principal amount is paid in full.
The principal amount of this Certificate shall be payable in installments on
the dates (each a "Principal Payment Date") set forth in Annex A hereto equal
to the corresponding percentage of the original principal amount of this
Certificate set forth in Annex A hereto.
<PAGE> 75
Notwithstanding the foregoing, the final payment made on this
Certificate shall be in an amount sufficient to discharge in full the unpaid
principal amount and all accrued and unpaid interest on, and any other amounts
due under this Certificate or as provided for in the Trust Indenture and
Security Agreement, dated as of April 1, 1995 relating to the Aircraft (such
agreement as the same may be modified, amended or supplemented being referred
to herein as the "Indenture"; the defined terms used therein and not otherwise
defined herein being used herein with the same meanings), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder.
Interest on the principal amount of this Certificate shall
accrue at the applicable Debt Rate (as defined below). The "Debt Rate"
applicable in respect of any day in any Interest Period (as defined below)
selected by the Owner Trustee or Southwest Airlines Co. (the "Company") (acting
on behalf of the Owner Trustee) as provided for below, or portion thereof,
shall be the Offshore Rate (as defined below) applicable to such Interest
Period as selected by the Owner Trustee or the Company (acting on behalf of the
Owner Trustee) as provided for below, plus in each case the margin applicable
from time to time determined pursuant to the following table:
<TABLE>
<CAPTION>
Interest Period:
---------------------------------------------------
Ending on Margin in Basis
Commencing On: And Including: Points Per Annum:
------------- -------------- ----------------
<S> <C> <C>
Delivery Date First anniversary 40
of the Delivery Date
First day subsequent to One-year and six-months 50
the first anniversary of anniversary of the
the Delivery Date Delivery Date
First day subsequent to the Second anniversary of the 75
one-year and six months Delivery Date
anniversary of the
Delivery Date
First day subsequent to the Third anniversary of the 500
second anniversary of the Delivery Date
Delivery Date
First day subsequent to the Fourth anniversary of the 600
third anniversary of the Delivery Date
Delivery Date
First day subsequent to the Any date subsequent to the 700
fourth anniversary of the fourth anniversary of the
Delivery Date Delivery Date
</TABLE>
provided, however, for any Interest Period beginning after the second
anniversary of the Delivery Date, the Debt Rate shall never be less than the
Treasury Rate applicable to such Interest
A-2
<PAGE> 76
Period, plus in each case the margin applicable from time to time determined
pursuant to the foregoing table.
Interest accrued and unpaid on any Interest Payment Date shall
be paid on such Interest Payment Date; provided, however, that all interest
accrued and unpaid on this Certificate on the date this Certificate shall be
paid in full shall be paid on such date; provided, however, that if any
Interest Period Date (as defined below) is not also an Interest Payment Date,
all interest accrued during the Interest Period relevant thereto and unpaid as
at such Interest Period Date shall be compounded until the next succeeding
Interest Payment Date and shall bear interest at the Debt Rate applicable from
time to time hereunder during the period from such Interest Period Date to the
next succeeding Interest Payment Date and all such compounded interest shall be
due and payable on such next succeeding Interest Payment Date; provided,
finally, that any amount of principal or interest payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest,
payable on demand, from the due date therefor until the date of payment at an
interest rate equal to the Debt Rate plus 2% per annum. All computations of
interest shall be made by the Original Holder on the basis of a year of 360
days for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest is payable.
Notwithstanding any provision hereof to the contrary, this
Certificate shall not constitute an obligation to pay nor shall the Bank be
entitled hereunder to collect any amount of interest to the extent not
permitted by applicable law.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
For purposes of this Certificate, the following capitalized
terms used herein shall have the following meanings:
"Basis Point" shall mean one one-hundredth of one percent
(1/100 of 1%).
"Interest Payment Date" shall mean each July 1 and January 1
beginning July 1, 1995.
"Interest Period" shall mean, with reference to the Offshore
Rate, a period of up to 30 consecutive days, as available, or one,
two, three or six months, as selected by the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) as provided for below,
and shall mean, with reference to the Treasury Rate, a period of 30,
60, 90 or 180 days, corresponding to the one, two, three or six month
Interest Period, as the case may be, which shall have been so selected
with reference to the Offshore Rate; provided, however, that (i) the
initial Interest Period shall commence on the Delivery Date; (ii) each
Interest Period immediately succeeding an Interest Period shall
commence on the last day of the preceding Interest Period; (iii) if
any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day; and (iv) notwithstanding anything to the contrary
A-3
<PAGE> 77
contained herein, no Interest Period shall extend beyond a date which
is a Principal Payment Date.
"Interest Period Date" shall mean each Business Day on which
an Interest Period expires.
"Offshore Rate" shall mean, for each Interest Period, the rate
at which deposits in U.S. dollars in same day funds would be offered
at 11:00 A.M., New York time, two Business Days prior to the
commencement of such Interest Period by the Bank's Grand Cayman Branch
(or such other office as the Bank may designate for such purpose,
including its London Branch, but in that case such time shall be
London rather than New York time) to major banks in the offshore
interbank market upon request of such major banks for a period equal
to the relevant interest period and in the amount of the advance
scheduled to be outstanding during such interest period. The exact
length of interest periods shall be determined in accordance with
standard practices of the offshore dollar interbank market.
"Treasury Rate" shall mean, as to any Interest Period, the
yield to maturity (rounded to the nearest 1/100 of 1%) of the most
recently auctioned United States Treasury securities having maturities
most closely corresponding (linearly interpolating between the next
preceding and next succeeding maturities) to the Maturity Date, as
determined at 11 a.m. (New York City time) on the first day of such
Interest Period by reference to the Telerate Trading Assistant or, if
such Telerate Trading Assistant is not available to provide such data,
the average (rounded upwards to the nearest 1/100 of 1%), as
determined by the Bank, of quotes furnished at (or as proximately
thereto as is reasonably practicable) such time by two reputable
dealers in United States Treasury securities, which shall be selected
by the Bank.
The selection of the Offshore Rate and the duration of the
Interest Period related thereto shall be made by telephonic notice (followed by
telex, telecopy or other written confirmation) from the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) to the Original Holder or its
designee by not later than (i) 11:00 A.M. (New York time) on the second
Business Day preceding the first day of the relevant Interest Period or (ii)
11:00 A.M. (New York time) on the third Business Day preceding the first day
of the relevant Interest Period, if such Offshore Rate is to relate to the
Bank's London Branch; provided, however, that if a Lease Default shall have
occurred or be continuing or no such notice shall have been given, the Debt
Rate will be deemed, effective upon the last day of the then current Interest
Period, to be determined by reference to the Offshore Rate for an Interest
Period of one month.
All payments of principal, interest and other amounts, if any,
to be made by the Owner Trustee hereunder and under the Indenture shall be made
only from the income and proceeds from the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture and only to the extent
that the Indenture Trustee shall have sufficient income or proceeds from the
Indenture Estate and such other amounts to make such payments in accordance
with the terms of the Indenture, and the Bank, by its acceptance of this
Certificate, agrees that it will look solely to the income and proceeds from
the Indenture Estate and the other amounts referred to in Section 3.03 of the
Indenture to the extent available for distribution to the Holder hereof as
above provided and that none of the Owner Participant,
A-4
<PAGE> 78
the Owner Trustee or the Indenture Trustee is or shall be personally liable or
liable in any manner extending to any assets, other than the Indenture Estate,
to the Bank for any amounts payable under this Certificate or the Indenture or,
except as provided in the Indenture, for any liability under the Indenture;
provided, however, that nothing herein contained shall limit, restrict or
impair the right of the Indenture Trustee, subject always to the terms and
provisions of the Indenture, to accelerate the maturity of this Certificate
upon an Indenture Event of Default, to bring suit and obtain a judgment against
the Owner Trustee on this Certificate for purposes of realizing upon the
Indenture Estate and to exercise all rights and remedies provided under the
Indenture or otherwise realized upon the Indenture Estate.
Both the original amount of principal due hereunder and
interest and other amounts due hereunder shall be payable in United States
currency in immediately available funds pursuant to Section 15.04 of the
Indenture. Each such payment shall be made on the date such payment is due and
without any presentment or surrender of this Certificate, except that in the
case of any final payment with respect to this Certificate, the Certificate
shall be surrendered promptly thereafter to the Indenture Trustee by the Bank
for cancellation.
The Bank, by its acceptance of this Certificate, agrees that
each payment received by it hereunder shall be applied in the manner provided
in Section 3.08 of the Indenture.
This Certificate is one of the Series SWA 1995 Trust N397SW-I
Certificates referred to in the Indenture which has been or is to be issued by
the Owner Trustee pursuant to the terms of the Indenture. The Indenture Estate
is held by the Indenture Trustee as security for the Certificates. The rights
of the Owner Trustee under the Indenture, as well as the beneficial interest of
the Owner Participant in and to the properties of the Owner Trustee assigned,
pledged or mortgaged as part of the Indenture Estate, are subject and
subordinate to the rights of the Holders of the Certificates to the extent
provided for in the Indenture. Reference is hereby made to the Indenture and
the Participation Agreement for a statement of the rights of the Bank in
respect of, and the nature and extent of the security for, this Certificate,
and the rights of the Owner Trustee and the Owner Participant, as well as for a
statement of the terms and conditions of the trusts created by the Indenture,
to all of which terms and conditions in the Indenture the Bank agrees by its
acceptance of this Certificate.
Any Holder of this Certificate shall be deemed to have made
the following representation by its acquisition of this Certificate: either
that (a) no part of the funds used by it to acquire this Certificate
constitutes "plan assets" of any "employee benefit plan" within the meaning of
ERISA or any "plan" within the meaning of Section 4975(e)(1) of the Code, or
(b) its purchase or acquisition of this Certificate will not result in a
non-exempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA.
This Certificate is subject to prepayment by redemption or
acceleration as provided in Articles 6 and 15 of the Indenture.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue,
A-5
<PAGE> 79
and neither the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant nor the Company shall be affected by notice to
the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK.
A-6
<PAGE> 80
IN WITNESS WHEREOF, the Owner Trustee has caused this
Certificate to be executed in its corporate name by its officer thereunto duly
authorized on the date hereof.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee
By:
------------------------------------------
Title:
A-7
<PAGE> 81
[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred to in the within-
mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
Indenture Trustee
By:
------------------------------------------
Title:
A-8
<PAGE> 82
Annex A to
Equipment Trust
Certificate
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
---------------------- ---------------------------
<S> <C>
</TABLE>
A-9
<PAGE> 83
Exhibit A-1 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N397SW Installment Certificates
$________________ No. ________________
Dated as of ______________ __, 199_
SERIES SWA 1995 TRUST N397SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of April 1, 1995
Issued in connection with Aircraft N397SW
Leased to
SOUTHWEST AIRLINES CO.
<TABLE>
<CAPTION>
INTEREST RATE MATURITY DATE
- ------------- -------------
<S> <C>
________________ ________________, 2___
</TABLE>
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of April 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars in
installments on each Installment Payment Date as set forth herein with the
final installment due and payable on the Maturity Date specified above and to
pay interest on the principal amount remaining unpaid from time to time at the
rate per annum specified above from ________________, 1995 or from the most
recent date to which interest has been paid or duly provided for, semiannually,
on _____________ and _______ in each year, commencing ____________________,
1995, until the principal hereof is paid or made available for payment in full.
All amounts payable by the Owner Trustee hereunder and under the Trust
Indenture and Security Agreement dated as of April 1, 1995, as supplemented (as
amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and the other amounts referred to in Section
3.03 of the Indenture for
<PAGE> 84
payment of such amounts, to the extent available for distribution to the Holder
hereof as provided in the Indenture and (b) neither the Owner Trustee, the
Owner Participant nor the Indenture Trustee is or shall be personally liable to
the Holder hereof for any amount payable hereunder or under the Indenture or
the other Operative Agreements or, except as provided in the Indenture, for any
liability under the Indenture.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payments Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
A-1-2
<PAGE> 85
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee, the
Owner Participant and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, and the terms upon
which the Certificates may be redeemed, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein.
<TABLE>
<CAPTION>
Installment Installment
Payment Payment
Date Percentage
----------- -----------
<S> <C>
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
</TABLE>
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Certificates may be
declared due and payable in the manner and with the effect provided in the
Indenture. If, and only if, such an Indenture Event of Default constitutes a
Lease Event of Default by the Company under the Lease, the Indenture Trustee
may, to the exclusion of the Owner Trustee, exercise one or more of the
remedies of the Owner Trustee provided in the Lease. Such remedies include (but
are not limited to) the right to repossess and use or operate the Aircraft, to
sell or relet the Aircraft free and clear of the Company's rights and retain
the proceeds and to require the Company to pay as liquidated damages (i) any
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
A-1-3
<PAGE> 86
Value of the Aircraft over the aggregate fair market rental value thereof for
the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for
A-1-4
<PAGE> 87
a like aggregate principal amount of Certificates of the same maturity and type
and of authorized denominations, as requested by the Holder surrendering the
same, upon presentation thereof for such purpose at the principal corporate
trust office of the Registrar, or at an office or agency maintained for such
purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-1-5
<PAGE> 88
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee
By:
------------------------------------------
Title:
Issue Date:
A-1-6
<PAGE> 89
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-
mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
Indenture Trustee
By:
------------------------------------------
Authorized officer or signatory
A-1-7
<PAGE> 90
Exhibit A-2 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N397SW Serial Certificates
$________________ No. ________________
Dated as of __________________ __, 199_
SERIES SWA 1995 TRUST N397SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of April 1, 1995
Issued in connection with Aircraft N397SW
Leased to
SOUTHWEST AIRLINES CO.
<TABLE>
<CAPTION>
INTEREST RATE MATURITY DATE
- ------------- -------------
<S> <C>
________________ ________________, 2___
</TABLE>
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of April 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars on the
Maturity Date specified above and to pay interest thereon at the rate per annum
specified above from ________________, 1995 or from the most recent date to
which interest has been paid or duly provided for, semiannually, on
_______________________ and ___________________ in each year, commencing
______________________, 1995, until the principal hereof is paid or made
available for payment. All amounts payable by the Owner Trustee hereunder and
under the Trust Indenture and Security Agreement dated as of April 1, 1995, as
supplemented (as amended or supplemented from time to time referred to herein
as the "Indenture", the defined terms therein not otherwise defined herein
being used herein with the same meanings), by and among the Owner Trustee and
Wilmington Trust Company, as Indenture Trustee thereunder, shall be made only
from the income and proceeds of the Indenture Estate and the other amounts
referred to in Section 3.03 of the Indenture. Each Holder hereof, by its
acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for
<PAGE> 91
any amount payable hereunder or under the Indenture or the other Operative
Agreements or, except as provided in the Indenture, for any liability under the
Indenture.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
A-2-2
<PAGE> 92
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee, the
Owner Participant and the Holders of the Certificates, and the terms upon which
the Certificates are, and are to be, executed and delivered, the terms upon
which the Certificates may be redeemed, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the right
to repossess and use or operate the Aircraft, to sell or relet the Aircraft
free and clear of the Company's rights and retain the proceeds and to require
the Company to pay as liquidated damages (i) any unpaid Basic Rent plus an
amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated
A-2-3
<PAGE> 93
Certificates, maintain paying agencies and hold money for payment in trust),
and the Indenture Trustee may thereupon cause the release of the Indenture
Estate from the lien of the Indenture, if (a) the Owner Trustee deposits or
causes to be deposited irrevocably with the Indenture Trustee, in trust, money
or Government Obligations which through the payment of interest and principal
in respect thereof in accordance with their terms will provide money in an
amount sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
CertifiCate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-2-4
<PAGE> 94
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee
By:
-------------------------------------------
Title:
Issue Date:
A-2-5
<PAGE> 95
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-
mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
Indenture Trustee
By:
--------------------------------------------
Authorized officer or signatory
A-2-6
<PAGE> 96
Exhibit B to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts and
Interest Rates of Series SWA 1995 Trust N397SW Certificates
<TABLE>
<CAPTION>
Premium
Principal Termination
Maturity Date Amount Interest Rate Date
- ------------- -------- ------------- ------------
<S> <C> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N397SW
Certificates, if any shall be issued hereunder.]
</TABLE>
<PAGE> 97
Exhibit B-1 to
Trust Indenture and
Security Agreement
Installment Payment Dates and Installment Payment Percentages
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N397SW
Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
Installment Certificate No. 2 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N397SW
Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
<PAGE> 98
Exhibit B-2 to
Trust Indenture and
Security Agreement
Issuance of Series SWA 1995 Trust N397SW Certificates
The Series SWA 1995 Trust N397SW Certificates issued hereunder
shall be issued to and shall be payable to _________ under the __________ with
respect to the [grantor trusts created thereby], in each case as set forth
below:
<PAGE> 99
Exhibit C to
Trust Indenture and
Security Agreement
[FORM OF]
TRUST AGREEMENT AND TRUST INDENTURE AND
SECURITY AGREEMENT SUPPLEMENT
This TRUST AGREEMENT AND TRUST INDENTURE AND SECURITY
AGREEMENT SUPPLEMENT, is dated ____________, 1995 (herein called the
"Supplement") of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee (herein called the "Owner
Trustee"), under the Trust Agreement, dated as of April 1, 1995 (herein called
the "Trust Agreement"), between the Owner Trustee and the Owner Participant
named therein,
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and
delivery of one or more supplements thereto substantially in the form hereof,
which shall particularly describe the Aircraft (such term and other terms
defined in the Trust Indenture referred to below, or in the Lease therein
referred to, being used herein as therein defined) included in the property
covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Security Agreement, dated as
of April 1, 1995 (herein called the "Trust Indenture"), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee (herein called the
"Indenture Trustee"), provides for the execution and delivery of a supplement
thereto substantially in the form hereof, which shall particularly describe the
Aircraft, and shall specifically mortgage such Aircraft to the Indenture
Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture
relates to the Airframe and Engines described below, and a counterpart of the
Trust Indenture is attached hereto and made a part hereof and this Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, This Supplement Witnesseth, that, to secure
the prompt payment of the principal of, Break Amount, if any, Premium, if any,
and interest on, and all other amounts due with respect to, all Certificates
from time to time Outstanding and all other amounts due to the Holders under
the Trust Indenture and the Participation Agreement and the performance and
observance by each of the Company and the Owner Trustee of all the agreements,
covenants and provisions in the Trust Indenture and in the other Operative
Agreements for the benefit of the Indenture Trustee and the Holders of the
Certificates and in the Certificates contained, and the prompt payment of all
amounts from time to time owing under the Operative Agreements to the Holders
of the Certificates, and for the uses and purposes of the Trust Indenture, and
in consideration of the premises and of the covenants contained in the Trust
Indenture, and of the acceptance of the Certificates by the Holders thereof,
and of the sum of $1.00 paid to the Owner Trustee by the Indenture Trustee at
or before the delivery hereof, the receipt whereof is hereby acknowledged, the
Owner Trustee has
<PAGE> 100
granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged
and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, upon the trusts created by the Trust Indenture, all right, title
and interest of the Owner Trustee in, to and under the following described
property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ ---------------
<S> <C> <C> <C>
The Boeing Company 737-3H4 N397SW 27691
</TABLE>
together with all Parts relating to such airframe.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, whether or not such
engines shall be installed in or attached to the Airframe or any other
airframe, identified as follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ ----- ---------------
<S> <C> <C>
CFM International CFM56-3-B1 859142
CFM International CFM56-3-B1 859144
</TABLE>
together with all Parts relating to such engines.
Together with all substitutions or replacements of and
additions, improvements, accessories and accumulations to the property above
described for which title vests in the Owner Trustee under the Operative
Agreements and all property which shall hereafter become physically attached to
or incorporated in the property above described, whether the same are now owned
by the Owner Trustee or shall hereafter be acquired by it for which title vests
in the Owner Trustee under the Operative Agreements.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, in the trust created by the Trust Indenture, all of the right,
title and interest of the Owner Trustee in, to and under the Lease Supplement
of even date herewith covering the property described above.
C-2
<PAGE> 101
Notwithstanding any provision hereof, no Excluded Payment
shall constitute security for any of the aforementioned obligations, and
nothing herein shall impair in any respect the rights of the Owner Trustee or
the Owner Participant under Section 9.13 or 11.06 of the Trust Indenture.
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Holders from time to time of the Certificates for
the uses and purposes and subject to the terms and provisions set forth in the
Trust Indenture.
This Supplement shall be construed as supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
AND, FURTHER, the Owner Trustee hereby acknowledges that the
Aircraft referred to in this Supplement and the aforesaid Lease Supplement has
been delivered to the Owner Trustee and is included in the property of the
Owner Trustee covered by all the terms and conditions of the Trust Agreement,
subject to the pledge and mortgage thereof under the Trust Indenture.
THIS SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
C-3
<PAGE> 102
IN WITNESS WHEREOF, the Owner Trustee has caused this
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee
By:
------------------------------------------
Title:
C-4
<PAGE> 1
EXHIBIT 4.13
________________________________________________________________________________
FIRST AMENDMENT
TO
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly set forth herein and
otherwise solely as Owner Trustee
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
One Boeing 737-3H4 Aircraft N397SW
Southwest Airlines Co.
Series 1995 Trust N397SW Certificates
(Southwest Airlines 1995 Trust N397SW)
________________________________________________________________________________
<PAGE> 2
FIRST AMENDMENT TO
TRUST INDENTURE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO TRUST INDENTURE AND SECURITY AGREEMENT N397SW)
dated as of October 1, 1995 (this "Amendment") between SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, in its individual capacity only as expressly
set forth herein and otherwise solely as Owner Trustee under that certain Trust
Agreement establishing the Southwest Airlines 1995 Trust N397SW and dated as of
April 1, 1995 (in such capacity, the "Owner Trustee") and WILMINGTON TRUST
COMPANY, as Indenture Trustee (the "Indenture Trustee"), amends that certain
related Trust Indenture and Security Agreement dated as of April 1, 1995 (the
"Original Indenture") between the Owner Trustee and the Indenture Trustee (the
Original Indenture, as supplemented by Trust Agreement and Trust Indenture and
Security Agreement Supplement dated April 3, 1995 by the Owner Trustee, being
referred to herein as the "Indenture"),
W I T N E S S E T H :
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Indenture;
WHEREAS, a counterpart to the Indenture was recorded by the Federal
Aviation Administration on April 5, 1995 and assigned Conveyance No. JJ13607;
WHEREAS, the Owner Trustee has agreed to refinance the Series SWA 1995
Trust N397SW-I Certificates with Series 1995 Trust N397SW Certificates; and
WHEREAS, in order to effect such refinancing, the Owner Trustee and
the Indenture Trustee have agreed to amend the Indenture as provided for below;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to the Indenture. The Indenture is, effective
as of the date hereof, hereby amended as follows:
(a) The definitions of "Business Day" and "Holder" in
Section 1.01(b) of the Indenture are amended in their entirety to read
as follows:
"Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or
authorized to close in the City of Dallas, Texas; New York,
New York; San Francisco, California; or the city and state in
which (i) so long as any Certificates shall be Outstanding,
each of the Indenture Trustee and the Pass Through Trustee and
(ii) thereafter, the Owner Trustee, has its principal place of
business; or the city
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
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and state in which the Indenture Trustee, the Pass Through
Trustee or the Owner Trustee, as the case may be, receives and
disburses funds.
"Holder" or "Certificate Holder" means a Person in
whose name a Certificate is registered on the Register
including, so long as it holds a Series SWA 1995 Trust N397SW
Certificate, the Pass Through Trustee.
(b) The following new definitions are inserted in Section
1.01(b) of the Indenture after the definition of "Owner Trustee":
"Pass Through Certificates" means any of the Pass
Through Certificates issued pursuant to the Pass Through Trust
Agreements.
"Pass Through Trust" means each pass through trust
created pursuant to the Pass Through Trust Agreements.
"Pass Through Trust Agreements" means the Pass
Through Trust Agreement dated as of February 1, 1993, between
the Company and the Pass Through Trustee, as supplemented by
the four Trust Supplements Nos. 1995-A1, 1995-A2, 1995-A3 and
1995-A4, each dated as of October 1, 1995, as the same may
from time to time be further amended, supplemented or
otherwise modified.
"Pass Through Trustee" means Wilmington Trust Company
in its capacity as trustee under each Pass Through Trust
Agreement, and such other Person that may from time to time be
acting as successor trustee under any such Pass Through Trust
Agreement.
(c) The first sentence of Section 6.02 of the Indenture
is amended by adding thereto the words "(x) the Premium Termination
Date in respect of such Certificate and (y)" immediately before the
words "the 181st day" therein.
(d) Exhibits A-1, A-2, B, B-1 and B-2 to the Indenture
are replaced in their entirety by Exhibits A-1, A-2, B, B-1 and B-2
hereto. Said revised Exhibits B, B-1 and B-2 shall, for all purposes,
be deemed to have been, and are, completed in accordance with Article
15 of the Indenture.
Section 2. Lease Amendment. As of the date hereof, the Lessee
and the Owner Trustee are entering into First Amendment to Sale and Lease
Agreement (the "Lease Amendment") to the Sale and Lease Agreement dated as of
April 1, 1995 relating to the Aircraft, which Sale and Lease Agreement
(together with Sale and Lease Agreement Supplement No. 1, dated April 3, 1995
thereto) was recorded with the Federal Aviation Administration on April 5, 1995
and assigned Conveyance No. JJ13608. The Lease Amendment is attached hereto
and, without limiting the generality of the Granting Clause of the Indenture,
is covered by the Lien of the Indenture and is made part of the Indenture
Estate.
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
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Section 3. Amendment and Incorporation by Reference. This
Amendment is and shall be construed as an amendment and supplement to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated herein by reference and is hereby ratified, approved and
confirmed.
Section 4. GOVERNING LAW. THIS AMENDMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 5. Execution in Counterparts. This Amendment may be
executed by the Owner Trustee and the Indenture Trustee in separate
counterparts, each of which when so executed and delivered is an original, but
all such counterparts shall together constitute but one and the same
instrument.
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
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IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity
only as expressly set forth
herein and otherwise solely as
Owner Trustee
By:/s/ Philip G. Kane, Jr.
Title: Vice President
WILMINGTON TRUST COMPANY,
not in its individual
capacity, except as otherwise
expressly provided herein,
but solely as Indenture Trustee
By:/s/ David A. Vanaskey, Jr.
Title: Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
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Exhibit A-1 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N397SW Installment Certificates
$______________ No._____________
Dated as of April 3, 1995
SERIES SWA 1995 TRUST N397SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of April 1, 1995
Issued in connection with Aircraft N397SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_____________ __________, ____
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of April 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to _______________ or
registered assigns the principal sum of ______________ Dollars in installments
on each Installment Payment Date as set forth herein with the final installment
due and payable on the Maturity Date specified above and to pay interest on the
principal amount remaining unpaid from time to time at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment in full. All amounts payable by the Owner
Trustee hereunder and under the related Trust Indenture and
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-1-1
<PAGE> 7
Security Agreement dated as of April 1, 1995, as supplemented and amended by
Trust Agreement and Trust Indenture and Security Agreement Supplement dated
April 3, 1995 and First Amendment to Trust Indenture and Security Agreement
dated as of October 1, 1995 (as further amended or supplemented from time to
time referred to herein as the "Indenture", the defined terms therein not
otherwise defined herein being used herein with the same meanings), by and
among the Owner Trustee and Wilmington Trust Company, as Indenture Trustee
thereunder, shall be made only from the income and proceeds of the Indenture
Estate and the other amounts referred to in Section 3.03 of the Indenture.
Each Holder hereof, by its acceptance of this Certificate, agrees that (a) it
will look solely to the income and proceeds of the Indenture Estate and the
other amounts referred to in Section 3.03 of the Indenture for payment of such
amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) neither the Owner Trustee, the Owner
Participant nor the Indenture Trustee is or shall be personally liable to the
Holder hereof for any amount payable hereunder or under the Indenture or the
other Operative Agreements or, except as provided in the Indenture, for any
liability under the Indenture.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-1-2
<PAGE> 8
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Certificates may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payment Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of any authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee, the
Owner Participant and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, and the terms upon
which the Certificates may be redeemed, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein, all as shown on Exhibit A hereto.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-1-3
<PAGE> 9
a Lease Event of Default by the Company under the Lease, the Indenture Trustee
may, to the exclusion of the Owner Trustee, exercise one or more of the
remedies of the Owner Trustee provided in the Lease. Such remedies include
(but are not limited to) the right to repossess and use or operate the
Aircraft, to sell or relet the Aircraft free and clear of the Company's rights
and retain the proceeds and to require the Company to pay as liquidated damages
(i) any unpaid Basic Rent plus an amount equal to the excess of the Stipulated
Loss Value of the Aircraft over the aggregate fair market rental value thereof
for the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus
the excess of the Stipulated Loss Value of the Aircraft over the fair market
sales value thereof or (iii) if the Aircraft has been sold, any unpaid Basic
Rent plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-1-4
<PAGE> 10
of transfer at the principal corporate trust office of the Registrar, or at the
office or agency maintained for such purpose, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Registrar duly
executed by, the Holder or his attorney duly authorized in writing, one or more
new Certificates of the same maturity and type and of authorized denominations
and for the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration or
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
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IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-1-6
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INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By:_________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-1-7
<PAGE> 13
Exhibit A-2 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N397SW Serial Certificates
$________________ No.____________
SERIES SWA 1995 TRUST N397SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of April 1, 1995
Issued in connection with Aircraft N397SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ ____________, ______
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of April 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ___________ or
registered assigns the principal sum of ___________ Dollars on the Maturity
Date specified above and to pay interest thereon at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment. All amounts payable by the Owner Trustee
hereunder and under the related Trust Indenture and Security Agreement dated as
of April 1, 1995, as supplemented and amended by Trust Agreement and Trust
Indenture and Security Agreement Supplement dated April 3, 1995 and First
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-2-1
<PAGE> 14
Amendment to Trust Indenture and Security Agreement dated as of October 1, 1995
(as further amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and other amounts referred to in Section 3.03
of the Indenture for payment of such amounts, to the extent available for
distribution to the Holder hereof as provided in the Indenture and (b) neither
the Owner Trustee, the Owner Participant nor the Indenture Trustee is or shall
be personally liable to the Holder hereof for any amount payable hereunder or
under the Indenture or the other Operative Agreements or, except as provided in
the Indenture, for any liability under the Indenture.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
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<PAGE> 15
or agency maintained by the Indenture Trustee for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Indenture Trustee or the Paying
Agent by check mailed on or before the due date to the address of the Holder
entitled thereto as such address shall appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Owner Participant the
Indenture Trustee and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, and the terms upon
which the Certificates may be redeemed, as well as for a statement of the terms
and conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Basic Rent plus
an amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
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The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-2-4
<PAGE> 17
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-2-5
<PAGE> 18
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By:__________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-2-6
<PAGE> 19
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By:___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
A-2-7
<PAGE> 20
Exhibit B to
First Amendment to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N397SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A1 July 1, 1997 $429,824.20 6.16% * Serial
1995-A2 July 1, 1998 $456,301.30 6.29% * Serial
1995-A3 January 1, 2013 $18,513,253.78 7.22% October 4, 2007 Installment
1995-A4 July 1, 2016 $4,150,203.14 7.64% January 4, 2016 Installment
</TABLE>
____________________________
* Not applicable.
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
B-1
<PAGE> 21
Exhibit B-1 to
First Amendment to
Trust Indenture and
Security Agreement
PAYMENT DATES AND PAYMENT PERCENTAGES AND AMOUNTS
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
B-1-1
<PAGE> 22
Exhibit B-2 to
First Amendment to
Trust Indenture and
Security Agreement
ISSUANCE OF SERIES SWA 1995 TRUST N397SW CERTIFICATES
The Series SWA 1995 Trust N397SW Certificates issued hereunder
shall be issued to and shall be payable to the Pass Through Trustee under each
Pass Through Trust Agreement with respect to the grantor trust created thereby,
in each case as set forth below:
1995-A1 Trust:
6.16% Certificate due July 1, 1997
1995-A2 Trust:
6.29% Certificate due July 1, 1998
1995-A3 Trust:
7.22% Certificate due January 1, 2013
1995-A4 Trust:
7.64% Certificate due July 1, 2016
TRUST INDENTURE AND SECURITY AGREEMENT [N397SW]
B-2-1
<PAGE> 1
EXHIBIT 4.15
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
dated as of April 1, 1995
among
SOUTHWEST AIRLINES CO.,
Lessee,
FORD MOTOR CREDIT COMPANY,
Owner Participant,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
Original Loan Participant,
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N397SW
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Certain Definitions; Participations in Lessor's Cost of the Aircraft . . . . . . . . . . . . 2
SECTION 2. Lessee's Notice of Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee . . . . . . . . . . . . . . . . . . . 6
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the Aircraft . . . . . . . . . . . . . . 6
(i) Notice; Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ii) No Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(iii) Original Loan Participant's Commitment . . . . . . . . . . . . . . . . . . . 7
(iv) Owner Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Authorization, Execution and Delivery of Documents . . . . . . . . . . . . . 7
(vi) UCC-1's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(vii) Proof of Corporate Action, Etc . . . . . . . . . . . . . . . . . . . . . . . 8
(viii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . 10
(x) Representations and Warranties Accurate; No Event of
Default; No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xi) Opinions of Lessee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 11
(xii) Opinion of Manufacturer's Counsel . . . . . . . . . . . . . . . . . . . . . . 11
(xiii) Opinion of Owner Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . 11
(xiv) Opinions of Owner Participant's Counsel . . . . . . . . . . . . . . . . . . . 11
(xv) Opinion of Oklahoma City Counsel . . . . . . . . . . . . . . . . . . . . . . 11
(xvi) Opinion of Indenture Trustee's Counsel . . . . . . . . . . . . . . . . . . . 11
(xvii) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xviii) Lessee's Bringdown Certificate . . . . . . . . . . . . . . . . . . . . . . . 11
(xix) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxi) Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxii) No Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxiii) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxiv) Bringdown of Other Parties' Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxv) Opinion of Owner Participant's Tax Counsel . . . . . . . . . . . . . . . . . 12
(xxvi) No Tax Law Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxvii) Copy of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(xxviii) Withholding Tax Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Conditions Precedent to the Obligations of Lessee . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5. Confidentiality of Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6. Extent of Interest of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . 15
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 16
(iii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(iv) Valid Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(vi) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(vii) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(viii) Registration and Recordation . . . . . . . . . . . . . . . . . . . . . . . . 17
(ix) Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(x) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xi) No Misstatement or Omission . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xii) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xiii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xiv) Effective Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xv) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xvii) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xviii) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xix) No Federal Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(xx) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(iii) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(iv) Notice and Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(v) Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(iii) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(iv) Right to Defend; Subrogation; Fees and Expenses of
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Owner Participant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(g) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8. Other Representations, Warranties, Covenants and Indemnities . . . . . . . . . . . . . . . . 30
(a) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
PARTICIPATION AGREEMENT [N397SW]
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
(c) Chief Executive Office of SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(f) Owner Participant's Representations and Warranties . . . . . . . . . . . . . . . . . . 31
(g) Lessor Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Indenture Trustee Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(i) Termination Instructions to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . 33
(j) Excess Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(k) Representations and Warranties of Indenture Trustee in Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(l) Transfers of Equity Interests; Rights of Owner Participant and
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(m) Obligations of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(n) Compliance with Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(o) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(p) SBC's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 36
(q) Owner Participant's Lease Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(r) Lessee's Assumption of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(s) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(t) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(u) Lease Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(v) Revocation of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(w) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(x) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(y) Discharge of Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(z) Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(aa) Assumption on Exercise of Purchase Option With Installments. . . . . . . . . . . . . . 41
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(cc) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(dd) Deferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(ee) Lessee as Pricing Agent for Certificate . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9. Payments to Lessee of Trust Indenture Monies . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 10. Other Documents; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 11. Certain Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(c) FAA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Engine Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(f) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(g) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(i) No Certificate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
PARTICIPATION AGREEMENT [N397SW]
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 12. Ownership of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 13. Notices; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 14. Change of Situs of Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(a) Consents under Lease and Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . 50
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(c) Counterparts; Waivers; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 50
(d) No Recourse Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(e) Duties Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(f) Binding on Parties and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(g) Enforceability Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(h) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 16. Transaction Costs; Invoices and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 51
SECTION 17. Optional Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 18. Interim Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 19. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
SCHEDULE III
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
</TABLE>
PARTICIPATION AGREEMENT [N397SW]
-iv-
<PAGE> 6
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of April 1, 1995 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) FORD MOTOR CREDIT COMPANY, a Delaware corporation (the "Owner
Participant"), (iii) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association (the "Original Loan Participant"), (iv) SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, in its
individual capacity, only as expressly provided herein (in such capacity,
"SBC") and otherwise, solely as Owner Trustee under the Trust Agreement (in
such capacity, the "Owner Trustee"), and (v) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, in its individual capacity and as Indenture
Trustee under the Trust Indenture (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, one of which, having U.S. Registration No. N397SW and Manufacturer's
serial number 27691, has been recently purchased by Lessee and is the subject
of this Agreement; and
WHEREAS, immediately prior to the execution and delivery of
this Agreement, the Owner Participant and the Owner Trustee have entered into
the Trust Agreement pursuant to which the Owner Trustee has agreed, among other
things, to hold the Trust Estate defined in Section 1.01 thereof (the "Trust
Estate") for the use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
(i) Lessee and the Owner Trustee are
entering into the Purchase Agreement Assignment whereby Lessee agrees
to assign to the Owner Trustee certain rights and interests of Lessee
under the Purchase Agreement with respect to the Aircraft; and
(ii) the Manufacturer has executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and
WHEREAS, the Indenture Trustee and the Owner Trustee
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft created
PARTICIPATION AGREEMENT [N397SW]
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pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
WHEREAS, as described in Section 2 hereof, concurrently with
the execution and delivery of this Agreement, the Owner Trustee and Lessee are
entering into the Lease whereby, subject to the terms and conditions set forth
therein, the Owner Trustee agrees to purchase the Aircraft from Lessee and to
lease the same back to Lessee, and Lessee agrees to sell the Aircraft to the
Owner Trustee and to lease the same back from the Owner Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "SBC," "Owner Trustee" and "Indenture Trustee"
shall have the further meanings attributed thereto in the Sale and Lease
Agreement dated as of the date hereof (the "Lease") between the Owner Trustee
and Lessee relating to the Aircraft referred to in the first recital herein,
and, except as otherwise defined in this Agreement, terms used herein in
capitalized form shall have the meanings attributed thereto in the Lease or, if
not defined therein, in the Trust Indenture. The term "Trust Supplement" has
the meaning attributed to the term "Indenture and Trust Supplement" in the
Lease and to the term "Trust Supplement" in the Trust Indenture. Unless the
context otherwise requires, any reference herein to any of the Operative
Agreements refers to such document as it may be amended from time to time in
accordance with its terms and the terms of each other agreement restricting the
amendment thereof. All rules of construction referred to in Section 1 of the
Lease shall apply to this Agreement likewise.
(b) Subject to the terms and conditions of this Agreement
(including Section 4), (i) the Original Loan Participant agrees to finance, in
part, the Owner Trustee's payment of Lessor's Cost for the Aircraft by making a
secured loan to the Owner Trustee (herein called the "Loan") on a date to be
designated pursuant to Section 2 hereof, in the amount in Dollars equal to the
lesser of (x) the percentage of Lessor's Cost and (y) the actual Dollar amount
set forth opposite its name on Schedule II hereto and (ii) the Owner
Participant hereby agrees, in connection with its equity investment in the
beneficial ownership of the Aircraft and the sale of the Aircraft by Lessee to
the Owner Trustee pursuant to the Lessee FAA Bill of Sale and Lessee Warranty
Bill of Sale, as contemplated hereby, to make its equity investment in the
beneficial ownership of the Aircraft on a date to be designated pursuant to
Section 2 hereof, in an amount in Dollars equal to the lesser of (x) the
percentage of Lessor's Cost and (y) the actual Dollar amount set forth opposite
its name on Schedule II hereto. In the case of the Owner Participant, the
amount of such equity investment to be made as provided above in the payment of
Lessor's Cost and, in the case of the Original Loan Participant, the aggregate
principal amount of the Series SWA 1995 Trust N397SW-I Certificate to be
simultaneously issued to it, is hereinafter called such Participant's
"Commitment" for the Aircraft. In case either Participant shall default in its
obligation to make the amount of its Commitment available pursuant to Section 2
hereof in respect of the Aircraft, the other Participant shall have no
obligation to make any portion of such amount available or to increase
PARTICIPATION AGREEMENT [N397SW]
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the amount of its Commitment and the obligation of the nondefaulting
Participant shall remain subject to the terms and conditions set forth in this
Agreement.
(c) In the event that either Participant shall for any
reason fail or refuse to make the full amount of its Commitment available to
the Owner Trustee in accordance with the terms of paragraph (b) of this Section
1 (such Participant, for the purpose of this Agreement, being called a
"Defaulting Participant"), the Owner Trustee shall give, at the earliest
practicable time (which may be the next Business Day), each party hereto
telephonic notice (to be confirmed promptly in writing) of such failure or
refusal and any funds received by the Owner Trustee in connection with the
Aircraft will be held in accordance with the terms of, and for the period
provided in, paragraph (b) of Section 2. In such event the Defaulting
Participant will have no further right to participate in, or make a loan for,
as the case may be, the payment of Lessor's Cost for the Aircraft. Lessee
shall have the right to designate a financial institution (which term, as used
in this paragraph (c), shall mean any banking or financial institution,
institutional investor or fund which is not affiliated with Lessee or with
Owner Participant) to be substituted for the Defaulting Participant; provided,
however, that (i) such substituted financial institution shall sign and deliver
an amendment to this Agreement, in form and substance satisfactory to the Owner
Trustee, the Indenture Trustee and the remaining Participant (other than the
Defaulting Participant), whereby such financial institution agrees to be a
party to this Agreement, to be bound by all the terms hereof and to undertake
all the obligations of the Defaulting Participant contained herein, other than
obligations, if any, arising from the aforesaid failure or refusal by such
Defaulting Participant, (ii) if the Defaulting Participant is Owner Participant
(A) such substituted financial institution shall have been approved by all
Original Loan Participants, (B) each such substituted financial institution
shall be domiciled in the United States and shall be a citizen of the United
States within the meaning of the Act and shall have the requisite power and
authority to enter into and carry out the transactions contemplated by this
Agreement and the Trust Agreement, (C) such substituted financial institution
shall enter into amendments to the Trust Agreement, in form and substance
satisfactory to the Owner Trustee, the Indenture Trustee and the Original Loan
Participants, whereby such substituted financial institution agrees to be a
party to the Trust Agreement, to be bound by all the terms thereof and to
undertake all the obligations of the Defaulting Participant contained therein,
and (D) the substitution of such substituted financial institution as above
provided shall not violate any provisions of the Act or the regulations
promulgated thereunder, or create a relationship which would be in violation
thereof and such substituted financial institution shall so represent in
writing to each other party hereto, and (iii) if the Defaulting Participant is
an Original Loan Participant, such substituted financial institution shall be
approved in writing by Owner Participant and the Agent. No action by Lessee in
finding a financial institution to be substituted as above provided shall be
deemed to constitute a waiver or release of any right which Lessee may have
against the Defaulting Participant. Each financial institution substituted for
an Original Loan Participant pursuant to this paragraph (c) shall be deemed an
Original Loan Participant for all purposes of this Agreement and the other
Operative Agreements; and each financial institution substituted for the Owner
Participant pursuant to this paragraph (c) shall (collectively, if more than
one) be deemed the Owner Participant for all purposes of this Agreement and the
other Operative Agreements.
PARTICIPATION AGREEMENT [N397SW]
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SECTION 2. Lessee's Notice of Delivery Date. (a)
Lessee agrees to give the Owner Participant, the Owner Trustee, the Original
Loan Participant and the Indenture Trustee at least three (3) Business Days'
written notice of the Delivery Date for the Aircraft, which Delivery Date shall
be a Business Day not later than April 30, 1995. As to each Participant, the
making of its Commitment for such Aircraft available in the manner required by
this Section 2 shall constitute a waiver of such notice. The Owner Trustee and
the Indenture Trustee shall be deemed to have waived such notice if the Owner
Trustee shall have received from the Owner Participant funds in the full amount
of the Owner Participant's Commitment and the proceeds of the sale of the
Series SWA 1995 Trust N397SW-I Certificate in the full amount of the Original
Loan Participant's Commitment.
Subject to the terms and conditions of this Agreement
(including Section 4), and simultaneously with receipt by the parties hereto of
all amounts to be paid to them on the Delivery Date pursuant to this Section 2,
(x) Lessee shall transfer title to and deliver the Aircraft to the Owner
Trustee, the Owner Trustee shall purchase and take title to, and accept
delivery of, the Aircraft, the Owner Trustee shall lease the Aircraft to Lessee
and Lessee shall lease the Aircraft from the Owner Trustee, it being understood
that the transactions described in this Section 2 shall be simultaneous and
mutually dependent and (y) the Owner Trustee shall issue and the Indenture
Trustee shall authenticate the Series SWA 1995 Trust N397SW-I Certificate which
shall be delivered simultaneously to the Original Loan Participant. On the
Delivery Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. 98120109 at Bank One, Dallas, N.A., ABA No. 111000614,
1717 Main Street, Dallas, Texas.
Subject to the terms and conditions of this Agreement
(including Section 4), the Original Loan Participant and the Owner Participant
each agree to make its Commitment available to Shawmut Bank Connecticut,
National Association, Hartford, Connecticut, Account No. 0067548290, ABA No.
011-900-445, Reference: Southwest Airlines 1995 Trust N397SW, at or before
10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's notice
referred to in the first paragraph of this Section 2 (such specified Delivery
Date, or the date on which the Commitments are made available as a waiver of
such notice, being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than April 30, 1995. In the event that no
Delayed Delivery Date is designated or, if designated, such closing does not
occur on the Delayed Delivery Date, or if any Participant shall so request,
such funds of each Participant shall be promptly returned to it by the Owner
Trustee or the Indenture Trustee, as the case may be.
PARTICIPATION AGREEMENT [N397SW]
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If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
made available for the period from and including the Scheduled Delivery Date to
but excluding the Delayed Delivery Date, or, as the case may be, to but
excluding the Business Day on which such Participant's funds are returned if
such return is made by 10:00 a.m. (New York City time) or to but excluding the
next following Business Day if such return is not made by such time and, in the
case of the Original Loan Participant, for the Break Amount, if any, applicable
to the Series SWA 1995 Trust N397SW-I Certificate.
"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Original
Loan Participant, the rate per annum borne by the Series SWA 1995 Trust
N397SW-I Certificate in respect of which such Original Loan Participant's
Commitment is made available. "Federal Funds Effective Rate" means, for any
period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for the day of such
transactions received by the Owner Participant from three federal funds brokers
of recognized standing selected by it; provided, that, subject to the
foregoing, the "Federal Funds Effective Rate" for any non-Business Day shall be
the "Federal Funds Effective Rate" for the previous Business Day.
SBC agrees that in the event it has received telephonic notice
(to be confirmed promptly in writing) from Lessee on the Scheduled Delivery
Date that the closing of the transactions contemplated hereby will not be
consummated on the Scheduled Delivery Date, it will, if instructed in the
notice from Lessee in regard to the funds received by it from the Participants,
use reasonable efforts to invest, at the risk, expense and direction of Lessee,
the funds received by it from the Participants in marketable direct obligations
of the United States of America or obligations of any of its agencies that are
guaranteed as to principal and interest by the United States of America, in any
such case having a stated maturity not later than 91 days from the date of
acquisition. Any such investment may be made through a repurchase agreement in
commercially reasonable form with SBC or a bank or other financial institution
having capital, surplus and undivided profits of at least $100,000,000;
provided, that title to the underlying obligations shall pass to SBC and that
such underlying securities shall be segregated in a custodial or trust account
of or for the benefit of the Owner Trustee. Any such obligations purchased by
SBC, whether directly or through a repurchase agreement, shall be held in trust
by SBC (but not as part of the Trust Estate or Trust Indenture Estate) for the
benefit of the respective Participants. Lessee shall, on the Delayed Delivery
Date or the date the funds furnished by the Participants are required to be
returned to the Participants, as the case may be, reimburse SBC for the benefit
of the respective Participant, for any losses incurred on such investments.
PARTICIPATION AGREEMENT [N397SW]
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All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the respective accounts of the
Participants (such income and profits to be credited against Lessee's
obligation to reimburse the Participants for the loss of use of funds made
available to SBC) and all other income and profits and all losses on the
investment of such funds shall be for the account of Lessee; and SBC shall not
be liable for failure to invest such funds or for any losses incurred on such
investments except for its own willful misconduct or negligence. Any failure
by SBC to invest such funds shall not affect Lessee's obligations hereunder
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee. Subject to the terms and conditions of this Agreement, the
Owner Trustee, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with written instructions from such Participant or its
special counsel to release such funds to Lessee, shall transfer such funds to
Lessee and the Owner Trustee shall purchase the Aircraft from Lessee and lease
the Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
(a) to pay to Lessee (on behalf of the Owner Trustee) the
Lessor's Cost in the manner set forth in Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
(c) to accept from Lessee the Lessee Warranty Bill of
Sale and the Lessee FAA Bill of Sale and the invoice with respect to the
Aircraft;
(d) to execute an aircraft registration application, a
Lease Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow the Loan from the Holders to finance a
portion of Lessor's Cost and to issue to the Original Loan Participant a Series
SWA 1995 Trust N397SW-I Certificate in a principal amount equal to the amount
borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be
taken by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. Conditions. (a) Conditions
Precedent to the Participations in the Aircraft. It is agreed that the
respective obligations of the Participants to participate in the payments of
Lessor's Cost and the other transactions contemplated hereby are subject to the
satisfaction prior to or on the Delivery Date of the following conditions
precedent, except that paragraphs (iii), (xx), (xxiv) (insofar as it relates to
the Original Loan Participant), (xxv) and (xxvi) shall not be a condition
precedent to the obligation of the Original Loan Participant, and paragraphs
(iv), (x)(B) (insofar as it relates to an Indenture Event of Default
attributable to the
PARTICIPATION AGREEMENT [N397SW]
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Owner Participant), (xiv), (xxiv) (insofar as it relates to representations of
the Owner Participant) and (xxvii) shall not be a condition precedent to the
obligation of the Owner Participant:
(i) Notice; Delivery Date. Each Participant
shall have received due notice with respect to such participation
pursuant to Section 2 hereof (or shall have waived such notice either
in writing or as otherwise provided in Section 2). The Delivery Date
shall have occurred on or before April 30, 1995.
(ii) No Change in Law. No change shall have
occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is, or is to become, a
party or (y) the Original Loan Participant or the Owner Participant to
make its Commitment available or, in the case of the Original Loan
Participant, to acquire the Series SWA 1995 Trust N397SW-I Certificate
or to realize the benefits of the security afforded by the Trust
Indenture.
(iii) Original Loan Participant's Commitment.
In the case of the Owner Participant, the Original Loan Participant
shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(iv) Owner Participant's Commitment. In the
case of the Original Loan Participant, the Owner Participant shall
have made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(v) Authorization, Execution and Delivery of
Documents. The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto,
shall each be satisfactory in form and substance to the Participants
and shall be in full force and effect and executed counterparts shall
have been delivered to each Participant and its respective counsel;
provided, that only the Original Loan Participant shall receive an
executed original of the Series SWA 1995 Trust N397SW-I Certificate,
only the Indenture Trustee, acting on behalf of the Holders, shall
receive the original counterpart of the Lease and the initial Lease
Supplement, and only Lessee and the Owner Participant shall receive
copies of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering
the Aircraft and dated the Delivery Date;
(3) the Tax Indemnity Agreement;
PARTICIPATION AGREEMENT [N397SW]
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(4) the Trust Agreement;
(5) a Trust Supplement covering
the Aircraft and dated the Delivery Date;
(6) the Bills of Sale and an
invoice from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement
Assignment;
(8) an acceptance certificate
covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate") duly
completed and executed by the Owner Trustee or its agent,
which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1995 Trust
N397SW-I Certificate; and
(11) the Manufacturer's Consent.
(vi) UCC-1's. Uniform Commercial Code
financing statement or statements covering all of the security
interests created by or pursuant to the Granting Clause of the Trust
Indenture and precautionary Uniform Commercial Code financing
statement or statements with respect to the Lease shall have been
executed and delivered, and all such financing statement or statements
shall have been duly filed in all places necessary or advisable, and
any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Original Loan Participant
shall have been executed and delivered by Lessee, the Indenture
Trustee or the Owner Trustee and duly filed.
(vii) Proof of Corporate Action, Etc. Each
Participant and the Indenture Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(1) a certified copy of the
Restated Articles of Incorporation and Bylaws of Lessee and a
copy of resolutions of the board of directors of Lessee or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of Lessee, duly authorizing the execution,
delivery and performance by Lessee of this Agreement, the
Lease, the Purchase Agreement Assignment, the Lessee Warranty
Bill of Sale, the Lessee FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with
the provisions hereof and thereof;
PARTICIPATION AGREEMENT [N397SW]
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(2) such other documents and
evidence with respect to Lessee, the Manufacturer, the Owner
Trustee, the Indenture Trustee and the Participants, as the
Original Loan Participant or the Owner Participant, or their
respective counsel, may reasonably request in order to
establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the
compliance with the conditions herein set forth;
(3) a certificate of Lessee as
to the person or persons authorized to execute and deliver
this Agreement, the other Lessee Documents, and any other
documents to be executed on behalf of Lessee in connection
with the transactions contemplated hereby and as to the
signature of such person or persons;
(4) a copy of the Purchase
Agreement (to the Owner Participant and the Indenture Trustee
only) certified by the Treasurer, the Assistant Treasurer or
an Assistant Secretary of Lessee as being a true and accurate
copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations
or any right in such Agreement assigned by Lessee to the Owner
Trustee pursuant to the Purchase Agreement Assignment; and
(5) a copy of the general
authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of
authorization of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, certified as of the
Delivery Date by the Secretary or an Assistant Secretary of
the Indenture Trustee (in its individual capacity), SBC and
the Owner Participant, respectively, which authorize the
execution, delivery and performance by the Indenture Trustee
(in its individual capacity), SBC and the Owner Participant,
respectively, of all of the Operative Agreements to which it
is a party, together with such other documents and evidence
with respect to the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant as either the
Original Loan Participant (or its counsel) or the Owner
Participant (or its counsel) may reasonably request in order
to establish the consummation of the transactions contemplated
by this Agreement, the taking of all corporate proceedings in
connection therewith and compliance with the conditions herein
set forth; provided, this clause shall not be a condition
precedent as to any Participant as to documents to be provided
by that Participant.
(viii) Governmental Approvals. All appropriate
action required to have been taken by the Federal Aviation
Administration, or any other governmental or political agency,
subdivision or instrumentality of the United States, prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders,
PARTICIPATION AGREEMENT [N397SW]
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permits, waivers, authorizations, exemptions and approvals shall be in
full force and effect on the Delivery Date.
(ix) Title, Registration, Airworthiness, Etc.
On the Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:
(1) the Owner Trustee has good
and marketable title (subject to filing and recording of the
Lessee FAA Bill of Sale with the Federal Aviation
Administration in accordance with the Act) to the Aircraft,
free and clear of Liens other than the rights of Lessee under
the Lease and Lease Supplement covering the Aircraft, the
mortgage and security interest created by the Trust Indenture,
the rights of the Owner Participant under the Trust Agreement
and the Trust Supplement and Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the
Lease;
(2) application for registration
of the Aircraft in the name of the Owner Trustee (together
with any required affidavits), the FAA Bill of Sale and the
Lessee FAA Bill of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the
Trust Indenture and the Trust Supplement and the Lease and the
Lease Supplement have been duly filed with the FAA for
recordation pursuant to the Act;
(4) each of the Owner Trustee,
as lessor under the Lease, and the Indenture Trustee, as
assignee thereof, is entitled to the protection of Section
1110 of the United States Bankruptcy Code in connection with
its right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor; and
(5) the Aircraft has been duly
certificated by the FAA as to type and airworthiness in
accordance with the terms of the Lease and has a current,
valid U.S. standard certificate of airworthiness issued by the
FAA.
(x) Representations and Warranties Accurate;
No Event of Default; No Adverse Change. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties shall be true and
accurate on and as of such earlier date), (B) no event shall have
occurred and be continuing, or would result from the purchase, sale,
lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) a
Lease Event of Default or an Indenture Event of Default, and (C) no
material adverse change shall have occurred
PARTICIPATION AGREEMENT [N397SW]
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in the consolidated financial condition of Lessee and its subsidiaries
from that shown in the consolidated financial statements of Lessee and
its subsidiaries as of December 31, 1993.
(xi) Opinions of Lessee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee and the Owner Trustee from Vinson & Elkins L.L.P.,
special counsel to Lessee.
(xii) Opinion of Manufacturer's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee, the Indenture Trustee and Lessee from counsel to the
Manufacturer.
(xiii) Opinion of Owner Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Shipman &
Goodwin, counsel for the Owner Trustee.
(xiv) Opinions of Owner Participant's Counsel.
The Original Loan Participant shall have received a favorable opinion,
in form and substance satisfactory to it, addressed to the Indenture
Trustee, the Original Loan Participant, the Owner Trustee and Lessee
from (a) White & Case, special New York counsel to the Owner
Participant and (b) Stanley E. Gutman, Esq., senior counsel to USL
Capital Corporation, agent for the Owner Participant.
(xv) Opinion of Oklahoma City Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma.
(xvi) Opinion of Indenture Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee and Lessee from Potter Anderson & Corroon, special counsel for
the Indenture Trustee.
(xvii) [Intentionally Reserved].
(xviii) Lessee's Bringdown Certificate. Each
Participant and the Indenture Trustee shall have received a
certificate signed by the President, any Vice President, the Treasurer
or the Assistant Treasurer of Lessee, dated the Delivery Date,
certifying as to the fulfillment of all conditions in this Section
4(a) insofar as they relate to Lessee or the Aircraft.
(xix) [Intentionally Reserved].
PARTICIPATION AGREEMENT [N397SW]
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(xx) Appraisal. The Owner Participant shall
have received an opinion, in form and substance reasonably
satisfactory to the Owner Participant, from Aero Economics, Inc.,
independent aircraft appraisers, or such other recognized aircraft
appraiser selected by the Owner Participant, to the effect set forth
in Schedule III hereto and with respect to such other matters as the
Owner Participant shall request.
(xxi) Insurance Certificates. Each
Participant, the Owner Trustee and the Indenture Trustee shall have
received an independent insurance broker's report and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of
the Lease relating to insurance with respect to the Aircraft.
(xxii) No Event of Loss. On the Delivery Date,
it shall be true that no Event of Loss (or event which with the
passage of time would become an Event of Loss) with respect to the
Airframe or any Engine has occurred.
(xxiii) No Proceedings. No action or proceeding
shall have been instituted, nor shall action or proceeding be
threatened before any court or governmental agency, nor shall any
order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency at the time of the Delivery Date to
set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) Bringdown of Other Parties'
Representations and Warranties. The respective representations and
warranties of each Participant, the Indenture Trustee and the Owner
Trustee contained in Section 8 hereof shall be true and accurate as of
the Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date), it being
understood and agreed that (a) each Participant shall, by making its
Commitment available as provided in Section 1(b) of this Agreement,
(b) the Indenture Trustee shall, by authenticating the Series SWA 1995
Trust N397SW-I Certificate issued on the Delivery Date, and (c) the
Owner Trustee shall, by accepting the Lessee Warranty Bill of Sale and
the Lessee FAA Bill of Sale, be respectively deemed to have reaffirmed
as of the Delivery Date the representations and warranties made by it
(individually or in its trust capacities, as the case may be) in
Section 8 of this Agreement.
(xxv) Opinion of Owner Participant's Tax
Counsel. The Owner Participant shall have received from White & Case,
special counsel to the Owner Participant, a favorable opinion, in form
and substance satisfactory to the Owner Participant, with respect to
income tax aspects of the transactions contemplated by the Operative
Agreements.
(xxvi) No Tax Law Change. In the opinion of
the Owner Participant and its special counsel, there shall have been,
since March 1, 1995, no amendment,
PARTICIPATION AGREEMENT [N397SW]
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modification, addition or change in or to the provisions of the Code
(including for this purpose, any non-Code provisions of legislation
affecting the Code such as transition rules or effective date
provisions), the regulations promulgated under the Code (including
temporary or proposed regulations), Internal Revenue Service Revenue
Procedures or Revenue Rulings, or other administrative
interpretations, applicable judicial precedents or Executive Orders of
the President of the United States which would adversely affect the
accuracy of the Tax Assumptions set forth in Section 2 of the Tax
Indemnity Agreement.
(xxvii) Copy of Appraisal. The Original Loan
Participant shall have received a copy of the opinion referred to in
paragraph (xx) above (without any tax-sensitive provisions) in form
and substance reasonably satisfactory to the Original Loan Participant
to the effect that the fair market value of the Aircraft on the
Delivery Date is at least equal to Lessor's Cost, and that the
assumptions made in reaching such conclusion are fair and reasonable,
but otherwise without regard to the form and substance thereof.
(xxviii) Withholding Tax Forms. If the Original
Loan Participant is required to execute any form or document in order
for payments to it to qualify for exemption from, or reduction of,
withholding tax imposed by the Government, in respect to such
payments, such Original Loan Participant shall have executed such form
or document (including, without limitation, United States Internal
Revenue Forms 1001, W-8 and/or 4224) and delivered it to the Indenture
Trustee and to the Owner Trustee in accordance with applicable
regulations to qualify for such exemption or reduction.
Promptly upon the registration of the Aircraft and the
recording of the Lessee FAA Bill of Sale, the Lease, the Trust Indenture, the
Trust Agreement, the Lease Supplement and the Trust Supplement covering the
Aircraft pursuant to the Federal Aviation Act, Lessee will request Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to deliver to
the Owner Participant, the Indenture Trustee, the Original Loan Participant,
the Owner Trustee and Lessee an opinion as to the due and valid registration of
the Aircraft in the name of the Owner Trustee, the due recording of the FAA
Bill of Sale, the Lessee FAA Bill of Sale, the Trust Indenture, the Lease
Supplement, the Trust Supplement, the Lease and the Trust Agreement and the
lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee.
It is agreed that the obligations of Lessee (A) to participate in the sale of
the Aircraft to the Owner Trustee, (B) to accept delivery of the Aircraft under
the Lease, and (C) to enter into its other Operative Agreements, are all
subject to the fulfillment to the satisfaction of Lessee prior to or on the
Delivery Date of the following conditions precedent:
(i) The conditions specified in Sections
4(a)(iii), 4(a)(iv), 4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and
4(a)(xxviii) hereof shall have been satisfied, unless such
nonsatisfaction is the result of the actions of, or other event
attributable to, Lessee.
PARTICIPATION AGREEMENT [N397SW]
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(ii) Those documents described in Section
4(a)(v) shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Lessee) in the manner
specified in Section 4(a)(v), shall each be satisfactory in form and
substance to Lessee, shall be in full force and effect on the Delivery
Date, and an executed counterpart of each thereof (other than the
Series SWA 1995 Trust N397SW-I Certificate) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of the Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the Indenture
Trustee (in its individual capacity), SBC and the Owner Participant,
respectively, of all the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to the
Indenture Trustee (in its individual capacity), SBC and the Owner
Participant as Lessee or its counsel may reasonably request in order
to establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and compliance with the conditions herein set forth.
(iv) The representations and warranties of
each Participant, the Indenture Trustee and the Owner Trustee
contained in Section 8 hereof shall be true and accurate as of the
Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date).
(v) Lessee shall have received the opinions
set forth in Sections 4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv) and
4(a)(xvi), in each case addressed to Lessee and dated the Delivery
Date.
(vi) No change shall have occurred after the
date of the execution and delivery of this Agreement in applicable law
or regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of Lessee,
would make it a violation of law or regulations for Lessee to execute,
deliver or perform the Operative Agreements to which it is a party.
(vii) In the opinion of Lessee and its
counsel, there shall have been, since March 1, 1995, no amendment,
modification, addition or change in or to the Code (including for this
purpose, any non-Code provisions of legislation affecting the Code
such as transition rules or effective date provisions), the
regulations promulgated under the Code (including temporary or
proposed regulations), Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, applicable
judicial precedents or Executive Orders of the President of the United
States which might give rise to an indemnity obligation under any of
the Operative Agreements,
PARTICIPATION AGREEMENT [N397SW]
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or as a result of which any adjustments to the Lease payments are
requested by the Owner Participant which would adversely affect the
accuracy of the Tax Assumptions set forth in Section 2 of the Tax
Indemnity Agreement.
SECTION 5. Confidentiality of Purchase Agreement.
The Owner Trustee, the Participants and the Indenture Trustee shall keep the
Purchase Agreement confidential and shall not disclose the same to any Person,
except (A) to prospective and permitted transferees of the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
interest who agree to hold such information confidential on the same terms as
set forth in this Section 5, (B) to the aforementioned prospective and
permitted transferees', the Owner Trustee's, the Original Loan Participant's,
the Owner Participant's or the Indenture Trustee's counsel or special counsel,
independent insurance brokers or other agents who agree to hold such
information confidential, (C) as may be required by any statute, court or
administrative order or decree or governmental ruling or regulation, including
federal or state banking examiners, tax auditors or taxing authorities, or (D)
as may be necessary or desirable for purposes of protecting the interest of any
such Person or for enforcement of any Operative Agreement by the Owner Trustee,
the Original Loan Participant, the Owner Participant or the Indenture Trustee;
provided, however, that any disclosures of any part of the Purchase Agreement
which are permitted by clause (C) or (D) above shall be made only to the extent
necessary to meet the specific requirements or needs of the Persons to whom
such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Holders. No
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
outstanding principal amount of, Break Amount, if any, Premium, if any, and
interest on all Certificates held by such Holder and all other sums payable to
such Holder hereunder, under the Trust Indenture and under such Certificates
shall have been paid in full. Each Holder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to such Holder as
provided in Section 2.09 of the Trust Indenture and that neither the Owner
Participant nor the Owner Trustee shall be personally liable to any Holder for
any amounts payable under the Certificates, the Trust Indenture, hereunder, or
under any other Operative Agreement (including, without limitation, amounts
payable as Premium or Break Amount), except as expressly provided in this
Agreement or (in the case of the Owner Trustee) in the Trust Indenture, and
that neither the Owner Participant nor the Owner Trustee shall have any
liability to any Holder in respect of the Deferred Equity Amount or the Second
Payment Amount.
SECTION 7. Lessee's Representations and Warranties;
Indemnities.
(a) In General. Lessee represents warrants, covenants
and agrees that:
(i) Organization, Citizenship, Etc. Lessee
(A) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, (B) is a "citizen of
the United States" (as defined in Section 40102(a)(15)(C) of Title 49,
U.S.C.) holding an air carrier operating certificate issued by the
Secretary of
PARTICIPATION AGREEMENT [N397SW]
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Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) has the corporate power and authority to carry on
its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Agreement and the other Operative Agreements to which Lessee is or
will be a party, and (D) is duly qualified to do business as a foreign
corporation in good standing in each state in which the nature of its
business makes such qualification necessary or the failure to be so
qualified or so to be in good standing would have a material adverse
effect on its business or operations or would impair its ability to
perform its obligations under the Operative Agreements.
(ii) Corporate Authorization, Etc. The
execution, delivery and performance of this Agreement and the other
Operative Agreements to which Lessee is or will be a party (A) have
been duly authorized by all necessary corporate action on the part of
Lessee, (B) do not require any shareholder approval, or approval or
consent of any trustee or holders of indebtedness or obligations of
Lessee or of any lessor under any lease to Lessee except such as have
been duly obtained, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) Governmental Approvals. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
(other than the FAA Bill of Sale) and 4(a)(ix)(3), and (C) such
federal and state securities law approvals or filings that will be
required in connection with the public offering, if any, of the
Certificates.
(iv) Valid Agreements. This Agreement and
the other Operative Agreements to which Lessee is or will be a party
constitute, or will constitute when entered into, assuming due
authorization, execution and delivery by the party or parties thereto
other than Lessee, legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
PARTICIPATION AGREEMENT [N397SW]
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(v) No Proceedings. There are no pending
or, to Lessee's knowledge, threatened actions or proceedings before
any court or administrative agency which, having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to materially adversely affect the consolidated financial
condition of Lessee and its subsidiaries, or the ability of Lessee to
perform its obligations under this Agreement and the other Operative
Agreements to which Lessee is or will be a party.
(vi) Taxes. Lessee and its subsidiaries have
filed or caused to be filed all federal, state, local and foreign tax
returns which are required to be filed and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessment received by Lessee or any of its subsidiaries to the extent
that such taxes have become due and payable (except to the extent
being contested in good faith and by appropriate proceedings and for
the payment of which adequate provisions have been made).
(vii) Financial Condition. The audited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Annual Report to Shareholders for the year ended
December 31, 1993 and the unaudited consolidated financial statements
of Lessee and its subsidiaries contained in Lessee's Quarterly Report
on Form 10-Q for the period ended September 30, 1994 (copies of each
of which have been furnished to each Participant) have been prepared
in accordance with generally accepted accounting principles, present
fairly, in all material respects, the consolidated financial position
of Lessee and its subsidiaries as of such dates and the consolidated
results of their operations and their cash flows for the periods then
ended, and there has been no material adverse change in the
consolidated financial position of Lessee and its subsidiaries from
that reflected in such audited consolidated financial statements.
(viii) Registration and Recordation. Except
for (A) the registration of the Aircraft with the FAA pursuant to the
Act in the name of Owner Trustee, (B) the filing for recordation of
the instruments referred to in Section 4(a)(ix)(2) (other than the FAA
Bill of Sale) and (3) and this Agreement, if deemed necessary due to
the incorporation by reference in such other instruments of terms
defined herein, (C) the filing of the UCC financing statements
referred to in Section 4(a)(vi) and continuation statements at
periodic intervals, (D) the taking of possession by the Indenture
Trustee of the original counterparts of the Lease and the initial
Lease Supplement, and (E) the affixation of the nameplate referred to
in Section 7.1.2 of the Lease, no further action, including any filing
or recording of any document (including any financing statement in
respect thereof under Article 9 of the Uniform Commercial Code of any
applicable jurisdiction), is necessary or advisable in order to
establish and perfect, as against the interests or rights of any
Person, the right, title or interest of the Owner Trustee or Owner
Participant in the property constituting the Trust Estate, or of
Indenture Trustee in the property constituting the Trust Indenture
Estate, in any applicable jurisdiction within the United States of
America.
PARTICIPATION AGREEMENT [N397SW]
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(ix) Chief Executive Office. The chief
executive office (as such term is defined in Article 9 of the UCC) of
Lessee is 2702 Love Field Drive, Dallas, Texas 75235, and Lessee
agrees to give the Participants, Owner Trustee and Indenture Trustee
10 days' prior written notice of any relocation of said chief
executive office from its present location.
(x) Securities Laws. Neither Lessee nor
anyone acting on behalf of Lessee has directly or indirectly offered
any beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, or any similar interest or
security, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security
to, any Person other than the Participants and not more than 30 other
leasing companies or other institutional investors (in the case of
such beneficial interest or securities), or one other institutional
investor (in the case of the Certificates and other similar interests
and securities) or (assuming the accuracy of the representations in
Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii)) to any Person in
violation of the Securities Act or applicable state securities laws,
or both, and Lessee will take no action which would constitute or
cause such violation.
(xi) No Misstatement or Omission. Neither
the financial statements referred to in Section 7(a)(vii) nor any
other documents furnished by Lessee to Owner Trustee, Indenture
Trustee or any Participant in connection with the transactions
contemplated by this Agreement or the other Operative Agreements
contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein (in the case
of statements referred to in Section 7(a)(vii), as of the date made)
not misleading; there is no fact known by Lessee which Lessee has not
disclosed to such parties in writing which materially adversely
affects or, so far as Lessee can now reasonably foresee, will
materially adversely affect the ability of Lessee to carry on its
business and perform its obligations under this Agreement or the other
Operative Agreements to which it is a party.
(xii) Investment Company. Neither Lessee nor
any subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) No Event of Default. No Lease Event of
Default or Lease Default has occurred and is continuing under the
Lease.
(xiv) Effective Sale. On the Delivery Date,
the Aircraft will be situated in Texas and the sale of the Aircraft by
Lessee to Owner Trustee shall be complete and effective and not
voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (in
PARTICIPATION AGREEMENT [N397SW]
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reliance upon the Participants' representations in Section 8(o)) the
transactions contemplated by the Operative Agreements do not
constitute a "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code for which an exemption is not
available by statute, regulation or class exemption. The execution and
delivery of this Agreement and the other Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will
not involve any non-exempt prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code (such
representation being made solely in reliance upon and subject to the
accuracy of the representations contained in Section 8(o)).
(xvi) Title to Aircraft, etc. Good and
marketable title to the Aircraft will be, immediately prior to the
time of delivery to Owner Trustee, vested in Lessee and, upon such
delivery and subject to the filing for recordation of the Lessee FAA
Bill of Sale in accordance with the Act, good and marketable title to
the Aircraft will have been duly conveyed by Lessee to Owner Trustee,
free and clear of all Liens other than the rights of Lessee under the
Lease and the Lease Supplement covering the Aircraft, the Lien of the
Trust Indenture, the beneficial interest of the Owner Participant in
the Aircraft, and the Liens permitted by clause (d) (solely for taxes
not yet due) or (e) of Section 6 of the Lease.
(xvii) Condition of Aircraft. The Aircraft has
been duly certificated by the FAA as to type and airworthiness, is
fully equipped to operate in commercial service and complies with all
material governmental requirements governing such service; the
Aircraft has been continuously operated and maintained by Lessee (in a
manner that would satisfy the provisions of Sections 7.1.3, 8.1 and
8.4 of the Lease) since its delivery to Lessee by Manufacturer, Lessee
is unaware of any material mechanical or structural defects in or
damage to the Aircraft since its delivery to Lessee by Manufacturer
and there has not occurred any event which constitutes or would, with
the passage of time or the giving of notice, or both, constitute an
Event of Loss.
(xviii) Use of Proceeds. None of the proceeds
from the issuance of the Certificates or from the acquisition by the
Owner Participant of its beneficial interest in the Trust Estate will
be used directly or indirectly by Lessee so as to result in a
violation of Regulation G or U of the Board of Governors of the
Federal Reserve System.
(xix) No Federal Approvals. No governmental
approval in the United States of any kind is required of the Owner
Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance
under this Agreement or any agreement contemplated hereby solely by
reason of any fact or circumstance peculiar to: (a) Lessee (as
contrasted to other airlines), (b) the nature of the Aircraft, or (c)
Lessee's proposed operations or use of the Aircraft, including as
contemplated in the Lease.
(xx) Section 1110. Owner Trustee and the
Indenture Trustee, as assignee thereof, are entitled to the protection
of Section 1110 of the United States
PARTICIPATION AGREEMENT [N397SW]
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Bankruptcy Code in connection with their right to take possession of
the Airframe and Engines in the event of a case under Chapter 11 of
the United States Bankruptcy Code in which Lessee is a debtor.
Southwest acquired the Aircraft new from the Manufacturer after
October 22, 1994, and Southwest first placed the Aircraft in service
after such date.
(b) General Tax Indemnity.
(i) Indemnity. Lessee hereby agrees to pay,
to indemnify, and, on written demand, reimburse and hold each
Indemnified Party (which, unless otherwise indicated herein, for
purposes of this Section 7(b) shall include any Affiliate of any
Participant, and all entities which are included in a consolidated,
combined or unitary return with such Indemnified Party) harmless from,
any and all license, documentation, recording and registration fees
and any and all taxes (including, without limitation, sales, use,
turnover, value-added, property (tangible and intangible), ad valorem,
consumption, rental, license, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature
whatsoever together with any and all penalties, fines, additions to
tax or interest thereon or computed with reference thereto
(collectively "Taxes"), howsoever imposed by any federal, state or
local government or governmental subdivision or taxing authority in or
of the United States of America (including any possession or territory
of the United States of America), or by any foreign government, taxing
authority or governmental subdivision of a foreign country, upon,
against, or with respect to any Indemnified Party, Lessee, the
Aircraft, Airframe, any Engine, any other engine installed on the
Airframe, Part or any other part thereof or interest therein or upon
or with respect to the purchase, acquisition, acceptance, rejection,
mortgaging, financing, refinancing, manufacture, sale, transfer of
title, ownership, delivery, nondelivery, insuring, inspection,
leasing, possession, use, registration, reregistration,
deregistration, operation, repair, replacement, abandonment,
redelivery, modification, rebuilding, importation, exportation, return
or other disposition thereof, or the imposition of any Lien (or the
occurrence of any liability to refund or pay over any amount as a
result of any Lien) thereon, or upon or with respect to the rentals,
receipts or earnings arising therefrom, or upon or with respect to
this Agreement, the Trust Agreement, the Trust Indenture, the Lease, a
Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Certificates or the issuance, reissuance, acquisition,
redemption, expiration or subsequent transfer thereof under the Trust
Indenture, or the beneficial interests in the Trust Estate or the
creation thereof, or any payment made pursuant to any such agreement
or instrument or upon or with respect to the property, held by Owner
Participant or by the Trust Estate or by Indenture Trustee under the
Trust Indenture, or otherwise with respect to or in connection with
the transactions contemplated by the Operative Agreements.
(ii) Exceptions. The indemnity set forth in
Section 7(b)(i) shall not extend in the case of any Indemnified Party
to Taxes (1) on, based on, or measured by, the receipts, gross or net
income, capital or net worth of such Indemnified Party (whether
denominated as franchise, excess profits, conduct of business, capital
gains, minimum and/or alternative minimum taxes) or accumulated
earnings, personal holding
PARTICIPATION AGREEMENT [N397SW]
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company, succession taxes and estate or franchise taxes (other than,
in any case referred to in this clause (1), taxes which are in the
nature of sales or use taxes, value-added taxes, rental taxes, license
taxes, consumption taxes, ad valorem taxes or property (tangible and
intangible) taxes) imposed by (A) the federal government of the United
States (including without limitation any taxes collected by
withholding) (but specifically excluding any excise taxes or penalties
imposed in connection with the occurrence of a "prohibited
transaction", within the meaning of Section 406 of ERISA or Section
4975 of the Code, for which an exemption is not available by statute,
regulation or class exemption) or (B) any state or local government or
governmental subdivision or state or local taxing authority in the
United States of America (including any possession or territory of the
United States of America) other than in the case of (B) any such tax
which is a Covered Income Tax, as defined below; (2) on, based on, or
measured by, any fees or compensation received by Owner Trustee or
Indenture Trustee in its individual capacity for services rendered in
connection with the transactions contemplated hereby; (3) relating to
the Aircraft for any period after the later of (A) the expiration or
early termination of the Lease and the return of the Aircraft in
connection therewith in accordance with the terms thereof and (B)
payment in full of Stipulated Loss Value or Termination Value, as the
case may be, and all Rent due and owing in accordance with the Lease;
(4) arising out of or caused by the wilful misconduct or gross
negligence of such Indemnified Party or the inaccuracy or breach of
any representation, warranty or covenant of such Indemnified Party
contained in any Operative Agreement; (5) imposed on the income of
such Indemnified Party by a foreign government or taxing authority,
except to the extent such Taxes are imposed by reason of the location,
operation, use or rental of the Aircraft or any Part thereof in such
jurisdiction or the presence of Lessee or Sublessee or other user in
such jurisdiction or the making of payments from such jurisdiction;
(6) which may become payable in connection with the occurrence of a
"prohibited transaction", within the meaning of Section 406(b) of
ERISA or Section 4975(c)(1)(E) or (F) of the Code, involving the
assets of any "employee benefit plan" within the meaning of Section
3(3) of ERISA, or of any "plan" within the meaning of Section
4975(e)(1) of the Code, with respect to which the Owner Participant is
the "plan sponsor" within the meaning of Section 3(16)(B) of ERISA;
and (7) which become payable as a result of any involuntary
disposition attributable to the bankruptcy of the Owner Participant or
Owner Trustee or any voluntary sale, transfer, mortgaging, pledging or
financing by such Indemnified Party of all or a portion of its
interest in the Aircraft, the Trust Estate, the Trust Indenture
Estate, the Lease, or any other Operative Agreement in a transaction
not contemplated by the Operative Agreements (it being understood that
any disposition of the Aircraft or any Part as a result of a
substitution, replacement or modification thereof or thereto by Lessee
shall not be treated as voluntary) unless, in each case, such transfer
shall occur (A) pursuant to the exercise of remedies under Section 15
of the Lease or (B) pursuant to Section 7, 8, 9, 10 or 18 thereof. As
used in clause (1)(B) of this Section 7(b)(ii), the term "Covered
Income Tax" means a Tax described in said clause (1)(B) imposed on an
Indemnified Party by any taxing authority (A) in whose jurisdiction
such Indemnified Party (including for this purpose all entities with
which it is combined, integrated or consolidated in such taxing
authority's jurisdiction) did not engage in business, did not maintain
an office or other place of business and was not otherwise located, if
such Tax resulted from the operation
PARTICIPATION AGREEMENT [N397SW]
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of the Aircraft or any Engine in such jurisdiction or the transactions
contemplated by the Operative Agreements, or (B) in whose jurisdiction
such Indemnified Party in fact is doing business, maintaining an
office or other place of business or is otherwise located, if such
circumstance was no factor in the imposition of such Tax.
(iii) Calculation. Lessee agrees that, with
respect to any payment or indemnity pursuant to Section 7(b)(i)
hereof, such payment or indemnity shall include an amount payable to
the Indemnified Party sufficient to hold such Indemnified Party
harmless on an after-tax basis from all Taxes required to be paid by
such Indemnified Party with respect to such payment or indemnity under
the laws of any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America,
including any possession or territory of the United States, or under
the laws of any foreign government, taxing authority or governmental
subdivision of a foreign country; provided, that if any Indemnified
Party realizes a reduction in Taxes not subject to indemnification
hereunder (a "tax benefit") by reason of such payment or indemnity
(whether such tax benefit shall be by means of investment tax credit,
foreign tax credit, depreciation deduction or otherwise), such
Indemnified Party shall, so long as no Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred or be continuing, pay Lessee (but not
before Lessee shall have made all payments or indemnities to such
Indemnified Party then due under the Operative Agreements) an amount
equal to the sum of such tax benefit plus any other tax benefit
realized by such Indemnified Party as the result of any payment made
pursuant to this proviso; provided, however, that such payment by an
Indemnified Party shall not exceed the aggregate payments by Lessee to
such Indemnified Party under Section 7(b)(i) hereof (but any such
excess shall be carried forward and shall reduce Lessee's obligation
to make any subsequent payments to such Indemnified Party pursuant to
Section 7(b) or 7(c) hereof). Each such Indemnified Party shall in
good faith use reasonable efforts in filing its tax returns and in
dealing with taxing authorities to seek and claim any such tax benefit
of which it is actually aware or of which it has been given notice.
Any Taxes that are imposed on any Indemnified Party as a result of the
disallowance or reduction of such tax benefit referred to in the next
preceding sentence in a taxable year subsequent to the year of
allowance and utilization by such Indemnified Party (including the
expiration of any tax credit carryovers or carrybacks of such
Indemnified Party that would not otherwise have expired) shall be
indemnifiable pursuant to the provisions of Section 7(b)(i) without
regard to Section 7(b)(ii). In determining the amount of any net
reduction in Taxes which is attributable to more than one transaction,
an Indemnified Party shall be deemed to have utilized its deductions
and credits attributable first, to all transactions other than
leveraged equipment leasing transactions and then to this transaction
and all such other leveraged equipment leasing transactions on a pari
passu basis.
If as a result of any Advance (as hereinafter
defined) to an Indemnified Party the aggregate taxes paid or accrued
by such Indemnified Party for any taxable year shall be more than the
amount of such taxes which would have been payable by the Indemnified
Party had no such Advance been made, and if such increase in taxes was
not taken into account in determining the amount of the Advance, then
such increase
PARTICIPATION AGREEMENT [N397SW]
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in taxes will be treated as Taxes for which Lessee must indemnify the
Indemnified Party pursuant to this Section 7(b). Upon the final
determination of any contest pursuant to Section 7(b)(iv) hereof in
respect of any Taxes for which Lessee has made an Advance, the amount
of Lessee's obligation shall be determined under this Section
7(b)(iii) as if such Advance had not been made. Any obligation of
Lessee under this Section 7(b) and the Indemnified Party's obligation
to repay the Advance will be satisfied first by set off against each
other and any difference owing by either party will be paid within 10
days of such final determination.
(iv) Notice and Contest. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 30 days after its receipt; provided, that failure to provide
such notice within 30 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of Vinson & Elkins L.L.P. or other independent counsel selected by
Lessee and reasonably satisfactory to Indemnified Party to the effect
that a reasonable basis in law and fact exists under ABA opinion
85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or permit Lessee, if desired by Lessee, to contest in
the name of Lessee) if permissible under applicable laws, the
validity, applicability or amount of such Taxes by (i) resisting
payment thereof if practicable, (ii) not paying the same except under
protest, if protest shall be necessary and proper, (iii) if payment
shall be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings, and (iv) taking
such other action as is reasonably requested by Lessee from time to
time. The Indemnified Party shall determine the method of any contest
and (in good faith consultation with Lessee) control the conduct
thereof. Notwithstanding anything contained in this Section 7(b)(iv),
an Indemnified Party will not be required to contest, or to continue
to contest, the validity, applicability or amount of any Tax (or
portion thereof) (w) unless Lessee shall have acknowledged in writing
its obligation to indemnify the Indemnified Party hereunder in the
event the Indemnified Party does not prevail in such contest, (x) if
such contest would result in any material risk of criminal penalties
or any material risk of sale, forfeiture or loss (or loss of use) of
the Aircraft, the Airframe or any Engine or any Part or any interest
therein, (y) if a Lease Event of Default has occurred and is
continuing or (z) if the claim (when aggregated with related or
correlative adjustments with respect to such Indemnified Party) will
not exceed $10,000. The Owner Participant shall not be required to
appeal, or seek leave to appeal, an adverse judicial determination
with respect to such Taxes to the United States Supreme Court. If an
Indemnified Party contests a Tax by making a
PARTICIPATION AGREEMENT [N397SW]
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payment and seeking a refund thereof, then Lessee shall advance to
such Indemnified Party, on an interest-free basis, an amount equal to
the Taxes and any penalties, additions to tax, fines and interest
thereon (which shall collectively be known, only for the purpose of
this Section 7(b), as an "Advance") that are paid by such Indemnified
Party in connection with such contest. Such Advance shall be
repayable to Lessee at the time and in the manner specified in the
last paragraph of Section 7(b)(iii). If any Indemnified Party shall
obtain a refund of all or any part of such Taxes for which an
indemnity was paid by Lessee, such Indemnified Party shall pay Lessee
the amount of such refund as is attributable to the Taxes for which
such indemnity was paid; provided, however, that such amount shall not
be payable before such time as Lessee shall have made all payments or
indemnities to such Indemnified Party then due under this Section 7(b)
and under the Lease. If in addition to such refund such Indemnified
Party shall receive an amount representing interest on the amount of
such refund, Lessee shall be paid that proportion of such interest
which is fairly attributable to Taxes paid with an indemnity payment
or Advance by Lessee prior to the receipt of such refund, reduced by
taxes imposed on such Indemnified Party on receipt of such refund or
interest and increased by any taxes saved by reason of the
deductibility of such payment by the Indemnified Party. Any
subsequent determination that such Indemnified Party was not entitled
to all or any portion of any refund paid to Lessee shall be treated as
a Tax indemnifiable under Section 7(b)(i) without regard to Section
7(b)(ii). Lessee shall not be deemed to be in default under any of
the indemnification provisions under this Section 7(b) so long as it
or any Indemnified Party shall diligently prosecute such contest;
provided, that Lessee shall nonetheless be required to pay all
Advances and expenses required hereunder. In case any report or
return is required to be made with respect to any obligation of Lessee
under this Section 7(b) or arising out of this Section 7(b), Lessee
will either timely make such report or return in such manner as will
show the ownership of the Aircraft in Owner Trustee, and send a copy
of such report or return to Owner Trustee (except for any report or
return that an Indemnified Party has notified Lessee that the
Indemnified Party intends to file or that the Indemnified Party is
required by law to file), or will notify Owner Trustee of such
requirement and prepare and deliver such report or return to the
Indemnified Party in such manner as shall be satisfactory to such
Indemnified Party and Owner Trustee.
Notwithstanding the above provisions of this Section 7(b), any
Indemnified Party in its sole discretion (by written notice to Lessee) may
unconditionally waive its rights to the indemnities provided for in this
Section 7(b) with respect to any Taxes, and refrain from contesting, or
continuing the contest of such Taxes, in which event Lessee shall have no
liability to such Indemnified Party hereunder with respect to such Taxes. In
addition, if an Indemnified Party shall agree to a settlement of any contest
under this Section 7(b) without the prior written consent of Lessee, then the
Indemnified Party shall be deemed to have waived its rights to the indemnities
provided in this Section 7(b) with respect to the subject matter of such
settlement.
(v) Withholdings. Notwithstanding the exceptions in
Section 7(b)(ii), Lessee agrees that each payment of Rent and any amount
payable on the Certificates shall be free of all withholdings (other than a
U.S. withholding tax, except to the extent described in Section 15.05(d) of
the Trust Indenture) of any nature whatsoever except to the extent
PARTICIPATION AGREEMENT [N397SW]
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otherwise required by law, and in the event that any such withholding is so
required, Lessee shall pay an additional amount of Rent such that after the
deduction of all amounts required to be withheld, the net amount actually
received by each Indemnified Party will equal the amount that would be due
absent such withholding. In the event additional Rent is paid by Lessee to
provide for withholdings pursuant to the preceding sentence in respect of Taxes
that are excepted from indemnification hereunder pursuant to Section 7(b)(ii),
the Indemnified Party on whom the Tax is imposed by way of withholding on
payments to such person shall, promptly upon receipt of notice from Lessee,
reimburse Lessee for such additional Rent. As used in this Section 7(b)(v), a
"U.S. withholding tax" shall mean any withholding tax imposed by the United
States of America (A) with respect to interest payments under any Certificate
pursuant to treaty or federal law imposing withholding tax generally on
interest payments to Persons not resident in the United States or (B) in the
nature of backup withholding under section 3406 of the Code and the regulations
thereunder, or any successor or similar provision of the Code, federal tax law
or regulations thereunder. All U.S. withholding taxes with respect to interest
payments shall be borne by the Holder of the relevant Certificate and none of
Lessee, Owner Participant, Indenture Trustee or Owner Trustee shall be
responsible for any U.S. withholding tax with respect to interest payments on
such Certificate. Owner Trustee may (or, if Lessee is making any payment
directly to the Holder of any Certificate or to the Indenture Trustee, Lessee
shall) withhold any applicable U.S. withholding tax from the amount of the
interest payment then due and pay (and, if Lessee is making any payment to the
Holder or the Indenture Trustee, Lessee shall pay) any amount withheld to the
appropriate federal taxing authority; provided, that Lessee shall indemnify and
hold the Owner Trustee and the Owner Participant harmless on an after-tax basis
from and against any and all liability arising from any failure by any Person
to withhold any U.S. withholding taxes with respect to payments required to be
made with respect to the Certificates, and Lessee shall timely prepare and
file, or, if required by applicable law, present to the Owner Trustee for
filing, all information returns required to be prepared with respect to any
such withholding tax payments or otherwise with respect to payments under the
Certificates.
(c) General Indemnity.
(i) Indemnity. Lessee hereby agrees,
whether or not any of the transactions contemplated hereby shall be
consummated, to pay, assume liability for and indemnify, protect,
defend, save and keep harmless each Indemnified Party from and
against, on a net after-tax basis as provided in Section 7(b)(iii),
any and all liabilities, obligations, losses, damages, settlements,
claims, actions, suits, penalties, costs, expenses and disbursements
(including but not limited to reasonable legal and investigative fees
and expenses and Transaction Costs to the extent not required to be
paid by Owner Participant pursuant to Section 16 hereof, and all costs
and expenses relating to amendments, supplements, waivers and consents
to and under the Operative Agreements, but excluding internal overhead
costs and expenses such as salaries (other than a reasonable
allocation in respect of the Original Loan Participant's in-house
counsel)) of whatsoever kind and nature, including but not limited to
negligence, liability of an owner, strict or absolute liability,
liability without fault and liability in tort (any of the foregoing
being called a "Loss") which may from time to time be imposed on,
incurred by or asserted against any Indemnified Party or the Aircraft,
Airframe, any Engine or any Part or any portion of the Trust Estate or
the Trust Indenture Estate
PARTICIPATION AGREEMENT [N397SW]
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(whether or not any such Loss is also indemnified or insured against
by any other Person or such Indemnified Party has also indemnified any
other Person against such Loss) in any way relating to or arising out
of (a) any Operative Agreement, the enforcement thereof or any of the
transactions contemplated thereby (including, without limitation, the
performance or observance of all obligations and conditions of Lessee
thereunder, or the falsity of any representations or warranties of
Lessee therein or thereunder or in any document or certificate
delivered pursuant thereto), (b) the purchase, acceptance or rejection
of the Aircraft, (c) the Aircraft, the Airframe, any Engine, any
engine or any Part, any data or any other thing delivered or to be
delivered under an Operative Agreement, including without limitation,
the ownership, financing, refinancing, delivery, nondelivery, lease,
sublease, assignment, registration, reregistration, deregistration,
possession, use, non-use, presence, operation, condition, storage,
preparation, installation, testing, manufacture, design, fitness for
use, merchantability, modification, replacement, substitution,
alteration, maintenance, repair, re-lease, sale, return,
transportation, transfer, abandonment or other disposition thereof or
any portion thereof (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent,
trademark or copyright infringement, or arising under environmental
control, noise or pollution laws or regulations, and loss of or damage
to any property or the environment or death or injury to any person),
or (d) the offer, sale or delivery of the Certificates, whether before
or after the Delivery Date (the indemnity in this clause (d) to extend
also to any Person who controls an Indemnified Party, its successors,
assigns, employees, servants and agents within the meaning of Section
15 of the Securities Act).
(ii) Exceptions. The indemnity set forth in
Section 7(c)(i) shall not extend to any Loss with respect to a
particular Indemnified Party (A) to the extent that such Loss is
caused by acts, omissions or events which occur after full and final
compliance by Lessee with all the terms of the Operative Agreements,
(B) to the extent such Loss is caused by acts, omissions or events
which occur following the earlier of: (I) acceptance of possession of
the Airframe or any Engine or Part by Lessor or its designee in
accordance with the terms of the Lease (other than (x) pursuant to
Section 15 thereof, in which case Lessee's liability under this
Section 7(c) shall survive for so long as Lessor shall be entitled to
exercise remedies under such Section 15, or (y) in connection with the
initial delivery of the Aircraft to the Owner Trustee), (II) the
termination of the Term in accordance with Section 9 of the Lease, or
(III) the transfer of title to the Aircraft to Lessee (or its
designee) in accordance with Section 10.1.4 or Section 18.2 of the
Lease, (C) to the extent that such Loss is a Tax or a loss of tax
benefits, whether or not Lessee is required to indemnify therefor
pursuant to Section 7(b) hereof, (D) to the extent that such Loss is
caused by the willful misconduct or gross negligence of such
Indemnified Party (other than willful misconduct or gross negligence
imputed to such Indemnified Party solely by reason of its interest in
the Aircraft) or any material misrepresentation by or violation or
breach of any obligations of such Indemnified Party contained in the
Operative Agreements then in force unless such misrepresentation,
violation or breach is a result of Lessee's failure to comply with the
terms of any Operative Agreement to which it is a party, or (E) to the
extent such Loss results from a sale, assignment or transfer by such
Indemnified Party of its interest
PARTICIPATION AGREEMENT [N397SW]
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in the Aircraft, the Certificates or the transactions contemplated
hereby (other than (1) as required by the Operative Agreements or (2)
during the continuance of a Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or a Lease Event of Default or the
exercise of remedies under the Lease). This Section 7(c) does not
constitute a guarantee of the useful life or residual value of the
Aircraft or a guarantee that the Certificates will be paid.
(iii) Notice. If any Indemnified Party or
Lessee has knowledge of any Loss for which Lessee is obligated to
indemnify under this Section 7(c), it shall give prompt written notice
thereof to Lessee or each Indemnified Party, as the case may be, but
failure by any such Person to give such notice shall not relieve
Lessee of its obligations hereunder or from any other obligation that
Lessee may have to any Indemnified Party at law or in equity, and no
payment by Lessee to an Indemnified Party pursuant to this Section
7(c) shall be deemed to constitute a waiver or release of any right or
remedy which Lessee may have against such Indemnified Party for any
actual damages as a result of the failure by such indemnified Party to
give Lessee such notice.
(iv) Right to Defend; Subrogation; Fees and
Expenses of Trustees. Lessee shall be entitled (and, at the
Indemnified Party's election, shall be obligated), at its sole cost
and expense, acting through counsel selected by Lessee reasonably
acceptable to the respective Indemnified Party, (A) in any judicial or
administrative proceeding that involves solely a claim for which
payment or indemnity is sought under this Section 7(c), to assume
responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for which payment or
indemnity is sought under this Section 7(c), and other claims related
or unrelated to the transactions contemplated by the Operative
Agreements, to assume responsibility for and the control of such claim
for which payment or indemnity is sought under this Section 7(c) to
the extent that the same may be and is severed from such other claims
(and such Indemnified Party shall use its reasonable best efforts to
obtain such severance), and (C) in any other case, to be consulted by
such Indemnified Party with respect to judicial proceedings subject to
the control of such Indemnified Party. Notwithstanding any of the
foregoing to the contrary, Lessee shall not be entitled to assume
responsibility for and control of any such judicial or administrative
proceedings (1) while any Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or Lease Event of Default shall
have occurred and be continuing, (2) if such proceedings will involve
a material risk of the sale, forfeiture or loss of, or the creation of
any Lien (other than a Permitted Lien) on, the Aircraft or the Trust
Estate or the Trust Indenture Estate or any part thereof or the loss
or impairment of the Lien of the Trust Indenture on all or any part of
the Trust Indenture Estate, (3) if such proceedings could, in the good
faith opinion of the Indemnified Party, entail any risk of material
criminal liability or material civil penalty or (4) if in the written
opinion of counsel to such Indemnified Party an actual or potential
material conflict of interest exists making it advisable for such
Indemnified Party to be represented by separate counsel. The
Indemnified Party may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to
the preceding provisions.
PARTICIPATION AGREEMENT [N397SW]
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The Indemnified Party shall supply Lessee, at Lessee's
expense, with such information within its possession reasonably requested by
Lessee as is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c) (other than the tax
records or returns or pricing or confidential information of or relating to the
Owner Participant or its Affiliates). Such Indemnified Party shall not enter
into a settlement or other compromise with respect to any Loss without the
prior written consent of Lessee (except during the continuance of a Lease
Default (of the type described in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default when such consent shall not be required if such Indemnified
Party gives 10 days' prior written notice to Lessee describing the proposed
settlement or other compromise), which consent shall not be unreasonably
withheld or delayed, unless such Indemnified Party waives its right to be
indemnified with respect to such Loss under this Section 7(c).
Lessee shall supply the Indemnified Party with such
information reasonably requested by the Indemnified Party as is necessary or
advisable for the Indemnified Party to control or participate in any proceeding
to the extent permitted by this Section 7(c).
Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.
In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person seeking indemnification from Lessee pursuant to any provision of
this Agreement may proceed directly against Lessee without first seeking to
enforce any other right of indemnification.
Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 2.03 or
9.02(c) of the Trust Indenture) and the amounts payable to the Owner Trustee
pursuant to Section 6.07 of the Trust Agreement (including, but not limited to,
the reasonable fees and expenses of its counsel), without cost, on a net
after-tax
PARTICIPATION AGREEMENT [N397SW]
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basis, to the Owner Participant, for acting as such, other than such fees and
expenses which constitute Transaction Costs for which the Owner Participant is
obligated under Section 16. Lessee agrees that it will pay the reasonable fees
and expenses of any separate owner trustee or co-trustee appointed pursuant to
Section 9.02 of the Trust Agreement as a result of any requirement of law or if
otherwise required by any Operative Agreement or if requested, or consented to,
by Lessee.
Lessee hereby waives and releases any claim now or hereafter
existing against any Indemnified Party arising out of the death or personal
injury to personnel of Lessee, loss or damage to the property or business of
Lessee, or the loss of use of any property or business of Lessee, which results
from or arises out of the condition, use or operation of the Aircraft,
including, without limitation, any latent or patent defect whether or not
discoverable unless, in any such case, such claim would, if asserted against
Lessee, be excluded from Lessee's indemnification obligations hereunder by
reason of Section 7(c)(ii).
(d) Owner Participant's Indemnity. Owner Participant
covenants and agrees that if (i) Lessee has elected pursuant to Section 9.1 of
the Lease to terminate the Lease by causing the Aircraft to be sold pursuant to
Section 9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of
the Lease, given to Lessee written notice of Lessor's election to retain title
to the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
on or before the proposed termination date from a Person that is not a
Prohibited Person over the price for which the Aircraft may subsequently be
sold (but disregarding any portion of such bid or such price in excess of the
applicable Termination Value), any additional Rent paid by Lessee (less an
amount representing the fair value to Lessee of its use of the Aircraft for the
period of time in respect of which such Rent was paid) and any reasonable fees
and expenses of lawyers, appraisers, brokers or accountants) incurred as a
consequence of such failure by Owner Trustee.
(e) Payments. Any payments made pursuant to this Section
7 shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.
(f) Interest on Overdue Amounts. If any amount payable
by Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.
(g) Survival. All indemnities, obligations, adjustments
and payments provided for in this Section 7 shall survive, and remain in full
force and effect, notwithstanding the
PARTICIPATION AGREEMENT [N397SW]
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expiration or other termination of this Agreement, the Lease or any other
Operative Agreement. The obligations of Lessee in respect of all such
indemnities, obligations, adjustments and payments are expressly made for the
benefit of, and shall be enforceable by, each Indemnified Party or other
indemnitee entitled thereto, without taking any action under the Lease.
SECTION 8. Other Representations, Warranties,
Covenants and Indemnities. (a) Securities Laws. The Owner Participant
represents that it is acquiring its interest in the Trust Estate for investment
purposes only and not with a present intent as to any resale or distribution
thereof (subject nonetheless to any requirement of law that the disposition of
its properties shall at all times be and remain within its control) and that
neither it nor anyone acting on its behalf has directly or indirectly offered
any interest in the Trust Estate or any Certificates or any similar securities
for sale to, or solicited any offer to acquire any of the same from, anyone in
a manner which would result (assuming the accuracy of the representations in
Sections 7(a)(x), 8(d), 8(k)(vi) and 8(p)(viii)) in a violation of the
Securities Act or the securities laws, rules and regulations of any state.
(b) Citizenship. Each of the Owner Participant and SBC,
in its individual capacity, severally represents and warrants to the other
parties to this Agreement that it is a "citizen of the United States" as
defined in the Act. The Owner Participant agrees, solely for the benefit of
Lessee, the Indenture Trustee and the Holders, that if at any time (i) it shall
not be a "citizen of the United States" within the meaning of the Act and (ii)
thereby the Aircraft shall be, or would become, ineligible for registration in
the name of the Owner Trustee under the Act and regulations then applicable
thereunder (it being understood that the effect of any such status shall be
determined without giving consideration to any provision of the Act (or any
superseding statute) which permits United States registration of an aircraft
based on conditions which impose restrictions on the location and use of such
aircraft or otherwise restrict the ability of an air carrier to operate an
aircraft in the ordinary course of its business), then the Owner Participant
shall (at its own expense and without any reimbursement or indemnification from
Lessee) as soon as is reasonably practicable but in any event within 30 days
after obtaining actual knowledge of such loss of citizenship (A) effect voting
trust or other similar arrangements or take any other action as may be
necessary to prevent any deregistration or to maintain the United States
registration of the Aircraft and (to the extent such recordation is dependent
on the U.S. registration of the Aircraft) the recordation with the FAA of the
Trust Indenture and the Lease, or (B) transfer its beneficial interest in the
Trust Estate in accordance with Section 8(l) hereof. Each of the Original Loan
Participant, the Owner Trustee and the Indenture Trustee agrees, upon the
request and at the sole expense of the Owner Participant, to take all
reasonable acts requested by the Owner Participant in complying with its
obligations under clause (A) or (B) of the second sentence of this Section
8(b). SBC, in its individual capacity, agrees that if at any time a
responsible officer of SBC shall obtain actual knowledge that SBC has ceased to
be a "citizen of the United States" within the meaning of the Act, it will
promptly resign as Owner Trustee (if and so long as such citizenship is
necessary under the Act as in effect at such time or, if it is not necessary,
if and so long as the Owner Trustee's citizenship would have any adverse effect
on a Holder, Lessee, a Sublessee or the Owner Participant), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of the
Trust Agreement.
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(c) Chief Executive Office of SBC. SBC in its individual
capacity represents and warrants that both the principal place of business of
the Owner Trustee and the place where its records concerning the Aircraft and
all of its interest in, to and under the Operative Agreements to which it is a
party are or will be kept is Hartford, Connecticut (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture)
and has its chief executive office (as such term is used in Article 9 of the
Uniform Commercial Code) in Hartford, Connecticut. SBC in its individual
capacity agrees that it will not change the location of such office to a
location outside of Hartford, Connecticut, without 10 days' prior written
notice to Lessee, Indenture Trustee and the Owner Participant.
(d) Securities Laws. The Original Loan Participant
represents and warrants that the Series SWA 1995 Trust N397SW-I Certificate to
be issued to it pursuant to the Trust Indenture is being acquired by it with no
present intent to make any resale or distribution thereof which would require
registration under the Securities Act and it will not offer or sell any
Certificate in violation of the Securities Act; provided, that the disposition
of its property shall at all times be and remain within its control, and that
neither it nor anyone acting on its behalf has offered any Certificates or any
similar securities relating to the Aircraft for sale to, or solicited any offer
to buy any Certificates or any similar securities relating to the Aircraft
from, any person or entity other than in a manner required by the Securities
Act and the rules and regulations thereunder and the securities laws, rules and
regulations of any state.
(e) [Intentionally Reserved].
(f) Owner Participant's Representations and Warranties.
The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation
duly organized and validly existing in good standing under the laws of
the State of Delaware and has the corporate power and authority to
carry on its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under the
Owner Participant Agreements;
(ii) the Owner Participant Agreements have
been duly authorized by all necessary corporate action on the part of
the Owner Participant, do not require any approval not already
obtained of stockholders of the Owner Participant or any approval or
consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been
duly executed and delivered by the Owner Participant or USL Capital
Corporation as its agent, and, subject to and in reliance upon the
representations made by the Original Loan Participant and Lessee in
Sections 8(o) and 7(a)(xv), respectively, neither the execution and
delivery thereof by the Owner Participant, nor the consummation of the
transactions contemplated thereby by the Owner Participant, nor
compliance by the Owner Participant with any of the terms and
provisions thereof will contravene any United States federal or state
law, judgment, governmental rule, regulation or order applicable to or
binding on the Owner Participant (it being understood that no
representation or warranty is made with respect to laws, rules or
regulations relating to (x) aviation or the nature of the equipment
owned by the
PARTICIPATION AGREEMENT [N397SW]
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Owner Trustee, except to the extent expressly made by the Owner
Participant in the first sentence of Section 8(b) or (y) any
securities laws, except as expressly provided in Section 8(a)) or
contravene or result in any breach of or constitute any default under,
or result in the creation of any Lien (other than Permitted Liens of
the type described in clause (a) of the definition thereof) upon the
Trust Estate under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement,
corporate charter, by-law or other agreement or instrument to which
the Owner Participant is a party or by which it or its properties may
be bound or affected;
(iii) assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, each
of the Owner Participant Agreements constitutes a legal, valid and
binding obligation of the Owner Participant enforceable against the
Owner Participant in accordance with the terms thereof;
(iv) there are no pending or, to the
knowledge of the Owner Participant, threatened actions or proceedings
against the Owner Participant before any court or administrative
agency which, if determined adversely to the Owner Participant, would
materially adversely affect the financial condition of the Owner
Participant or the ability of the Owner Participant to perform its
obligations under the Owner Participant Agreements;
(v) on the Delivery Date, there will be no
Lessor Liens attributable to the Owner Participant;
(vi) the Owner Participant's net worth (as
defined in Section 8(l)) is at least $75,000,000; and
(vii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to the Owner
Participant and which is presently continuing.
(g) Lessor Liens. Each of SBC in its individual capacity
and the Owner Participant severally covenants and agrees (i) that it shall not
cause or permit to exist a Lessor Lien attributable to it with respect to the
Aircraft or any other portion of the Trust Estate, (ii) that it will promptly,
at its own expense, take such action as may be necessary duly to discharge such
Lessor Lien attributable to it, and (iii) that it will make restitution to the
Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it.
(h) Indenture Trustee Liens. Wilmington Trust Company in
its individual capacity covenants and agrees that it shall not cause or permit
to exist any Lien, arising as a result of (i) claims against the Indenture
Trustee not related to its interest in the Aircraft or the administration of
the Trust Estate pursuant to the Trust Indenture, (ii) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to take any
action required by, the Operative Agreements to the extent such acts arise or
such failure arises from or constitutes
PARTICIPATION AGREEMENT [N397SW]
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gross negligence or willful misconduct, (iii) claims against the Indenture
Trustee relating to Taxes or Losses which are excluded from the indemnification
provided by Section 7 hereof pursuant to said Section 7, or (iv) claims against
the Indenture Trustee arising out of the transfer by the Indenture Trustee of
all or any portion of its interest in the Aircraft, the Trust Estate, the Trust
Indenture Estate or the Operative Agreements other than (A) a transfer of the
Aircraft pursuant to Section 9, 10 or 18 of the Lease or Article 5 or 8 of the
Trust Indenture, (B) any borrowing pursuant to Section 17 hereof, or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while a Lease
Event of Default is continuing and prior to the time that the Indenture Trustee
has received all amounts due pursuant to the Trust Indenture.
(i) Termination Instructions to Owner Trustee. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.
(j) Excess Payment. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly, to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and (iii) any such Holder or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects
any payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Holder or the Indenture
Trustee shall promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made such payment) such Excess Payment. For purposes of
this Section 8(j), "Excess Payment" means the amount by which any payment
exceeds the amount which would have been received by such Holder or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the
Owner Participant had not become subject to the recourse liability referred to
in clause (ii) above. Nothing contained in this Section 8(j) shall prevent
such Holder or the Indenture Trustee from enforcing any personal recourse
obligation (and retaining the proceeds thereof) of the Owner Trustee (in its
individual capacity) or the Owner Participant under this Agreement or the Trust
Indenture (and any exhibits or annexes thereto), it being understood that the
foregoing shall not be construed so as to permit the Indenture Trustee or any
Holder to enforce the Owner Participant's or Owner Trustee's obligation to the
Lessee with respect to the Deferred Equity Amount or the Second Payment Amount.
(k) Representations and Warranties of Indenture Trustee
in Individual Capacity. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States"
as defined in the Act, that it will notify promptly all parties to
this Agreement if in its reasonable opinion its status as a "citizen
of the United States" is likely to change and that it will resign as
Indenture Trustee as provided in Section 9.07 of the Trust Indenture
if it should cease to be a "citizen of the United States";
PARTICIPATION AGREEMENT [N397SW]
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(ii) it is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and
the authentication of the Certificates have been duly authorized by
all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation governing its banking or trust powers or any judgment or
order binding on it or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it or its properties may be bound or affected;
(iv) each of the Indenture Trustee Agreements
has been duly executed and delivered by it and, assuming that each
such agreement is the legal, valid and binding obligation of each
other party thereto, is the legal, valid and binding obligation of the
Indenture Trustee, enforceable against it in accordance with its
terms;
(v) neither the execution and delivery by
it, in its individual capacity or as Indenture Trustee, as the case
may be, of this Agreement or the Trust Indenture nor the consummation
of any of the transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, or the registration
with, any governmental authority or agency pursuant to any law of the
State of Delaware or the United States governing the banking or trust
powers of the Indenture Trustee; and
(vi) neither it nor anyone authorized to act
on its behalf has directly or indirectly offered any beneficial
interest or security relating to the ownership of the Aircraft or the
Lease or any interest in the Trust Estate or the Trust Indenture
Estate, or any of the Certificates or any other interest in or
security under the Trust Indenture, for sale to, or solicited any
offer to acquire any such interest or security from, or has sold any
interest or security to, any Person, and it will not directly or
indirectly make any such offer, solicitation or sale.
(l) Transfers of Equity Interests; Rights of Owner
Participant and Owner Trustee. So long as the Aircraft shall be leased to
Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion of
counsel (who shall be reasonably satisfactory to the Indenture Trustee and
Lessee) to the effect that the agreement referred to in clause (O) below and
any guaranty required by clause (B) or (C) below, are the legal, valid, binding
and enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital and surplus
PARTICIPATION AGREEMENT [N397SW]
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of at least $75,000,000 or a limited partnership or corporation whose net worth
is at least $75,000,000, (B) any subsidiary of such a bank, financial
institution, limited partnership or corporation; provided, that such bank,
financial institution, limited partnership or corporation furnishes to the
Owner Trustee, the Indenture Trustee and Lessee a guaranty reasonably
satisfactory to them with respect to the Owner Participant's obligations, in
the case of the Owner Trustee, under the Trust Agreement and, in the case of
the Indenture Trustee and Lessee, the Owner Participant's obligations
hereunder, or (C) any other corporation or limited partnership, provided such
obligations are guaranteed by the transferor Owner Participant; provided,
however, that unless otherwise consented to by Lessee any Transferee shall not
be an air carrier, an air freight forwarder or other similar Person or a
corporation controlling, controlled by or under common control with such an air
carrier, an air freight forwarder or other similar Person. Each such transfer
to a Transferee shall be subject to the conditions that (M) upon giving effect
to such transfer, the Transferee is a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) or the Transferee, at its sole
cost and expense on an after-tax basis (including any continuing costs of any
voting trust), shall have entered into a voting trust or other arrangement
which permits the registration of the Aircraft under the Act in the name of the
Owner Trustee without any restriction on the operation of the Aircraft, (N) the
Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
or agreements whereby the Transferee confirms that it shall be deemed a party
to this Agreement and a party to the Trust Agreement and agrees to be bound by
all of the terms of, and to undertake all of the obligations of the transferor
Owner Participant contained in the Owner Participant Agreements and makes
representations of the scope provided for as to the Owner Participant in each
of the Operative Agreements, (P) such transfer does not result in a nonexempt
prohibited transaction under Section 4975 of the Code or Section 406 of ERISA
with respect to such Holders about which the Owner Participant shall have
received, within ten Business Days of its request to the Indenture Trustee
therefor, such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Original Loan Participant and the Indenture Trustee shall cooperate
in providing such information as may be available), (Q) such transfer does not
violate any applicable law including, without limitation, the Act, or any rules
or regulations promulgated thereunder, the Securities Act or the Trust
Indenture Act of 1939, (R) after giving effect to such transfer, there shall be
no more than one Owner Participant of record at that time and (S) such transfer
will not, in and of itself, give rise to an Indenture Default or Indenture
Event of Default; and Lessee or the Indenture Trustee may request such
Transferee to provide an opinion of counsel (who shall be reasonably
satisfactory to Lessee and the Indenture Trustee) as to the non-violation of
the Act or the registration requirements of the Securities Act by reason of
such transfer. Upon any such transfer by the Owner Participant as above
provided, the Transferee shall be deemed the Owner Participant for all purposes
hereof and of the other Operative Agreements and each reference herein to the
transferor Owner Participant shall be deemed for all purposes, with respect to
circumstances existing and requirements arising thereafter, to be to the
Transferee and the transferor Owner Participant shall be relieved of all
obligations of the transferring Owner Participant under the Owner Participant
Agreements assumed by the transferee Owner Participant. If the Owner
Participant intends to transfer its interests hereunder, it shall give prior
written notice thereof as soon as practicable, but in no event less than ten
(10) Business Days prior thereto, to the Indenture Trustee, the Owner
PARTICIPATION AGREEMENT [N397SW]
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Trustee and Lessee, specifying the name and address of the proposed Transferee
and the facts necessary to determine whether or not the requirements for a
Transferee, as set forth herein, are satisfied. The Owner Participant shall
pay, or shall cause the transferee Owner Participant to pay, all of the
reasonable costs and expenses (including, without limitation, legal fees and
expenses) of the other parties hereto (except if such transfer is effected
during the continuance of a Lease Default (of the type described in Section
14.1 or 14.5 of the Lease) or a Lease Event of Default or in connection with
the exercise of remedies under the Lease), on a net after-tax basis, of any
such transfer. For purposes of this Agreement, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined
in accordance with generally accepted accounting principles consistently
applied.
(m) Obligations of Trustees. The Indenture Trustee shall
be responsible for the payment, performance and discharge of, and shall fully
and completely pay, perform and discharge, all of its obligations under the
Trust Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Operative Agreements, the Owner Trustee shall be responsible
for the performance and discharge of, and shall fully and completely perform
and discharge, all of its obligations under the Lease in accordance with the
terms thereof.
(n) Compliance with Trust Indenture. SBC and Wilmington
Trust Company, each in its individual capacity, agrees for the benefit of
Lessee to comply with the terms of the Trust Indenture which it is required to
comply with in its individual capacity.
(o) ERISA. The Owner Participant represents and warrants
that no part of the funds used by it to acquire its interest in the Trust
Estate constitutes "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4975(e)(1) of
the Code, as interpreted by the Department of Labor. The Original Loan
Participant represents and warrants that no part of the funds used by it to
acquire the Certificates or any interest therein (including any participation
in such Certificates) constitutes "plan assets" of any "employee benefit plan"
within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code.
(p) SBC's Representations and Warranties. SBC, in its
individual capacity, represents, warrants and covenants that:
(i) each of the Owner Trustee Documents has
been duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such instruments on behalf of the
Owner Trustee or SBC, as the case may be;
(ii) the Trust Estate is free and clear of
Lessor Liens attributable to SBC in its individual capacity, and there
are no Liens affecting the title of the Owner Trustee to the Aircraft
or resulting from any act or claim against SBC in its individual
capacity arising out of any event or condition not related to the
ownership, leasing, use or operation of the Aircraft or to any other
transaction contemplated by this Agreement or any of the other
Operative Agreements, including any Lien resulting from the nonpayment
by SBC in its individual capacity of any Taxes imposed or measured by
its net income;
PARTICIPATION AGREEMENT [N397SW]
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(iii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to SBC in its
individual capacity and which is presently continuing;
(iv) it is a national banking association
duly organized, validly existing and in good standing under the laws
of the United States and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has the
corporate power and authority to enter into and perform its
obligations under the Trust Agreement and this Agreement (in its
individual capacity), and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has full
right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the
other Owner Trustee Documents;
(v) each of the Trust Agreement and this
Agreement (in its individual capacity) and the Owner Trustee Documents
(in its trust capacity) has been duly authorized by all necessary
corporate action on its part, and neither the execution and delivery
thereof nor its performance of any of the terms and provisions thereof
will violate any federal or Connecticut law or regulation relating to
its banking or trust powers or contravene or result in any breach of,
or constitute any default under, its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution
and delivery of the Trust Agreement by the Owner Participant, each of
the Owner Trustee Documents has been duly executed and delivered by it
and, each of the Trust Agreement and this Agreement (to the extent
executed by the Owner Trustee in its individual capacity), assuming
due authorization, execution and delivery thereof by the other party
or parties thereto, is a legal, valid and binding obligation of SBC in
its individual capacity and as Owner Trustee, as the case may be,
enforceable against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee
shall have received whatever title to the Aircraft as was conveyed to
it by Lessee;
(viii) neither it nor anyone acting on its
behalf has offered any interest in the Trust Estate or any
Certificates or any similar securities for sale to, or solicited any
offer to acquire the same from, anyone other than the Participants,
and no responsible officer or responsible employee of SBC has
knowledge of any such offer or solicitation, except as set forth in
Section 7(a)(x) hereof;
(ix) assuming due authorization, execution
and delivery of each of the Owner Trustee Documents by each of the
parties thereto (other than the Owner Trustee), each of the Owner
Trustee Documents is a legal, valid and binding obligation
PARTICIPATION AGREEMENT [N397SW]
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of the Owner Trustee, enforceable against the Owner Trustee in
accordance with its respective terms;
(x) there are no proceedings pending or, to
the best knowledge of SBC, threatened, against SBC in any court or
before any governmental authority or arbitration board or tribunal
which, if adversely determined, would materially and adversely affect
the right, power and authority of SBC to enter into or perform its
obligations under the Owner Trustee Documents;
(xi) neither the due execution and delivery
of the Owner Trustee Documents by SBC, in its individual capacity or
as Owner Trustee under the Trust Agreement, as the case may be, nor
the consummation by it of any of the transactions contemplated thereby
require the consent or approval of, the giving of notice to, or the
registration with, any federal or Connecticut governmental authority
or agency pursuant to any federal or Connecticut law governing the
banking or trust powers of SBC; and
(xii) no later than sixty (60) days after
Lessee shall so request, Owner Trustee shall execute and deliver to
Lessee (on a form to be supplied by Lessee) a Texas Sales and Use Tax
Certificate of Resale reflecting Owner Trustee's Texas or Connecticut
sales tax permit number and Owner Trustee's purchase of the Aircraft
pursuant to the Lease for lease to Lessee thereunder, and, if
necessary to permit Owner Trustee to issue such Certificate, Owner
Trustee shall apply for (on a form to be supplied by Lessee) a Texas
sales tax permit.
(q) Owner Participant's Lease Expenses. The Owner
Participant covenants and agrees to pay or cause the Owner Trustee to pay any
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) Lessee's Assumption of Debt. Subject to compliance
by Lessee with all of its obligations under the Operative Agreements and
provided that the Series SWA 1995 Trust N397SW-I Certificate is no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense on a net after-tax
basis (including, without limitation, reasonable attorneys' fees and expenses
of each of such parties), (i) if Lessee elects to terminate the Lease and to
purchase the Aircraft pursuant to Section 18.2(b) of the Lease, each of such
parties will, subject to due compliance by Lessee with the provisions of said
Section 18.2(b) and the other Operative Agreements, execute and deliver
appropriate documentation to Transfer to Lessee the Aircraft, and (ii) Lessee,
in connection with such purchase, may (if no Lease Event of Default shall have
occurred and be continuing, unless such Lease Event of Default is waived by the
Indenture Trustee) assume (and, as set forth in Section 18.2(c) of the Lease,
receive a credit in an amount equal to the principal amount of the debt
assumed, against the purchase price payable by Lessee pursuant to Section
18.2(b) of the Lease) the obligations of the Owner Trustee pursuant to Section
7.03 of the Trust Indenture and the Certificates (and the Lease, to the extent
that the Owner Trustee's obligations thereunder are incorporated into the Trust
Indenture or the Certificates), and in such event each of the parties shall
execute and deliver appropriate documentation as contemplated by Section 7.03
of the Trust Indenture.
PARTICIPATION AGREEMENT [N397SW]
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(s) [Intentionally Reserved].
(t) [Intentionally Reserved].
(u) Lease Adjustments. Section 3.7 of the Lease
contemplates that, under certain circumstances, the Owner Participant will make
certain recalculations and the Owner Participant hereby agrees to promptly take
such actions as may be necessary or desirable to give effect to and to cause
the Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.
(v) Revocation of Trust Agreement. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee that it will not
revoke or otherwise terminate the Trust Agreement as long as the lien of the
Trust Indenture is in effect, and (ii) solely for the benefit of Lessee that it
will not revoke or otherwise terminate the Trust Agreement during the Term
without the prior written consent of Lessee, except that, notwithstanding the
foregoing clauses (i) and (ii), or any other provision of the Operative
Agreements to the contrary, the Owner Participant shall have the right to
terminate the trusts set forth in the Trust Agreement without the consent of
any other party to the Operative Agreements, at any time, if in connection
therewith the Owner Participant shall simultaneously create a new trust upon
substantially the same terms and conditions as the trusts so terminated and
shall cause the Trust Estate to be vested in the Owner Trustee under the new
trust upon the same terms and conditions so applied to such terminated trust;
provided, however, that in connection with any such termination (A) none of the
creation of such new trust, the termination of the trust set forth in the Trust
Agreement or the transactions consummated in connection therewith will have any
adverse impact on any of Lessee's rights or the Indenture Trustee's rights
under the Operative Agreements (including the first priority lien status of the
Lien of the Trust Indenture), (B) Lessee shall have no responsibility to
indemnify any Indemnified Party under any provision of any Operative Agreement
for any Taxes or other consequences that in either case would not have been
incurred but for such termination and transfer, (C) the Owner Participant shall
indemnify Lessee and the Indenture Trustee for any costs, expenses, taxes or
other consequences that in either case would not have been incurred but for
such termination and transfer, (D) the Owner Participant shall provide Lessee
and the Indenture Trustee with an opinion in form and substance reasonably
satisfactory to them as to the validity of such termination and transfer, and
(E) immediately after such transfer, the beneficiary of the new trust shall be
the same as the beneficiary of the trust set forth in the Trust Agreement,
unless the Owner Participant makes a transfer complying with Section 8(l). The
Owner Participant further agrees (x) promptly to provide instructions to the
Owner Trustee, upon the request of the Owner Trustee and as otherwise required
or permitted under the Trust Agreement, so as to enable the Owner Trustee to
perform its duties and obligations under the Operative Agreements in accordance
with the terms and provisions thereof and (y) not to remove the institution
acting as Owner Trustee, and not to replace the institution acting as Owner
Trustee in the event that such institution resigns as Owner Trustee, unless the
Owner Participant shall have consulted in good faith with Lessee prior to such
removal or replacement; provided, that no such consultation shall be required
if a Lease Event of Default shall have occurred and be continuing.
PARTICIPATION AGREEMENT [N397SW]
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(w) [Intentionally Reserved].
(x) Withholding Taxes. The Original Loan Participant
represents that it is exempt from United States withholding taxes, and
covenants that, if required to obtain or renew such exemption, it will properly
prepare and promptly furnish to each of the Owner Trustee, the Indenture
Trustee and Lessee Internal Revenue Service Form 1001, Form 4224 (with respect
to each tax year) or Form W-8, whichever is applicable. The Original Loan
Participant represents, warrants and covenants that it will promptly notify the
Owner Trustee, the Indenture Trustee and Lessee if it transfers any interest in
its Series SWA 1995 Trust N397SW-I Certificate to any Person, other than
pursuant to Section 17 or 18 hereof or Section 8.03(e)(ii) of the Indenture.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee, Lessee and
the Owner Participant against any United States withholding taxes (and related
interest and penalties) which the Indenture Trustee fails to withhold on
payments to it as a result of its failure to provide the required certificate
or form or the invalidity of any certificate or form provided by it pursuant to
this Section 8(x) or as a result of any inaccuracy of the representations set
forth in the immediately preceding paragraph. Any amount payable hereunder
shall be paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor and shall include interest at the Overdue Rate from
the date any withholding tax has been paid by such party until the date
indemnified by the Original Loan Participant.
(y) Discharge of Trust Indenture. The Owner Participant
agrees that, at Lessee's expense (including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses of the Owner Trustee and Owner
Participant), upon request of Lessee, the Owner Participant will negotiate
promptly in good faith with respect to any arrangements pursuant to which the
Trust Indenture may be satisfied and discharged in respect of the Certificates
in accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that during
such time as a Lease Event of Default has not occurred it will not, and the
Owner Participant agrees that during such time as a Lease Event of Default has
not occurred it will not cause the Owner Trustee to, take any action to effect
such satisfaction and discharge except upon the request of Lessee made pursuant
to this Section 8(y).
(z) Permitted Investments. The Owner Trustee and the
Indenture Trustee agree that (i) so long as the Trust Indenture has not been
duly discharged, any profit, income, interest, dividend or gain realized upon
the maturity, sale or other disposition of any Permitted Investment made by the
Indenture Trustee pursuant to Section 9.04 of the Trust Indenture, and paid to
Lessee on behalf of the Owner Trustee by the Indenture Trustee in accordance
with the terms of such Section 9.04, shall be entirely for the account of, and
the sole property of, Lessee who, for such purposes, shall not be deemed to be
acting as agent of the Owner Trustee, and Lessee shall have no obligation to
pay over such profit, income, interest, dividend or gain to the Owner Trustee,
(ii) any such profit, income, interest, dividend or gain not theretofore
PARTICIPATION AGREEMENT [N397SW]
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distributed shall, upon discharge of the Trust Indenture, be paid by the
Indenture Trustee to Lessee, unless instructed by the Owner Participant to
distribute such funds to the Owner Participant or the Owner Trustee to the
extent the Owner Participant or the Owner Trustee is owed any amounts under the
Operative Agreements that have not been paid when due, and (iii) to the extent
the Owner Trustee or Owner Participant is owed any amounts under the Operative
Agreements by Lessee and such amounts are not paid when due, the Owner
Participant may cause the Indenture Trustee to distribute and apply such
profit, income, interest, dividend or gain realized upon the maturity, sale or
other disposition of investment of funds in satisfaction or partial
satisfaction of the amounts so due.
(aa) Assumption on Exercise of Purchase Option With
Installments. If Lessee shall have elected both (i) to assume all of the
rights and obligations of Lessor under the Trust Indenture in accordance with
Section 7.03 of the Trust Indenture and (ii) to pay to Lessor the installments
specified in the proviso to Section 18.2(c) of the Lease, then the consummation
of such assumption shall be subject to the following additional conditions:
(i) in addition to the
provisions contemplated by clauses (a) and (b) of Section 7.03 of the
Trust Indenture, the Trust Indenture shall be amended (1) to provide
for an additional series of loan certificates (the "EBO Certificates")
to be issued to the Owner Participant on the Special Purchase Option
Date to evidence the aggregate amount calculated pursuant to Section
18.2(c) of the Lease payable after the first EBO Installment Payment
Date, (2) to provide for distribution of payments in respect of the
EBO Certificates to be made to the Owner Participant on the payment
date therefor out of funds available therefor after all amounts then
due to the other Holders and the Indenture Trustee have been paid, (3)
to include the failure to pay any installment of EBO Certificates
within seven Business Days of when due as an Indenture Event of
Default, (4) to include a right so long as the EBO Certificates shall
be outstanding for the Owner Participant or the Owner Trustee to (x)
purchase the other Certificates under circumstances similar to, and on
the same terms as provided in, clause (e)(ii) of Section 8.03 of the
Trust Indenture, and (y) cure Indenture Events of Default
substantially as provided in clause (e)(i) of Section 8.03 of the
Trust Indenture (it being understood that upon any assumption pursuant
to Section 7.03 of the Trust Indenture the other provisions of the
Trust Indenture intended for the benefit of the Owner Participant or
Owner Trustee, other than as to Excluded Payments or Section 9
thereof, shall be of no further force and effect), (5) to provide that
the Owner Participant and the Owner Trustee shall have no voting or
consent rights under the Trust Indenture by reason of being the holder
of the EBO Certificates or otherwise until all other Certificates have
either been paid in full or been purchased by the Owner Participant or
the Owner Trustee (pursuant to the provisions contemplated by
clause(i)(4) of this Section 8(aa) by the reference therein to clause
(e)(ii) of Section 8.03 of the Trust Indenture), except that without
the consent of the Owner Participant the Trust Indenture may not be
amended, modified or supplemented to reduce the amount or extend the
time of payment of any amount owing or payable under the EBO
Certificates, and (6) to confirm that, although the Owner Participant
cannot participate in the exercise of remedies under the Trust
Indenture, it shall not be precluded from
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demanding, collecting, suing for or otherwise receiving and enforcing
payment of the EBO Certificates;
(ii) for purposes of satisfaction of
the conditions of Section 7.03 of the Trust Indenture, (1) the EBO
Certificates shall be treated separately from the other Certificates
such that matters required to be satisfactory to the Holders (or the
Indenture Trustee) must be satisfactory both to the Owner Participant
and to the holders of the other Certificates, (2) the EBO Certificates
shall be obligations assumed by the Lessee under the Assumption
Agreement (as defined in Section 7.03 of the Trust Indenture), and (3)
references in said Section 7.03 to the transactions contemplated by
said Section 7.03 shall also include the transactions contemplated by
this Section 8(aa);
(iii) upon the Lessee's payment in
full of all amounts due on or prior to the Special Purchase Option
Date in accordance with clauses (i) and (ii) of Section 18.2(c) of the
Lease and compliance with all of the conditions to such assumption in
accordance with Section 7.03 of the Trust Indenture and clause (i) of
this Section 8(aa), (1) the Owner Trustee shall assign the right to
the remaining installments of the Special Purchase Price to the Owner
Participant, (2) the EBO Certificates shall be issued to the Owner
Participant in the aggregate amount of such remaining installments of
the Special Purchase Price, and (3) the Owner Trustee shall Transfer
to the Lessee all right, title, and interest of the Owner Trustee in
and to the Aircraft; and
(iv) the Owner Participant shall
have received such additional security with respect to the EBO
Certificates as it may reasonably request, it being understood that
the Lessee's taking out an irrevocable direct-pay letter of credit
issued by a Qualified Issuing Bank for the account of the Owner
Participant in an aggregate amount at any time equal to the remaining
installments of the Special Purchase Price plus an amount equal to 20
days of interest thereon calculated at the Past Due Rate shall be
deemed to be acceptable additional security.
(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or Section 8.03(e)(ii)
of the Indenture, the Original Loan Participant covenants that it will not (i)
transfer or (ii) grant participations in, its Certificate to any Person unless
such Person represents, warrants and covenants in writing to the Original Loan
Participant and, in the case of a transfer, to the Owner Participant and
Lessee, (A) to the effect set forth in Section 8(x) hereof and (B) further
represents and warrants to the Original Loan Participant and, in the case of a
transfer, to the Owner Participant and Lessee either that (a) no part of the
funds used by it to acquire its Series SWA 1995 Trust N397SW-I Certificate or
participation constitutes "plan assets" of any "employee benefit plan" within
the meaning of ERISA or any "plan" within the meaning of Section 4975(e)(1) of
the Code, or (b) its purchase or acquisition of such Series SWA 1995 Trust
N397SW-I Certificate or participation will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of ERISA. Any such
Person shall require any transferee of its interest to make the
representations, warranties and covenants in the preceding sentence.
(cc) [Intentionally Reserved].
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(dd) Deferred Equity. The Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and not with or for
the benefit of any other party to this Agreement or the Holders of any
Certificates), that, so long as no Lease Event of Default or Lease Default (of
the type described in Section 14.1 or 14.5 of the Lease) shall have occurred
and be continuing and no refunding or refinancing of the Certificates shall
have occurred prior to the Deferred Equity Date, it will pay or cause to be
paid to the Indenture Trustee on the Deferred Equity Date sufficient funds to
effect the payment of an amount (the "Deferred Equity Amount") equal to the
amount due on such date in respect of principal together with accrued interest
on the Certificates from their date of issuance to and including the Deferred
Equity Date. The Owner Participant and the Owner Trustee hereby direct the
Indenture Trustee, and the Indenture Trustee hereby agrees, to apply the
Deferred Equity Amount to the payment of principal and interest on the
Certificates which may be due and payable pursuant to the provisions of the
Trust Indenture on the Deferred Equity Date. The Owner Participant agrees to
make payment of the Deferred Equity Amount in immediately available funds on or
before 11:00 a.m., New York City time, on the Deferred Equity Date; provided,
that the Owner Participant agrees to give Lessee notice by 11:00 a.m., New York
City time, on the second Business Day prior to the Deferred Equity Date if it
shall not make such payment. The Indenture Trustee agrees to give Lessee
prompt notice if it shall not have received such payment by noon, New York City
time, on the Deferred Equity Date. The Owner Participant further agrees with
Lessee, and only with Lessee (and not with or for the benefit of any other
party to this Agreement or the Holders of any Certificates), to fund the
obligations of the Owner Trustee arising pursuant to clause (5) of Section
18(a) (the "Second Payment Amount"). In the event the Owner Participant fails
to make any payment in respect of the Deferred Equity Amount or the Second
Payment Amount when required, or if the Owner Trustee shall fail to make any
such payment when required, in any such case no Indenture Default or Indenture
Event of Default shall arise solely by virtue of such failure. Further, if in
any such case Lessee shall make an Advance as required by Section 3.8 of the
Lease in circumstances where the Owner Participant was required to pay the
Deferred Equity Amount or the Second Payment Amount but failed to do so, Lessee
may to the extent of such failure obtain reimbursement in the manner and to the
extent provided in Section 3.8 of the Lease for the Advance, together with
interest on such amount at the rate described below from (and including) the
date of the making of such Advance to (but excluding) the date of reimbursement
by the Owner Participant or the date Lessee deducts such Advance from other
payments to the extent and as provided in Section 3.8 of the Lease. Interest
shall accrue on the amount of the Advance at an annual rate equal to 5% in
excess of the Base Rate, unless the Advance is made when any Lease Event of
Default or Lease Default (of the type described in Section 14.1 or 14.5 of the
Lease) shall have occurred and be continuing, in which event interest shall
accrue on the amount of the Advance at the Base Rate, but in each case not to
exceed the maximum rate permitted by applicable law. All amounts paid to
Lessee by the Owner Participant in respect of the Advance or deducted by Lessee
pursuant to Section 3.8 of the Lease shall be applied first to payment to
Lessee of interest and then to payment to Lessee of amounts equal to the
Advance. Notwithstanding anything to the contrary contained in the Operative
Agreements, the Owner Participant shall have no obligation to pay or fund any
amount under this Section 8(dd) in excess of $2,600,000. Nothing in this
Section 8(dd) or in clause (5) of Section 18(a) shall be deemed to alter the
non-recourse nature of the Owner Trustee's borrowings under the Trust Indenture
or limit the provisions of Section 2.09 thereof.
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(ee) Lessee as Pricing Agent for Certificate. The Owner
Trustee hereby appoints Lessee as its agent to select the pricing provisions
and related Interest Periods in respect of the Series SWA 1995 Trust N397SW-I
Certificate, such appointment to be effective so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing.
SECTION 9. Payments to Lessee of Trust Indenture
Monies. The Owner Participant hereby agrees to instruct the Owner Trustee to
promptly distribute any money received by it pursuant to Section 7.01 or 10.04
of the Trust Indenture to Lessee to the extent such amounts were paid by Lessee
or on behalf of Lessee and the Owner Trustee or the Owner Participant is not
owed any amounts under any of the Operative Agreements by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and reinvest all money
so held by it in such Permitted Investments as Lessee deems appropriate.
Lessee will apply such money to the payment of previously unclaimed payments
with respect to the Certificates when and as claims for payment are made by the
Holders of such Certificates. As compensation for its services pursuant to
this Section 9, Lessee shall be entitled to an annual fee from the Owner
Participant in an amount to be agreed to at the time by Lessee and the Owner
Participant but in no event shall such fee exceed at any time the amount of
earnings on the monies so held in trust and, subject to the netting provisions
of the second succeeding sentence, distributed at such time to the Owner
Participant. Any net losses on such investment shall be for the account of
Lessee. Any net earnings on such investment shall be distributed from time to
time by Lessee to the Owner Participant after deducting therefrom any portion
of such fee then due and unpaid. Upon the date required by applicable law
dealing with unclaimed property, Lessee will distribute to the Owner
Participant any amount held by it pursuant to this Section 9 and not previously
applied to the payment of the Certificates, after deducting therefrom any
portion of such fee then due and unpaid.
SECTION 10. Other Documents; Amendment. Lessee
acknowledges receipt of executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to the execution and delivery of
the Trust Agreement and Trust Indenture and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, to the extent the same purports or
is stated to bind the Owner Participant, the Trust Indenture (each as the same
may hereafter be amended or supplemented from time to time in accordance with
the terms thereof) applicable to it, to the extent such non-compliance would be
adverse to such party; and (B) subject to Section 8(v), agrees with Lessee and
the Indenture Trustee not to amend, supplement or otherwise modify any
provision of the Trust Agreement in a manner adversely affecting such party
without the prior written consent of such party. In addition, unless a Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing, the Indenture Trustee
and the Owner Trustee hereby agree for the benefit of Lessee that without the
consent of Lessee they will not (and the Owner Participant agrees that it will
not cause the Owner Trustee to) amend, supplement or otherwise modify any
provision of the
PARTICIPATION AGREEMENT [N397SW]
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Trust Indenture in a manner adversely affecting Lessee. The Indenture Trustee
and the Owner Trustee agree to promptly furnish to Lessee copies of any
supplement, amendment, waiver or modification of any of the Operative
Agreements to which Lessee is not a party. Each Holder agrees that it will not
take any action in respect of the Trust Indenture Estate except through the
Indenture Trustee pursuant to the Trust Indenture or as otherwise permitted by
the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee
covenants and agrees with the Participants, the Indenture Trustee and the Owner
Trustee, in its capacity as such and in its individual capacity, as follows:
(a) Further Assurances. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of the Owner Trustee, and shall furnish to the Owner Trustee such information
as may be required to enable the Owner Trustee to make application for such
registration (at the expense of Lessee, including, without limitation,
reasonable attorneys' fees and expenses), and shall promptly furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to timely file any reports required to be filed by it as the lessor under the
Lease or as the owner of the Aircraft with any governmental authority
(including tax authorities), it being understood that Lessee shall not be
required to comply with this covenant to the extent that SBC's or the Owner
Participant's failure to comply with its covenant in Section 8(b) with regard
to its citizenship makes such compliance by Lessee impossible.
(b) Filing and Recording, Etc. Lessee, at its expense,
will, at the request of any party hereto, take, or cause to be taken, such
action with respect to the recording, filing, rerecording and refiling of the
Lessee FAA Bill of Sale, the Trust Agreement, the Lease, all Lease Supplements,
the Trust Indenture, all Trust Supplements and any financing statements or
other instruments as are necessary to create or maintain, so long as the Trust
Indenture or the Lease is in effect, the perfection of the security interests
created by the Trust Indenture and any security interest that may be claimed to
have been created by the Lease and the ownership interest of the Owner Trustee
in the Aircraft. Lessee agrees, upon the request and at the sole expense of
the Owner Participant, to take all reasonable acts requested by the Owner
Participant in complying with its obligations under clause (A) or (B) of the
second sentence of Section 8(b).
(c) FAA Filings. Upon execution and delivery, the
following documents shall be filed for recording with the FAA in the following
order of priority: first, the Lessee FAA Bill of Sale; second, the FAA
registration application referred to in Section 4(a)(ix)(2) (together with any
required affidavits); third, the Trust Indenture, with the Trust Agreement and
the Trust Supplement covering the Aircraft attached; and fourth, the Lease,
with the Lease Supplement covering the Aircraft, the Trust Indenture and the
Trust Supplement covering the Aircraft attached. Lessee agrees to furnish the
Participants and the Indenture Trustee with
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copies of the foregoing documents with recording data as promptly as
practicable following the issuance of same by the FAA.
(d) Annual Compliance Opinions. Lessee will furnish to
Owner Trustee and Indenture Trustee annually after the execution hereof (but
not later than December 1 of each year), commencing with the year 1996,
opinions of counsel for Lessee selected by Lessee and reasonably satisfactory
to Owner Trustee and Indenture Trustee stating that, in the opinion of such
counsel, either (a) such action has been taken (or specifying any action which
must be taken) with respect to the recording, filing, rerecording and refiling
of (i) the appropriate Operative Agreements and any supplements and amendments
thereto, (ii) UCC financing statements, and (iii) such other filings or
recordings as are necessary to maintain for the 15-month period succeeding the
date of such opinion the perfection of Owner Trustee's and Indenture Trustee's
title to and interest in the Aircraft and the Operative Agreements and the
ownership interest of Owner Trustee in the Aircraft, reciting the details of
such actions, or (b) no such action is necessary to maintain for the 15-month
period succeeding the date of such opinion the perfection of such title and
interest.
(e) Engine Purchase Agreement. Lessee agrees to furnish
the Owner Trustee and the Indenture Trustee, promptly upon demand therefor, an
agreement (the "Engine Purchase Agreement Assignment") assigning the rights of
Lessee under the purchase agreement pursuant to which Lessee originally
acquired the Engines (the "Engine Purchase Agreement") to the Owner Trustee
(which rights are collaterally assigned to the Indenture Trustee under the
Trust Indenture), substantially in the form of the Purchase Agreement
Assignment, and to use its best efforts to obtain from the Engine Manufacturer
a consent and agreement in substantially the form of the Manufacturer's
Consent.
(f) Merger. Lessee will not consolidate with or merge
into any other Person or convey, transfer or lease all or substantially all of
its assets to any Person unless:
(i) the Person formed by such consolidation
or into which Lessee is merged or the Person which acquires by
conveyance, transfer or lease all or substantially all of the assets
of Lessee as an entirety, as the case may be (the "Successor") shall
be (i) a Person organized and existing under the laws of the United
States of America or any state thereof or the District of Columbia,
(ii) a "citizen of the United States" as defined in the Act, and (iii)
a United States certificated air carrier;
(ii) the Successor shall execute and deliver
to the Owner Trustee, the Indenture Trustee and the Participants an
agreement in form reasonably satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant containing an assumption by the
Successor of the due and punctual performance and observance of each
covenant and condition of the Operative Agreements to be performed or
observed by Lessee;
(iii) immediately after giving effect to such
transaction and as a result of giving effect to such transaction, no
Lease Default or Lease Event of Default shall have occurred and be
continuing;
PARTICIPATION AGREEMENT [N397SW]
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(iv) Lessee shall have delivered to the Owner
Trustee, the Indenture Trustee and each Participant an Officer's
Certificate and an opinion of counsel to the Successor reasonably
satisfactory to the Owner Trustee, the Indenture Trustee and each
Participant, each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
subparagraph (ii) above comply with this Section 11(f) (except that
such opinion need not refer to subparagraph (iii) above), that the
agreements entered into to effect such consolidation, merger,
conveyance, transfer or lease and such assumption agreement are legal,
valid and binding obligations of the Successor, enforceable against
the Successor in accordance with their respective terms (subject to
applicable bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and to general principles
of equity), and that all conditions precedent herein provided for
relating to such transaction have been complied with; and
(v) the Successor shall make such filings
and recordings (including those with the FAA pursuant to the Act) as
shall be necessary or desirable to evidence such consolidation,
merger, conveyance, transfer or lease with or to such Successor.
Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor Person which shall theretofore have become such in the manner
prescribed in this Section 11(f) from its liability in respect of any Operative
Agreement to which it is a party. Nothing contained herein shall permit any
lease, sublease or other arrangement for the use, operation or possession of
the Aircraft except in compliance with the applicable provisions of the Lease
(or any assignment by Lessee of its rights under the Lease, except in
connection with a transaction in compliance with the express provisions of this
Section 11(f)).
(g) Corporate Existence. Except as permitted by Section
11(f) hereof, Lessee shall at all times maintain its corporate existence.
Lessee covenants and agrees that it will at all times be a "citizen of the
United States" within the meaning of the Act.
(h) Certificate Schedule. Lessee will provide on behalf
of the Owner Trustee the amortization schedule for the Certificate to be issued
to the Original Loan Participant at least two days before the Delivery Date.
(i) No Certificate Ownership. Except as permitted by
Section 7.03 of the Trust Indenture, Lessee agrees that it will not, at any
time, hold any Certificates or any interest (including through another Person)
in any Certificates or any security secured by, in whole or in part, such
Certificates.
SECTION 12. Ownership of Aircraft. It is hereby
agreed among Lessee, the Owner Participant and the Owner Trustee that for all
purposes the Owner Trustee will be the owner of the Aircraft (except that the
Owner Participant will be the owner for income tax
PARTICIPATION AGREEMENT [N397SW]
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purposes and except to the extent and under the circumstances contemplated by
the proviso to Section 18.2(d) of the Lease) and Lessee will be the lessee
thereof, and each party hereto agrees to characterize the Lease as a lease for
income tax purposes and all other relevant purposes (subject to the election
referred to above).
SECTION 13. Notices; Consent to Jurisdiction. (a)
Except as otherwise provided in this Agreement respecting telephone notices,
all notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be in writing and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, or by prepaid telex, TWX or telegram (with messenger delivery
specified in the case of a telegram), or by telecopier, or by prepaid courier
service, and shall be deemed to be given for purposes of this Agreement on the
day that such writing is delivered or, if given by certified mail, three (3)
Business Days after being deposited in the mails, in accordance with the
provisions of this Section 13(a). Unless otherwise specified in a notice sent
or delivered in accordance with the foregoing provisions of this Section 13(a),
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) as follows:
(A) if to Lessee, the Owner Trustee, the Original Loan Participant, the
Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I hereto (and in the case of Owner Trustee a copy shall be
sent to the Owner Participant) or (B) if to a subsequent Owner Participant,
addressed to such subsequent Owner Participant at such address as such
subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Holder, addressed to such Holder at its
address set forth in the Register maintained pursuant to Section 2.03 of the
Trust Indenture.
(b) Each party to this Agreement (individually a "Party"
and collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises solely out of or relates
solely to the Operative Agreements or any of the transactions contemplated
hereby or thereby or any document referred to herein or therein, may be
instituted in the competent courts of the State of New York in New York County
or the United States District Court for the Southern District of New York and
that they, to the maximum extent permitted by law, hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
parties in the same or different jurisdictions. The agreement set forth in
this Section 13(b) is given solely for the benefit of the Parties, and such
agreement is not intended to and shall not (i) confer exclusive jurisdiction on
any court or (ii) inure to the benefit of any other Person.
SECTION 14. Change of Situs of Owner Trust. The
Owner Participant agrees that if, at any time, the Trust Estate becomes subject
to any Taxes for which it is indemnified pursuant to Section 7(b) hereof and
if, as a consequence thereof, Lessee should request that the situs of the trust
be moved to another state in the United States from the state in which it is
then located, the situs of the trust may be moved and the Owner Participant
will
PARTICIPATION AGREEMENT [N397SW]
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take whatever action may be reasonably necessary to accomplish such removal;
provided, that (A) Lessee shall provide such additional tax or other
indemnification as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Agreements of the Owner Participant shall
not be adversely altered as a result of the taking of such action, or the Owner
Participant shall be indemnified by Lessee to the former's reasonable
satisfaction for any such alteration, (C) the lien of the Trust Indenture on
the Trust Indenture Estate shall not be adversely affected by such action, and
Lessee shall execute and deliver such documents as may be requested by the
Indenture Trustee to continue the perfection and priority of the lien on the
Trust Indenture Estate, (D) the Owner Participant shall have received an
opinion or opinions of counsel (reasonably satisfactory to the Owner
Participant) in scope, form and substance reasonably satisfactory to the Owner
Participant to the effect that (I) the trust, as thus removed, shall remain a
validly established trust and the Trust Agreement and other Operative
Agreements shall remain valid, binding and enforceable in accordance with their
terms, (II) any amendments to the Trust Agreement necessitated by such removal
shall have been duly authorized, executed and delivered by the parties thereto
and shall constitute the legal, valid and binding obligations of such parties,
enforceable in accordance with their terms, (III) such removal will not result
in the imposition of, or increase in the amount of, any Tax or other expense,
cost or liability for which Lessee is not required to indemnify the Owner
Participant, the Owner Trustee or the Trust Estate pursuant to Section 7(b)
hereof (taking into account any additional indemnification provided by Lessee
pursuant to clause (A) of this sentence), (IV) such removal will not result in
any Loss of MACRS Deductions, Transaction Expense Deductions, Interest
Deductions or an Inclusion (as defined in the Tax Indemnity Agreement) with
respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 6 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to
such successor Owner Trustee in form and substance reasonably satisfactory to
the Owner Participant covering the matters addressed by the opinion delivered
pursuant to Section 4(a)(xiii) hereof, (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees incurred by the Owner
Trustee or Owner Participant, in connection with such change of situs and (G)
no Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default shall exist.
SECTION 15. Miscellaneous.
(a) Consents under Lease and Trust Indenture. Each of
the Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.
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(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, the Owner Trustee, the Indenture Trustee,
the Owner Participant and the Original Loan Participant provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, the
Original Loan Participant's and the Owner Participant's obligations under any
and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement, except as
otherwise expressly provided herein or therein.
(c) Counterparts; Waivers; Governing Law. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. Neither this
Agreement nor any of the terms hereof may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement, waiver
or modification is sought; and no such termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy thereof shall
have been delivered to Lessee, the Owner Participant, the Indenture Trustee and
the Owner Trustee. The terms of this Agreement shall be binding upon, and
inure to the benefit of and shall be enforceable by, Lessee, the Participants,
the Indenture Trustee and the Owner Trustee. THIS AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(d) No Recourse Against Owner Trustee. The parties
hereto agree that all of the statements, representations, covenants and
agreements made by the Owner Trustee (when made in such capacity) contained in
this Agreement and any agreement referred to herein other than the Trust
Agreement, unless expressly otherwise stated, are made and intended only for
the purpose of binding the Trust Estate and establishing the existence of
rights and remedies which can be exercised and enforced against the Trust
Estate. Therefore, anything contained in this Agreement or such other
agreements to the contrary notwithstanding (except for any express provisions
that the Owner Trustee is responsible for or is acting in or making
representations or agreements in its individual capacity), no recourse shall be
had with respect to this Agreement or such other agreements against the Owner
Trustee in its individual capacity or against any institution or person which
becomes a successor trustee or co-trustee or any officer, director, trustee,
servant or direct or indirect parent or controlling person or persons of any of
them; provided, however, that this Section 15(d) shall not be construed to
prohibit any action or proceeding against any party hereto for its own willful
misconduct or grossly negligent conduct; and provided, further, that nothing
contained in this Section 15(d) shall be construed to limit the exercise and
enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement and the other Operative Agreements.
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(e) Duties Limited. No Participant shall have any
obligation or duty to Lessee, to any other Participant or to others with
respect to the transactions contemplated hereby except those obligations or
duties of such Participant expressly set forth in this Agreement and the other
Operative Agreements, and no Participant shall be liable for performance by any
other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever shall any Participant be liable to Lessee, nor shall any Participant
be liable to any other Participant, for any action or inaction on the part of
the Indenture Trustee or the Owner Trustee in connection with the transactions
contemplated herein, whether or not such action or inaction is caused by the
willful misconduct or gross negligence of the Indenture Trustee or the Owner
Trustee.
(f) Binding on Parties and Successors. This Agreement
shall be binding upon and shall inure to the benefit of and shall be
enforceable against, the parties hereto and their respective successors and
permitted assigns including each successive holder of any Certificate issued
and delivered pursuant to this Agreement or the Trust Indenture whether or not
an express assignment to such holder of rights and obligations under this
Agreement has been made.
(g) Enforceability Representations. Every representation
or warranty contained herein as to the enforceability of any Operative
Agreement shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity.
(h) Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred and be continuing during the Term, none of the
Participants, the Indenture Trustee or the Owner Trustee will, through its own
actions or breaches of any of its obligations under the Operative Agreements,
interfere in the quiet enjoyment of the Aircraft by Lessee or any Permitted
Sublessee.
SECTION 16. Transaction Costs; Invoices and Payment
of Expenses. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the
subsequent placement of the permanent debt pursuant to Section 18 hereof, the
reasonable and actual fees, expenses and disbursements of (1) Potter Anderson &
Corroon, special counsel for the Indenture Trustee, (2) Shipman & Goodwin,
counsel for the Owner Trustee, (3) Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel
for the underwriters in a potential refinancing transaction pursuant to Section
18 hereof (to the extent not payable by the underwriters, if any), (5) Vinson &
Elkins L.L.P., special counsel for Lessee, but only to the extent of their
expenses and disbursements and (6) Office of the General Counsel of the
Original Loan Participant, (ii) all fees, taxes and other charges payable in
connection with the recording or filing of instruments and financing statements
in respect of the transactions contemplated hereby, (iii) the initial fee and
initial reasonable and actual disbursements of the Owner Trustee under the
Trust Agreement, (iv) the initial fee and initial reasonable and actual
disbursements of the Indenture Trustee under the Trust Indenture, (v) the fee
and expenses of Aero Economics, Inc. (or of such other appraiser as shall be
acceptable to Lessee and the
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Owner Participant) with respect to the appraisal of the Aircraft required on or
before the Delivery Date pursuant to Section 4(a) hereof, (vi) the advisory
fees and expenses of Babcock & Brown Financial Corporation in respect of the
transactions contemplated hereby on the Delivery Date, (vii) the reasonable
out-of-pocket disbursements, costs and expenses of the Original Loan
Participant relating to the transactions contemplated hereby, (viii) the
reasonable out-of-pocket expenses of the Owner Participant relating to the
transactions contemplated hereby (excluding the fees, expenses and
disbursements of its counsel), (ix) the initial fee, if any, of the Original
Loan Participant in respect of the transactions contemplated hereby, (x) the
placement or underwriting fees, commissions and expenses, if any, in placing
the permanent debt pursuant to Section 18 hereof and all costs and expenses
associated with a public offering, if any, pursuant thereto, and (xi) printing
and distribution costs in respect of the transactions contemplated hereby.
(b) Each of the Owner Trustee, the Indenture Trustee,
Lessee and the Participants shall promptly submit to the Owner Participant
copies of invoices of the Transaction Costs as they are received. Lessee shall
also be provided with a copy of any bill for legal expenses, with an
opportunity to review and approve it (such approval not to be unreasonably
withheld or delayed). Provided the transactions contemplated hereby are
consummated and the Owner Participant receives invoices and any required
approvals for Transaction Costs within six months of the relevant closing date
and no Lease Default (of the type referred to in Section 14.1 or 14.5 of the
Lease) or Lease Event of Default shall then exist, the Owner Participant agrees
to pay such Transaction Costs incurred in connection with the closing of this
transaction on the Delivery Date (up to a maximum amount of $200,000) and
incurred in connection with the refinancing or refunding of the Certificates
pursuant to Section 18 (up to a maximum amount of $300,000), either directly or
by transferring to the Owner Trustee from time to time such amount as shall be
necessary in order to enable the Owner Trustee to pay such Transaction Costs.
To the extent of funds received by it, the Owner Trustee agrees to pay all
invoices of Transaction Costs that have been so approved promptly upon receipt
thereof. Notwithstanding the foregoing, Lessee, (x) at its option, may pay
directly any Transaction Costs in excess of (i) 0.365% of Lessor's Cost
incurred in connection with the closing of this transaction on the Delivery
Date and (ii) 0.625% of Lessor's Cost incurred in connection with the
refinancing or refunding of the Certificates pursuant to Section 18, (y) shall
pay the fees of its special counsel and all Transaction Costs not required to
be paid by the Owner Participant hereunder and (z) in the event that the
transactions contemplated hereby shall not be consummated, Lessee shall pay all
Transaction Costs plus the reasonable fees, expenses and disbursements of the
Owner Participant's special counsel, White & Case, except that the fees,
expenses and disbursements of the Owner Participant (including those relating
to its counsel) shall be borne by the Owner Participant if such failure to
consummate the transactions results from the failure of the Owner Participant
to close after all conditions precedent to the Owner Participant's funding
(other than those conditions within the control of the Owner Participant) of
its Commitment set forth herein have been satisfied. In any and all events,
Lessee agrees to pay on a net after-tax basis the reasonable out-of-pocket
costs and expenses (including counsel fees) of each Indemnified Party incurred
in connection with the entering into or giving or withholding of any future
waiver, modification, supplement, consent, amendment or other action with
respect to any Operative Agreement which (a) is requested by Lessee, (b)
results from any adjustment pursuant to Section 3.7 of the Lease, or (c) is
necessary
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to effectuate the intent of any Operative Agreement. In addition, upon such
failure to consummate, Lessee shall pay the Original Loan Participant any
applicable Break Amount.
SECTION 17. Optional Redemption of Certificates.
(a) Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of all or
part of the Outstanding Certificates by the Owner Trustee as part of a
refunding or refinancing transaction, the Owner Participant agrees to negotiate
promptly in good faith to conclude an agreement with Lessee as to the terms of
such refunding or refinancing transaction (including the terms of any debt to
be issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new debt to be issued and the other aspects of such
refunding or refinancing transaction to be consummated (such date, the
"Refinancing Date", which date shall be determined so as to comply
with Section 6.03(a) of the Trust Indenture) and (ii) the following
information: (A) subject to the limitations set forth in this Section
17, any proposed adjusted ratio of debt evidenced by the Certificates
to the Owner Participant's investment in the beneficial ownership of
the Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date and, if such amount is less than the aggregate principal amount
of the Outstanding Certificates (as the Owner Participant may agree in
its sole discretion) the amount of any additional contribution to the
Trust Estate to be made by the Owner Participant on the Refinancing
Date, and (C) any proposed revised debt amortization and schedules of
Basic Rent, Stipulated Loss Value percentages and Termination Value
percentages and any revised Special Purchase Price (including any
installments thereof). The Refinancing Certificate shall not provide
for a Debt/Equity ratio of more than 4:1. Within ten (10) Business
Days of its receipt of the Refinancing Certificate, Lessee may demand
a verification of the information set forth in the Refinancing
Certificate in the manner described in Section 3.7 of the Lease. Upon
the acceptance by Lessee of the accuracy of the information set forth
in the Refinancing Certificate or the determination of such
information pursuant to such verification procedures (such
information, the "Refinancing Information") the appropriate parties
will take the actions specified in subparagraphs (2) through (6)
below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities) or the sale of the Owner
Trustee's interest in the Trust Estate and/or the Aircraft and its
simultaneous resale to the Owner Trustee) with the institution or
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institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities (the "New Debt") in an
aggregate principal amount specified in the Refinancing Information,
(ii) the application of the proceeds of the sale of the New Debt, plus
any additional contribution to the Trust Estate, to the redemption of
all such Certificates on the Refinancing Date and the payment of any
other amounts payable to the Holders under the Operative Agreements on
the Refinancing Date, and (iii) the payment of the excess, if any, of
such proceeds over the amount necessary to effect such redemption to
the Owner Trustee for payment to the Owner Participant and (B)
pursuant to which the parties to the refinancing transaction
(including the Owner Participant and Lessee but excluding any public
holders of debt) make such representations, warranties and covenants
as the Owner Participant or Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Basic Rent payable in respect of the
period from and after the Refinancing Date shall be as provided in the
Refinancing Information (and shall take into account any variation of
the Deferred Equity Amount paid by or on behalf of the Owner
Participant pursuant to Section 8(dd), if applicable, from the
corresponding Assumed Interest Amount with respect to the Deferred
Equity Date), (ii) amounts payable in respect of Stipulated Loss Value
and Termination Value from and after the Refinancing Date shall be as
provided in the Refinancing Information, and (iii) in the event that
the Series SWA 1995 Trust N397SW Certificates shall have been publicly
issued, the early termination notice revocation and payment provisions
shall be modified to comport with the applicable notice and payment
requirements of The Depository Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing of the New Debt in like manner
as the Certificates and will enter into such amendments and
supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to by the Owner
Participant (acting in its sole discretion) and whether or not such
refunding or refinancing transaction is consummated, Lessee shall pay
on a net after-tax basis all of the reasonable out-of-pocket expenses
of all parties to such refunding or refinancing, including, without
limitation, the reasonable fees and expenses of such parties' counsel
(including allocated costs of the Original Loan Participant's in-house
counsel) and any related loan or commitment fees; and
(6) subject to compliance by the Owner
Trustee with all applicable terms and conditions for voluntary
redemption under the Trust Indenture and this Agreement, each Holder
of a Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
PARTICIPATION AGREEMENT [N397SW]
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interest thereon, Premium, if any, plus in the case of the Series SWA
1995 Trust N397SW-I Certificates, Break Amount, if any, together with
payment in full of all other amounts then payable to such Holder and
the Indenture Trustee hereunder or under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a
public offering of the New Debt, the Owner Participant shall have the right
(but not the obligation) to review and approve (which approval shall not be
unreasonably withheld) any registration statement filed with the SEC to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as required by Lessee, contain any restrictions on the sale to
Holders who may use ERISA funding sources. It is expressly understood that the
Owner Participant shall have no obligation hereunder to consent to such public
refunding or refinancing if, in its good faith judgment, such refunding or
refinancing increases its or any of its Affiliates' exposure to (i) liabilities
under federal or state securities laws, (ii) regulation under state or federal
securities laws, (iii) the need to disclose publicly information that is not
generally available to the public, or (iv) being adversely affected in its
ability to engage in any other financing transaction, in each case to a level
unacceptable to it in its reasonable, good faith judgment. Any trustee of
public debt shall be (i) Wilmington Trust Company or (ii) a bank or trust
company in the United States and having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of trustee upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least
thirty (30) days' irrevocable written notice of the proposed date of the
optional refunding or refinancing.
(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) no refinancing or refunding shall be consummated and neither
the Owner Participant nor the Owner Trustee shall be required to execute and
deliver any such agreement or instrument or to make any other arrangements
which in its opinion would result in any unreimbursed increased costs or
liability, including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would have any other
adverse effect on it, and (iii) the Owner Participant shall have no obligation
to make any additional investment in connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
(f) Any refunding or refinancing pursuant to this Section
17 shall be effected in accordance with Section 6.03(a) of the Trust Indenture.
(g) When calculating any of the information required to
be set forth in a Refinancing Certificate, the Owner Participant shall make
such calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc.
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75-28 (or any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) complies with Temp.
Treasury Reg. Section 1.861-10T or any successor thereto and uses the same
methodology and assumptions used by the Owner Participant in determining Basic
Rent, Stipulated Loss Values, Termination Values and Special Purchase Price on
the Delivery Date (except to the extent such assumptions have been altered
since the Delivery Date in connection with an adjustment to Rent pursuant to
Section 3.7 of the Lease).
(h) No refinancing or refunding pursuant to this Section
17 shall be permitted prior to the second anniversary of the Delivery Date or
during the continuance of a Lease Default or a Lease Event of Default.
SECTION 18. Interim Debt. (a) The parties hereto
acknowledge and agree that each Series SWA 1995 Trust N397SW-I Certificate
originally issued to the Original Loan Participant on the Delivery Date
represents interim debt financing and that it is intended that the Series SWA
1995 Trust N397SW-I Certificates be refinanced by Series SWA 1995 Trust N397SW
Certificates issued to new Holders. In connection therewith, in the event that
Lessee shall have given written notice to the Owner Trustee, the Indenture
Trustee, the Owner Participant and the Original Loan Participant that Lessee is
requesting a voluntary redemption of the Series SWA 1995 Trust N397SW-I
Certificates (in compliance with the provisions of Articles 6 and 15 of the
Trust Indenture) by the Owner Trustee as part of a refunding or refinancing
transaction, the Owner Participant agrees to negotiate promptly in good faith
with Lessee in connection therewith (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Agreements as may be necessary in order to
facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within five (5) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Section 18 Refinancing Certificate") setting forth
(i) the proposed date on which the Outstanding Series SWA 1995 Trust
N397SW-I Certificates will be redeemed, describing the new debt to be
issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, to be determined so as to
comply with Section 6.03(a) or 6.03(b) of the Trust Indenture (as
appropriate), the "Section 18 Refinancing Date") and (ii) the
following information: (A) the principal amount of debt to be issued
by the Owner Trustee on the Section 18 Refinancing Date, (B) and, if
such amount is less than the principal amount of the Outstanding
Series SWA 1995 Trust N397SW-I Certificates (as the Owner Participant
may agree in its sole discretion) the amount of any additional
contribution to the Trust Estate to be made by the Owner Participant
on the Section 18 Refinancing Date and (C) any proposed revised debt
amortization and schedules of Basic Rent, Stipulated Loss Value
percentages and Termination Value percentages and any revised Special
Purchase Price (including any installments thereof). The principal
amount of debt to be issued by the Owner Trustee on the Section 18
Refinancing Date shall not equal more than
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80.00% of Lessor's Cost. Within five (5) Business Days of its receipt
of the Section 18 Refinancing Certificate, Lessee may demand a
verification of the information set forth in the Section 18
Refinancing Certificate in the manner described in Section 3.7 of the
Lease. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Section 18 Refinancing Certificate or the
determination of such information pursuant to such verification
procedures (such information, the "Section 18 Refinancing
Information") the appropriate parties will take the actions specified
in paragraphs (2) through (10) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to Lessee, the Owner Participant and the Owner Trustee
(which, subject to subsection (d) below, may involve an underwriting
agreement in connection with a public offering of such debt or the
purchase of such debt by a publicly funded entity (or entities)) with
the institution or institutions to be named therein (A) providing for
(i) the issuance and sale by the Owner Trustee to such institution or
institutions on the Section 18 Refinancing Date of Series SWA 1995
Trust N397SW Certificates in an aggregate principal amount specified
in the Section 18 Refinancing Information (such debt securities, the
"Section 18 New Debt"), (ii) the application of the proceeds of the
sale of the Section 18 New Debt, plus any additional contribution to
the Trust Estate, to the redemption of the Series SWA 1995 Trust
N397SW-I Certificates Outstanding on the Section 18 Refinancing Date
and the payment of any other amounts payable to the Holders under the
Operative Agreements on the Section 18 Refinancing Date, all in
accordance with Section 6.03(b) of the Trust Indenture, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Basic Rent payable in respect of the
period from and after the Section 18 Refinancing Date shall be as
provided in the Section 18 Refinancing Information (and shall take
into account any variation of the sum of any interest or other payment
made pursuant to paragraph (5) or (5A) of this Section 18(a) and the
Deferred Equity Amount paid by or on behalf of the Owner Participant
pursuant to Section 8(dd), if applicable, from the Assumed Interest
Amount with respect to the Deferred Equity Date), (ii) amounts payable
in respect of Stipulated Loss Value, Termination Value and Special
Purchase Price from and after the Section 18 Refinancing Date shall be
as provided in the Section 18 Refinancing Information, and (iii) in
the event that the Series SWA 1995 Trust N397SW Certificates shall
have been publicly issued, the early termination notice revocation and
payment provisions shall be modified to comport with the applicable
notice and payment requirements of The Depository Trust Company or any
other depository;
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(4) the Owner Trustee will enter into an
agreement to provide for the securing of the Section 18 New Debt in
like manner as the Series SWA 1995 Trust N397SW-I Certificates and
will enter into such amendments and supplements to the Trust Indenture
(or such new indenture or other security agreement) as may be
necessary to effect such security;
(5) subject in all respects to the
provisions of Section 8(dd) and provided the Owner Participant shall
have provided the requisite funds in compliance with such Section
8(dd), if such refunding or refinancing shall be consummated on or
prior to December 31, 1995, the Owner Trustee shall pay to the
Original Loan Participant the Break Amount, if any (as indemnification
for the loss resulting from such refunding or refinancing), and all
accrued and unpaid interest on the Certificates, subject to Lessee's
obligations under Sections 3.4 and 3.8 of the Lease;
(5A) if such refunding or refinancing shall
be consummated after December 31, 1995, Lessee on behalf of the Owner
Trustee shall pay to the Original Loan Participant as Supplemental
Rent the Break Amount, if any (as indemnification for the loss
resulting from such refunding or refinancing), and all accrued and
unpaid interest on the Certificates (in each case, without duplication
of other amounts, if any, payable pursuant to any other provision of
the Operative Agreements);
(6) the Owner Trustee shall pay all of the
costs of any such refunding or refinancing so consummated, to the
extent the same are Transaction Costs required to be paid by the Owner
Participant pursuant to Section 16 above and such Transaction Costs
shall be appropriately considered in calculating any proposed revised
debt amortization and schedules of Basic Rent, Stipulated Loss Value
percentages and Termination Value percentages and the Special Purchase
Price;
(7) each Holder of the Series SWA 1995 Trust
N397SW-I Certificates will deliver to the Owner Trustee the Series SWA
1995 Trust N397SW-I Certificate held by it immediately prior to such
refunding or refinancing for cancellation (and the Owner Trustee shall
cancel the same), against simultaneous receipt by such Holder of
payment of the then outstanding principal amount of such Series SWA
1995 Trust N397SW-I Certificate, accrued and unpaid interest thereon
plus Break Amount, if any, together with payment in full of all other
amounts then payable to such Holder hereunder or under the Series SWA
1995 Trust N397SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such
of the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) no refinancing or refunding shall be consummated and
neither Owner Participant nor the Owner Trustee shall be required to
execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would
PARTICIPATION AGREEMENT [N397SW]
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<PAGE> 64
result in any unreimbursed increased costs or liability, including any
adverse tax consequences or risk thereof (unless indemnified against
to its reasonable satisfaction) or would have any other adverse effect
on it, and (iii) the Owner Participant shall have no obligation to
make any additional investment in connection with any such refinancing
(other than, for Lessee's sole benefit, the Deferred Equity Amount, if
applicable);
(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel;
(10) the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 if, in
its opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax and, in the case of
a private refinancing, ERISA consequences); provided, however, that
the Owner Participant will be obligated to proceed with such
refinancing if Lessee agrees to indemnify the Owner Participant for
such unindemnified adverse consequences (any such indemnity to be
satisfactory to the Owner Participant) or provides compensation that
will maintain the Owner Participant's Net Economic Return if its
counsel cannot provide a tax opinion satisfactory to it that will
permit the Owner Participant to report properly the proposed
refinancing and rely on Lessee's indemnity; and
(11) unless otherwise agreed to by the Owner
Participant (acting in its sole discretion) and whether or not such
refunding or refinancing transaction is consummated and except to the
extent provided in paragraph (6) above, Lessee shall pay on a net
after-tax basis all of the reasonable out-of-pocket expenses of all
parties to such refunding or refinancing, including, without
limitation, the reasonable fees and expenses of such parties' counsel
(including allocated costs of the Original Loan Participant's in-
house counsel) and any related loan or commitment fees.
(b) Only one optional refinancing or refunding pursuant
to this Section 18 shall be permitted during the Term and such refinancing
shall occur on or prior to the second anniversary of the Delivery Date.
(c) Any refinancing or refunding pursuant to this Section
18 shall be of all Series SWA 1995 Trust N397SW-I Certificates then
Outstanding.
(d) Any public refinancing pursuant to this Section 18
shall comply with all the restrictions, limitations and conditions applicable
in the case of a public refinancing pursuant to Section 17(b) hereof.
(e) No refunding or refinancing pursuant to this Section
18 shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to
be set forth in a Section 18 Refinancing Certificate, the Owner Participant
shall make such calculations in a
PARTICIPATION AGREEMENT [N397SW]
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<PAGE> 65
manner which (A) maintains its Net Economic Return, (B) minimizes the Net
Present Value of Rents to the extent possible consistent with clause (A), (C)
is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or any successor
thereto) and would not cause the Lease to constitute a "disqualified leaseback
or long term agreement" within the meaning of Section 467 of the Code (or any
successor thereto), and (D) satisfies the requirements of Temp. Treasury
Regulation Section 1.861-10T and any successor thereto and uses the same
methodology and assumptions used by the Owner Participant in determining Basic
Rent, Stipulated Loss Values, Termination Values and Special Purchase Price on
the Delivery Date (except to the extent such assumptions have been altered
since the Delivery Date in connection with an adjustment to Rent pursuant to
Section 3.7 of the Lease).
SECTION 19. Section 1110 Compliance. The
Participants and Lessee agree that the Owner Trustee, the Indenture Trustee and
the transactions contemplated by this Agreement and the other Operative
Agreements are intended to be, shall be and should be construed so as to be,
entitled to the full benefits of 11 U.S.C. Section 1110.
PARTICIPATION AGREEMENT [N397SW]
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<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ John D. Owen
-----------------------------------
Treasurer
FORD MOTOR CREDIT COMPANY,
Owner Participant
By: USL CAPITAL CORPORATION,
as agent
By: /s/ Nancy B. Clark
--------------------------------
Nancy B. Clark
Senior Investment Officer
Transportation and
Industrial Financing
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
Original Loan Participant
By: /s/ Timothy C. Hintz
-----------------------------------
Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual
capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
By: /s/ Pablo de la Canal
-----------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as otherwise
expressly provided herein, but solely as
Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
-----------------------------------
Senior Financial Services Officer
PARTICIPATION AGREEMENT [N397SW]
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<PAGE> 67
SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee: With a copy to:
------ Timothy C. Hintz, Vice President
Southwest Airlines Co. Bank of America National Trust and
2702 Love Field Drive Savings Association
P.O. Box 36611 555 South Flower Street, 11th Floor,
Dallas, Texas 75235-1611 Unit 5618
Attn: Treasurer Los Angeles, California 90071
Telecopy: (214) 904-4022 Telephone: (213) 228-2810
Payment Instructions:
Federal Reserve Bank of S.F.
Owner Participant: ABA No. 121000358
----------------- For the account of Bank of America National
Ford Motor Credit Company Trust and Savings Association
c/o USL Capital Corporation For credit to GPO Account Administration #5693
730 Front Street, Sixth Floor Account No. 12331-83980
San Francisco, California 94111 Reference: Southwest Airlines Interim Debt
Attn: Portfolio Management, Attn: Nona Merritt
M.S. 610
Telephone: (415) 627-9345
Telecopy: (415) 627-9241
Payment Instructions:
Citibank, N.A. Owner Trustee:
-------------
New York, New York Shawmut Bank Connecticut, National
ABA No. 021000089 Association
For the account of Ford Motor 777 Main Street
Credit Company Hartford, Connecticut 06115
Account Name: USL/FMCC DFO Wire Attn: Corporate Trust Administration
Account Telecopy: (203) 240-7920
Account No. 4060-1687
Reference: T&IF Southwest Airlines
1995 Transaction Indenture Trustee:
-----------------
Wilmington Trust Company
Rodney Square North
Original Loan Participant: 1100 North Market Street
------------------------- Wilmington, Delaware 19890-0001
Bank of America National Trust and Attn: Corporate Trust Administration
Savings Association Telecopy: (302) 651-8882
GPO Account Admin. #5693 Payment Instructions:
1850 Gateway Boulevard Wilmington Trust Company
Concord, California 94520 Wilmington, Delaware
Attn: Nona Merritt ABA No. 031100092
Telecopy: (510) 675-7531 For the account of Southwest Airlines 1995-2
Telephone: (510) 675-7156 Account No. 34523-0
Reference: N397SW
Attn: David A. Vanaskey
Corporate Trust Administration
</TABLE>
PARTICIPATION AGREEMENT [N397SW]
S-1
<PAGE> 68
SCHEDULE II
Commitments
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
---------------- ------------- -------------
<S> <C> <C>
Bank of America National Trust
and Savings Association 80.0% $25,600,000.00
Owner Participant:
- -----------------
Ford Motor Credit Company 20.0% $6,400,000.00
Total Commitments: 100.0% $32,000,000.00
================= ====== ==============
</TABLE>
PARTICIPATION AGREEMENT [N397SW]
S-2
<PAGE> 69
SCHEDULE III
Appraisal
1. The fair market value of the Aircraft on the Delivery Date is equal to
Lessor's Cost.
2. The Aircraft is reasonably estimated to have:
(A) a useful life of 30.5 years;
(B) a residual value as of a date 24 years after the Delivery Date
of more than 20% of Lessor's Cost (without taking into account
any increase or decrease for inflation or deflation); and
(C) an estimated fair market value (taking into account expected
inflation or deflation) of not more than the Special Purchase
Price on January 1, 2014.
3. The Aircraft will not be "limited use property" as described in Rev.
Proc. 76-30, 1976-7. CB. 647.
4. Such other matters as may be reasonably requested by the Owner
Participant.
PARTICIPATION AGREEMENT [N397SW]
S-3
<PAGE> 1
EXHIBIT 4.16
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO.,
as Lessee
FORD MOTOR CREDIT COMPANY,
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
and in its capacity as Pass Through Trustee under
each of the four Pass Through Trust Agreements
and as Holder
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N397SW)
<PAGE> 2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT dated as of October 1,
1995 (this "Amendment") by and among (i) Southwest Airlines Co., a Texas
corporation ("Lessee"), (ii) Ford Motor Credit Company, a Delaware corporation
("Owner Participant"), (iii) Shawmut Bank Connecticut, National Association, a
national banking association, not in its individual capacity, except as
expressly provided herein, but solely as Owner Trustee under the Trust
Agreement ( "Owner Trustee"), and (iv) Wilmington Trust Company, a Delaware
banking corporation, in its individual capacity and as Indenture Trustee under
the Trust Indenture (the "Indenture Trustee") and in its capacity as Pass
Through Trustee under each of the four separate Pass Through Trust Agreements
("Pass Through Trustee") and as Holder, amends that certain Participation
Agreement respecting the aircraft bearing U.S. registration number N397SW and
dated as of April 1, 1995 (the "Participation Agreement"), by and among Lessee,
Owner Participant, Bank of America National Trust and Savings Association (the
"Original Loan Participant"), Owner Trustee and Indenture Trustee,
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, Indenture Trustee received the Deferred Equity Amount in full
on the Deferred Equity Date from Owner Participant as contemplated by Section
8(dd) of the Participation Agreement;
WHEREAS, concurrently with the execution of this Amendment, the Series
SWA 1995 Trust N397SW-I Certificate held by the Original Loan Participant is
being refinanced by the issuance of one or more new Certificates issued to Pass
Through Trustee as Holder; and
WHEREAS, as contemplated by Section 18 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
Section 1. Amendment to Schedule I. Schedule I to the
Participation Agreement is hereby deleted in its entirety and replaced with
Schedule I to this Agreement.
Section 2. Amendments to Section 7(b). Section 7(b) of the
Participation Agreement is hereby amended in the following manner:
(i) Section 7(b) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase is
hereby amended to be and read in its entirety as follows:
PARTICIPATION AMENDMENT [N397SW]
-1-
<PAGE> 3
"Operative Agreement or each Pass Through Trust Agreement" and
"Operative Agreements or each Pass Through Trust Agreement"
except in the case of Section 7(b)(iii) where the phrase "Operative
Agreements" is hereby amended to be and read in its entirety "Operative
Agreements and the Pass Through Trust Agreements."
(ii) Section 7(b)(i) is hereby amended as follows:
(a) the following language is added immediately after the
words "combined or unitary return with such Indemnified
Party)" and before the words "harmless from, any and all":
"except that for purposes of this Section 7(b)(i) an
Indemnified Party shall not include any Holder other than
Original Loan Participant";
(b) unless as otherwise provided in (c) below, wherever the
term "Certificates" is used, such term is hereby amended to be
and read in its entirety as follows:
"Certificates and each Pass Through Certificate"; and
(c) the language immediately after the phrase "or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture" is
hereby amended to be and read in its entirety as follows:
"and each Pass Through Trust Agreement, or the beneficial
interests in the Trust Estate and each Pass Through Trust
Estate or the creation thereof, or any payments made pursuant
to any such agreement or instrument or upon or with respect to
the property held by Owner Participant or by the Trust Estate
or by Indenture Trustee under the Trust Indenture or the
property held by Pass Through Trustee under the respective
Pass Through Trust Estate, amounts payable with respect to the
Certificates and each Pass Through Certificate, including
withholding Taxes imposed on payments of principal, interest,
Premium or Break Amount on the Certificates or payments of
principal of, interest on or any other amounts payable with
respect to each Pass Through Certificate that are asserted
against the Owner Participant, Owner Trustee or Pass Through
Trustee, as withholding agent, or otherwise with respect to or
in connection with the transactions contemplated by the
Operative Agreements."
Section 3. Amendments to Section 7(c). Section 7(c) of the
Participation Agreement shall be amended in the following manner:
(i) Section 7(c) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase
shall be deemed to include each Pass Through Trust Agreement.
PARTICIPATION AMENDMENT [N397SW]
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<PAGE> 4
(ii) Clause (d) of Section 7(c)(i) is hereby amended to be
and read in its entirety as follows:
"(d) the offer, sale or delivery of the Certificates or the
Pass Through Certificates, whether before or after the
Delivery Date (the indemnity in this clause (d) to extend also
to any Person who controls an Indemnified Party, its
successors, assigns, employees, servants and agents within the
meaning of Section 15 of the Securities Act)."
(iii) The penultimate paragraph of Section 7(c) is hereby
amended to be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of Indenture Trustee (including the reasonable fees
and expenses of its counsel and any agent appointed in
accordance with Section 2.03 or 9.02(c) of the Trust
Indenture) and Pass Through Trustee and the amounts payable to
Owner Trustee pursuant to Section 6.07 of the Trust Agreement
(including, but not limited to, the reasonable fees and
expenses of its counsel), without cost, on a net after-tax
basis, to Owner Participant, for acting as such, other than
such fees and expenses which constitute Transaction Costs for
which Owner Participant is obligated under Section 16. Lessee
agrees that it will pay the reasonable fees and expenses of
any separate owner trustee or co-trustee appointed pursuant to
Section 9.02 of the Trust Agreement as a result of any
requirement of law or if otherwise required by any Operative
Agreement or if requested, or consented to, by the Lessee."
Section 4. Amendments to Section 8. Section 8 of the
Participation Agreement is hereby amended in the following respects:
(i) Section 8(e) is hereby amended to be and read in its
entirety as follows:
"(e) (i) Pass Through Trustee hereby agrees that, except
as otherwise required by applicable law including, without
limitation, any law which requires Pass Through Trustee to act
within its own discretion, it shall not, without the prior
written consent of Owner Trustee, direct Indenture Trustee to
take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization,
direction or consent of, or notice from, the Holders holding a
specified percentage in principal amount of Outstanding (as
defined in the Trust Indenture) Certificates unless Pass
Through Trustee receives a Direction (as defined in the
relevant Pass Through Trust Agreement) to so direct the
Indenture Trustee from Certificateholders (as defined in the
relevant Pass Through Trust Agreement) holding the same
percentage of Certificates (as defined in the relevant Pass
Through Trust Agreement) evidencing Fractional Undivided
Interests (as defined in the relevant Pass Through Trust
Agreement) in the Trust (as defined in the relevant Pass
Through Trust Agreement) holding the Certificates.
PARTICIPATION AMENDMENT [N397SW]
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<PAGE> 5
(ii) Lessee and Pass Through Trustee hereby agree
that Article X of each Pass Through Trust Agreement (to the
extent relating to the Certificates) shall not be amended
without the prior written consent of Owner Participant.
(iii) Pass Through Trustee hereby agrees that,
except as otherwise required by applicable law including,
without limitation, any law which requires Pass Through
Trustee to act within its own discretion, if requested to do
so by Owner Trustee or Owner Participant, Pass Through Trustee
shall request a Direction from the relevant Certificateholders
to establish whether Pass Through Trustee, in its capacity as
a Holder, may direct the Indenture Trustee to take or refrain
from taking any action under the Operative Agreements."
(ii) Section 8(l) is hereby amended by deleting the
references therein to the Original Loan Participant.
(iii) Section 8(bb) is hereby amended to be and read in its
entirety as follows:
"(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or
Section 8.03(e)(ii) of the Indenture, each Holder covenants
that it will not transfer its Certificate to any Person unless
such Person represents and warrants in writing to such Holder,
the Owner Participant and Lessee either that (a) no part of
the funds used by it to acquire its Certificate constitutes
'plan assets' of any 'employee benefit plan' within the
meaning of ERISA or any 'plan' within the meaning of Section
4975(e)(1) of the Code or (b) its purchase or acquisition of
such Certificate will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of
ERISA. Any such Person shall require any transferee of its
interest to make the representations and warranties in the
preceding sentence."
(iv) Section 8(dd) is hereby amended by substituting the
amount $3,033,333" for the amount "$2,600,000" therein.
Section 5. Amendments to Section 11(f). Section 11(f) of the
Participation Agreement is hereby amended such that wherever the phrase
"Operative Agreement" or "Operative Agreements" is used, such phrase is hereby
amended to be and read in its entirety as follows:
"Operative Agreement and each Pass Through Trust Agreement"
and "Operative Agreements and each Pass Through Trust
Agreement."
Section 6. Amendments to Section 15. Section 15(b) of the
Participation Agreement is hereby amended to be and read in its entirety as
follows:
PARTICIPATION AMENDMENT [N397SW]
-4-
<PAGE> 6
"(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, Owner Trustee, Indenture
Trustee, Owner Participant, Pass Through Trustee and any
Holder provided for in this Agreement, and Lessee's, Owner
Trustee's, Indenture Trustee's, Owner Participant's, Pass
Through Trustee's and any Holder's obligations under any and
all thereof, shall survive the making available of the Owner
Participant's Commitment, the delivery or return of the
Aircraft, the transfer of any interest of Owner Participant in
the Trust Estate or the Aircraft or any Engine or the transfer
of any interest by any Holder in any Certificate or the Trust
Indenture Estate and the expiration or other termination of
this Agreement, any other Operative Agreement or the Pass
Through Trust Agreements, except as otherwise expressly
provided herein or therein."
Section 7. Amendment to Section 16. Section 16(b) of the
Participation Agreement is hereby amended by changing "0.365%" in clause (i) of
the fourth sentence thereof to read "0.354142" and by changing "0.625%" in
clause (ii) of the fourth sentence thereof to read "0.623076."
Section 8. Amendment to Section 17. Section 17(a)(3) of the
Participation Agreement is hereby amended by deleting the parenthetical
contained in clause (i) thereof.
Section 9. Ratification. Except as amended hereby, the
Participation Agreement continues and shall remain in full force and effect in
all respects.
Section 10. Authorization to Execute Amendments. By execution of
this Amendment, but subject to the fulfillment of the conditions precedent set
forth in Section 3 of the Refinancing Agreement, Owner Participant hereby
authorizes, directs and instructs Owner Trustee to execute and deliver this
Amendment and any and all other amendments, agreements and certificates as may
be necessary as a result of the refinancing contemplated hereby and by Section
18 of the Participation Agreement.
Section 11. Pass Through Trustee a Party. Effective as of the
date hereof, Pass Through Trustee shall be a party to the Participation
Agreement and shall have the rights and obligations of the Holders as set forth
in the Participation Agreement, as amended hereby.
Section 12. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 13. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
PARTICIPATION AMENDMENT [N397SW]
-5-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Participation Agreement to be duly delivered in the State of New
York and executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By /s/ John D. Owen
Treasurer
FORD MOTOR CREDIT COMPANY,
Owner Participant
By: USL CAPITAL CORPORATION,
as agent
By: /s/ Nancy B. Clark
Nancy B. Clark
Senior Investment Officer
Transportation and Industrial
Financing
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By /s/ Philip G. Kane, Jr.
Title: Vice President
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as otherwise expressly
provided herein, but solely as
Indenture Trustee
By /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services Officer
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services Officer
PARTICIPATION AMENDMENT [N397SW]
-6-
<PAGE> 8
SCHEDULE I
Names and Addresses
Lessee: Indenture Trustee and Pass Through
Southwest Airlines Co. Trustee and Holder:
2702 Love Field Drive Wilmington Trust Company
P.O. Box 36611 Rodney Square North
Dallas, Texas 75235-1611 1100 North Market Street
Attn: Treasurer Wilmington, Delaware 19890-0001
Telecopy: (214) 904-4022 Attn: Corporate Trust Administration
Telecopy: (302) 651-8882
Payment Instructions:
Owner Participant: Wilmington Trust Company
Ford Motor Credit Company Wilmington, Delaware
c/o USL Capital Corporation ABA No. 031100092
730 Front Street, Sixth Floor For the account of Southwest Airlines 1995-1
San Francisco, California 94111 Account No. 34522-0
Attn: Portfolio Management, Reference: N397SW
M.S. 610 Attn: David A. Vanaskey
Telephone: (415) 627-9345 Corporate Trust Administration
Telecopy: (415) 627-9241
Payment Instructions:
Citibank, N.A.
New York, New York
ABA No. 021000089
For the account of Ford Motor
Credit Company
Account Name: USL/FMCC DFO Wire
Account
Account No. 4060-1687
Reference: T&IF Southwest Airlines
1995 Transaction
Owner Trustee:
Shawmut Bank Connecticut, National
Association
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration
Telecopy: (203) 240-7920
PARTICIPATION AGREEMENT [N397SW]
S-1
<PAGE> 1
EXHIBIT 4.17
- --------------------------------------------------------------------------------
SALE AND LEASE AGREEMENT
dated as of April 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N397SW
- --------------------------------------------------------------------------------
All right, title and interest of Lessor in and to this Sale and Lease
Agreement and the Aircraft (including the Engines) has been assigned to and is
subject to a security interest in favor of WILMINGTON TRUST COMPANY, as
Indenture Trustee. This Sale and Lease Agreement has been executed in several
counterparts. No security interest in Lessor's right, title and interest in
and to this Sale and Lease Agreement may be created through the transfer or
possession of any counterpart other than the counterpart identified, for
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart. This is not the original
counterpart.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Sale, Lease and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Variable Amounts on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Adjustment to Basic Rent, Stipulated Loss Value and Termination Value . . . . . . . . . . . . . . . 16
3.7.1 Adjustments upon Payment by Lessor of Transaction Costs, Etc . . . . . . . . . . . . . . 16
3.7.2 Recalculation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.8 Certain Advances; Reimbursement Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain
Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 Lessor's Representations and Warranties; DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1 General Condition upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.1 Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.2 Free of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.3 Operating Configuration and Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.4 Cleanliness and Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1.5 Parts and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Return of Other Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Return at End of Base Lease Term or Renewal Lease Term . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Manuals; Service Bulletins, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Failure to Return Aircraft or Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Aid in Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Storage upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7. Registration, Operation, Possession, Subleasing and Records . . . . . . . . . . . . . . . . . . . . 24
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7.1 Registration and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.2 Nameplate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1.4 Insurance Requirements; Government Requisition; Indemnity . . . . . . . . . . . . . . . . 25
7.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.1 Interchange and Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.2 Testing and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.3 Civil Reserve Air Fleet Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.4 Installation of Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.5 Installation of Engines on Other Airframes . . . . . . . . . . . . . . . . . . . . . . . 27
7.2.6 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2.7 Wet Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2.8 Sublease to Permitted Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.2 Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations;
Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.1 Maintenance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.2 Compliance with Government Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4.1 Mandatory Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4.2 Voluntary Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Right of Termination upon Obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Sale of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Retention by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.4 Termination As to Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10. Loss, Destruction, Requisition, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Event of Loss with Respect to Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.1 Lessee's Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.2 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.3 Payment of Stipulated Loss Value and Rent . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.4 Stipulated Loss Value Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.5 Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.6 Conditions to Replacement of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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10.1.6.1 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.6.2 Tax Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.6.3 Lessee's Obligations with Respect to Replacement Aircraft . . . . . . . . . . . 37
10.1.7 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.1.8 Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.2 Conditions; Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.3 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2.4 Conveyance; Replacement Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2.5 No Reduction of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Application of Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.1 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.2 Replacement of Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.3 Nonreplacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.4 Requisition of Aircraft for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 43
10.5 Requisition of an Engine for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 43
10.6 Application of Payments During Existence of Default . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1 Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.2 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.3 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2 Insurance Against Loss of or Damage to Aircraft and Engines . . . . . . . . . . . . . . . . . . . . 44
11.2.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.2 War-Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3 Certain Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.1 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.2 Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2.4 Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2.5 Government Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3 General Policy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.1 Primary Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.2 Coverage for Each Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.3 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.5 Notice of Termination or Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.6 Nonliability for Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.7 Identity of Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.8 Fifty-fifty Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4 Application of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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11.5 Certificates; Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.6 Lessor's Right to Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.7 Insurance for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.8 Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.2 Security for Lessor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.1 Failure to Pay Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.2 Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.3 General Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.4 Misrepresentation and Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.5 Bankruptcy, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1 Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.1 Return; Repossession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.2 Sale; Use Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.1.3 Certain Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.1.3.1 Liquidated Damages--Fair Market Rental Value . . . . . . . . . . . . . . . . . 52
15.1.3.2 Liquidated Damages--Fair Market Sales Value . . . . . . . . . . . . . . . . . . 52
15.1.4 Liquidated Damages upon Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
15.1.5 Termination and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
15.2 Determination of Fair Market Rental Value and Fair Market Sales
Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.3 No Waiver, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 17. Net Lease; Lessee's Obligations; No Setoff, Counterclaim, Etc . . . . . . . . . . . . . . . . . . . 55
Section 18. Renewal and Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.1 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.2 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 19. Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 20. Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 21. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
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Section 22. Investment of Security Funds; Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . 61
22.1 Investment of Security Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
22.2 Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 23. Permitted Foreign Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
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EXHIBIT A Form of Sale and Lease Agreement Supplement
EXHIBIT B-1 Stipulated Loss Value Schedule
EXHIBIT B-2 Termination Value Schedule
EXHIBIT C Rent Payment Schedule and EBO Installment Payment Schedule
EXHIBIT D Permitted Foreign Air Carriers
EXHIBIT E Assumed Interest Amounts
APPENDIX A Certain Return Conditions
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THIS SALE AND LEASE AGREEMENT, dated as of April 1, 1995, is between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity except as expressly stated herein, and otherwise
as Owner Trustee under the Trust Agreement hereinafter referred to (together
with any successor in such capacity and its permitted assigns, "Lessor"), and
SOUTHWEST AIRLINES CO., a Texas corporation (together with its successors and
permitted assigns, "Lessee").
RECITALS
1. On March 16, 1995, an AC Form 8050-2 Bill of Sale dated
February 15, 1995, from Manufacturer (as defined below) in favor of Lessee
covering the Aircraft (as defined below) was recorded by the FAA (as defined
below) as Conveyance Number P01547.
2. The parties hereto desire that Lessor purchase the Aircraft
from and lease it back to Lessee as hereinbelow provided.
In consideration of the premises and the mutual agreements herein
contained, Lessor and Lessee agree as follows:
Section 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease and shall be equally applicable to both the singular and the plural forms
of the terms herein defined. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified (including as the same may be
amended and restated) from time to time, to the extent permitted by, and in
accordance with, the terms thereof. For all purposes of this Lease the
capitalized terms used but not defined herein are used as defined in the Trust
Indenture or, if not defined therein, as defined in the Participation
Agreement. A reference to a Person shall include the successors and permitted
assigns of such Person.
"Act" means Subtitle VII of Title 49 of the United States Code, as
amended from time to time.
"Advance" is defined in Section 3.8.
"Affiliate" means, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aircraft" means the Airframe, together with the two Engines, whether
or not any of such Engines may from time to time be installed on the Airframe
or may be installed on any other airframe or on any other aircraft.
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"Airframe" means (i) the Boeing Model 737-3H4 aircraft (excluding
Engines or engines from time to time installed thereon) specified in the
initial Lease Supplement, manufactured by Manufacturer and sold by Manufacturer
to Lessee pursuant to the Purchase Agreement, sold hereunder by Lessee to
Lessor, and leased back by Lessor to Lessee, all hereunder and under the
initial Lease Supplement, (ii) any Replacement Airframe, (iii) any and all
Parts so long as the same shall be incorporated in such aircraft or such
Replacement Airframe and title thereto shall have vested in Lessor pursuant to
the terms of Section 8, and any and all Parts removed from such aircraft or
such Replacement Airframe so long as title thereto shall remain vested in
Lessor in accordance with the terms of Section 8, and (iv) all Records at any
time maintained with respect to the foregoing property; provided, however, that
at such time as a Replacement Airframe shall be substituted hereunder and the
replaced Airframe shall be released from the Lien of the Trust Indenture, such
replaced Airframe shall cease to be the Airframe hereunder.
"Assumed Interest Rate" means (i) for the period from and including
the Delivery Date to but excluding the Deferred Equity Date, the equivalent
(computed on the basis of the actual number of days elapsed over a 360-day
year) of 6.75% per annum, compounded semi-annually and (ii) for the period from
and including the Deferred Equity Date, 8.27% per annum, compounded
semi-annually and computed on the basis of a 360-day year of twelve 30-day
months.
"Assumed Interest Amount" means, with respect to the Deferred Equity
Date and each Rent Payment Date, the amount set forth on Exhibit E opposite
such date.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time, or any successor statute.
"Base Lease Term" means the period commencing on the Base Lease Term
Commencement Date and expiring at the end of the day on April 2, 2019.
"Base Lease Term Commencement Date" means July 1, 1995.
"Base Rate" means the interest rate publicly announced in New York
City from time to time by The Chase Manhattan Bank (National Association) as
its prime or base lending rate.
"Basic Rent" means the rent identified as Basic Rent in and payable
pursuant to Section 3.3.
"Bills of Sale" means the FAA Bill of Sale, the Warranty Bill of Sale,
the Lessee FAA Bill of Sale and the Lessee Warranty Bill of Sale.
"Break Amount" is defined in Section 15.05(b) of the Trust Indenture.
"Business Day" shall have the meaning attributed thereto in the Trust
Indenture, so long as the Trust Indenture shall remain in effect, and otherwise
means a day on which banks are
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not required or authorized to close in any of the City of New York, New York,
San Francisco, California, Dallas, Texas, and Hartford, Connecticut, or such
other city as shall be the situs of the principal office of Lessee or Lessor at
the time in question.
"Certificate Holder" is defined in Section 1.01(b) of the Trust
Indenture.
"Certificate Rate" means, as of any date of determination thereof, (i)
in respect of amounts owing or distributable pursuant to the Trust Indenture to
the Holders of Certificates issued prior to the Refinancing Date or the Section
18 Refinancing Date, as the case may be, the applicable Assumed Interest Rate,
(ii) in respect of amounts owing to the Holders of Certificates issued on or
after the Refinancing Date or the Section 18 Refinancing Date, as the case may
be, the interest rate or, if such Certificates shall have been issued with more
than one Maturity Date or interest rate, the weighted average of the interest
rates (which weighting is to be based on the Outstanding principal amounts of
the Certificates of each Maturity Date or interest rate), then in effect with
respect to the then Outstanding principal amounts of the Certificates, (iii) in
respect of any portion of Stipulated Loss Value, Termination Value or the
Special Purchase Price expected to be distributed to the Owner Trustee or the
Owner Participant, an interest rate equal to the yield utilized in calculating
the Owner Participant's Net Economic Return, and (iv) in respect of any other
amount owing to the Owner Participant (and which is not required to be
distributed to the Holders pursuant to the Trust Indenture), 1% in excess of
the Base Rate, but in no event to exceed the maximum rate permitted by
applicable law.
"Certificates" means the Certificates (as defined in the Trust
Indenture) issued under the Trust Indenture.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Deferred Equity Amount" is defined in Section 8(dd) of the
Participation Agreement.
"Deferred Equity Date" means July 1, 1995, the first day of the Base
Lease Term.
"Delivery Date" means the date of the initial Lease Supplement, which
date shall be the date on which the Aircraft is delivered by Lessee to, and
accepted by, Lessor hereunder and in turn leased back by Lessor to Lessee
hereunder, which date shall be a Business Day.
"Dollars" and "$" mean the lawful currency of the United States of
America.
"DOT" means the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"EBO Installment Payment Date" means a date set forth in Part II of
Exhibit C hereto.
SALE AND LEASE AGREEMENT [N397SW]
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"Engine" means (i) each of the CFM International Model CFM56-3-B1
engines identified by manufacturer's serial number in the initial Lease
Supplement subjecting the Aircraft to this Lease and originally installed on
the Airframe covered by such Lease Supplement, whether or not from time to time
thereafter installed on such Airframe or installed on any other airframe or on
any other aircraft, and (ii) any Replacement Engine, whether or not from time
to time thereafter installed on the Airframe or any other airframe or on any
other aircraft, together in each case with any and all Parts incorporated in
such Engine or Replacement Engine and any and all Parts removed from such
Engine or Replacement Engine, in each case so long as title thereto shall have
been and shall remain vested in Lessor in accordance with the terms of Section
8, and all Records at any time maintained with respect to the foregoing
property. Except as otherwise set forth herein, at such time as a Replacement
Engine shall be substituted hereunder and the Engine for which the substitution
is made shall be released from the Lien of the Trust Indenture, such replaced
Engine shall cease to be an Engine hereunder. The term "Engines" means, as of
any date of determination, all Engines then leased hereunder.
"Engine Manufacturer" means CFM International, Inc., a Delaware
corporation, in its capacity as manufacturer of the Engines.
"Estate" means the Trust Estate as that term is defined in the Trust
Agreement.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such property: (i)
disappearance or theft of such property or the loss of the use thereof for any
reason not covered by any other clause of this definition, including hijacking,
for a period of three consecutive months or for a period continuing through the
last day of the Term, whichever first occurs, or destruction, damage beyond
economic repair or rendition of such property permanently unfit for normal use
for any reason whatsoever; (ii) any damage to such property which results in an
insurance settlement with respect to such property on the basis of a total loss
or a constructive or compromised total loss; (iii) the confiscation,
condemnation or requisition of use of such property by the Government or any
other government or any instrumentality or agency thereof for a period in
excess of six consecutive months or for a period continuing beyond the Term,
whichever first occurs; (iv) as a result of any rule, regulation, order or
other action by the FAA, DOT or other governmental body (including any court)
having jurisdiction, the use of such property in the normal course of
interstate air transportation of persons shall have been prohibited for a
period of more than six consecutive months, unless Lessee, prior to the
expiration of such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit normal use by Lessee, but in any event (a) in any case in which such
prohibition shall apply generally to all similar Boeing Model 737-300 series
aircraft, if such prohibition is continuing on the last day of the Term, or (b)
in all other cases, if such prohibition is continuing on the earlier of the
first anniversary of such prohibition and the last day of the Term; provided,
however, that if such prohibition is continuing on the last day of the Term, no
Event of Loss pursuant to this clause (iv) shall exist if Lessor shall have
delivered to Lessee a written notice not less than two days prior to the end of
the Term that such prohibition on the last day of the Term shall not be deemed
an Event of Loss; (v) the confiscation, condemnation or requisition
SALE AND LEASE AGREEMENT [N397SW]
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of title to such property by the Government or any other government or any
instrumentality or agency thereof; or (vi) respecting any Engine, any
divestiture of title treated as an Event of Loss pursuant to Section 7.2.1 or
any other provision of this Lease. An Event of Loss with respect to the
Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe. An Event of Loss shall be deemed to occur as of the
date of the disappearance, theft, destruction, damage, divestiture, rendition,
loss of use, insurance settlement, prohibition, confiscation, condemnation or
requisition of title or of use, as applicable, except that no Event of Loss
shall be deemed to have occurred pursuant to clause (i), (iii) or (iv) above
until the expiration of the applicable period referred to therein.
"FAA" or "Federal Aviation Administration" means the Federal Aviation
Administration or any governmental person, agency or other authority succeeding
to the functions of the Federal Aviation Administration.
"FAA Bill of Sale" means a bill of sale for the Aircraft on AC Form
8050-2 delivered to Lessee on the date of delivery of the Aircraft to Lessee by
Manufacturer under the Purchase Agreement.
"FAA Regulations" means the Federal Aviation Regulations issued
pursuant to the Act from time to time, or any successor regulations thereto.
"Government" means the federal government of the United States of
America or any instrumentality or agency thereof having the full faith and
credit of the United States of America.
"Holder" is defined in Section 1.01(b) of the Trust Indenture.
The term "incorporated in" means incorporated or installed in or
attached to or otherwise made a part of.
"Indemnified Parties" means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1994 Trust N397SW-I
Certificate (including without limitation the Original Loan Participant), (v)
the Estate and the Trust Indenture Estate, (vi) the respective Affiliates,
successors and assigns of the foregoing, and (vii) the respective directors,
officers, employees, agents, partners and servants of the foregoing.
"Indenture and Trust Supplement" means a supplement to the Trust
Agreement and the Trust Indenture, substantially in the form of Exhibit C to
the Trust Indenture.
"Indenture Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Indenture Trustee under the Trust Indenture
and any successor, separate or additional Indenture Trustee thereunder.
SALE AND LEASE AGREEMENT [N397SW]
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"Indenture Trustee Agreements" means the Participation Agreement and
the Trust Indenture.
"Interim Lease Term" means the period commencing on the Delivery Date
and expiring at the end of the day on the day before the Base Lease Term
Commencement Date.
"Investment Grade" is defined in Section 11.8.
"Lease", "this Lease", "this Agreement", "hereby", "herein", "hereof",
"hereunder" or other words mean this Sale and Lease Agreement, including
without limitation supplementation hereof by one or more Lease Supplements.
"Lease Default" means any event or condition which, with notice or
lapse of time or both, would constitute a Lease Event of Default.
"Lease Event of Default" is defined in Section 14.
"Lease Period" means each of (i) the Interim Lease Term, (ii) each
six-month period commencing on a January 1 (other than January 1, 2019) or July
1, as the case may be, thereafter during the Term and (iii) the period
commencing on January 1, 2019 and ending on April 2, 2019.
"Lease Supplement" means a supplement to this Lease, in the case of
the initial such supplement substantially in the form attached as Exhibit A
hereto, subjecting the Aircraft or other property to this Lease.
"Lessee FAA Bill of Sale" means a bill of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the FAA and delivered to
Lessor on the Delivery Date by Lessee.
"Lessee Warranty Bill of Sale" means a full warranty bill of sale
covering the Aircraft delivered to Lessor on the Delivery Date by Lessee.
"Lessor's Cost" for the Aircraft means the amount identified as such
in the initial Lease Supplement subjecting the Aircraft to this Lease.
"Lessor Liens" means Liens of any Person claiming by, through or under
Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant which arise as a result of (i) claims against Lessor, the
Person serving as Owner Trustee, in its individual capacity, or Owner
Participant, as the case may be, not related to the transactions contemplated
by the Operative Agreements, (ii) any act or omission of Lessor, the Person
serving as Owner Trustee, in its individual capacity, or Owner Participant, as
the case may be, which is not related to the transactions contemplated by the
Operative Agreements, or is in violation of any of the express terms of any of
the Operative Agreements, (iii) Taxes or Losses imposed against or
SALE AND LEASE AGREEMENT [N397SW]
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incurred by Lessor, the Person serving as Owner Trustee, in its individual
capacity, or Owner Participant, as the case may be, for which Lessee is not
obligated to indemnify pursuant to the Participation Agreement or the Tax
Indemnity Agreement, other than Liens for Taxes not yet due or for Taxes or
Losses being contested in good faith (and for the payment of which adequate
reserves have been provided in accordance with generally accepted accounting
principles) by appropriate proceedings so long as such proceedings do not
involve any material danger of the sale, forfeiture, loss or loss of use of the
Aircraft, the Airframe or any Engine or any interest therein, or (iv) claims
against Lessor, the Person serving as Owner Trustee, in its individual
capacity, or Owner Participant, as the case may be, arising out of any transfer
by any of such Persons in violation of the express terms of the Operative
Agreements; provided, however, that no such Lien shall constitute a Lessor Lien
for any purpose of the Operative Agreements if the same shall have been bonded
to the reasonable satisfaction of Lessee and the Indenture Trustee.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest, or any claim or exercise of rights, affecting the title to
or any interest in property.
"Loss" is defined in Section 7(c)(i) of the Participation Agreement.
"Maintenance Program" is defined in Section 8.1.1.
"Manufacturer" means The Boeing Company, a Delaware corporation, or
any Affiliate thereof whose obligations are guaranteed by The Boeing Company,
and their respective successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
Manufacturer dated as of April 1, 1995, attached to the Purchase Agreement
Assignment and, if applicable, the Agreement of Subsidiary by Boeing Domestic
Sales Corporation of even date therewith.
"Net Economic Return" means the initial Owner Participant's internal
rate of return as calculated by it and anticipated after-tax economic yield,
total aggregate after-tax cash flow and general pattern of book earnings
expected by the initial Owner Participant with respect to the Aircraft for the
Base Lease Term, utilizing the same assumptions (including tax assumptions and
constraints) as were utilized by the Owner Participant in determining Basic
Rent, Stipulated Loss Value and Termination Value percentages as of the
Delivery Date, as such assumptions may be adjusted from time to time to take
into account the impact of any change of the type specified in Section 3.7
which theretofore has resulted in an adjustment of the percentages of Basic
Rent, Stipulated Loss Value or Termination Value.
"Net Present Value of Rents" means, as of any date of determination,
the net present value, as of the Delivery Date, of each of (i) all unpaid Basic
Rent through the end of the Term and (ii) for any date of determination prior
to the Special Purchase Option Date, all unpaid Basic Rent through the Special
Purchase Option Date plus the Special Purchase Price, in each case utilizing a
semi-annual discount rate that, on an annual basis, is equal to 8.60%.
SALE AND LEASE AGREEMENT [N397SW]
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"Officer's Certificate" means a certificate signed by the Chairman,
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Assistant Secretary of the Person providing
such certificate.
"Operative Agreements" means this Agreement, each Lease Supplement,
the Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement
and the Manufacturer's Consent, including any consents included in or attached
to any thereof.
"Original Loan Participant" means Bank of America National Trust and
Savings Association, and its successors and permitted assigns as holder of the
Series SWA 1994 Trust N397SW-I Certificates.
"Overdue Rate" means (i) in respect of that portion of Basic Rent,
Stipulated Loss Value, Termination Value or Special Purchase Price (or any
installment thereof) expected to be applied to principal of or interest on the
Certificates, the Past Due Rate, or if Certificates shall have been issued
after the Section 18 Refinancing Date with more than one Maturity Date,
interest rate or Past Due Rate, the weighted average of the Past Due Rates in
respect of the then-outstanding Certificates of each Maturity Date (which
weighting is to be based on the Outstanding principal amounts of the
Certificates of each Maturity Date, interest rate or Past Due Rate) and (ii) in
respect of any other portion of Basic Rent, Stipulated Loss Value, Termination
Value or Special Purchase Price (or any installment thereof), any Renewal Rent,
any Supplemental Rent owing to any Person, or any amount payable to Lessee
(except as otherwise provided), 2% in excess of the Base Rate, but in no event
to exceed the maximum rate permitted by applicable law. Any interest payable
at the Overdue Rate that is determined with reference to clause (i) of this
definition shall be computed on the same basis as the Past Due Rate, and any
interest payable at the Overdue Rate that is determined with reference to
clause (ii) of this definition shall be computed on the basis of a year of 365
or 366 days, as the case may be, and actual days elapsed.
"Owner Participant" means Ford Motor Credit Company, a Delaware
corporation, and its successors and permitted assigns.
"Owner Participant Agreements" means the Participation Agreement, the
Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means Shawmut Bank Connecticut, National Association,
not in its individual capacity but solely as trustee under the Trust Agreement,
and any successor, separate or additional Owner Trustee thereunder.
"Owner Trustee Documents" means the Participation Agreement, this
Lease, the Trust Agreement, the Trust Indenture, the Certificates and the
Purchase Agreement Assignment.
SALE AND LEASE AGREEMENT [N397SW]
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"Participant" means Owner Participant and Original Loan Participant
and their respective successors and permitted assigns.
"Participation Agreement" means the Participation Agreement, dated as
of April 1, 1995, among Lessee, Participants, Lessor and Indenture Trustee,
relating to the Aircraft.
"Parts" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(other than (a) complete Engines or engines and (b) any items leased by Lessee
from a third party (other than Lessor)) which may from time to time be
incorporated in the Airframe or any Engine and title to which shall vest in
Lessor (and "Part" means any of the foregoing) or, so long as title thereto
shall remain vested in Lessor in accordance with Section 8.2 or any other
provision hereof, after removal therefrom.
"Permitted Foreign Air Carrier" means a "foreign air carrier" (as
defined in the Act) named in Exhibit D hereto (as the same may be modified from
time to time in accordance with Section 23) and any successor of any such
carrier.
"Permitted Lien" means any Lien referred to in clauses (a) through (g)
of Section 6.
"Permitted Sublease" means a sublease permitted under Section 7.2.8.
"Permitted Sublessee" means the sublessee under a Permitted Sublease.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Prohibited Person" is defined in Section 9.2.
"Purchase Agreement" means the Purchase Agreement between Manufacturer
and Lessee specified in the Purchase Agreement Assignment providing, among
other things, for the manufacture and sale by Manufacturer to Lessee of certain
Boeing Model 737-300 series aircraft (including the Aircraft), as the same has
been or may hereafter (to the extent permitted by the terms of the Purchase
Agreement Assignment) be amended, modified or supplemented and including,
without limitation, as part thereof, the detail specifications referred to
therein and any and all change orders from time to time entered into with
respect thereto (to the extent permitted by the terms of the Purchase Agreement
Assignment), as such Purchase Agreement relates to the Aircraft and has been
assigned pursuant to the Purchase Agreement Assignment.
"Purchase Agreement Assignment" means the Purchase Agreement
Assignment, dated as of April 1, 1995, between Lessee and Lessor, assigning to
Lessor certain of Lessee's rights and interests under the Purchase Agreement
with respect to the Aircraft, which Purchase Agreement Assignment has annexed
thereto the Manufacturer's Consent, executed by Manufacturer.
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"Qualifying Issuing Bank" means any bank or financial institution
principally based in Canada, France, Germany, Switzerland, Japan, the United
Kingdom or the United States (which may be state owned, but may not be the
central bank of such country) having a rating on its certificates of deposits
of "A2" or higher from Moody's Investor Service (or a rating from any other
nationally recognized bond rating service equivalent to or better than such a
rating) and a combined capital, surplus and undivided profits of at least
$500,000,000 (or the equivalent thereof) and which is otherwise reasonably
satisfactory to Lessor based upon established credit or country limit policies
and like criteria of the Owner Participant.
"Records" is defined in Section 5.4.
"Refinancing Date" is defined in Section 17(a) of the Participation
Agreement.
"Renewal Rent" means the rent payable in respect of a Renewal Term
determined pursuant to Section 18.1.
"Renewal Term" means any of the successive periods of six months or
one, two, three of four years each, not to exceed four years in the aggregate,
which follow the end of the Base Lease Term and with respect to which Lessee
shall have exercised its option pursuant to Section 18.1 hereof.
"Rent" means Basic Rent, Renewal Rent and Supplemental Rent.
"Rent Differential Amount" is defined in Section 3.3.
"Rent Payment Date" means (i) each January 1 and July 1 during the
Base Lease Term and any Renewal Term, commencing with January 1, 1996, and (ii)
April 2, 2019.
"Replacement Aircraft" means any Aircraft of which a Replacement
Airframe is a part.
"Replacement Airframe" means a Boeing Model 737-300 (or an improved
model) aircraft (except Engines or engines from time to time installed thereon)
which shall be leased hereunder pursuant to Section 10.1.2.
"Replacement Engine" means a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer or an engine
of another manufacturer of at least equivalent utility, remaining useful life
and value, in each case suitable for installation and use on the Airframe and
fully compatible with the other Engine or engine installed thereon) which shall
have been substituted for an Engine leased hereunder pursuant to Section 5.2,
9.4, 10.1 or 10.2.
"Section 18 Refinancing Date" is defined in Section 18(a) of the
Participation Agreement.
SALE AND LEASE AGREEMENT [N397SW]
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"Securities Act" means the Securities Act of 1933, as amended.
"SLV Determination Date" means any date set forth in Exhibit B-1
hereto.
"Special Purchase Option Date" is defined in Section 18.2(b).
"Special Purchase Price" is defined in Section 18.2(b).
"Special Purchase Price After-Tax Yield" means the after-tax economic
yield, total aggregate after-tax cash flow and general pattern of book earnings
expected by the Owner Participant with respect to the Aircraft through the
Special Purchase Option Date if the Special Purchase Option were exercised and
the Special Purchase Option Price paid in installments, utilizing the multiple
investment sinking fund method of analysis and the same assumptions as used by
such Owner Participant (including the Tax Assumptions set forth in Section 2 of
the Tax Indemnity Agreement and the assumption that the amount of interest
payable on the Certificates on each Rent Payment Date occurring prior to or
concurrent with the Special Purchase Option Date will be the Assumed Interest
Amount set forth on Exhibit E in respect of such Rent Payment Date) in its
economic analysis of the transaction as of the Delivery Date.
"Stipulated Loss Value" means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment (and, to the
extent that the actual amount of interest paid and to be paid on the
Certificates during the Lease Period in which such SLV Determination Date
occurs up to and including such date is greater or less than the amount
included in calculating the percentage set forth in Exhibit B-1 with respect to
such SLV Determination Date on account of such interest, such percentage shall
be adjusted appropriately to compensate for such differential). Stipulated
Loss Value may be subject to adjustment in accordance with Section 3.7 and
Section 18.2(d) of this Agreement.
"Supplemental Rent" means, without duplication, all amounts,
liabilities and obligations (other than Basic Rent or Renewal Rent) which
Lessee assumes or agrees to pay to Lessor or any other Person hereunder, under
the Participation Agreement or any of the other Operative Agreements,
including, without limitation (i) Stipulated Loss Value and Termination Value
payments and Special Purchase Price payments, (ii) all amounts required to be
paid by Lessee under the agreements, covenants and indemnities contained in the
Participation Agreement and the Tax Indemnity Agreement and (iii) all amounts
required to be paid pursuant to Sections 3.4, 3.5 and 3.8 hereof.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement, dated as
of April 1, 1995, between Owner Participant and Lessee, relating to the
Aircraft.
SALE AND LEASE AGREEMENT [N397SW]
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"Taxes" is defined in Section 7(b)(i) of the Participation Agreement.
"Term" means the term for which the Aircraft is leased pursuant to
Section 3 hereof and, unless earlier terminated, shall include the Interim
Lease Term, the Base Lease Term and any Renewal Term then in force or committed
to in accordance with Section 18.1.
"Termination Date" is defined in Section 9.1.
"Termination Value" means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined (and, to the extent that the actual amount of interest paid and to
be paid on the Certificates during the Lease Period in which such TV
Determination Date occurs up to and including such date is greater or less than
the amount included in calculating the percentage set forth in Exhibit B-2 with
respect to such TV Determination Date on account of such interest, such
percentage shall be adjusted appropriately to compensate for such
differential). Termination Value may be subject to adjustment in accordance
with Section 3.7 of this Agreement.
"Transfer" means, with respect to any Person, to transfer, by bill of
sale or otherwise, all such Person's right, title and interest in and to the
Aircraft, Airframe or any Engine, as the case may be, to another Person on an
"as is, where is" basis, free and clear of any Lessor Lien but otherwise
without recourse, representation or warranty, express or implied, and including
an express disclaimer of warranties, representations and guarantees in a manner
comparable to that set forth in Section 4.1.
"Trust Agreement" means the Trust Agreement, dated as of April 1,
1995, between Owner Participant and Shawmut Bank Connecticut, National
Association, in its individual capacity, relating to the Aircraft.
"Trust Indenture" means the Trust Indenture and Security Agreement,
dated as of April 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft.
"Trust Indenture Estate" has the meaning attributed to the term
"Indenture Estate" in the Trust Indenture.
"TV Determination Date" means any date set forth in Exhibit B-2 hereto.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to 49 U.S.C. Section 41102 and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
SALE AND LEASE AGREEMENT [N397SW]
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"Warranty Bill of Sale" means the full warranty bill of sale for the
Aircraft delivered to Lessee on the date of delivery of the Aircraft to Lessee
by the Manufacturer under the Purchase Agreement.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which the Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under the Act for the performance by such employees of
similar functions within the United States of America (it being understood that
cabin attendants need not be regular employees of Lessee), (ii) shall be
maintained by Lessee in accordance with its Maintenance Program, and (iii)
shall be and remain, in the hands of such third party, subject to all other
terms and conditions of this Lease.
Section 2. Sale, Lease and Acceptance.
(a) Lessor, subject to satisfaction or waiver of the conditions
set forth in Section 4 of the Participation Agreement and the concurrent
acceptance hereunder by Lessee of the Aircraft, hereby agrees, to the extent
that the funds received by it pursuant to Section 2 of the Participation
Agreement are adequate for the purpose, to purchase at a purchase price equal
to Lessor's Cost and to accept delivery on the Delivery Date from Lessee
hereunder and to lease back (immediately after extension of the Lien of the
Trust Indenture to the Aircraft) to Lessee hereunder, and Lessee hereby agrees
to sell to Lessor and to lease back (immediately after extension of the Lien of
the Trust Indenture to the Aircraft) from Lessor hereunder on the Delivery
Date, the Aircraft, which shall have been accepted by Lessor and Lessee
hereunder as evidenced by the execution by Lessor and Lessee of the Lease
Supplement conveying to Lessor and leasing to Lessee the Aircraft hereunder;
provided, however, that Lessor and Lessee shall have no further obligation
hereunder with respect to the Aircraft if the Delivery Date shall not have
occurred on or before April 30, 1995. The purchase price of the Aircraft shall
be paid by Lessor to Lessee on the Delivery Date in the manner specified in
Section 2 of the Participation Agreement.
(b) Lessor hereby authorizes each of Gary C. Kelly, John D. Owen
and Laura Wright, all of whom are employees of Lessee, as the authorized
representative or representatives of Lessor to accept delivery of the Aircraft
from Lessee pursuant hereto. Lessee hereby agrees that in the event delivery
of the Aircraft shall be accepted by an employee or employees of Lessee
pursuant to such authorization by Lessor, such acceptance of delivery by such
employee or employees on behalf of Lessor shall, without further act, also
irrevocably constitute (i) acceptance by such employee of such appointment and
(ii) acceptance by Lessee of the Aircraft for all purposes of this Agreement.
SALE AND LEASE AGREEMENT [N397SW]
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Section 3. Term and Rent.
3.1 General. Except as otherwise provided herein, the Term for
the Aircraft shall commence on the Delivery Date specified in the initial Lease
Supplement and shall terminate as herein provided.
3.2 Lease Term. Except as provided herein, the Aircraft shall be
leased hereunder for the Interim Lease Term, the Base Lease Term and each
Renewal Term, if any.
3.3 Basic Rent. No Basic Rent shall be paid during the Interim
Lease Term. Lessee hereby agrees to pay to Lessor Basic Rent for the Base
Lease Term with respect to the Aircraft on each Rent Payment Date set forth in
Part I of Exhibit C, in each case in an amount equal to the percentage of
Lessor's Cost of the Aircraft set forth in Part I of Exhibit C opposite such
Rent Payment Date, subject to the terms of the next succeeding paragraphs of
this Section 3.3 and Section 3.7. Each installment (or portion of an
installment) of Basic Rent under the heading "Advance" in Exhibit C payable on
a Rent Payment Date shall relate to the respective Lease Period immediately
following such Rent Payment Date, and each installment (or portion of an
installment) of Basic Rent under the heading "Arrears" in Exhibit C payable on
a Rent Payment Date shall relate to the respective Lease Period immediately
preceding such Rent Payment Date.
Although the Basic Rent amounts set forth in Exhibit C hereto have
been computed on the assumption that the amount of interest payable on the
Certificates on the Rent Payment Dates throughout the Base Lease Term will be
the Assumed Interest Amounts, Lessor and Lessee recognize that the actual
amount of interest payable on the Certificates may, from time to time during
the Base Lease Term, be different from the Assumed Interest Amounts.
Accordingly, Basic Rent shall be increased or decreased (but not below zero),
as the case may be, by the Rent Differential Amount (as defined herein). Any
increase in Basic Rent shall constitute additional arrears Rent on the date in
question, and any decrease in Basic Rent shall first decrease arrears Rent
before affecting advance Rent on the date in question. For purposes hereof,
"Rent Differential Amount" shall mean, as of any Rent Payment Date, the
absolute value of the difference between (i) the aggregate amount of interest
due and payable on such Rent Payment Date on the Certificates (or due and
payable on the next following or next preceding Business Day, as the case may
be, if such date shall not constitute a Business Day) and (ii) the Assumed
Interest Amount with respect to such Rent Payment Date. If, as of such Rent
Payment Date, the amount determined in accordance with clause (i) of the
immediately preceding sentence shall be greater than the amount determined in
accordance with clause (ii) of such sentence, the amount of Basic Rent payable
on such Rent Payment Date shall be increased by the Rent Differential Amount.
If, as of such Rent Payment Date, the amount determined in accordance with such
clause (ii) shall exceed the amount determined in accordance with such clause
(i), the amount of Basic Rent due on such Rent Payment Date shall be decreased
(but not below zero) by the Rent Differential Amount.
SALE AND LEASE AGREEMENT [N397SW]
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Anything contained in the Participation Agreement or this Lease or any
other Operative Agreement to the contrary notwithstanding, (a) each installment
of Basic Rent payable under this Lease, whether or not adjusted in accordance
with the immediately preceding paragraph or the provisions of Section 3.7,
shall be, under any circumstances and in any event, in an amount at least
sufficient to pay in full, on the Rent Payment Date on which such installment
is due and payable, any scheduled payments then required to be made on account
of the principal of and interest on the Certificates, and (b) Stipulated Loss
Value, Termination Value and, unless Lessee shall have assumed the Certificates
pursuant to Section 18.2(c) hereof, the Special Purchase Price and the initial
installment of the Special Purchase Price if paid in installments, in each case
whether or not adjusted in accordance with the provisions of Section 3.7, as of
any date of determination thereof, together with any amount of Basic Rent
required to be paid on such date and all other amounts payable on such date,
shall equal, under any circumstances and in any event, an amount at least
sufficient to pay in full any payments then required to be made on account of
the principal of and interest (including, without limitation, any interest on
overdue principal and, to the extent permitted by applicable law, interest),
Premium, if any, and Break Amount, if any, on the Certificates and all amounts
which would be payable prior thereto or on a parity therewith if Section 3.03
of the Trust Indenture were applicable at the time of such payment.
3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Break Amount (if any) or the Premium (if any) payable on the Certificates,
amounts due pursuant to Section 15.05 of the Trust Indenture and each other
amount required to be paid (other than principal and interest on the
Certificates) by Lessor as Owner Trustee under the Trust Indenture, on the same
date that such amounts are due under the Trust Indenture, and as provided in
Section 3.6.
3.5 Supplemental Rent. In addition to the amounts payable as
Supplemental Rent pursuant to Section 3.4, Lessee also agrees to pay (or cause
to be paid) to Lessor, or to whomsoever shall be entitled thereto, all
Supplemental Rent with respect to Stipulated Loss Value or Termination Value
when and as the same shall become due and owing and all other amounts of
Supplemental Rent (other than as covered by Section 3.4) within five days after
demand or such other relevant period as may be provided in any Operative
Agreement. Lessee will also pay to Lessor, or to whomsoever shall be entitled
thereto, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Overdue Rate on any part of any installment of Basic Rent or
Renewal Rent not paid when due for any period from and including the date on
which the same was due to but excluding the date of payment in full and (to the
extent permitted by applicable law) on any payment of Supplemental Rent not
paid when due to Lessor, or to whomsoever shall be entitled thereto, as the
case may be, for the period from the date on which the same was due to but
excluding the date of payment in full. The expiration or other termination of
Lessee's obligation to pay Basic Rent or Renewal Rent hereunder shall not limit
or modify the obligations of Lessee with respect to Supplemental Rent.
3.6 Payments. Payments of Rent and any and all other payments
payable to Lessor hereunder shall be paid in funds of the United States of
America which shall be immediately
SALE AND LEASE AGREEMENT [N397SW]
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available not later than 11:00 A.M., New York City time, on the date due at the
office of Lessor at 777 Main Street, Hartford, Connecticut 06115, Attention:
Corporate Trust Administration, Re: Southwest Airlines 1995 Trust N397SW, or
as otherwise directed by Lessor in writing at least five Business Days prior to
the date such payment is due; provided, that so long as the Trust Indenture
shall not have been terminated pursuant to Section 10.01 of the Trust
Indenture, Lessor hereby directs and Lessee agrees, that, unless the Indenture
Trustee shall otherwise direct, all Rent (other than Excluded Payments) shall
be paid prior to 11:00 A.M., New York City time, on the due date thereof
directly to Indenture Trustee to its account set forth in Schedule I to the
Participation Agreement. All payments of Supplemental Rent owing to Indenture
Trustee or to any Holder pursuant to the Participation Agreement shall be made
in immediately available funds prior to 11:00 A.M. New York City time, on the
due date thereof at the office of Indenture Trustee or at such other office of
such other financial institution located in the continental United States as
the party entitled thereto may so direct at least five Business Days prior to
the due date thereof. All payments of Supplemental Rent payable to Owner
Participant, to the extent that such amounts constitute Excluded Payments (as
defined in the Trust Indenture), shall be made by wire transfer prior to 11:00
A.M., New York City time, on the due date thereof, to its account set forth in
Schedule I to the Participation Agreement, with sufficient information to
identify the source and application of the funds. Except as otherwise
expressly provided herein, whenever any payment of Rent or other payment to be
made hereunder shall be due on a day which is not a Business Day, such payment
shall be made on the next succeeding day which is a Business Day and (provided
such payment is made on such next succeeding Business Day) no interest shall
accrue on the amount of such payment from and after such scheduled date.
3.7 Adjustment to Basic Rent, Stipulated Loss Value and
Termination Value.
3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a)
of the Participation Agreement paid by Owner Participant in connection
with the closing of this transaction on the Delivery Date are equal to
an amount which is other than 0.365% of Lessor's Cost, (b) the
Transaction Costs referred to in Section 16(a) of the Participation
Agreement paid by Owner Participant in connection with the initial
refinancing or refunding of the Certificates pursuant to Section 18 of
the Participation Agreement are equal to an amount which is other than
0.625% of Lessor's Cost, or no such refinancing or refunding shall
occur within two years of the Delivery Date, (c) the Delivery Date is
not April 3, 1995, (d) a refinancing or refunding of the Certificates
pursuant to Section 17 or 18 of the Participation Agreement occurs,
(e) any recalculation of Basic Rent, Stipulated Loss Value,
Termination Value and the Special Purchase Price is required by the
terms of the Tax Indemnity Agreement, or (f) the interest portion of
the Deferred Equity Amount is not equal to the Assumed Interest Amount
with respect to the Deferred Equity Date and there shall not have
occurred a refunding or refinancing pursuant to Section 17 or 18 of
the Participation Agreement prior to the first Rent Payment Date, then
in each case, the Basic Rent percentages set forth in Exhibit C, the
Stipulated Loss Value percentages set forth in Exhibit B-1 and the
Termination Value percentages set forth in
SALE AND LEASE AGREEMENT [N397SW]
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Exhibit B-2 shall be recalculated by Owner Participant (i) in the case
of a recalculation pursuant to clause (a) or (c), prior to April 1,
1996, (ii) in the case of a recalculation pursuant to clause (b), on
or prior to the later of April 3, 1997 and the second Rent Payment
Date next following the relevant Refinancing Date or Section 18
Refinancing Date, as the case may be, (iii) in the case of a
recalculation pursuant to clause (d), prior to the relevant
Refinancing Date or Section 18 Refinancing Date, as the case may be,
(iv) in the case of a recalculation pursuant to clause (e), prior to
the Rent Payment Date next following (by at least five Business Days)
the event described in clause (e), or (v) in the case of a
recalculation pursuant to clause (f), prior to the first Rent Payment
Date, in each case in order to: (A) maintain Net Economic Return and
(B) minimize the Net Present Value of Rents to the extent possible
consistent with clause (A). In addition, in the event of an
adjustment pursuant to this Section 3.7, the Special Purchase Price
(including any installments thereof) shall be recalculated in
accordance with the terms of Section 18.2(b).
3.7.2 Recalculation Procedures. Any recalculation of
Basic Rent, Stipulated Loss Value and Termination Value percentages
and the Special Purchase Price pursuant to this Section 3.7 shall be
determined by Owner Participant, and shall be subject to the
verification of Lessee and its advisors. Such recalculated Basic
Rent, Stipulated Loss Value and Termination Value percentages and
Special Purchase Price (including installments thereof) shall be set
forth in a Lease Supplement and, in the case of Basic Rent, shall
become effective as of the next succeeding Rent Payment Date and, in
the case of Stipulated Loss Value, Termination Value and the Special
Purchase Price, shall be retroactive to the inception of this Lease.
Such recalculated Basic Rent and, if applicable, the Special Purchase
Price shall be determined so as to conform, in the opinion of Owner
Participant's tax counsel, to all applicable tax constraints and
requirements, including the requirements of Section 467 of the Code
and Sections 4.(1)(B), 4.(6) and 5. of Revenue Procedure 75-21, 75-1
Cum. Bull. 715; provided, however, that notwithstanding the foregoing,
all adjustments provided for herein shall be based on the same
calculation methods and assumptions (including tax assumptions set
forth in Section 2 of the Tax Indemnity Agreement) as were used
initially by the Owner Participant in determining Basic Rent,
Stipulated Loss Values, Termination Values and the Special Purchase
Price for the Aircraft (except and only to the extent such assumptions
are required to be changed by virtue of the event giving rise to the
adjustment or any event giving rise to any prior adjustments pursuant
to the terms of this Lease) and shall take into account the amount and
timing of any contribution made by the Owner Participant to the Estate
subsequent to the Delivery Date. If, upon verification of the
percentages determined by Owner Participant pursuant to this Section
3.7, Lessee does not agree with the determination of Owner
Participant, then an independent accounting firm, to be selected by
Owner Participant and reasonably acceptable to Lessee, shall verify
the computations. Such accounting firm shall be requested to make its
determination within 30 days. Owner Participant shall provide to such
accounting firm such information as it may reasonably require,
including a description of the methodology of the calculations used in
computing such adjustments
SALE AND LEASE AGREEMENT [N397SW]
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and such other information as is necessary to determine whether the
computations are mathematically accurate. The accounting firm shall
hold in strict confidence such methodology and other information. The
computations of Owner Participant or the accounting firm selected as
provided above, whichever is applicable, shall be final, binding and
conclusive upon Lessee and Lessor, and Lessee shall have no right to
inspect the books, records, tax returns or other documents of or
relating to Owner Participant to verify such computations or for any
other purpose in connection with such adjustments. All fees and
expenses payable to the accounting firm selected above under this
Section 3.7.2 shall be borne by Lessee, except that such fees and
expenses shall be payable by Owner Participant if the computations
provided by Owner Participant are higher than those provided by the
accounting firm and the computations of such accounting firm causes
the present value of the Basic Rent (utilizing a semi-annual discount
rate that, on an annual basis, is equal to 8.60%) as computed by Owner
Participant to decrease by ten basis points or more.
Section 3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received (i) the Deferred
Equity Amount on the Deferred Equity Date, or such amount is insufficient to
pay all principal and interest on the Certificates due on such date, or (ii)
the payment to be made by the Owner Trustee pursuant to clause (5) of Section
18(a) of the Participation Agreement on the Section 18 Refinancing Date, or the
amount of such payment is insufficient to pay the Break Amount and all accrued
and unpaid interest on the Certificates, then Lessee shall pay to the Indenture
Trustee on behalf of the Owner Participant or the Owner Trustee, as the case
may be, on the Deferred Equity Date or the Section 18 Refinancing Date, as the
case may be, an amount equal to all amounts payable as principal or interest on
the Certificates on the Deferred Equity Date and/or as Break Amount and all
accrued and unpaid interest on the Certificates on the Section 18 Refinancing
Date, as the case may be, less any portion of either such amount so paid by the
Owner Participant or the Owner Trustee, as the case may be (such amount herein
referred to as an "Advance"). In the event Lessee makes any Advance pursuant
to this Section 3.8, then, notwithstanding any provision to the contrary herein
or in any other Operative Agreement, Lessee shall be entitled to demand
immediate repayment of such Advance from the Owner Participant to the extent of
the portion thereof that relates to a payment that the Owner Participant or
Owner Trustee failed to make as required by Section 8(dd) or 18(a)(5A) of the
Participation Agreement, and, in addition, shall be entitled to offset and
deduct (without duplication) against each succeeding payment (other than as
limited by the provisos to this sentence) due from Lessee to Persons other than
the Holders, the Indenture Trustee and Lessor in its individual capacity
(including, without limitation, Basic Rent, payments due under Sections 5, 9,
10, 15 and 18 hereof, and payments due to Persons other than the Holders, the
Indenture Trustee and Lessor in its individual capacity under Section 7 of the
Participation Agreement) the amounts (including interest at the rates provided
therein) due and owing by the Owner Participant to Lessee under Section 8(dd)
of the Participation Agreement until Lessee has been fully reimbursed for such
amounts; provided, that in the case of any payment due from Lessee which is
distributable under the terms of the Trust Indenture, Lessee's right of offset
and deduction shall be limited to amounts distributable to Lessor or the Owner
Participant
SALE AND LEASE AGREEMENT [N397SW]
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thereunder (and shall not include any amounts distributable to the Indenture
Trustee or the Holders); and provided, further, that in no event shall any such
offset or aggregate combined effect of separate offsets reduce the amount of
(i) any installment of Basic Rent to an amount that is insufficient to pay in
full the scheduled payments then required to be made on account of the
Certificates then Outstanding or (ii) any payment of Stipulated Loss Value,
Termination Value or Special Purchase Price (or installment thereof) to an
amount that, together with any other amounts then required to be paid by Lessee
hereunder in connection therewith, is insufficient to pay in full as of the
date of payment thereof, the aggregate unpaid principal of the Outstanding
Certificates, together with all unpaid interest, Premium (if any) and Break
Amount (if any) thereon. Notwithstanding any provision of this Section 3.8 to
the contrary, Lessee's obligation to make any Advance shall terminate at such
time as its obligation to pay Basic Rent terminates under this Lease (other
than by reason of a Lease Event of Default).
Section 4. Lessor's Representations and Warranties; DISCLAIMER;
Certain Agreements of Lessee.
4.1 Lessor's Representations and Warranties; DISCLAIMER. LESSEE
EXPRESSLY AGREES TO TAKE THE AIRCRAFT "AS IS", AND LESSEE HAS SELECTED THE
AIRCRAFT AND THE MANUFACTURER THEREOF (AND EACH PORTION THEREOF) AND ALL
MAINTENANCE FACILITIES REQUIRED FOR THE AIRCRAFT OR HEREUNDER. NEITHER LESSOR
(INDIVIDUALLY OR AS OWNER TRUSTEE) NOR THE INDENTURE TRUSTEE (INDIVIDUALLY OR
AS INDENTURE TRUSTEE) NOR ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO
HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS (OR, IF NOT A PARTY HERETO SHALL
BE DEEMED TO HAVE EXPRESSLY DISCLAIMED), ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Shawmut Bank
Connecticut, National Association, in its individual capacity (i) represents
and warrants that on the Delivery Date Lessor shall have received whatever
title thereto as was conveyed to it by the Lessee, (ii) represents and warrants
that on the Delivery Date the Aircraft shall be free of Lessor Liens
attributable to it, (iii) agrees that it will not directly or indirectly
create, incur, assume or suffer to exist any Lessor Lien attributable to it on
or with respect to the Airframe or any Engine or any other portion of the
Estate, and (iv) represents and warrants that it is a "citizen of the United
States" as defined in the Act. Lessor covenants that during the Term (so long
as no Lease Event of Default shall have occurred and be continuing) it will
not, through its own actions or breaches of any of its obligations under the
Operative Agreements, interfere in the quiet enjoyment of the Aircraft by
Lessee or any Permitted Sublessee.
SALE AND LEASE AGREEMENT [N397SW]
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Nothing in this Section 4.1 shall be deemed to modify or otherwise
affect the respective rights and obligations of Lessee and of Manufacturer
under the Purchase Agreement.
4.2 Certain Agreements of Lessee. All obligations of Lessee in
this Lease shall be done, performed or complied with at Lessee's cost and
expense, whether or not so expressed, unless otherwise expressly stated.
Lessee hereby agrees with Lessor for the benefit of the Participants that it
shall perform the agreements, covenants and indemnities set forth in the
Participation Agreement (including, without limitation, Sections 7(b) and 7(c)
of the Participation Agreement) which are incorporated herein, and hereby
restates Lessee's representations and warranties set forth in the Participation
Agreement and the Tax Indemnity Agreement, as fully and to the same extent and
with the same force and effect as if set forth in full in this Section 4.2.
Section 5. Return of Aircraft.
5.1 General Condition upon Return. Unless purchased by Lessee
pursuant to Section 18.2, and subject to Section 10, upon the expiration or
termination of this Lease, Lessee will return the Aircraft to Lessor by
delivering the same at any location in the continental United States at which
Lessee has maintenance facilities (and Section 5.7 shall apply). Lessee shall
give Lessor not less than 15 days prior notice of the return location. All
costs associated with the return flight shall be for the account of Lessee. At
the time of such return, the Airframe and Engines or engines installed thereon:
5.1.1 Airworthiness. Subject to the exception described
in clause (iii) of Section 8.1.1, shall be duly certificated as an
airworthy aircraft by the FAA under Part 121 of the Federal Aviation
Regulations or any successor provision; provided, that Lessee's
ability to satisfy such return condition shall not preclude the
occurrence of an Event of Loss pursuant to clause (iv) of the
definition thereof;
5.1.2 Free of Liens. Shall be free and clear of all Liens
(except Lessor Liens);
5.1.3 Operating Configuration and Condition. Shall be in a
configuration suitable for operation in regularly scheduled commercial
airline passenger service in the United States and shall be in as good
operating condition as when delivered new to Lessee by Manufacturer,
ordinary wear and tear excepted or, in the case of any such engines
not owned by Lessor, shall have a value, utility, airworthiness and
remaining useful life at least equal to, and shall be in as good
operating condition as required by the terms hereof with respect to,
Engines constituting part of the Aircraft but not then installed on
the Airframe. All Lessee or Permitted Sublessee exterior markings, as
the case may be, shall have been painted over in matching exterior
colors. In addition, any appliance, part, instrument, appurtenance,
accessory, furnishing or other equipment leased by Lessee from a third
party (other than Lessor) and incorporated in the Aircraft shall be
removed prior to the date of such return without any damage to the
Aircraft and without diminishing or impairing the value, utility,
remaining useful life or condition
SALE AND LEASE AGREEMENT [N397SW]
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which the Aircraft would have had at such time had such equipment not
been installed, and Lessee shall make all repairs which are required
as a result of such removal;
5.1.4 Cleanliness and Operability. Shall be clean by
United States commercial airline operating standards with all systems
and components operable; and
5.1.5 Parts and Equipment. Shall have installed thereon
all Engines and Parts installed thereon at the commencement of the
Term therefor or replacements therefor made in accordance with the
terms of this Lease.
5.2 Return of Other Engines. In the event that any engine not
owned by Lessor shall be installed on the Airframe returned in accordance with
Section 5.1, such engine shall be a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer, or an engine
of another manufacturer of at least equivalent utility, value, airworthiness
and remaining useful life in each case suitable for installation and use on the
Airframe and fully compatible with the other Engine or engine installed on the
Airframe). At the time of such replacement, such engine shall have performance
and durability characteristics and a value, condition, utility, airworthiness
and remaining useful life at least equal to the Engine it replaced hereunder,
assuming such Engine was maintained in accordance with the requirements of this
Lease, and at the time the Airframe is returned shall fully comply with all the
requirements of this Lease, including this Section 5, which are applicable to
Engines. Upon return of the Aircraft, Lessee shall duly convey to Lessor good
title to any such replacement engine, free and clear of (i) all rights of third
parties under any arrangement, including pooling, interchange, overhaul, repair
or other similar agreements or arrangements and (ii) Liens other than Lessor
Liens; and, upon such conveyance and as a condition thereto, Lessee will (a)
furnish Lessor with a full warranty (as to title) bill of sale, in form and
substance reasonably satisfactory to Lessor, with respect to each such
replacement engine, together with an opinion of counsel to the effect that such
bill of sale has been duly authorized and delivered and is enforceable in
accordance with its terms and that each such replacement engine is free and
clear of all Liens other than Lessor Liens, and (b) take such other action as
Lessor may reasonably request in order that title to such replacement engine
may be duly and properly vested in Lessor to the same extent as the Engine
replaced thereby. Upon compliance by Lessee with the foregoing, Lessor will,
so long as no Lease Event of Default has occurred and is continuing, comply
with the applicable provisions of the Trust Indenture and, upon Indenture
Trustee's release of the Engine from the Lien of the Trust Indenture Estate,
Transfer to Lessee any Engine not installed on the Airframe at the time of
return.
5.3 Return at End of Base Lease Term or Renewal Lease Term. Upon
return of the Aircraft at the expiration or termination of this Lease, Lessee
shall have caused all FAA Airworthiness Directives applicable to the Aircraft
and all mandatory service bulletins from Manufacturer, Engine Manufacturer or
other manufacturer of an engine then installed on the Airframe (in compliance
with Section 5.2) applicable to the Aircraft to have been complied with (except
for any such FAA Airworthiness Directives and bulletins that permit compliance
after the return date and would not, in the normal course of the Maintenance
Program, be complied
SALE AND LEASE AGREEMENT [N397SW]
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with on or prior to the return date). Lessee shall have treated the Aircraft,
including without limitation with respect to maintenance, additions and
modifications (including compliance with FAA Airworthiness Directives), during
the Term similarly to all other Boeing 737-300 aircraft in its fleet, without
in any way discriminating against the Aircraft, whether by reason of its leased
status or otherwise.
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of such return, the Airframe shall have remaining until the
next scheduled "C" check (which term, as used in this paragraph, shall include
a "C" check and any other check equivalent thereto) at least 50% of the
allowable hours between "C" checks permitted under the Maintenance Program then
used by Lessee (or such Permitted Sublessee, as the case may be), and the
condition set forth in Appendix A shall have been satisfied. In the event that
Lessee (or any Permitted Sublessee then in possession of the Aircraft) shall
then be using a continuous or "progressive" maintenance program with respect to
the Airframe, then the Airframe shall be current on such program. If the
conditions set forth in the first sentence of this paragraph shall be
applicable to the Airframe but shall not have been met at the time of such
return, Lessee shall perform (or cause to be performed) all maintenance work
necessary to meet such conditions or, if Lessee shall so elect, Lessee shall
pay or cause to be paid to Lessor an amount computed by multiplying (i) the
current market cost of a "C" check by (ii) a fraction of which (x) the
numerator shall be the excess of 50% of hours of operation allowable between
such "C" checks over the actual number of hours of operation remaining on the
Airframe to the next such "C" check, and (y) the denominator shall be the
number of hours of operation allowable between such "C" check in accordance
with such Maintenance Program.
Lessee further agrees that, whether or not the then-current engine
maintenance program is on-condition, the number of hours or cycles of operation
(whichever shall be applicable under the Maintenance Program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 3,000 allowable hours
or cycles (whichever shall be applicable), in the aggregate for both Engines or
engines; provided, that each life-limited Part within each Engine or engine
shall have a minimum of 1,200 allowable hours or cycles (whichever shall be
applicable) remaining until its next required replacement. If, at the time of
such return, the Engines or engines do not meet the aggregate 3,000 hour
condition specified in the previous sentence, Lessee shall perform (or cause to
be performed) all maintenance work necessary to meet such conditions or, if
Lessee shall so elect, Lessee shall pay or cause to be paid to Lessor an amount
computed by multiplying (i) the current market cost of performing for an engine
of the same model as such Engines or engines the scheduled engine refurbishment
under the Maintenance Program then used by Lessee (or such Permitted Sublessee,
as the case may be) for engines of such model by (ii) a fraction of which (x)
the numerator shall be the excess of 3,000 hours or cycles (whichever is
applicable) over the aggregate number of hours or cycles of operation on such
Engines or engines remaining until the next scheduled engine refurbishment, and
(y) the denominator shall be the number of hours or cycles allowable between
such scheduled engine refurbishments. If, at the time of such return, any
life-limited Part within such Engine or engine does not meet the
SALE AND LEASE AGREEMENT [N397SW]
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1,200 hour condition specified in the first sentence of this paragraph, Lessee
shall perform (or cause to be performed) all maintenance work necessary to meet
such conditions or, if Lessee shall so elect, Lessee shall pay or cause to be
paid to Lessor an amount computed by multiplying (i) the current market cost of
replacing such life-limited Part by (ii) a fraction of which (x) the numerator
shall be the excess of 1,200 hours or cycles (whichever is applicable) over the
number of remaining hours or cycles (whichever is applicable) of operation of
such life-limited Part, and (y) the denominator shall be the total number of
hours or cycles allowable on such life-limited Part.
5.4 Manuals; Service Bulletins, Etc. Upon return of the Aircraft
at the expiration or termination of this Lease, Lessee shall deliver or cause
to be delivered to Lessor all logs, manuals, drawings and data and inspection,
modification and overhaul records in respect of the Aircraft required to be
maintained under applicable rules and regulations of the FAA, updated through
the date of return (collectively, "Records"). All "no-charge" service bulletin
kits received by or on behalf of Lessee from Manufacturer, Engine Manufacturer
or vendors for the Aircraft and Engines or engines and not incorporated therein
shall be returned at no charge to Lessor as cargo on board the Aircraft at the
time of its return. At the time the Aircraft is returned, Lessor shall have
the option to purchase from Lessee, at Lessee's cost therefor, any "charge"
service bulletin kits purchased by Lessee which have not been incorporated in
the Aircraft. All such items shall thereupon become the property of Lessor.
5.5 Failure to Return Aircraft or Engines. If Lessee shall, for
any reason whatsoever, fail to return the Aircraft or any Engine at the time
specified herein, the obligations of Lessee as provided in this Lease
(including the obligation to pay Rent on the same basis as that applicable
immediately prior to such failure) shall continue in effect with respect to the
Aircraft or such Engine until the Aircraft or such Engine is returned to
Lessor; but this Section 5.5 shall not be construed as permitting Lessee to
fail to meet its obligation to return the Aircraft or such Engine in accordance
with the requirements of this Lease or constitute a waiver of a Lease Event of
Default.
5.6 Aid in Disposition. Lessee agrees that, unless Lessee shall
have elected to purchase the Aircraft pursuant to Section 18.2, during the last
six months of the Term it will cooperate in all reasonable respects with any
efforts of Lessor to lease or sell the Aircraft, including without limitation
(subject to the provisions of Section 12) permitting potential lessees or
purchasers to inspect the Aircraft and the records relating thereto.
5.7 Storage upon Return. Upon written request of Lessor or Owner
Participant received by Lessee at least 10 days prior to its return of the
Aircraft at the expiration or termination of this Lease, Lessee will attempt to
arrange for parking facilities for the Aircraft for a period not exceeding 60
days following return thereof by Lessee at the location of return pursuant to
Section 5.1; and Lessor shall bear or reimburse Lessee for Lessee's
out-of-pocket expenses of such storage (including maintenance and insurance
expenses).
SALE AND LEASE AGREEMENT [N397SW]
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Section 6. Liens. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, the Airframe or any Engine, title thereto or any interest therein or
in this Lease except: (a) the respective rights of the parties to the
Operative Agreements; (b) the rights of others under agreements or arrangements
to the extent expressly permitted by the terms of Sections 7.2 and 8.3; (c)
Lessor Liens; (d) Liens for taxes, assessments or other governmental charges
either not yet due or being contested in good faith (and for the payment of
which adequate reserves have been provided in accordance with generally
accepted accounting principles) by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture, loss or
loss of use of the Aircraft, the Airframe or any Engine or any interest
therein; (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 due or not overdue for a period of more than
60 days or is being contested in good faith (and for the payment of which
adequate reserves have been provided in accordance with generally accepted
accounting principles) by appropriate proceedings so long as such Liens do not
involve any material danger of the sale, forfeiture, loss or loss of use of the
Aircraft, the Airframe or any Engine or any interest therein; (f) Liens arising
out of any judgment or award against Lessee, unless the judgment secured shall
not, within 45 days after entry thereof, have been discharged or vacated or
execution thereof stayed pending appeal or shall not have been discharged,
vacated or reversed within 45 days after the expiration of such stay; and (g)
any other Lien with respect to which Lessee shall have provided a bond or other
security adequate in the reasonable judgment of Lessor. Lessee will promptly
take (or cause to be taken) such action at its own expense as may be necessary
duly to discharge any such Lien not excepted above if the same shall arise at
any time.
Section 7. Registration, Operation, Possession, Subleasing and
Records.
7.1 Registration and Operation.
7.1.1 Registration. Lessee shall forthwith upon the
delivery of the Aircraft hereunder cause the Aircraft to be duly
registered and at all times thereafter to remain duly registered in
the name of Lessor with the FAA pursuant to and as permitted by the
Act (it being understood that Lessee shall not be required to comply
with this covenant to the extent that Shawmut Bank Connecticut,
National Association's or Owner Participant's failure to comply with
its covenant set forth in Section 8(b) of the Participation Agreement
with regard to its citizenship makes such compliance by Lessee
impossible).
7.1.2 Nameplate. Lessee agrees to affix within 10 days of
the Delivery Date and thereafter to maintain in the cockpit of the
Airframe adjacent to the airworthiness certificate and on each Engine
a nameplate bearing the inscription "OWNED BY AND LEASED FROM SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND
LESSOR" and, so long as the Trust Indenture shall be in effect,
"SUBJECT TO A SECURITY INTEREST IN FAVOR OF WILMINGTON TRUST COMPANY,
AS INDENTURE TRUSTEE" (such nameplate to be replaced promptly, if
necessary, with a nameplate reflecting the name of any
SALE AND LEASE AGREEMENT [N397SW]
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successor Lessor or successor Indenture Trustee). Except as above
provided, Lessee will not allow the name of any person, association or
corporation to be placed on the Airframe or on any Engine as a
designation that might be interpreted as a claim of ownership;
provided, that nothing herein contained shall prohibit Lessee (or any
Permitted Sublessee) from placing its customary colors and insignia on
the Airframe or any Engine or displaying information concerning the
registration or manufacture of the Aircraft, the Airframe, any Engine
or Part.
7.1.3 Compliance with Laws. Lessee agrees that it will
not use or operate the Aircraft, the Airframe or any Engine in
violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign) or in violation of any airworthiness certificate, license or
registration relating to the Aircraft, the Airframe or any Engine
issued by any such authority, except to the extent Lessee is
contesting in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect the Owner Participant or Lessor's title to
or interest in the Aircraft (but subject in any event to Section 5).
7.1.4 Insurance Requirements; Government Requisition;
Indemnity. Lessee agrees not to operate, use or locate the Aircraft,
the Airframe or any Engine, or permit any Permitted Sublessee to
operate, use or locate the Aircraft, the Airframe or any Engine, (i)
in any area excluded from coverage by any insurance required by the
terms of Section 11, except in the case of a requisition by the
Government where Lessee obtains indemnity (backed by the full faith
and credit of the United States of America) in lieu of such insurance
from the Government against the risks and in the amounts required by
Section 11 covering such area, or (ii) in any area where maintenance
of war-risk insurance is required by Section 11 unless fully covered
by war-risk insurance satisfying the terms of Section 11, or unless
the Aircraft, the Airframe or such Engine is operated or used under
contract with the Government under which contract the Government
assumes liability (backed by the full faith and credit of the United
States of America) in an amount not less than the amount of insurance
otherwise required by Section 11 for any damage, loss, destruction or
failure to return possession of the Aircraft, the Airframe or such
Engine at the end of the term of such contract or for injury to
persons or damage to property of others, or (iii) in any area referred
to in subclause 3(iv) immediately following Section 7.2.8.
7.2 Possession. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine or install
any Engine, or permit any Engine to be installed, on any airframe other than
the Airframe; provided, however, that so long as no Lease Default (of the type
described in Section 14.1 or 14.5) or Lease Event of Default shall have
occurred and be continuing, and so long as Lessee shall comply with the
provisions of Section 11, and all FAA approvals required for such purposes have
been obtained, Lessee may, without such prior written consent:
SALE AND LEASE AGREEMENT [N397SW]
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7.2.1 Interchange and Pooling. Subject or permit any
Permitted Sublessee to subject (i) the Aircraft, Airframe or any
Engine to normal interchange agreements customary in the airline
industry and entered into by Lessee or such Permitted Sublessee in the
ordinary course of its business with, in the case of the Airframe, a
U.S. Air Carrier or a Permitted Foreign Air Carrier, in either case
that is not then subject to bankruptcy or similar proceedings, and
(ii) any Engine to pooling agreements or arrangements customary in the
United States domestic commercial airline industry and entered into by
Lessee or such Permitted Sublessee in the ordinary course of its
business; but in either case (A) no transfer of the registration of
the Airframe or any Engine shall be effected in connection therewith
and the terms of this Lease and the Participation Agreement shall be
observed and (B) no such agreement or arrangement shall contemplate or
require the transfer of title to the Aircraft, Airframe or any Engine
and if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect thereto and Lessee shall comply with
Section 10.2 hereof;
7.2.2 Testing and Service. Deliver or permit any
Permitted Sublessee to deliver possession of the Aircraft, Airframe or
any Engine or Part, to the manufacturer thereof for testing or other
similar purposes, or to any organization for service, repair,
maintenance or overhaul work on the Aircraft, Airframe or any Engine
or Part, or for alterations or modifications in or additions to the
Aircraft, Airframe or any Engine to the extent required or permitted
by the terms of Section 8.4;
7.2.3 Civil Reserve Air Fleet Program. Transfer or permit
any Permitted Sublessee, if required by law to do so, to transfer
possession of the Aircraft, Airframe or any Engine to the Government
pursuant to the Civil Reserve Air Fleet Program or any similar or
substitute programs, so long as such transfer of possession does not
continue beyond the end of the Term and so long as Lessee shall (A)
promptly notify Lessor upon subjecting the Airframe or any Engine to
such program and provide Lessor with the name and address of the
appropriate party to whom notice must be given in connection with any
repossession of the Aircraft under Section 15.1.1, and (B) promptly
notify Lessor upon transferring possession of the Airframe or any
Engine to the Government pursuant to such program;
7.2.4 Installation of Engines. Install or permit any
Permitted Sublessee to install an Engine on an airframe owned by
Lessee or such Permitted Sublessee, as the case may be, free and clear
of all Liens, except (A) Permitted Liens and those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of air carriers under normal interchange
agreements which are customary in the airline industry and do not
contemplate, permit or require the transfer of title to the airframe
or engines installed thereon, and (C) mortgage liens or other security
interests, provided, that (as regards this clause (C)) such mortgage
liens or other security interests effectively provide
SALE AND LEASE AGREEMENT [N397SW]
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that such Engine shall not become subject to the lien of such mortgage
or security interest, notwithstanding the installation thereof on such
airframe, unless and until Lessee shall become the owner of such
Engine;
7.2.5 Installation of Engines on Other Airframes. Install
or permit any Permitted Sublessee to install an Engine on an airframe
leased to, or purchased by, Lessee or any Permitted Sublessee subject
to a lease, conditional sale, trust indenture or other security
agreement, but only if (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease, conditional
sale, trust indenture or other security agreement covering such
airframe, or their successors or assigns, and except Liens of the type
permitted by clauses (A) and (B) of Section 7.2.4, and (B) the lease,
conditional sale, trust indenture or other security agreement covering
such airframe effectively provides that such Engine will not become
subject to the Lien thereof at any time while such Engine is subject
to this Lease, notwithstanding the installation thereof on such
airframe;
7.2.6 Pooling of Parts. To the extent permitted by
Section 8.3, subject any Parts owned by Lessor and removed from the
Airframe or any Engine to any pooling arrangement referred to in
Section 8.3;
7.2.7 Wet Lease. Enter into a Wet Lease for the Airframe
and Engines or engines then installed thereon with any third party for
a term not to continue beyond the Term;
7.2.8 Sublease to Permitted Air Carriers. So long as the
proposed sublessee is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the date
the sublease is entered into, enter into a sublease of the Aircraft,
or the Airframe and Engines or engines then installed on the Airframe,
or any Engine, for use on the sublessee's regularly scheduled or
charter routes, with any U.S. Air Carrier or Permitted Foreign Air
Carrier, in any such case for a term not to continue beyond the
remaining Term.
Provided, further, with respect to this Section 7.2, that:
(1) the rights of any transferee who receives
possession by reason of a transfer permitted by this Section
7.2 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be effectively subject and subordinate
to, and any sublease permitted by this Section 7.2 shall be
made expressly subject and subordinate to, all the terms of
this Lease and the Lien of the Trust Indenture, and to
Lessor's rights, powers and remedies under this Lease,
including the rights to repossession pursuant to Section 15
and to terminate and avoid such sublease upon such
repossession and to require such sublessee to forthwith
deliver the Aircraft, Airframe and Engines subject to such
sublease upon such repossession;
SALE AND LEASE AGREEMENT [N397SW]
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(2) Lessee shall remain primarily liable
hereunder for the performance of all the terms of this Lease
(including, without limitation, the payment of Supplemental
Rent representing any indemnities payable as a result of acts
or circumstances respecting a sublease or a sublessee's
operation of the Aircraft) to the same extent as if such
sublease, transfer or relinquishment of possession had not
occurred (it being understood that, without limitation of the
foregoing, any standards established under this Lease with
reference to Lessee's practices respecting other aircraft
owned or operated by it shall continue to refer to such
practices of Lessee rather than of any transferee); provided,
that performance of any such terms by any Permitted Sublessee
shall be as effective, for purposes of this Lease, as
performance thereof directly by Lessee;
(3) any such sublease shall (i) be consistent
with the requirements of this Lease and the applicable
requirements of the Participation Agreement, (ii) include
appropriate provisions for the continued maintenance in
accordance with applicable maintenance standards in the
appropriate jurisdiction, operation, insurance (appropriate
certificates as to which shall be furnished to Lessor and
Indenture Trustee prior to Lessee's entry into any such
sublease with any Permitted Foreign Air Carrier or within 10
days thereafter) and return of the subleased property as
required hereunder, (iii) provide that the sublessee may not
assign or further sublease the Aircraft, (iv) provide that the
Aircraft may not be operated into a country with which the
United States does not maintain diplomatic relations or in
which there is open warfare, whether or not declared, (v) not
provide for sublease rentals to be prepaid or assigned to a
third party; provided, however, that (x) up to six months'
rentals may be prepaid to Lessee and (y) this clause (v) shall
not preclude Lessee's establishing and holding appropriate
reserves for any obligations arising under such sublease, and
(vi) not require the sublessee to purchase the Aircraft or
grant the sublessee any purchase options, or any options for
the renewal of such sublease for a term beyond the Base Lease
Term, in each case on dates other than, or at amounts less
than, corresponding options granted to Lessee hereunder;
(4) no interchange agreement, transfer,
sublease or other relinquishment of possession permitted
hereunder shall affect the registration of the Aircraft or
shall permit any action not permitted to Lessee in this Lease;
and
(5) no such interchange agreement, sublease,
transfer or other relinquishment of possession of the
Aircraft, Airframe or any Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or
under any other Operative Agreement or constitute a waiver of
Lessor's rights or remedies hereunder or under any other
Operative Agreement.
Lessee shall notify Lessor within 10 days after the commencement of
any sublease permitted hereunder and shall deliver to Lessor within such period
a duly executed copy of any
SALE AND LEASE AGREEMENT [N397SW]
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sublease or interchange or pooling agreement permitted hereunder. Upon request
of Lessor, Lessee shall promptly duly execute and deliver to Lessor an
assignment of any such sublease having a term in excess of 12 months in favor
of Lessor in form and substance reasonably satisfactory to Lessor. Lessor
hereby agrees, for the benefit of Lessee (and any Permitted Sublessee) and for
the benefit of each lessor, conditional seller, indenture trustee or secured
party of any airframe or engine leased to or purchased by Lessee (or any
Permitted Sublessee) subject to a lease, conditional sale, trust indenture or
other security agreement, that Lessor will not acquire or claim, as against
such lessor, conditional seller, indenture trustee or secured party, or any
successor or assign thereof, any right, title or interest in any engine as the
result of such engine being installed on the Airframe at any time while such
engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such indenture trustee or
secured party; provided, however, that such agreement of Lessor shall not be
for the benefit of any lessor or secured party of any airframe (other than the
Airframe) leased to Lessee (or any Permitted Sublessee) or purchased by Lessee
(or any Permitted Sublessee) subject to a conditional sale or other security
agreement or for the benefit of any mortgagee of or any other holder of a
security interest in an airframe owned by Lessee (or any Permitted Sublessee),
unless such lessor, conditional vendor, other secured party or mortgagee has
expressly agreed (which agreement may be contained in such lease, conditional
sale or other security agreement or mortgage) that neither it nor its
successors or assigns will acquire, as against Lessor, any right, title or
interest in an Engine as a result of such Engine being installed on such
airframe.
A consolidation, merger, conveyance, transfer, or lease permitted by
Section 11(f) of the Participation Agreement shall not be deemed to be a
transaction to which this Section 7.2 shall apply.
7.3 Records and Reports. Lessee shall:
7.3.1 Records. Maintain or cause to be maintained all
records, logs and other materials required by the FAA or any other
governmental authority having jurisdiction to be maintained in respect
of the Aircraft, the Airframe and each Engine;
7.3.2 Information and Reports. Upon request, promptly
furnish or cause to be furnished to Lessor (in sufficient number) such
information as may be required to enable Lessor or any Participant to
file any reports, including tax returns, required to be filed by
Lessor or such Participant with any governmental authority because of
Lessor's ownership of the Aircraft, Airframe or any Engine or because
of receipt of Rent or because of the interest of any Participant in
the Estate or Trust Indenture Estate; provided, however, that with
respect to any such information (other than with respect to income
taxes) which Lessee deems commercially sensitive or confidential, if
reasonably feasible, Lessor shall afford Lessee a reasonable
opportunity to seek from any such governmental authority a waiver of
Lessor's or such Participant's obligation to file any such information
or consent to the filing of such information directly by Lessee in
lieu
SALE AND LEASE AGREEMENT [N397SW]
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of filing by Lessor or such Participant and if any such waiver or
consent is evidenced to the reasonable satisfaction of Lessor, then
Lessee shall not be required to furnish such information to Lessor;
and
7.3.3 Financial Information. Promptly provide Lessor, the
Owner Participant, the Original Loan Participant and Indenture Trustee
with (i) such financial information concerning Lessee as is provided
from time to time to the public shareholders of Lessee, (ii) within 60
days after the end of each of the first three quarterly periods of
each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of such
period, together with the related consolidated statements of income
for such period, (iii) within 120 days after the close of each fiscal
year of Lessee, a consolidated balance sheet of Lessee and its
consolidated subsidiaries as of the close of such fiscal year,
together with the related consolidated statements of income for such
fiscal year, as certified by independent public accountants, (iv)
promptly upon the sending, making available or filing of the same, all
such reports (other than reports on Form 11-K or similar forms) as
Lessee shall file with the Securities and Exchange Commission, and (v)
from time to time such other information as to its financial condition
as Lessor, Indenture Trustee or any Participant may reasonably
request. In addition, Lessee shall promptly notify Lessor, Indenture
Trustee, the Original Loan Participant and the Owner Participant after
a Responsible Company Officer of Lessee shall acquire knowledge of a
Lease Default or Lease Event of Default.
Section 8. Maintenance; Replacement and Pooling of Parts;
Alterations; Modifications and Additions.
8.1 Maintenance.
8.1.1 Maintenance Program. Lessee shall maintain,
service, repair, overhaul, alter, modify, add to and test (or cause to
be maintained, serviced, repaired, overhauled, altered, modified,
added to and tested) the Aircraft, the Airframe and each Engine, and
each other engine installed from time to time on the Airframe, in
accordance with Lessee's FAA-approved maintenance program for the
Aircraft, Airframe and Engines (the "Maintenance Program"), (i) so as
to keep the Aircraft, the Airframe and each Engine in as good
operating condition as when delivered new to Lessee by the
Manufacturer, ordinary wear and tear excepted, (ii) in the same manner
and with the same care as used by Lessee with similar aircraft owned
or operated by Lessee, without in any way discriminating against the
Aircraft, whether by reason of its leased status or otherwise, and
(iii) so as to keep the Aircraft, the Airframe and each Engine in such
condition as required to enable the FAA certificate of airworthiness
for the Aircraft to be maintained in good standing at all times under
the Act, except when all comparable Boeing Model 737-300 series
aircraft registered in the United States of America have been grounded
by the FAA other than as a result of actions taken or omitted to be
taken by Lessee (or, if a sublease is then in effect, any Permitted
Sublessee).
SALE AND LEASE AGREEMENT [N397SW]
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8.1.2 Compliance with Government Requirements. Lessee will
comply with all service, inspection, maintenance, repair and overhaul
regulations, directives and instructions which are made mandatory by
the FAA or other applicable government authority upon operators of
Boeing Model 737-300 series aircraft and CFM International Model
CFM56-3-B1 engines (or any different model Replacement Engine) and
which require compliance during the Term and prior to return of the
Aircraft under this Lease.
8.2 Replacement of Parts. Lessee, at its own cost and expense,
will promptly replace (or cause to be replaced) all Parts which may from time
to time be incorporated in the Aircraft, Airframe or any Engine and which may
from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever, except as otherwise provided in Section 8.4. In
addition, Lessee may, at its own cost and expense, remove in the ordinary
course of maintenance, service, repair, overhaul or testing any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, however, Lessee, except
as otherwise provided in Section 8.4, at its own cost and expense, will replace
such Parts as promptly as possible. All replacement parts shall be free and
clear of all Liens (except for Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof. All Parts at any
time removed from the Aircraft, Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by parts which have been incorporated in the Aircraft,
Airframe or such Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement part becoming incorporated
in the Aircraft, Airframe or such Engine as above provided, without further
act, (i) unless the replacement property is temporarily installed on an
emergency basis, title to the replaced Part shall thereupon vest in Lessee free
and clear of all rights of Lessor, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement part shall thereupon
vest in Lessor (subject only to Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis), and (iii)
such replacement part shall become a Part subject to this Lease and be deemed
part of the Aircraft, Airframe or such Engine for all purposes hereof to the
same extent as the Parts originally incorporated in such Aircraft, Airframe or
Engine.
8.3 Pooling of Parts. Any Part removed from the Aircraft,
Airframe or any Engine as provided in Section 8.2 may be subjected by Lessee
(or a Permitted Sublessee) to a normal pooling arrangement customary in the
airline industry entered into in the ordinary course of business of Lessee or
such Permitted Sublessee, so long as a part replacing such removed Part shall
be incorporated in the Aircraft, Airframe or such Engine in accordance with
Section 8.2 as promptly as practicable after the removal of such removed Part.
In addition, any replacement part when incorporated in the Aircraft, Airframe
or any Engine in accordance with Section 8.2 may be owned by any third party
subject to such a normal pooling arrangement, so long as Lessee (or any
Permitted Sublessee), at its own cost and expense, as promptly thereafter
SALE AND LEASE AGREEMENT [N397SW]
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as practicable either (i) causes title to such replacement part to vest in
Lessor in accordance with Section 8.2 by Lessee (or any Permitted Sublessee)
acquiring title thereto for the benefit of, and transferring such title to,
Lessor free and clear of all Liens (except Permitted Liens), or (ii) replaces
such replacement part by incorporating in the Aircraft, Airframe or such Engine
a further replacement part owned by Lessee (or any Permitted Sublessee) free
and clear of all Liens (except Permitted Liens) and by causing title to such
further replacement part to vest in Lessor in accordance with Section 8.2.
8.4 Alterations, Modifications and Additions.
8.4.1 Mandatory Alterations, Etc. Lessee shall make (or
cause to be made) such alterations and modifications in and additions
to the Aircraft, Airframe and each Engine as may be required from time
to time to meet the standards of the FAA or other governmental
authority having jurisdiction and to maintain the FAA certificate of
airworthiness for the Aircraft; provided, however, that, without
affecting in any manner Lessee's obligations in Section 7.1.3, Lessee
may contest in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect the Owner Participant or Lessor's title to
or interest in the Aircraft. All alterations and modifications made
pursuant to this Section 8.4.1 shall be made at the cost and expense
of Lessee.
8.4.2 Voluntary Alterations, Etc. Lessee, at its own cost
and expense, may, from time to time make (or cause to be made),
subject to the standards set forth in Section 8.1.1, such alterations
and modifications in and additions to the Aircraft, Airframe or any
Engine as Lessee may deem desirable in the proper conduct of its
business, including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine; provided, however, that no such
alteration, modification, addition or removal shall diminish the
value, remaining useful life, or utility of the Aircraft, Airframe or
such Engine, or impair the condition or airworthiness thereof, below
the value, remaining useful life, utility, condition and airworthiness
thereof immediately prior to such alteration, modification or addition
assuming the Aircraft, Airframe or such Engine was then of the value
and utility and in the condition and airworthiness required to be
maintained by the terms of this Lease. Title to all parts
incorporated in the Aircraft, Airframe or such Engine as the result of
such alteration, modification or addition shall remain vested in
Lessee and Lessee may, at any time during the Term, remove any such
part if (i) such part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated in the Aircraft,
Airframe or such Engine at the time of delivery thereof hereunder or
any Part in replacement of or substitution for any such Part, (ii)
such part is not required to be incorporated in the Aircraft, Airframe
or such Engine pursuant to the terms of this Section 8, (iii) such
part can be removed from the Aircraft, Airframe or such Engine without
diminishing or impairing the value, remaining useful life, utility,
condition or airworthiness required to be maintained by the terms of
this Lease which the Aircraft, Airframe or such Engine would have had
at such time had
SALE AND LEASE AGREEMENT [N397SW]
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such alteration, modification or addition not occurred, and (iv) no
Lease Event of Default or Lease Default shall have occurred and be
continuing. Title to all other such parts shall, without further act,
vest in Lessor and shall constitute "Parts" for all purposes
hereunder. Upon the removal of any part title to which is retained by
Lessee, Lessee shall promptly repair any damage to the Airframe or
Engine from which it was removed which resulted from such removal and
such part shall no longer be deemed part of the Airframe or such
Engine from which it was removed. Any part not removed by Lessee as
above provided prior to the return of the Aircraft, Airframe or such
Engine to Lessor hereunder shall, without further act, vest in Lessor
and shall constitute a "Part" for all purposes hereunder.
Section 9. Voluntary Termination.
9.1 Right of Termination upon Obsolescence. So long as no Lease
Event of Default or Lease Default shall have occurred and be continuing, Lessee
shall have the right at its option to terminate this Lease with respect to the
Aircraft during the Base Lease Term on the first day of any month (a
"Termination Date") occurring on or after the seventh anniversary of the
Delivery Date on at least three months' prior written notice to Lessor, each
Participant and Indenture Trustee specifying a proposed Termination Date;
provided, that such notice shall also include copies of resolutions of Lessee's
board of directors stating that such board of directors has determined, in good
faith, that the Aircraft either has become economically obsolete or is surplus
to Lessee's requirements. Lessee may revoke any notice of termination referred
to in this Section 9.1 by notice to Lessor, each Participant and the Indenture
Trustee not less than 30 days prior to the proposed Termination Date, if Lessor
shall not have received a bid to purchase the Aircraft for at least the
Termination Value thereof pursuant to Section 9.2 and if Lessor shall not have
furnished to Lessee the notice referred to in Section 9.3, and upon doing so,
shall reimburse Lessor and Owner Participant on an after-tax basis for all
reasonable out-of-pocket expenses incurred by them in contemplation of such
termination; provided, however, that Lessee may so revoke a notice of
termination no more than three times during the Term.
9.2 Sale of Aircraft. Lessee, as agent for Lessor, shall, from
the date of such notice of termination until no more than 30 days' prior to the
proposed Termination Date specified by Lessee, use its reasonable best efforts
to obtain bids (in the worldwide market) for the cash purchase of the Aircraft
and Lessor may, if it desires to do so, seek to obtain such bids and may itself
bid to retain the Aircraft. In the event Lessee receives any bid, Lessee shall
within 30 days of receiving such bid (and in any event no later than 30 days
prior to the proposed Termination Date), certify to Lessor in writing the
amount and terms of such bid, and the name and address of the Person submitting
such bid (who shall not be Lessee, an Affiliate of Lessee or a Person who shall
be a party to any arrangement for the further use of the Aircraft by Lessee or
any of its Affiliates (in each case a "Prohibited Person")). In the event
Lessor receives any bid, Lessor shall, at least five Business Days prior to the
proposed Termination Date, certify to Lessee in writing the amount and terms of
such bid and the name and address of the Person submitting such bid. Subject
to Section 9.3, on the Termination Date, (a) Lessee shall deliver the Airframe
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and Engines or engines constituting part of the Aircraft to the bidder, if any,
which shall have submitted the highest cash bid (net of any brokerage
commissions) prior to such date, in the same manner as if delivery were made to
Lessor pursuant to Section 5 and in full compliance with the terms thereof, and
shall duly transfer to Lessor under a full warranty (as to title) bill of sale
title to any such engines not owned by Lessor, all in accordance with the terms
of Section 5, and (b) unless Lessor is the successful bidder, Lessor shall
simultaneously therewith Transfer the Airframe and Engines or engines to such
bidder for cash paid to Lessor in the manner and in funds of the type specified
in Section 3.6, provided that no purchaser shall be a Prohibited Person without
the Owner Participant's written consent. The total sales price realized at
such sale shall be paid to and retained by Indenture Trustee, so long as the
Trust Indenture remains in effect, and otherwise shall be paid to and retained
by Lessor and, in addition, on such Termination Date, and as a condition
precedent to such sale and the delivery of the Aircraft and Engines or engines
to such bidder, Lessee shall pay to Indenture Trustee, so long as the Trust
Indenture remains in effect, and otherwise to Lessor the sum of (i) the excess,
if any, of (A) the Termination Value for the Aircraft, computed as of such
Termination Date, over (B) the sales price of the Airframe and Engines or
engines sold (or if the winning bidder is Lessor, the amount of such bid) after
deducting the reasonable fees and expenses incurred by Lessor, Indenture
Trustee and the Participants, if any, in connection with such termination and
sale, (ii) all unpaid Basic Rent due on or prior to the TV Determination Date
with reference to which the Termination Value is computed (it being understood
and agreed that Lessee shall not be required to pay the portion, if any, of
such Basic Rent designated in Exhibit C hereto as payable in advance on such TV
Determination Date, unless attributable to accrued interest on the
Certificates), and (iii) (without duplication) all other amounts (including,
without limitation, Break Amount, if any, or Premium, if any) owing by Lessee
under this Lease or under any other Operative Agreement. Upon such payment,
Lessor will comply with Section 10.01 of the Trust Indenture and, upon
Indenture Trustee's release of such Engines from the Lien of the Trust
Indenture Estate, Transfer to Lessee any Engines constituting part of the
Aircraft but which were not then installed on the Airframe and sold therewith.
If no sale shall have occurred on or as of the Termination Date specified in
such notice of termination, this Lease shall continue in full force and effect,
no Lease Event of Default shall be deemed to have occurred, Lessee shall pay
the reasonable expenses incurred by Lessee, Lessor, each Participant and
Indenture Trustee in connection with the proposed sale, and Lessee shall have
the right at any time to submit another notice of termination pursuant to, and
subject to the terms of, Section 9.1. In the event of any such sale and
receipt by Lessor or Indenture Trustee, as appropriate, of such sale price and
other amounts as provided herein, and upon compliance by Lessee with the
provisions of this Section 9.2, the obligation of Lessee to pay Basic Rent due
after the TV Determination Date with reference to which the Termination Value
is computed shall cease and the Base Lease Term shall end effective as of the
date of such sale. Lessor shall be under no duty to solicit bids, to inquire
into the efforts of Lessee to obtain bids or otherwise to take any action in
connection with any such sale other than to Transfer to the purchaser named in
the highest bid as referred to above the Airframe and Engines or engines
against receipt of the payments provided for herein.
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9.3 Retention by Lessor. Notwithstanding anything in this Section
9 to the contrary, Lessor may, by irrevocable notice to Lessee at least 45 days
prior to the proposed date of sale referred to in Section 9.1, reject all bids
and retain title to the Aircraft (and take possession thereof); provided, that
Lessor shall pay (and, by delivering such notice, Lessor shall be obligated to
pay) to Indenture Trustee on the proposed Termination Date an amount equal to
the unpaid principal amount of the Certificates, together with all interest due
thereon. Upon receipt of notice of such an election by Lessor, Lessee shall
cease any efforts to obtain bids as provided in Section 9.1 and shall reject
all bids theretofore or thereafter received for the Aircraft. In the event
Lessor elects to retain the Aircraft as provided in this Section 9.3, and upon
its payment to Indenture Trustee of such amount, Lessee shall deliver the
Aircraft and Engines to Lessor on the proposed Termination Date pursuant to
Section 5 and in full compliance with the terms thereof and upon such delivery
and payment in full of the amounts specified in the first sentence hereof and
the next following sentence and shall have no obligation to make any payment of
Termination Value. The foregoing shall in no way affect the obligation of
Lessee to make payment of any Basic Rent on or before the proposed Termination
Date and all other amounts of Rent and other amounts payable hereunder or under
the other Operative Agreements and due on or prior to such date, including,
without limitation, all other sums due and payable to the Holders under the
Certificates (including, without limitation, Break Amount or Premium, if any,
as of such TV Determination Date). If the amounts required to be paid pursuant
to this Section 9.3 shall not be received by the respective payees thereof on
the proposed Termination Date, this Lease shall continue in full force and
effect and no Lease Event of Default shall be deemed to have occurred.
9.4 Termination As to Engines. So long as no Lease Event of
Default or Lease Default shall have occurred and be continuing, Lessee shall
have the right, at its option at any time during the Term, on at least 30 days'
prior written notice to Lessor, Indenture Trustee, the Original Loan
Participant and the Owner Participant, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe. In such event,
and prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10.2 to the same extent as if
an Event of Loss had occurred with respect to such Engine, and, upon Indenture
Trustee's release of the replaced Engine from the Lien of the Trust Indenture
Estate, Lessor shall Transfer to Lessee the replaced Engine as provided in
Section 5.2.
Section 10. Loss, Destruction, Requisition, Etc.
10.1 Event of Loss with Respect to Airframe.
10.1.1 Lessee's Election. Upon the occurrence of an Event
of Loss with respect to the Aircraft, Lessee shall forthwith (and in
any event within 15 days after such occurrence) give Lessor, Indenture
Trustee and each Participant written notice of such Event of Loss and,
within 60 days after such occurrence, give Lessor, Indenture Trustee
and each Participant written notice of its election to comply either
with Section 10.1.2 or Section 10.1.3, and if Lessee shall not have
given notice of such election within 60
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days after such occurrence (or, if earlier, the last day of the Term
shall have occurred) Lessee shall be deemed to have elected to comply
with Section 10.1.3.
10.1.2 Replacement of Airframe and Engines. As promptly as
practicable, and in any event on or before the Business Day next
preceding the 180th day following the date of occurrence of such Event
of Loss, Lessee shall, in compliance with Section 10.1.6, convey or
cause to be conveyed to Lessor, to be leased by Lessee hereunder in
replacement thereof, a Replacement Airframe (which need not be a new
Replacement Airframe but shall have been placed in service not earlier
than January 1, 1994) together with the same number of Replacement
Engines as the Engines, if any, subject to such Event of Loss, such
Replacement Airframe and Replacement Engines to be free and clear of
all Liens (except Permitted Liens), to have a value, remaining useful
life and utility at least equal to, and to be in as good operating
condition as, the Airframe and Engines, if any, so replaced (for such
purpose, it shall be assumed that the Airframe and such Engines were
in the condition and repair required by the terms of this Lease). If
Lessee shall not effect such replacement hereunder on or before the
Business Day next preceding the 150th day following the date of the
occurrence of such Event of Loss, then Lessee shall immediately
deposit with Lessor, in the manner and in funds of the type specified
in Section 3.6, an amount equal to the excess of the Stipulated Loss
Value for the Aircraft over any funds then being held by Lessor or the
Indenture Trustee with respect to such Event of Loss. If Lessee shall
not perform its obligation to effect such replacement hereunder on or
before the Business Day next preceding the 180th day following the
date of the occurrence of such Event of Loss, then Lessee shall
immediately pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, the aggregate amount specified in clauses
(A), (B) and (C) of Section 10.1.3, net of any amount deposited with
Lessor pursuant to the next preceding sentence of this Section 10.1.2.
10.1.3 Payment of Stipulated Loss Value and Rent. On or
before the Business Day next preceding the earlier of (i) the 180th
day following the date of the occurrence of such Event of Loss, (ii)
the second Business Day next succeeding the last day of the Term, or
(iii) the later of 15 days following the receipt of insurance proceeds
with respect to such occurrence or the date Lessee shall have made or
shall be deemed to have made its election under Section 10.1.1 to
comply with Section 10.1.3, Lessee shall pay to Lessor, in the manner
and in funds of the type specified in Section 3.6, (A) the Stipulated
Loss Value for the Aircraft, determined as of the date of payment (as
described in the definition of Stipulated Loss Value), (B) all unpaid
Basic Rent due on or prior to the SLV Determination Date with
reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date, unless attributable
to accrued interest on the Certificates), and (C) (without
duplication) any other Rent which is due and payable through and
including the date of payment.
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10.1.4 Stipulated Loss Value Payment. In the event of
payment in full of the Stipulated Loss Value for the Aircraft pursuant
to Section 10.1.2 or 10.1.3 and, in either case, the amounts referred
to in clauses (B) and (C) of Section 10.1.3, (A) the obligation of
Lessee to pay Basic Rent due after the SLV Determination Date with
reference to which such Stipulated Loss Value is computed shall
terminate, (B) the Term for the Aircraft shall end, and (C) Lessor
will comply with the applicable provisions of Section 10.01 of the
Trust Indenture and, upon Indenture Trustee's release of the Aircraft
from the Lien of the Trust Indenture Estate, will Transfer to Lessee
the Aircraft.
10.1.5 Payment of Rent. In the event of an Event of Loss,
during the period between the occurrence of the Event of Loss and the
date of payment pursuant to Section 10.1.3 or replacement, the
obligation of Lessee to pay Basic Rent or Renewal Rent shall continue
unchanged, except that upon such replacement, it shall become an
obligation to pay such Rent in respect of the Replacement Aircraft.
10.1.6 Conditions to Replacement of Aircraft. Lessee's
right to exercise the replacement options contemplated by Section
10.1.1 with respect to the Aircraft shall be subject to the
fulfillment prior to or at the time of any such replacement, in
addition to the requirements contained in Section 10.1.2, of the
conditions precedent set forth below:
10.1.6.1 No Default. No Lease Event of Default or
Lease Default shall have occurred and be continuing.
10.1.6.2 Tax Loss. Owner Participant and Lessor
shall have received, at Lessee's and the Owner Participant's
joint and equal expense, a tax opinion of tax counsel selected
by the Owner Participant, to the effect that the Event of Loss
or the replacement of the Airframe or Aircraft in connection
therewith will not cause any adverse tax consequences to
Lessor or Owner Participant or its Affiliates (or, in lieu
thereof, Lessee shall have agreed to indemnify for such tax
risk), or if Owner Participant and Lessee shall have agreed
upon the amount, if any, payable and upon the manner of
payment thereof with respect to such replacement by Lessee
pursuant to the Tax Indemnity Agreement or Section 7(b) of the
Participation Agreement, then any such amount shall be paid.
10.1.6.3 Lessee's Obligations with Respect to
Replacement Aircraft. Lessee will promptly (all writings
referred to below to be reasonably satisfactory in form and
substance to Lessor):
(a) furnish Lessor with (i) a full
warranty bill of sale and FAA bill of sale duly
conveying to Lessor the Replacement Airframe and
Replacement Engines, if any, and (ii) an assignment
of the purchase agreement with respect to the
Replacement Airframe and Replacement
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Engines, if any (if Lessee shall have any rights
thereunder) substantially in the form of the
Purchase Agreement Assignment and a consent and
agreement of the manufacturer thereof substantially
in the form of the Manufacturer's Consent;
(b) cause a Lease Supplement
subjecting such Replacement Airframe and Replacement
Engines, if any, to this Lease, duly executed by
Lessee, to be delivered to Lessor for execution, and
an Indenture and Trust Supplement to be delivered to
Lessor for execution and, in each case upon such
execution, to be filed for recordation with the FAA
pursuant to the Act;
(c) furnish Lessor with such evidence
of compliance with (i) Section 5.01(b) of the Trust
Indenture (if the Trust Indenture shall be in effect
at such time) and (ii) the insurance provisions of
Section 11 hereof with respect to the Replacement
Airframe and Replacement Engines, if any, and the
payment of all premiums then due with respect to all
such insurance, as Lessor may reasonably request;
(d) furnish Lessor with an opinion or
opinions of counsel reasonably satisfactory to
Lessor to the effect that, upon such conveyance,
Lessor will acquire good and marketable title to the
Replacement Airframe and Replacement Engines, if
any, free and clear of all Liens other than
Permitted Liens, the Replacement Airframe and
Replacement Engines, if any, will be leased
hereunder and subject to the Lien of the Trust
Indenture (if then in effect) to the same extent as
the Airframe and Engines replaced thereby, Lessor
and (assuming the Trust Indenture is still in
effect) the Indenture Trustee shall be entitled to
the benefit of Section 1110 of the Bankruptcy Code
with respect to the Replacement Aircraft to the same
extent as the Aircraft, and to such further effect
as Lessor may reasonably request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Airframe
which shall be identified by manufacturer,
model, FAA registration number and
manufacturer's serial number;
(ii) a description of the Replacement
Airframe to be received (including the
manufacturer, model, FAA registration
number and manufacturer's serial number)
as consideration for the Airframe to be
released;
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(iii) that on the date of the Indenture
and Trust Supplement and the Lease
Supplement relating to the Replacement
Airframe, Lessor will be the legal owner
of such Replacement Airframe free and
clear of all Liens (other than Permitted
Liens), that such Replacement Airframe
will on such date be in good working order
and condition, and that such Replacement
Airframe has been or, substantially
concurrently with such replacement, will
be duly registered in the name of Lessor
under the Act and that an airworthiness
certificate has been duly issued under the
Act with respect to such Replacement
Airframe, and that such registration and
certificate are in full force and effect,
and that Lessee will have the full right
and authority to use such Replacement
Airframe;
(iv) that the insurance required by
Section 11 is in full force and effect
with respect to such Replacement Airframe
and all premiums then due thereon have
been paid in full;
(v) that the Replacement Airframe is
of the same or an improved model as the
Airframe requested to be released from the
Lien of the Trust Indenture;
(vi) that no Lease Default or Lease
Event of Default has occurred and is
continuing or would result from the making
and granting of the request for release
and the addition of a Replacement
Airframe; and
(vii) if the Trust Indenture has not
theretofore been discharged, the release
of the Airframe so to be released will not
impair the security of the Trust Indenture
or be in contravention of any of the
provisions of the Trust Indenture;
(f) furnish Lessor with a certificate
or certification of qualified independent aircraft
appraisers reasonably satisfactory to Lessor
certifying that the Replacement Airframe and
Replacement Engines, if any, have a value, remaining
useful life and utility at least equal to, and are
in at least as good operating condition as, the
Airframe and Engines, if any, so replaced (assuming
the Airframe and Engines were in the condition and
repair required by the terms hereof immediately
prior to the occurrence of such Event of Loss); and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to
the financing statements filed on or
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before the Delivery Date) as Lessor or any
Participant may reasonably request to effect such
replacement.
10.1.7 Recordation and Opinions. In the case of any
Replacement Airframe and/or Replacement Engines conveyed to Lessor
under this Section 10.l, promptly upon the registration of the
Replacement Aircraft and the recordation of the Lease Supplement and
Indenture and Trust Supplement covering the Replacement Airframe and
Replacement Engines, if any, pursuant to the Act, Lessee will cause to
be delivered to Lessor an opinion of Daugherty, Fowler & Peregrin or
other FAA counsel satisfactory to Lessor as to the due registration of
the Replacement Aircraft and the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.1.8 Conveyance. Upon compliance by Lessee with all of
the terms of this Section 10.1, (i) Lessor will comply with the
applicable provisions of Section 10.01 of the Trust Indenture and,
upon Indenture Trustee's release of the Aircraft and Engines (if
applicable) from the Lien of the Trust Indenture Estate, Transfer to
Lessee the replaced Airframe and Engines (if any), and (ii) Lessee
will be subrogated to all claims of Lessor, if any, against third
parties for damage to or loss of such Airframe and Engines to the
extent of the then insured value thereof in respect of any insurance
provided by Lessee.
10.2 Event of Loss with Respect to an Engine.
10.2.1 Event of Loss. Upon the occurrence of an Event of
Loss with respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe, Lessee
shall forthwith (and in any event within 15 days after such
occurrence) give Lessor, Indenture Trustee and each Participant
written notice thereof and shall, as promptly as possible and in any
event within 60 days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement for the
Engine with respect to which such Event of Loss occurred, title to a
Replacement Engine free and clear of all Liens, other than Permitted
Liens, and having a value, remaining useful life and utility at least
equal to, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such Engine was
of the value, remaining useful life and utility and in the condition
and repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss.
10.2.2 Conditions; Lessee's Obligations. Prior to or at
the time of any such conveyance, Lessee will promptly:
(a) furnish Lessor with a full warranty (as to
title) bill of sale duly conveying to Lessor such Replacement
Engine;
(b) cause a Lease Supplement subjecting such
Replacement Engine to this Lease, duly executed by Lessee, to
be delivered to Lessor for execution,
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and an Indenture and Trust Supplement to be delivered to
Lessor for execution and, in each case upon execution, to be
filed for recordation with the FAA pursuant to the Act;
(c) furnish Lessor with such evidence of
compliance with (i) Section 5.01(b) of the Trust Indenture (if
the Trust Indenture shall be in effect at such time) and (ii)
the insurance provisions of Section 11 hereof with respect to
such Replacement Engine and the payment of all premiums then
due with respect to such insurance, as Lessor may reasonably
request;
(d) furnish Lessor with an opinion or opinions
of Lessee's counsel, in form, substance and scope reasonably
satisfactory to Lessor, to the effect that, upon such
conveyance, Lessor will acquire good title to such Replacement
Engine free and clear of all Liens other than Permitted Liens,
and that such Replacement Engine will be leased hereunder and
subject to the Lien of the Trust Indenture (if then in effect)
to the same extent as the Engine replaced thereby and to such
further effect as Lessor or Indenture Trustee may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Engine which
shall be identified by manufacturer's serial number;
(ii) a description of the Replacement
Engine (including the manufacturer's name, model and
serial number) as consideration for the Engine to be
released;
(iii) that on the date of the Lease
Supplement and the Indenture and Trust Supplement
relating to the Replacement Engine, Lessor will be
the legal owner of such Replacement Engine free and
clear of all Liens except Permitted Liens, that such
Replacement Engine will on such date be in good
working order and condition, and that such
Replacement Engine is the same or an improved or
equivalent model as the Engine to be released; and
(iv) if the Trust Indenture has not
theretofore been discharged, that the release of the
Engine so to be released will not impair the
security of the Trust Indenture or be in
contravention of any of the provisions of the Trust
Indenture;
(f) furnish Lessor with a certificate of a
qualified aircraft engineer (who may be an employee of Lessee)
certifying that such Replacement Engine has a value, remaining
useful life and utility at least equal to, and is in at least
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as good operating condition as, the Engine so replaced
assuming such Engine was in the condition and repair required
by the terms hereof immediately prior to the occurrence of
such Event of Loss; and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to the
financing statements filed on or before the Delivery Date) as
Lessor or any Participant may reasonably request to effect
such replacement.
10.2.3 Recordation and Opinions. In the case of any
Replacement Engine conveyed to Lessor under this Section 10.2,
promptly upon the recordation of the Lease Supplement and the
Indenture and Trust Supplement covering such Replacement Engine
pursuant to the Act, Lessee will cause to be delivered to Lessor an
opinion of Daugherty, Fowler & Peregrin or other FAA counsel
satisfactory to Lessor as to the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.2.4 Conveyance; Replacement Engine. Upon compliance by
Lessee with the terms of this Section 10.2, Lessor will comply with
the provisions of the Trust Indenture applicable thereto and, upon
Indenture Trustee's release of the Engine with respect to which such
Event of Loss occurred from the Lien of the Trust Indenture Estate,
Transfer such Engine to Lessee, and Lessee will be subrogated to all
claims of Lessor, if any, against third parties for damage to or loss
of such Engine to the extent of the insured value thereof in respect
of any insurance provided by Lessee.
10.2.5 No Reduction of Rent. No Event of Loss with respect
to an Engine under the circumstances contemplated by the terms of this
Section 10.2 shall result in any reduction of Basic Rent or Renewal
Rent.
10.3 Application of Certain Payments. Any payments (other than
insurance proceeds, the application of which is provided for in Section 11)
received at any time by Lessor, Lessee or any Permitted Sublessee from any
governmental authority or other Person with respect to any Event of Loss, will
be applied as follows:
10.3.1 Replacement of Airframe and Engines. If such
payments are received with respect to the Airframe and/or the Engines
(or engines) installed on the Airframe that have been or are being
replaced by Lessee pursuant to Section 10.1 (other than Section
10.1.3), such payments shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect,
Lessor, and upon completion of such replacement be paid over to
Lessee, provided Lessee shall have fully performed or, concurrently
therewith will fully perform, the terms of Section 10.1 with respect
to the Event of Loss for which such payments are made.
10.3.2 Replacement of Engine. If such payments are
received with respect to an Engine that has been or is being replaced
by Lessee pursuant to Section 10.2, such
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payments shall be paid over to, or retained by, Indenture Trustee or,
if the Trust Indenture is no longer in effect, Lessor, and upon
completion of such replacement be paid over to Lessee, provided Lessee
shall have fully performed or, concurrently therewith will fully
perform, the terms of Section 10.2 with respect to the Event of Loss
for which such payments are made.
10.3.3 Nonreplacement. If such payments are received with
respect to the Airframe and/or the Engines or engines installed on the
Airframe that has not or have not been and are not being replaced
pursuant to Section 10.1 or 10.2, such payments shall be paid over to,
or retained by, Indenture Trustee, or, if the Trust Indenture is no
longer in effect, Lessor, and so much of such payments remaining after
reimbursement of Lessor, Indenture Trustee and each Participant for
costs and expenses shall be applied in reduction of Lessee's
obligation to pay Stipulated Loss Value and other amounts required to
be paid by Lessee hereunder, if not already paid by Lessee, or, if
already paid by Lessee, shall be applied to reimburse Lessee for its
payment of such Stipulated Loss Value and other amounts. The balance,
if any, of such payment remaining thereafter shall be divided between
Lessor and Lessee in proportion to their relative interests in the
Aircraft.
10.4 Requisition of Aircraft for Use by Governmental Authorities.
In the event of the requisition for use of the Airframe and the Engines or
engines installed on such Airframe during the Term by any governmental
authority, Lessee shall notify Lessor promptly of such requisition, and all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred. All
payments received by Lessor or Lessee from such governmental authority for the
use of such Airframe and Engines or engines prior to the time such requisition
becomes an Event of Loss shall be paid over to, or retained by, Lessee (or, if
directed by Lessee, any Permitted Sublessee); and all payments received by
Lessor or Lessee from such governmental authority for the use of such Airframe
and Engines or engines after such time shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect, Lessor,
and upon the performance by Lessee of the terms of Section 10.1 with respect to
such Event of Loss, shall be paid over to Lessee.
10.5 Requisition of an Engine for Use by Governmental Authorities.
In the event of the requisition for use by any governmental authority (other
than in circumstances contemplated by Section 10.4) of any Engine but not the
Airframe, Lessee will replace such Engine hereunder by complying with the terms
of Section 10.2 to the same extent as if an Event of Loss had occurred with
respect to such Engine, and any payments received from such governmental
authority with respect to such requisition shall be paid over to, or retained
by, Indenture Trustee, or if the Trust Indenture is no longer in effect,
Lessor, and upon the performance by Lessee of the terms of Section 10.2 to the
same extent as if an Event of Loss had occurred with respect to such
requisitioned Engine, shall be paid over to Lessee.
10.6 Application of Payments During Existence of Default. Any
amount referred to in this Section 10 which is payable or creditable to or
retainable by Lessee shall not be paid or
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credited to or retained by Lessee if, at the time of such payment, credit or
retention, a Lease Event of Default or Lease Default of the type specified in
Section 14.1 or 14.5 shall have occurred and be continuing hereunder but shall
be paid to and held by Indenture Trustee and applied by it as provided in the
Trust Indenture, or, if the Trust Indenture is no longer in effect, held by
Lessor as security for the obligations of Lessee under this Lease and applied
against Lessee's obligations hereunder as and when due; at such time as there
shall not be continuing any such Lease Event of Default or Lease Default, any
remaining balance of such amount shall be paid to Lessee to the extent not
previously applied in accordance with the preceding clause of this sentence.
Section 11. Insurance.
11.1 Public Liability and Property Damage Insurance. Lessee shall
at all times maintain, or cause to be maintained, at its or any Permitted
Sublessee's expense, public liability (including without limitation contractual
liability, passenger legal liability and property damage, but excluding
manufacturer's product liability coverage) insurance which shall:
11.1.1 Type, Form and Amount. Be of a type and form
carried by similarly situated United States commercial air carriers
generally, and carried in amounts not less than that carried by Lessee
on similar equipment owned or leased by Lessee and not less than the
minimum amount of $350,000,000 (per occurrence) combined single limit
(or such greater amount as Lessee may carry from time to time on other
737-300 series aircraft in its fleet);
11.1.2 Coverage. Include, but not be limited to, public
liability insurance, contractual liability insurance, passenger
liability insurance and property damage liability insurance (including
cargo and baggage liability insurance); and
11.1.3 Additional Insureds. Name as additional insureds
Lessor (in its individual and trust capacities), Indenture Trustee,
USL Capital Corporation (so long as it is an Affiliate of the Owner
Participant), each Participant and each other Indemnified Party, as
their interests may appear.
In addition to the other insurance required by this Section
11.1, the Lessee shall at all times cause the Owner Participant, the
Original Loan Participant and USL Capital Corporation (so long as it
is an Affiliate of the Owner Participant) to be named as additional
insureds on any umbrella or excess liability coverage policy carried
and maintained by Lessee.
11.2 Insurance Against Loss of or Damage to Aircraft and Engines.
Lessee shall at all times maintain, or cause to be maintained, at its or any
Permitted Sublessee's expense, insurance against loss of or damage to the
Aircraft, Airframe and Engines as follows:
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11.2.1 Type, Form and Amount. "All-risk" ground and flight
aircraft hull insurance on the Aircraft and "all-risk" coverage on
each Engine and on Parts while removed from the Aircraft or Engines,
which is of the type and form, and in an amount not less than that,
carried by Lessee on similar equipment owned or leased by Lessee and
in an amount not less than that usually carried by similarly situated
United States commercial air carriers generally; and, to the extent so
usually carried, at all times that the Aircraft or any Engine is not
covered by the insurance described in Section 11.2.2, coverage against
the perils of (i) strikes, riots, civil commotions or labor
disturbances, (ii) any malicious act or act of sabotage, and (iii)
hijacking, or any unlawful seizure or wrongful exercise of control of
the Aircraft or crew in flight (including any attempt at such seizure
or control) made by any person or persons on board the Aircraft acting
without the consent of the insured other than hijacking committed by
persons engaged in a program of irregular warfare for terrorist
purposes. Such insurance shall at all times be for an amount not less
than the Stipulated Loss Value of the Aircraft.
11.2.2 War-Risk Insurance. If at any time (a) war-risk
insurance is maintained by Lessee or any Permitted Sublessee
subleasing the Aircraft or any Engine with respect to other aircraft
operated by Lessee or such Permitted Sublessee on the same or similar
routes, (b) the Aircraft is operated on routes where the custom in the
United States commercial airline industry is to carry war-risk
insurance, (c) the Aircraft is operated by a Permitted Foreign Air
Carrier as a Permitted Sublessee in any recognized or threatened area
of hostilities, or (d) the Aircraft is operated on any route where no
other aircraft is regularly operated by a United States commercial
airline and such route is within any such area of hostilities, then
war-risk and allied perils insurance of the type carried by similarly
situated United States commercial air carriers operating the same or
comparable models of aircraft on the same or similar routes shall be
maintained on the Aircraft in an amount not less than that specified
in Section 11.2.l.
11.2.3 Certain Requirements. The insurance policies
required by this Section 11.2 shall:
11.2.3.1 Additional Insureds. Be endorsed to name
Lessor (in its individual and trust capacities), USL Capital
Corporation (so long as it is an Affiliate of the Owner
Participant), each Participant, the Indenture Trustee and each
other Indemnified Party as additional insureds, as their
interests may appear.
11.2.3.2 Payment of Proceeds. Provide that
proceeds thereunder shall be paid directly to Indenture
Trustee, so long as the Trust Indenture shall be in effect,
and thereafter to Lessor, in either case, as exclusive loss
payee; provided, however, that any proceeds payable as a
result of any property damage to the Airframe or any Engine,
which property damage does not exceed $4,000,000 and does not
constitute an Event of Loss with respect to the Aircraft or
such Engine, shall be paid to Lessee unless Lessor or
Indenture Trustee, prior to such
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payment, shall have notified the insurer making such payment
that a Lease Default (of the type described in Section 14.1 or
14.5) or Lease Event of Default has occurred and is
continuing.
11.2.3.3 Waiver of Subrogation. Provide that the
insurers shall waive any rights of subrogation against Lessor,
Indenture Trustee, each Participant and each other Indemnified
Party except for claims arising out of gross negligence or
willful misconduct of such Person; provided, that the exercise
by insurers of rights of subrogation, if any, permitted by
this Section 11.2 shall not, in any way, delay payment of any
claim that would otherwise be payable by such insurers but for
the existence of such rights of subrogation or entitle such
insurers to exercise or to assert any setoff, recoupment,
counterclaim or any other deduction in respect of any amounts
payable under such policies.
11.2.4 Deductibles. The insurance required by this Section
11.2 may, subject to Section 11.8, provide for standard deductibles
which are from time to time in effect in the aviation insurance
industry generally and which are customarily maintained by similarly
situated United States commercial air carriers generally; provided,
however, such deductibles shall not be more than the deductibles
generally maintained by Lessee (and which Lessee is under no
compulsion to maintain pursuant to any indenture, mortgage, lease or
other agreement) with respect to its fleet of Boeing Model 737-300
series aircraft and CFM International Model CFM56-3 engines generally.
11.2.5 Government Indemnity. In the case of a contract
with the Government in respect of the Aircraft or Engines, a valid
agreement by the Government to indemnify Lessee, Lessor, each
Participant, Indenture Trustee and each other Indemnified Party
against the same risks which are required hereunder to be insured
against in amounts at least equal to the amounts required hereunder
from time to time (such indemnity to be backed by the full faith and
credit of the United States of America), shall be considered adequate
insurance with respect to the Aircraft, Airframe and any Engine
subject to such contract to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
11.3 General Policy Provisions. Each insurance policy to be
procured and maintained hereunder shall:
11.3.1 Primary Insurance. Be primary and without right of
contribution from other insurance which may provide coverage to
Lessor, Indenture Trustee, or any Participant or any other Indemnified
Party with respect to its interest in the Aircraft, Airframe or any
Engine or its liabilities with respect to or arising out of the
transactions contemplated by the Operative Agreements;
11.3.2 Coverage for Each Insured. Expressly provide that
all the provisions thereof, except the agreed values and the limits of
the liability of the insurer under such
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policy, shall operate in the same manner as if there were a separate
policy covering each insured;
11.3.3 Waiver of Certain Rights. Waive any right of the
insurers to any setoff, recoupment, counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
liability of Lessee, Lessor, Indenture Trustee, any Participant or any
other Indemnified Party;
11.3.4 Breach of Warranty. Provide that, in respect of
Lessor, Indenture Trustee, each Participant and each other Indemnified
Party, such insurance shall not be invalidated by any action or
inaction by Lessee, any Indemnified Party or other Person and shall
insure the interests of Lessor, Indenture Trustee, each Participant
and each other Indemnified Party regardless of any breach or violation
by Lessee, any Indemnified Party or other Person of any
representation, warranty, declaration or condition contained in such
policy;
11.3.5 Notice of Termination or Changes. Provide for not
less than 30 days' prior written notice to be received by Lessor,
Indenture Trustee and each Participant before any lapse, alteration,
termination or cancellation of the insurance evidenced thereby shall
be effective as to Lessor, Indenture Trustee, each Participant and
each other Indemnified Party, except that war-risk and allied perils
policies may provide for not less than seven days' prior written
notice or such lesser or greater notice as shall at the time be
customary in the aviation insurance industry generally, and which are
customarily in effect with respect to major United States commercial
air carriers generally from time to time;
11.3.6 Nonliability for Premiums. Provide that neither
Lessor, Indenture Trustee, any Participant nor any other Indemnified
Party shall be liable for any insurance premium;
11.3.7 Identity of Insurers. Be with insurance companies,
underwriters or funds of recognized responsibility; and
11.3.8 Fifty-fifty Clause. Contain a fifty-fifty clause
per AVS 103 or its equivalent, but only in the event that such clause
is customarily included in such policies maintained by similarly
situated United States commercial air carriers generally.
11.4 Application of Insurance Proceeds. As between Lessor and
Lessee, all insurance proceeds received under policies required to be
maintained (or to be caused to be maintained) by Lessee pursuant to Section
11.2 as a result of the occurrence of an Event of Loss with respect to the
Aircraft, Airframe or any Engine will be applied in accordance with Section
10.3.1, 10.3.2 or 10.3.3, as the case may be (except that the balance referred
to in Section 10.3.3 shall be paid over to, or retained by, Lessee). All
insurance proceeds received under such policies in respect of any property
damage loss not constituting an Event of Loss
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with respect to the Airframe or an Engine will be applied in payment for
repairs or for replacement property in accordance with the terms of Section 8,
if not already paid for by Lessee, and any balance remaining after compliance
with such Section with respect to such loss shall be paid to Lessee. In the
case of a loss with respect to an engine (other than an Engine) installed on
the Airframe, Lessor shall hold any payment to it of any insurance proceeds in
respect of such loss for the account of Lessee or any other third party that is
entitled to receive such proceeds. The provisions of Section 10.6 shall apply
to amounts referred to in this Section 11.4.
11.5 Certificates; Reports, Etc. With respect to any policy
required hereunder, Lessee shall cause to be furnished to Lessor, Indenture
Trustee and each Participant on or prior to the Delivery Date of the Aircraft
and on or prior to expiration of such policy, certificates of the insurer or
insurers (or their authorized representatives) providing insurance pursuant to
the requirements of this Section 11. On or before the Delivery Date of the
Aircraft, and annually thereafter on or before the renewal date of such policy,
Lessee shall cause to be furnished to Lessor, Indenture Trustee, the Original
Loan Participant and Owner Participant a report signed by Willis Corroon
Aerospace (or any other firm of independent aircraft insurance brokers,
appointed by Lessee, reasonably satisfactory to the Original Loan Participant
and Owner Participant) describing in reasonable detail the insurance then
carried and maintained with respect to the Aircraft and stating the opinion of
such firm that the insurance then carried and maintained on the Aircraft
complies with the terms hereof. Lessee agrees that it will cause such firm to
advise Lessor, Indenture Trustee, the Original Loan Participant and Owner
Participant in writing promptly of any default in the payment of any premium or
any other act or omission on the part of Lessee or any Permitted Sublessee of
which they have knowledge and which might invalidate or render unenforceable,
in whole or in part, the insurance on the Aircraft.
11.6 Lessor's Right to Maintain Insurance. In the event that
Lessee shall fail to maintain or cause to be maintained insurance as herein
provided, Lessor, Indenture Trustee or any Participant may at its option (but
shall not be obligated to) provide such insurance and in such event, Lessee
shall, upon demand, reimburse such Person, as Supplemental Rent, for the cost
thereof. No such payment, performance or compliance shall be deemed to cure
any Lease Default hereunder or otherwise relieve Lessee of its obligations with
respect thereto.
11.7 Insurance for Own Account. Nothing in Section 11 shall limit
or prohibit Owner Participant (directly or through Lessor) from obtaining
insurance for its own account, and any proceeds payable thereunder shall be
payable as provided in the insurance policy relating thereto; provided,
however, that no such insurance may be obtained which would limit or otherwise
adversely affect the availability or coverage or cost of any insurance required
to be obtained or maintained pursuant to this Section 11. Nothing in this
Section 11 shall limit or prohibit Lessor, Indenture Trustee or any Holder from
obtaining insurance for its own account, and any proceeds payable thereunder
shall be payable as provided in the insurance policy relating thereto;
provided, however, that no such insurance may be obtained which would limit or
otherwise adversely affect the availability or coverage or cost of any
insurance required to be
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obtained or maintained pursuant to this Section 11 or obtained by Owner
Participant pursuant to the preceding sentence.
11.8 Self-Insurance. Notwithstanding the foregoing provisions of
this Section 11, Lessee may, from time to time so long as no Lease Event of
Default has occurred and is continuing, self-insure with respect to the
Aircraft to the same extent as it does with respect to, or maintain policies
with deductibles or premium adjustment provisions consistent with similar
provisions applicable to, other comparable aircraft operated by Lessee;
provided, however, that in the case of public liability insurance, such
self-insurance shall in no event exceed $50,000,000; and provided, further,
that if at any time Lessee's unsecured senior long-term debt securities are not
rated Investment Grade, such self-insurance (inclusive of any such public
liability insurance and without derogation from the preceding proviso) shall in
no case be in amounts greater than 4% of Lessee's tangible net worth. As used
in this Agreement, the term "Investment Grade" means a rating of "Baa3" or
higher from Moody's Investors Service or a rating from any other nationally
recognized bond rating service equivalent to or better than such a rating.
Section 12. Inspection. At all reasonable times, and upon
reasonable notice, Lessor, Indenture Trustee or any Participant or its
authorized representatives may inspect the Aircraft and inspect and copy
(subject to any confidentiality agreements, copyright restrictions and the
like) the books and records of Lessee relative thereto. Any such inspection of
the Aircraft shall be without out-of-pocket expense or risk to Lessee and shall
be a visual, walk-around inspection and may not include opening any panels,
bays or the like; provided, that no exercise of such inspection right shall
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee (or any Permitted Sublessee). Subject to the proviso in
the preceding sentence, upon receipt by Lessee of a written request from the
Owner Participant or the Indenture Trustee specifying that the Owner
Participant or the Indenture Trustee desires to have an authorized
representative observe the major overhaul to be performed on the Aircraft next
following receipt of any such request, Lessee shall permit such authorized
representative to observe such overhaul. Neither Lessor, Indenture Trustee nor
any Participant shall have any duty to make any such inspection or shall incur
any liability or obligation by reason of not making any such inspection.
Section 13. Assignment.
13.1 In General. Except as otherwise expressly permitted in
Section 7.2 or Section 11(f) of the Participation Agreement, or as required in
the case of any requisition by the Government referred to in Section 7.1,
Lessee will not, without the prior or written consent of Lessor, assign or
transfer any of its rights or obligations under this Lease or any other
Operative Agreement. Lessor may assign or convey any of its right, title and
interest in and to this Lease, any of the other Operative Agreements or the
Aircraft in accordance with the Participation Agreement, the Trust Agreement or
the express provisions of this Lease. The terms and provisions of the Lease
shall be binding upon and inure to the benefit of Lessor and Lessee and their
respective permitted successors and assigns.
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13.2 Security for Lessor's Obligations. In order to secure the
indebtedness evidenced by the Certificates, the Trust Indenture provides, among
other things, for the assignment by Lessor to Indenture Trustee of its right,
title and interest in, to and under this Lease and any Permitted Sublease, to
the extent set forth in the Trust Indenture, and for the creation of a first
mortgage lien on and perfected security interest in the Aircraft in favor of
Indenture Trustee. Lessee hereby consents to such assignment and to the
creation of such mortgage and security interest and acknowledges receipt of
copies of the Trust Agreement and the Trust Indenture, it being understood that
such consent shall not affect any requirement or the absence of any requirement
for any consent under any other circumstances. So long as the Trust Indenture
shall be in effect, Lessee will furnish to Indenture Trustee counterparts of
all writings of any kind required to be delivered hereunder by Lessee to
Lessor. Until the Lien of the Trust Indenture has been released, as provided
in the Trust Indenture, certain rights of Lessor with respect to this Lease,
the Aircraft, the Airframe or any Engine (or any Part thereof) or any other
part of the Trust Indenture Estate are exercisable by Indenture Trustee.
Section 14. Events of Default. The following events shall
constitute Lease Events of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body), and each such
Lease Event of Default shall continue so long as, but only so long as, it shall
not have been remedied or waived:
14.1 Failure to Pay Rent. Lessee shall fail to make any payment of
Basic Rent, Stipulated Loss Value, Termination Value or Special Purchase Price
or any amount due pursuant to Section 3.4 within seven Business Days from the
due date thereof; or Lessee shall fail to make any other payments required to
be made by it under the Operative Agreements within ten Business Days after the
receipt of written demand therefor delivered to Lessee by Lessor after such
payments were required to have been made (provided, that any failure to pay any
amount owed by Lessee under the Tax Indemnity Agreement or any failure of
Lessee to pay when due any Excluded Payments shall not constitute a Lease Event
of Default unless written notice is given by the Owner Participant to Lessee
and the Indenture Trustee that such failure shall constitute a Lease Event of
Default); or
14.2 Specific Defaults. Lessee shall fail to carry and maintain
(or cause to be carried and maintained) insurance on or with respect to the
Aircraft in accordance with the provisions of Section 11; provided, that any
such failure shall not constitute a Lease Event of Default so long as such
failure is for a period of not more than 30 days, Lessee shall not operate the
Aircraft at a time when such insurance is not in effect and the Aircraft
continues to be covered by such insurance as is required when the Aircraft is
on the ground, or Lessee shall fail to comply with Section 7.1.1; or
14.3 General Default. Lessee shall fail to perform or observe any
other covenant, condition or agreement to be performed or observed by it
hereunder or under any other Operative Agreement (except the Tax Indemnity
Agreement), and such failure shall continue
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unremedied for a period of 30 days after written notice thereof to Lessee,
unless Lessee shall be diligently proceeding to correct such failure and such
failure is cured within 180 days after such notice or by the end of the Term,
whichever first occurs; or
14.4 Misrepresentation and Breach of Warranty. Any representation
or warranty made by Lessee herein or in the Participation Agreement or in any
other Operative Agreement (other than the Tax Indemnity Agreement) or in any
document or certificate furnished by Lessee in connection with any thereof,
shall prove to have been incorrect in any material respect at the time made,
shall remain material at the time of discovery and shall, if curable, remain
incorrect in any material respect after 30 days after written notice thereof to
Lessee;
14.5 Bankruptcy, Etc. Lessee shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official or agency in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to authorize
any of the foregoing; or an involuntary case or other proceeding shall be
commenced against Lessee seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official or agency of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 90 days.
Section 15. Remedies.
15.1 Default; Remedies. Upon the occurrence of a Lease Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, so long as any such Lease Event of Default shall be
continuing, exercise one or more of the following remedies as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect
which have not been effectively waived by Lessee:
15.1.1 Return; Repossession. Lessor may cause Lessee, upon
written demand by Lessor and at Lessee's expense, to return promptly,
and Lessee shall return promptly, all or any part of the Aircraft,
Airframe or Engines as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with
all the provisions of, Section 5 as if the Aircraft, Airframe or
Engines were being returned at the end of the Term; or Lessor, at its
option, may enter upon the premises where the Aircraft, Airframe or
any Engine, or part thereof is located and take immediate possession
of and remove the same by summary proceedings or otherwise, all
subject to receipt of notice delivered pursuant to Section 7.2.3 (if
applicable) and
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without liability accruing to Lessor for or by reason of such entry or
taking of possession, whether for the restoration of damage to
property caused by such taking or otherwise, and Lessee expressly
waives any right it may have under applicable law to a hearing prior
to repossession of the Aircraft, Airframe or any Engine or part
thereof; or
15.1.2 Sale; Use Etc. Lessor may sell all or any part of
the Aircraft, Airframe or any Engine, at public or private sale, at
such times and places, to such Persons (including Lessor, Indenture
Trustee or any Participant) as Lessor may determine, or otherwise
dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, Airframe or any Engine or part thereof, as Lessor, in its
sole discretion, may determine, all free and clear of any rights of
Lessee except as hereinafter set forth in this Section 15 and without
any duty to account to Lessee with respect to such action or inaction
or for any proceeds with respect thereto; or
15.1.3 Certain Liquidated Damages.
15.1.3.1 Liquidated Damages--Fair Market Rental
Value. Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under
Section 15.1.1 or 15.1.2 with respect to the Aircraft,
Airframe or any Engine or part thereof, Lessor, by written
notice to Lessee specifying a payment date (which shall be an
SLV Determination Date) not earlier than ten days from the
date of such notice, may cause Lessee to pay to Lessor, and
Lessee shall pay to Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Basic Rent or Renewal Rent,
as the case may be, due after the date specified for payment
in such notice), any unpaid Basic Rent or Renewal Rent, as the
case may be, due on or prior to such SLV Determination Date
(it being understood and agreed that Lessee shall not be
required to pay the portion, if any, of such Basic Rent
designated in Exhibit C hereto as payable in advance on such
SLV Determination Date, unless the same is attributable to
accrued interest on the Certificates) plus an amount equal to
the excess, if any, of the Stipulated Loss Value for the
Aircraft, computed as of such SLV Determination Date, over the
fair market rental value (determined as hereafter provided in
this Section 15) of the Aircraft for the remainder of the
Term, after discounting such fair market rental value
semiannually (effective on each Rent Payment Date) by a rate
equal to the Certificate Rate to present worth as of the date
specified for payment in such notice, together with interest,
if any, on such amount and unpaid Basic Rent or Renewal Rent,
as the case may be, at the Overdue Rate from the due date
thereof to the date of payment in full; or
15.1.3.2 Liquidated Damages--Fair Market Sales
Value. If Lessor shall not have sold the Aircraft, Lessor, by
written notice to Lessee specifying a payment date (which
shall be an SLV Determination Date) not earlier than ten days
from the date of such notice, may cause Lessee to pay to
Lessor, and Lessee
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shall pay to Lessor, on the payment date specified in such
notice, as liquidated damages for loss of a bargain and not as
a penalty (in lieu of the Basic Rent or Renewal Rent, as the
case may be, due after the date specified for payment in such
notice), any unpaid Basic Rent or Renewal Rent, as the case may
be, due on or prior to such SLV Determination Date (it being
understood and agreed that Lessee shall not be required to pay
the portion, if any, of such Basic Rent designated in Exhibit C
hereto as payable in advance on such SLV Determination Date,
unless the same is attributable to accrued interest on the
Certificates) plus an amount equal to the excess, if any, of
the Stipulated Loss Value for the Aircraft, computed as of such
SLV Determination Date, over the fair market sales value of the
Aircraft (determined as hereafter provided in this Section 15
as of the date specified for payment in such notice), together
with interest, if any, on such amount and unpaid Basic Rent or
Renewal Rent, as the case may be, at the Overdue Rate from
the due date thereof to the date of payment in full; or
15.1.4 Liquidated Damages upon Sale. If Lessor,
pursuant to Section 15.1.2 or applicable law, shall have sold
the Aircraft, Lessor, in lieu of exercising its rights under
Section 15.1.3 with respect to the Aircraft, may, if Lessor
shall so elect, upon giving written notice to Lessee, cause
Lessee to pay Lessor, and Lessee shall pay to Lessor, on the
date of such sale, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Basic Rent or Renewal
Rent, as the case may be, due after the date of such sale),
any unpaid Basic Rent or Renewal Rent, as the case may be, due
on or prior to the SLV Determination Date (it being understood
and agreed that Lessee shall not be required to pay the
portion, if any, of such Basic Rent designated in Exhibit C
hereto as payable in advance on such SLV Determination Date,
unless the same is attributable to accrued interest on the
Certificates) on or immediately preceding such date of sale
plus the amount of any deficiency between the net proceeds of
such sale or (if such sale is a private sale and is made to
Lessor, Indenture Trustee, a Participant or any Affiliate
thereof) between the fair market sales value of the Aircraft,
determined as of the date of such sale as hereinafter provided
in this Section 15, and the Stipulated Loss Value of the
Aircraft, computed as of the date of such sale, together with
interest, if any, on such amount and such unpaid Basic Rent or
Renewal Rent at the Overdue Rate from the due date thereof to
the date of payment in full; or
15.1.5 Termination and Other Remedies. Lessor
may terminate this Lease, or may exercise any other right or
remedy which may be available to it under applicable law or
proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof, including
without limitation Lessee's agreement to lease the Aircraft
for the Term and to pay Rent.
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In addition to the foregoing remedies, Lessee shall be liable (except
as otherwise provided above and without duplication of amounts otherwise
payable hereunder) for any and all unpaid Rent due hereunder before, during or
after the exercise of any of the foregoing remedies and for all legal fees and
other costs and expenses (including the fees and expenses of all appraisers
required by this Section 15) of Lessor, Indenture Trustee and Participants,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all insurance and
storage costs and all costs and expenses incurred in connection with the return
of the Aircraft, Airframe or any Engine or part thereof, in accordance with the
terms of Section 5 or in placing the Aircraft, Airframe or any Engine or part
thereof, in the condition and airworthiness required by Section 5.
Lessor agrees to give Lessee at least 15 days' prior written notice of
the date fixed for any public sale of the Aircraft, the Airframe or any Engine
or part thereof, and of the date on or after which will occur the execution of
any contract providing for any private sale.
15.2 Determination of Fair Market Rental Value and Fair Market
Sales Value. For the purpose of this Section 15, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession, as the case may
be, and in each case shall be determined on an "as is, where is" basis pursuant
to an appraisal by a recognized independent aircraft appraiser chosen by Lessor
and approved by Lessee, which approval shall not be unreasonably withheld or
delayed and shall be deemed granted if such choice is not rejected within 10
days after Lessee's receipt of notice of Lessor's choice.
15.3 No Waiver, Etc. No remedy referred to in this Section 15 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. No express or implied waiver by
Lessor of any Lease Event of Default shall in any way be, or be construed to
be, a waiver of any earlier or subsequent Lease Event of Default. To the
extent permitted by applicable law, Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use the Aircraft, Airframe or any Engine, or part thereof,
in mitigation of Lessor's damages as set forth in this Section 15 or which may
otherwise limit or modify any of Lessor's rights or remedies under this Section
15.
Section 16. Notices. All notices required under the terms and
provisions hereof shall be in writing and shall be given by certified mail,
telecopy or any other customary means of written communication, addressed:
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If to Lessee, at 2702 Love Field Drive, P.O. Box 36611, Dallas, Texas
75235-1611 (telecopy no. 214/904-4022), Attention: Treasurer, or at such other
address as Lessee shall from time to time designate in writing;
If to Lessor, at 777 Main Street, Hartford, Connecticut 06115
(telecopy no. 203/240-7920), Attention: Corporate Trust Administration, or at
such other address as Lessor shall from time to time designate in writing;
If to any Participant or Indenture Trustee, at the applicable address
set forth in the signature pages of the Participation Agreement or Schedule I
thereto, or at such other address as any such Participant or Indenture Trustee,
as the case may be, shall from time to time designate in writing.
The effective date of any such notice shall be, if sent by mail, three
Business Days after mailing and otherwise the date on which it is received by
the addressee. Lessee shall furnish to Lessor for transmission to Indenture
Trustee and Participants a sufficient number of copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished hereunder, except in any case where Lessee shall have transmitted the
same directly to any such person.
Section 17. Net Lease; Lessee's Obligations; No Setoff,
Counterclaim, Etc. This is a net lease and it is hereby recognized that Lessor
is the owner of the Aircraft (except that Owner Participant will be the owner
for income tax purposes) and Lessee is the lessee thereof. It is the intent of
the parties hereto that this Lease be a "true lease". Lessee's obligation to
pay all Rent payable hereunder as and when due and to the Person entitled
thereto shall, subject to Section 3.8, be absolute and unconditional and shall
not be affected by any circumstance, including without limitation: (a) any
setoff, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor (in its individual or trust capacity), Indenture Trustee (in its
individual or trust capacity), any Participant, Manufacturer, any Indemnified
Party or any other Person for any reason whatsoever; (b) any defect in the
title, airworthiness, condition, design, operation or fitness for use of, or
any damage to or loss, theft, taking, requisition, condemnation, confiscation
or destruction of, the Aircraft, Airframe or any Engine, or any interruption
or cessation in the use or possession thereof by Lessee, any sublessee or any
other Person for any reason whatsoever; (c) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee or any other Person;
(d) any restriction, prevention or curtailment of or interference with any use
of the Aircraft or part thereof; (e) any invalidity or unenforceability or
disaffirmance of this Lease or any provision hereof or any of the other
Operative Agreements or any provision thereof, in each case whether against or
by Lessee or otherwise; or (f) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided, that
nothing in this sentence shall be construed to modify or limit in any way
Lessee's rights under Section 3.8.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees,
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subject to Section 3.8, to pay an amount equal to each Basic Rent, Renewal Rent
and Supplemental Rent payment at the time such payment would have become due
and payable in accordance with the terms hereof had this Lease not been
terminated in whole or in part. All Rent payable by Lessee shall be paid
without notice or demand (except as otherwise expressly provided) and, subject
to Section 3.8, without abatement, suspension, deferment, deduction, diminution
or proration by reason of any circumstance or occurrence whatsoever. Lessee
hereby waives, to the extent permitted by applicable law, any and all rights
which it may now have or which at any time hereafter may be conferred upon it,
by statute or otherwise, to terminate, cancel, quit or surrender this Lease or
any part hereof, or to any abatement, suppression, deferment, diminution,
reduction or proration of Rent except in accordance with the express terms
hereof. Each payment of Rent made by Lessee shall, subject to Section 3.8, be
final as to Lessor and Lessee. Lessee will not, subject to Section 3.8, seek
to recover all or any part of any such payment of Rent for any reason
whatsoever. Lessee covenants that it will remain obligated under this Lease in
accordance with its terms and will take no action to terminate, rescind or
avoid this Lease whether or not as a result of the bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding-up
or other similar proceeding affecting Lessor or Owner Participant or any other
action with respect to this Lease which may be taken in any such proceeding by
any trustee or receiver of Lessor or Owner Participant or by any court (it
being understood that nothing in this sentence shall prevent Lessee from taking
any action to which it would have been entitled had such bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding-up or other similar proceeding not occurred).
Section 18. Renewal and Purchase Options.
18.1 Renewal Options. At the end of the Base Lease Term and any
Renewal Term (other than any Renewal Term ending four years after the end of
the Base Lease Term), so long as no Lease Event of Default or Lease Default (of
the type described in Section 14.1 or 14.5) has occurred and is continuing,
Lessee shall have the option to renew this Lease for a Renewal Term. In order
to exercise the option to renew, Lessee shall notify Lessor thereof in writing
not more than nine months nor less than six months prior to the commencement of
the applicable Renewal Term (which notice shall be irrevocable and shall
specify the length of such Renewal Term). Renewal Rent shall be payable in
arrears for each Lease Period occurring during any Renewal Term. The Renewal
Rent payable for any Renewal Term hereunder shall be the fair market rental
value of the Aircraft (as defined below) calculated as of the commencement of
such Renewal Term. Such fair market rental value shall be determined not later
than three months prior to the commencement of such Renewal Term by mutual
consent of Owner Participant and Lessee or, if they shall be unable so to
agree, by three recognized independent aircraft appraisers, one chosen and paid
for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market rental value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two
SALE AND LEASE AGREEMENT [N397SW]
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appraisals, then the appraisal of such appraiser shall be excluded, the
remaining appraisals shall be averaged and such average shall be deemed to be
the fair market rental value of the Aircraft for all purposes hereof. If
either Owner Participant or Lessee shall fail to appoint an appraiser by the
date which is two months prior to the commencement of such Renewal Term or if
such two appraisers cannot agree on the amount of such appraisal and fail to
appoint a third appraiser by the date which is one month before the
commencement of such Renewal Term, then either Owner Participant or Lessee may
apply to any court having jurisdiction (including, without limitation, the
courts referred to in Section 13(b) of the Participation Agreement) to make
such appointment. For purposes of this Section 18.1, fair market rental value
shall be the cash rental obtainable in an arm's-length lease between an
informed and willing lessee (under no compulsion to lease) and an informed and
willing lessor (under no compulsion to lease) and shall be determined on the
assumptions that the Aircraft is in the United States of America, available for
use by Lessee, unencumbered by any renewal or purchase option contained in this
Lease, in the return condition required by Section 5 of this Lease and
otherwise in compliance with and subject to the terms and requirements of this
Lease. Stipulated Loss Value amounts that are payable during any such Renewal
Term shall be calculated as of the date of commencement of such Renewal Term
and shall be determined in the same manner referred to above based on the fair
market sales value of the Aircraft on such date determined in accordance with
Section 18.2(a).
18.2 Purchase Options. (a) Lessee shall have the option to
purchase the Aircraft at the end of the Base Lease Term and each Renewal Term,
so long as (i) no Lease Default (of the type described in Section 14.1 or 14.5)
or Lease Event of Default shall have occurred and be continuing on the date of
notice of exercise of such option and (ii) no Lease Event of Default of the
type described in Section 14.5 or Lease Default of such type shall have
occurred and be continuing on the purchase date. In order to exercise such
option, Lessee shall notify Lessor thereof in writing not more than nine months
nor less than six months prior to the end of the Base Lease Term or such
Renewal Term, as applicable (which notice shall be irrevocable). In such case,
Lessee shall purchase the Aircraft on the last Business Day of the Base Lease
Term or such Renewal Term, as applicable, at a purchase price equal to the fair
market sales value thereof as of such last Business Day. Such fair market
sales value shall be determined not later than three months prior to such last
Business Day by mutual consent of Owner Participant and Lessee or, if they
shall be unable so to agree, by three recognized independent aircraft
appraisers, one chosen and paid for by Owner Participant, one chosen and paid
for by Lessee and the third appraiser chosen by the mutual consent of the first
two appraisers and paid for equally by Owner Participant and Lessee, the
appraisals of which three appraisers shall be averaged and such average shall
be deemed to be the fair market sales value of the Aircraft for all purposes
hereof; provided, however, that if the appraisal of one appraiser is more
disparate from the average of all three appraisals than each of the other two
appraisals, then the appraisal of such appraiser shall be excluded, the
remaining appraisals shall be averaged and such average shall be deemed to be
the fair market sales value of the Aircraft for all purposes hereof. If either
Owner Participant or Lessee shall fail to appoint an appraiser by the date
which is two months prior to such last Business Day or if such two appraisers
cannot agree on the amount of such appraisal and fail to appoint a third
appraiser by the date which
SALE AND LEASE AGREEMENT [N397SW]
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is one month before such last Business Day, then either Owner Participant or
Lessee may apply to any court having jurisdiction to make such appointment.
For purposes of this Section 18.2, fair market sales value shall be the cash
price obtainable in an arm's-length sale between an informed and willing buyer
(under no compulsion to buy) and an informed and willing seller (under no
compulsion to sell) and shall be determined on the assumptions that the
Aircraft is in the United States of America, available for use by the buyer,
unencumbered by any renewal or purchase option contained in this Lease, in the
return condition required by Section 5 of this Lease and otherwise in
compliance with the requirements of this Lease. At the time of payment to
Lessor, in funds of the type specified in Section 3.6, of the full amount of
the purchase price pursuant to this Section 18.2(a), Lessee shall also pay to
Lessor all unpaid Basic Rent due on or prior to the last day of the Term and
(without duplication) any other Rent which is due and payable through and
including the date of payment.
(b) So long as (i) no Lease Default (of the type described in
Section 14.1 or 14.5) or Lease Event of Default shall have occurred and be
continuing on the date of notice of exercise of such option and (ii) no Lease
Event of Default of the type described in Section 14.5 or Lease Default of such
type shall have occurred and be continuing on the Special Purchase Option Date,
Lessee shall have the option to purchase the Aircraft on January 1, 2014 or, if
such date is not a Business Day, on the next succeeding Business Day (the
"Special Purchase Option Date") at a purchase price equal to 57.72866546% of
Lessor's Cost (the "Special Purchase Price"); provided, that if there has been
an adjustment prior to the Special Purchase Option Date pursuant to Section
3.7, the Special Purchase Price (including any installments thereof) shall be
at all times calculated to preserve the Owner Participant's Special Purchase
Price After-Tax Yield, but in any event subject to Section 3.7.2. Such option
to purchase the Aircraft shall be exercised upon written notice from Lessee to
Lessor given not more than nine months nor less than six months prior to the
Special Purchase Option Date. Such notice shall be irrevocable and shall
contain the statement that this Lease will terminate upon the consummation of
such purchase. On the Special Purchase Option Date, Lessee shall pay to
Lessor, in funds of the type specified in Section 3.6, the full amount of the
Special Purchase Price pursuant to this Section 18.2(b), together with all
unpaid Basic Rent due on or prior to the Special Purchase Option Date (it being
understood and agreed that Lessee shall not be required to pay the portion, if
any, of such Basic Rent designated in Exhibit C hereto as payable in advance on
such Special Purchase Option Date, unless the same is attributable to accrued
interest on the Certificates) and (without duplication) any other Rent
(including Premium, if any, and Break Amount, if any, payable in respect of the
Certificates) which is due and payable through and including the date of
payment; provided, that, if no Lease Default (of the type specified in Section
14.1 or 14.5) or Lease Event of Default exists on the Special Purchase Option
Date and subject to the other conditions herein set forth, Lessee may elect, by
notice to Lessor given at least ten days prior to the Special Purchase Option
Date, to pay the Special Purchase Price in installments as Supplemental Rent,
secured as provided herein, in which case Lessee shall pay to Lessor, on each
EBO Installment Payment Date, the amount determined by multiplying Lessor's
Cost by the percentage set forth opposite such EBO Installment Payment Date in
Part II of Exhibit C.
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(c) In connection with any purchase pursuant to Section 18.2(b),
Lessee may, at its option, as part or all, as the case may be, of the
applicable purchase price, assume all of the rights and obligations of Lessor
under the Trust Indenture in respect of the Certificates (including, without
limitation, any scheduled payment of principal of or accrued interest on the
Certificates due and payable on such date of purchase but only to the extent
that any Basic Rent installment payable by Lessee on any such date of purchase
does not cover such scheduled payment of principal or accrued interest on the
Certificates and excluding any obligations or liabilities of Lessor in its
individual capacity incurred on or prior to such date of purchase, which
obligations and liabilities shall remain the sole responsibility of Lessor in
its individual capacity) in accordance with Section 7.03 of the Trust Indenture
and simultaneously shall pay to Lessor, in funds of the type specified in
Section 3.6, an amount equal to (i) the excess, if any, of the applicable
purchase price over an amount equal to the sum of the principal of, and accrued
and unpaid interest on, the Outstanding Certificates on such date of purchase,
after taking into account any payments of principal and interest made in
respect of the Outstanding Certificates on or before such date of purchase,
plus (ii) all unpaid Basic Rent due and owing by Lessee hereunder on or prior
to such date of purchase and (without duplication) any other Rent which is due
and payable through and including the date of payment (it being understood and
agreed that Lessee shall not be required to pay the portion, if any, of such
Basic Rent designated in Exhibit C hereto as payable in advance on such date of
purchase, unless the same is attributable to accrued interest on the
Certificates); provided, that, if no Lease Default (of the type specified in
Section 14.1 or 14.5) or Lease Event of Default exists on the Special Purchase
Option Date and subject to the other conditions herein set forth or referred to
in Section 8(aa) of the Participation Agreement, Lessee may elect, by notice to
Lessor concurrently with notice of its election to assume such obligations of
Lessor, to pay the amount of the excess calculated pursuant to clause (i) above
in installments as Supplemental Rent, in which case (I) Lessee shall pay to
Lessor on the first EBO Installment Payment Date, the excess, if any, of (x)
the amount determined by multiplying Lessor's Cost by the percentage set forth
opposite such EBO Installment Payment Date in Part II of Exhibit C hereto, over
(y) the principal amount of the Certificates outstanding on such date, and
shall pay to Lessor on each subsequent EBO Installment Payment Date the amount
determined by multiplying Lessor's Cost by the percentage set forth opposite
such EBO Installment Payment Date in Part II of Exhibit C hereto, and (II)
Section 8(aa) of the Participation Agreement shall apply.
(d) Upon full payment to Lessor of the applicable purchase price
for the Aircraft as set forth in this Section 18.2, or the portion thereof due
on the Special Purchase Option Date if Lessee shall have elected to pay the
Special Purchase Price in installments, together with the other amounts
specified above to be paid by Lessee concurrently with such purchase, Lessor
will Transfer to Lessee all of the Lessor's right, title and interest in and to
the Aircraft, this Lease will terminate and, if Lessee shall not have assumed
the rights and obligations of the Owner Trustee under the Trust Indenture in
respect of the Certificates as provided for above, Lessor will request the
Indenture Trustee to execute and deliver to Lessee an appropriate instrument
releasing the Airframe and Engines with respect to which title is transferred
from the lien of the Trust Indenture and releasing the Purchase Agreement, the
Purchase Agreement Assignment, the Engine Purchase Agreement and the Engine
Purchase Agreement Assignment
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from the assignment and pledge, if any, thereunder; provided, that if Lessee
elects to pay the Special Purchase Price in installments, but not to assume the
rights and obligations of Lessor under the Trust Indenture in respect of the
Certificates, as provided for above (and shall have paid in full the
installment thereof due on the Special Purchase Option Date), the following
provisions shall also be applicable (and, as a condition to Lessee's payment of
the Special Purchase Price in installments, the following clauses (a)-(f) shall
have been given effect in one or more amendments to the Operative Agreements,
in each case in form and substance reasonably satisfactory to Lessor): (a)
this Lease shall continue in full force and effect (except as hereinafter
provided) but shall constitute then and thereafter a lease intended for
security securing the payment of such installments (and any appropriate UCC
financing statements or amendments to UCC financing statements shall be filed
in order to indicate that this Lease is intended for security purposes), (b)
Lessor shall permit re-registration of the Aircraft in the name of Lessee or a
Sublessee on the Special Purchase Option Date (it being understood that in all
other respects the registration provisions of the Operative Agreements shall
remain fully applicable), (c) no Basic Rent shall be payable after the Special
Purchase Option Date, except to the extent theretofore accrued, (d) the
Stipulated Loss Value of the Aircraft determined at any time after the Special
Purchase Option Date shall be equal to the aggregate amount of the installments
of the Special Purchase Price which have not been paid at the time of such
determination, (e) the reference to Basic Rent in Section 14.1 shall be deemed
to refer to installments of the Special Purchase Price and (f) in the event of
the occurrence and continuance of a Lease Event of Default after the Special
Purchase Option Date, Lessor shall be entitled to accelerate the unpaid
installments and exercise all the remedies available under applicable law to a
secured creditor with respect thereto.
In connection with, and as a condition to, Lessee's election to pay
the Special Purchase Price in installments pursuant to Section 18.2, but not to
assume the rights and obligations of Lessor under the Trust Indenture in
respect of the Certificates, on the Special Purchase Option Date Lessee shall,
at its sole cost and expense, (a) deliver to Lessor and the Owner Participant
an opinion of Vinson & Elkins L.L.P. or other counsel selected by Lessee and
reasonably satisfactory to Lessor to the effect that this Lease (alone or in
conjunction with other instruments delivered on the Special Purchase Option
Date) creates a valid security interest in the Aircraft securing the payment of
such installments prior to any Liens other than Permitted Liens (except for
those described in Section 6(f)), (b) execute and deliver to Lessor and cause
to be duly filed and recorded such other and further instruments as Lessor may
reasonably request to establish and perfect such a security interest (subject
to no other Liens other than Permitted Liens (except for those described in
clause (f) of Section 6)) in the Aircraft securing the payment by Lessee to
Lessor of such installments and (c) provide to Lessor such other evidence as
Lessor may reasonably request to establish the due authorization and
consummation of the transactions contemplated by this Section 18.2; provided,
that in lieu of satisfying the conditions specified in the foregoing clauses
(a)-(c) of this paragraph, Lessee may deliver to Lessor in support of its
obligation to pay the installments of the Special Purchase Price due after the
Special Purchase Option Date, an irrevocable direct-pay letter of credit issued
by a Qualified Issuing Bank, in form and substance reasonably satisfactory to
Lessor and the Owner
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Participant and in an amount at any time equal to the aggregate amount of such
installments plus an amount equal to 20 days of interest thereon calculated at
the Past Due Rate.
Section 19. Successor Owner Trustee. Lessee agrees that in the
case of the appointment of any successor Owner Trustee pursuant to the terms of
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft for all purposes hereof without the necessity of any consent or
approval by Lessee (but such successor Owner Trustee shall qualify under the
terms of Section 8(b) of the Participation Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Trust Agreement, and such right may be exercised repeatedly as
long as this Lease shall be in effect.
Section 20. Right to Perform for Lessee. If Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor (subject
to the terms of the Trust Indenture) or Indenture Trustee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or
Indenture Trustee incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
Section 21. Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred, and be continuing, during the Term, Lessor will
not, through its own actions or inactions, interfere in the quiet enjoyment of
the Aircraft by Lessee or any Permitted Sublessee.
Section 22. Investment of Security Funds; Miscellaneous;
Amendment.
22.1 Investment of Security Funds. Subject always to the terms of
the Trust Indenture for so long as the Trust Indenture shall remain in effect,
any moneys required to be paid to or retained by Lessor which are not required
to be paid to Lessee pursuant to Section 10.6 or 11.4 solely because a Lease
Event of Default or Lease Default shall have occurred and be continuing, or
which are held by Lessor pending payment to Lessee pursuant to Section 11.4 or
which are required to be paid to Lessee pursuant to Section 10.3 or 11.4 after
completion of a replacement to be made pursuant to Section 10.1 or 10.2, shall,
until paid to Lessee as provided in Section 10 or 11 or applied as provided
herein or in the Trust Indenture or Trust Agreement, be invested by Lessor from
time to time as directed in writing by Lessee and at the expense and risk of
Lessee in the following securities (which shall mature within 91 days of the
date of purchase thereof): (a) direct obligations of the Government; (b)
obligations fully guaranteed by the Government; (c) open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any State thereof rated P-1 or its equivalent by Moody's Investors
Service and A-l or its equivalent by Standard & Poor's
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Rating Group, a division of McGraw-Hill, Inc.; or (d) certificates of deposit
issued by, or bankers' acceptances of, or time deposits or a deposit account
with (i) the Owner Trustee or Indenture Trustee (in their individual
capacities) or (ii) any bank, trust company or national banking association
incorporated or doing business under the laws of the United States of America
or any state thereof having a combined capital and surplus of at least
$100,000,000. There shall be promptly remitted to Lessee or its order any gain
(including interest received) realized as the result of any such investment
(net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) unless a Lease Event of Default or a Lease
Default (of the type described in Section 14.1 or 14.5) shall have occurred and
be continuing. Lessee will promptly pay to Lessor, on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other expenses, including Taxes, if any, incurred in connection
with such investment), such amount to be disposed of in accordance with the
terms of the Trust Indenture or the Trust Agreement.
22.2 Miscellaneous; Amendment. Lessee shall do, execute,
acknowledge and deliver, or shall cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances and assurances as Owner Trustee,
Indenture Trustee or any Participant shall reasonably require for accomplishing
the purposes of this Agreement and the other Operative Agreements. Any
provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. This Lease shall constitute an
agreement of lease, and nothing herein shall be construed as conveying to
Lessee any right, title or interest in or to the Aircraft, Airframe or Engines
except as a lessee only. The section and paragraph headings in this Lease and
the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN, AND EACH LEASE SUPPLEMENT AND
AMENDMENT HERETO IS INTENDED TO BE, DELIVERED IN THE STATE OF NEW YORK AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY
RESIDENTS THEREOF AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease and each Lease
Supplement and amendment hereto may be executed in several counterparts, each
of which shall be deemed an original, and all such counterparts shall
constitute one and the same instrument; provided, that no security interest in
Lessor's right, title and interest in and to this Agreement may be created
through the transfer or possession of any counterpart other than the
counterpart identified, for
SALE AND LEASE AGREEMENT [N397SW]
-62-
<PAGE> 69
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart on the cover hereof.
Section 23. Permitted Foreign Air Carriers. Lessor may, in the
exercise of its reasonable business judgment, by written notice to Lessee,
remove any foreign air carrier from Exhibit D and Lessee may, by written notice
to Lessor, request that any foreign air carrier be added to Exhibit D, subject
to Lessor's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no deletion of an airline from the
list of Permitted Foreign Air Carriers pursuant hereto shall (i) affect any
existing sublease or other agreement providing for transfer of possession of
the Aircraft, Airframe, any Engine or Part which was permitted hereunder at the
time entered into, or (ii) preclude any subsequent renewal or extension of such
sublease or other agreement to which the Permitted Foreign Air Carrier under a
sublease is entitled by the terms thereof as originally in effect.
SALE AND LEASE AGREEMENT [N397SW]
-63-
<PAGE> 70
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed and delivered as of the day and year first above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity except as expressly stated
herein, and otherwise solely as Owner Trustee
under the Trust Agreement
By: /s/ Pablo de la Canal
-------------------------------------------
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By: /s/ John D. Owen
-------------------------------------------
Treasurer
SALE AND LEASE AGREEMENT [N397SW]
-64-
<PAGE> 71
EXHIBIT A TO
LEASE AGREEMENT
SALE AND LEASE AGREEMENT SUPPLEMENT NO.
THIS SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____, dated
______________, _____ between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner Trustee under that certain
Trust Agreement, dated as of April 1, 1995 (the "Trust Agreement"), between the
Owner Participant named therein and such Bank ("Lessor"), and SOUTHWEST
AIRLINES CO., a Texas corporation ("Lessee"),
RECITALS.
A. On March 16, 1995 an AC Form 8050-2 Bill of Sale from
Manufacturer (as defined in the Sale and Lease Agreement hereinbelow referred
to) in favor of Lessee covering the Aircraft hereinbelow described was recorded
by the Federal Aviation Administration as Conveyance Number P01547;
B. Lessor and Lessee have heretofore entered into that certain
Sale and Lease Agreement dated as of April 1, 1995, as supplemented and amended
from time to time (herein called the "Lease Agreement" and the defined terms
therein being herein used with the same meaning), which Lease Agreement
provides in Section 2 for the execution of a Lease Supplement substantially in
the form hereof for the purpose of Lessee's selling to Lessor, and Lessor's
leasing back to Lessee, the Aircraft under the Lease Agreement as and when
delivered by Lessor to Lessee in accordance with the terms thereof; and
C. The Lease Agreement relates to the airframe and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation with the FAA on the date hereof as
one document.
______________________
All of the right, title and interest of Lessor in and to this Sale and
Lease Agreement Supplement has been assigned to and is subject to a security
interest in favor of Wilmington Trust Company, as Indenture Trustee. This Sale
and Lease Agreement Supplement has been executed in several counterparts. No
security interest in Lessor's right, title and interest in and to this Sale and
Lease Agreement Supplement may be created through the transfer or possession of
any counterpart other than the counterpart identified, for purposes of
perfection of a security interest in chattel paper (as such term is defined in
the UCC), as the original counterpart. [This is not the original counterpart.]
A-1
<PAGE> 72
In consideration of the premises and other good and sufficient
consideration, and pursuant to Section 2 of the Lease Agreement, Lessor and
Lessee hereby agree as follows:
1. Lessee hereby delivers and sells to Lessor and Lessor hereby
accepts and purchases from Lessee and in turn delivers and leases back to
Lessee, and Lessee hereby accepts and leases back from Lessor, under the Lease
Agreement, as herein supplemented, the following-described Boeing Model 737-3H4
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date
hereof consists of the following:
Airframe: U.S Registration Number N397SW and Manufacturer's Serial No. 27691;
and
Engines: Two CFM International Model CFM56-3-B1 Engines installed
thereon bearing Engine Manufacturer's Serial Numbers as follows: 859142 and
859144.
Each of the Engines described above has 750 or more rated takeoff
horsepower or the equivalent of such horsepower.
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms to Lessor that the Delivered Aircraft
has been or will be duly marked in accordance with the terms of Section 7.l.2
of the Lease and that Lessee has accepted the Delivered Aircraft for all
purposes hereof and of the Lease Agreement, including its being airworthy, in
accordance with specifications, in good working order and repair and without
defect or inherent vice in title, condition, design, operation or fitness for
use, whether or not discoverable by Lessee as of the date hereof, and free and
clear of all Liens except Permitted Liens; provided, however, that this Section
3 is without prejudice to the rights of Lessee or Lessor against Manufacturer
or any supplier of the Aircraft, Engines or any Part.
4. Lessor's Cost for the Delivered Aircraft is $32,000,000.
5. All the provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement, on and as of the date of
this Lease Supplement, to the same extent as if fully set forth herein.
6. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW
YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
A-2
<PAGE> 73
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered as of the date and year first
above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By
-------------------------------------------
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By
-------------------------------------------
Treasurer
A-3
<PAGE> 74
EXHIBIT B-1 TO
LEASE AGREEMENT
STIPULATED LOSS VALUE SCHEDULE
<TABLE>
<CAPTION>
SLV
Determination Stipulated Loss Value
Date (% of Lessor's Cost)
------------------ ---------------------
<S> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
_________________________
* NOTE: If the event giving rise to an obligation to pay any Stipulated
Loss Value occurs and the actual date of the loss of tax benefits
resulting from such event shall be earlier or later than the date
assumed in calculating the Federal income tax consequences reflected
in the applicable Stipulated Loss Value, such Stipulated Loss Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-1-1
<PAGE> 75
EXHIBIT B-2 TO
LEASE AGREEMENT
TERMINATION VALUE SCHEDULE
<TABLE>
<CAPTION>
TV
Determination Termination Value
Date (% of Lessor's Cost)
-------------- --------------------
<S> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
_________________________
* NOTE: If the event giving rise to an obligation to pay any
Termination Value occurs and the actual date of the loss of tax
benefits resulting from such event shall be earlier or later than the
date assumed in calculating the Federal income tax consequences
reflected in the applicable Termination Value, such Termination Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-2-1
<PAGE> 76
EXHIBIT C TO
LEASE AGREEMENT
PART I
RENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Percentage of
Lessor's Cost
----------------------------------------------------------------------
Rent Payment
Date Total Advance Arrears
-------------- ----- ------- -------
<S> <C> <C> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
C-1
<PAGE> 77
EXHIBIT C TO
LEASE AGREEMENT
PART II
EBO INSTALLMENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
EBO Installment Percentage of
Payment Date Lessor's Cost
---------------- ---------------
<S> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
C-2
<PAGE> 78
EXHIBIT D TO
LEASE AGREEMENT
PERMITTED FOREIGN AIR CARRIERS
<TABLE>
<S> <C>
Aer Lingus Icelandair
Aerolineas Argentinas Interflug
Air Afrique Japan Air Lines
Air Canada Japan Air Lines System
Air Europa Japan TransOcean Air
Air France JAT
Air Inter KLM
Air Jamaica Korean Air
Air New Zealand LAN Chile
Air UK Lauda Air
Alitalia Lufthansa
All Nippon Airways Luxair
ALM Maersk
Ansett Airlines of Australia Malaysian Airline System
Australian Airlines Martinair
Austrian Airlines Monarch Airlines
AVENSA Nordair
Bahamasair Olympic Airlines
Braathens S.A.F.E. Philippine Airlines
Britannia QANTAS Airways
British Airways Quebecair
British Midland Ryanair
BWIA Sabena
CAAC SAS
Canadian Airlines International Saudi Arabian Airlines
Cathay Pacific Airways Singapore Airlines
Cayman Airways Swissair
China Airlines TAP
Condor Flugdienst Thai Airways
DanAir Trans Australia Airlines
Egyptair Transavia Holland
El Al Transbrasil
Finnair VARIG
Garuda VIASA
Hopag Lloyd VIVA Air
Iberia
</TABLE>
D-1
<PAGE> 79
EXHIBIT E TO
LEASE AGREEMENT
ASSUMED INTEREST AMOUNTS
<TABLE>
<CAPTION>
Rent Payment
Date or Assumed Interest
Deferred Equity Date Amount
-------------------- ----------------
<S> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
E-1
<PAGE> 80
APPENDIX A TO
LEASE AGREEMENT
CERTAIN RETURN CONDITIONS
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of its return of the Aircraft pursuant to Section 5.3, the
Airframe shall have at least one year remaining until the next scheduled "D"
check (which term, as used in this paragraph, shall refer to a "full D" check
accomplished at ten year intervals, rather than to any "quarter D" or "half D"
check which may be scheduled under the Maintenance Program then used by Lessee
or any Permitted Sublessee, as the case may be).
* * *
APP-1
<PAGE> 1
EXHIBIT 4.18
FIRST AMENDMENT TO
SALE AND LEASE AGREEMENT
dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
_______________________
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N397SW)
All right, title and interest of Lessor in and to the Sale and Lease
Agreement, as amended, and the Aircraft (including the Engines), has been
assigned to and is subject to a security interest in favor of WILMINGTON TRUST
COMPANY, as Indenture Trustee. This First Amendment to Sale and Lease
Agreement has been executed in several counterparts. No security interest in
Lessor's right, title and interest in and to this First Amendment to Sale and
Lease Agreement may be created through the transfer or possession of any
counterpart other than the counterpart identified, for purposes of perfection
of a security interest in chattel paper (as such term is defined in the UCC),
as the original counterpart. This is not the original counterpart.
<PAGE> 2
THIS FIRST AMENDMENT TO SALE AND LEASE AGREEMENT, dated as of October
1, 1995 (this "Amendment"), between SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee under that certain Trust Agreement establishing the
Southwest Airlines 1995 Trust N397SW and dated as of April 1, 1995 ("Lessor"),
and SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), amends that certain
related Sale and Lease Agreement dated as of April 1, 1995 (the "Original
Lease") between Lessee and Lessor (the Original Lease, as supplemented by Sale
and Lease Agreement Supplement No. 1 thereto relating to the Aircraft referred
to below dated April 3, 1995 ("Lease Supplement No. 1") between Lessor and
Lessee, being referred to herein as the "Lease"),
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor, the
Aircraft, which consists of the following components: (i) Airframe: One (1)
Boeing 737-3H4, FAA Registration No. N397SW, Manufacturer's serial no. 27691;
and (ii) Engines: Two (2) CFM International Model CFM56-3-B1 Engines bearing,
respectively, Manufacturer's serial numbers 859142 and 859144; and
WHEREAS, a counterpart of the Original Lease, to which was attached
and made a part thereof a counterpart of Lease Supplement No. 1, was recorded
by the Federal Aviation Administration on April 5, 1995 and assigned Conveyance
No. JJ13608; and
WHEREAS, the Indenture Trustee received the Deferred Equity Amount in
full on the Deferred Equity Date from the Owner Participant; and
WHEREAS, in connection with the refinancing of the Certificates
pursuant to Section 18 of the Participation Agreement, the parties wish to
recalculate Basic Rent, Stipulated Loss Value percentages, Termination Value
percentages and Special Purchase Price; and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to Exhibits B-1, B-2, C and E. Exhibits
B-1, B-2 and C to the Lease are hereby deleted in their entirety and replaced
with Exhibits B-1, B-2 and C, respectively, to this Amendment. Exhibit E to
the Lease is hereby deleted in its entirety.
Section 2. Amendments to Section 1. Section 1 of the Lease is
hereby amended in the following manner:
SALE AND LEASE AMENDMENT [N397SW]
-1-
<PAGE> 3
(a) The following defined terms are hereby added to
Section 1 in alphabetical order:
"`First Amendment to Sale and Lease Agreement' means that certain
First Amendment to Sale and Lease Agreement dated as of October 1, 1995 by and
between Lessee and Lessor relating to the Aircraft."
"`First Amendment to Participation Agreement' means that certain First
Amendment to Participation Agreement dated as of October 1, 1995 by and among
Lessee, Owner Participant, Owner Trustee, Indenture Trustee and Pass Through
Trustee relating to the Aircraft."
"`First Amendment to Trust Indenture' means that certain First
Amendment to Trust Indenture and Security Agreement, dated as of October 1,
1995 between Owner Trustee and Indenture Trustee relating to the Aircraft."
"`Pass Through Certificates' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trust Agreements' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trustee' is defined in Section 1.01(b) of the Trust
Indenture."
"`Pass Through Trust Supplement' means each of the four separate Trust
Supplements Nos. 1995-A1, 1995-A2, 1995- A3 and 1995-A4 dated as of October 1,
1995 between Lessee and Pass Through Trustee."
"`Refinancing Agreement' means that certain Refinancing Agreement
relating to the Aircraft dated as of October 1, 1995 by and among Lessee, Owner
Participant, Original Loan Participant, Owner Trustee, Indenture Trustee and
Pass Through Trustee."
(b) The definition of "Indemnified Parties" is hereby
amended to be and read in its entirety as follows:
"`Indemnified Parties' means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N397SW
Certificate (including without limitation the Pass Through Trustee), (v) the
Estate and the Trust Indenture Estate, (vi) the Original Loan Participant,
(vii) the respective Affiliates, successors and assigns of the foregoing and
(viii) the respective directors, officers, employees, agents, partners and
servants of the foregoing."
(c) The definition of "Lease", "this Lease", "this
Agreement", "hereby", "herein", "hereof", and "hereunder" is hereby amended to
be and read in its entirety as follows:
SALE AND LEASE AMENDMENT [N397SW]
-2-
<PAGE> 4
"`Lease', `this Lease', `this Agreement', `hereby', `herein',
`hereof', `hereunder' or other words mean this Sale and Lease Agreement as
amended by the First Amendment to Sale and Lease Agreement, and as supplemented
by one or more Lease Supplements and as may be further amended from time to
time."
(d) The definition of "Operative Agreements" is hereby
amended to be and read in its entirety as follows:
"`Operative Agreements' means this Lease, each Lease Supplement, the
Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement,
the Manufacturer's Consent and the Refinancing Agreement, including any
consents included in or attached to any thereof."
(e) The definition of "Participant" is hereby amended to
be and read in its entirety as follows:
"`Participant' means Owner Participant and its successors and
permitted assigns."
(f) The definition of "Participation Agreement" is hereby
amended to be and read in its entirety as follows:
"`Participation Agreement' means the Participation Agreement relating
to the Aircraft, dated as of April 1, 1995, among Lessee, Owner Participant,
Original Loan Participant, Lessor and Indenture Trustee as amended by the First
Amendment to Participation Agreement and as may be further amended from time to
time."
(g) The definition of "Special Purchase Price After-Tax
Yield" means the after-tax economic yield, total aggregate after-tax cash flow
and general pattern of book earnings expected by the Owner Participant with
respect to the Aircraft through the Special Purchase Option Date if the Special
Purchase Option were exercised and the Special Purchase Option Price paid in
installments, utilizing the multiple investment sinking fund method of analysis
and the same assumptions as used by Owner Participant (including the Tax
Assumptions set forth in Section 2 of the Tax Indemnity Agreement) in its
economic analysis of the transaction as of the Delivery Date.
(h) The definition of "Stipulated Loss Value" is hereby
amended to be and read in its entirety as follows:
"`Stipulated Loss Value' means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment. Stipulated Loss
Value may
SALE AND LEASE AMENDMENT [N397SW]
-3-
<PAGE> 5
be subject to adjustment in accordance with Section 3.7 and Section 18.2(d) of
this Agreement."
(i) The definition of "Termination Value" is hereby
amended to be and read in its entirety as follows:
"`Termination Value' means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined. Termination Value may be subject to adjustment in accordance with
Section 3.7 of this Agreement."
(j) The definition of "Trust Indenture" is hereby amended
to be and read in its entirety as follows:
"`Trust Indenture' means the Trust Indenture and Security Agreement,
dated as of April 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft, as supplemented by the Trust Agreement and Trust
Indenture and Security Agreement Supplement, dated April 3, 1995, and as
amended by the First Amendment to Trust Indenture and as may be further amended
or supplemented from time to time."
(k) The definitions of "Advance," "Assumed Interest
Rate," "Assumed Interest Amount" and "Rent Differential Amount" are hereby
deleted in their entirety.
Section 3. Amendments to Section 3. Section 3 of the Lease is
hereby amended in the following manner:
(a) Section 3.3 is hereby amended to be and read in its
entirety as follows:
"3.3 Basic Rent. No Basic Rent shall be paid during the
Interim Lease Term. Lessee hereby agrees to pay to Lessor Basic Rent for the
Base Lease Term with respect to the Aircraft on each Rent Payment Date set
forth in Part I of Exhibit C, in each case in an amount equal to the percentage
of Lessor's Cost of the Aircraft set forth in Part I of Exhibit C opposite such
Rent Payment Date, subject to the terms of the next succeeding paragraph of
this Section 3.3. Each installment (or portion of an installment) of Basic
Rent under the heading `Advance' in Part I of Exhibit C payable on a Rent
Payment Date shall relate to the respective Lease Period immediately following
such Rent Payment Date, and each installment (or portion of an installment) of
Basic Rent under the heading `Arrears' in Part I of Exhibit C payable on a Rent
Payment Date shall relate to the respective Lease Period immediately preceding
such Rent Payment Date.
"Anything contained in the Participation Agreement or this
Lease or any other Operative Agreement to the contrary notwithstanding, (a)
each installment of Basic Rent payable under this Lease, whether or not
adjusted in accordance with the provisions of Section 3.7 hereof, shall be,
under any circumstances and in any event, in an amount at least sufficient to
pay in full, on the Rent Payment Date on which such installment is due and
payable, any scheduled payments then required to be made on account of the
principal of
SALE AND LEASE AMENDMENT [N397SW]
-4-
<PAGE> 6
and interest on the Certificates, and (b) Stipulated Loss Value, Termination
Value and, unless Lessee shall have assumed the Certificates pursuant to
Section 18.2(c) hereof, the Special Purchase Price and the initial installment
of the Special Purchase Price if paid in installments, in each case whether or
not adjusted in accordance with the provisions of Section 3.7, as of the date
of determination thereof, together with any amount of Basic Rent required to be
paid on such date and all other amounts payable on such date, shall equal under
any circumstances and in any event, an amount at least sufficient to pay in
full any payments then required to be made on account of the principal of and
interest (including, without limitation any interest on overdue principal and,
to the extent permitted by applicable law, interest), and Premium, if any, on
the Certificates and all amounts which would be payable prior thereto or on a
parity therewith if Section 3.03 of the Trust Indenture were applicable at the
time of such payment."
(b) Section 3.4 of the Lease is hereby amended to be and
read in its entirety as follows:
"3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Premium (if any) payable on the Certificates, amounts due pursuant to
Section 15.05 of the Trust Indenture and each other amount required to be paid
(other than principal and interest on the Certificates) by Lessor as Owner
Trustee under the Trust Indenture, on the same date that such amounts are due
under the Trust Indenture, and as provided in Section 3.6."
(c) Section 3.7.1 of the Lease is hereby amended to be
and read in its entirety as follows:
"3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a) of the
Participation Agreement paid by Owner Participant in connection with the
closing of this transaction on the Delivery Date are equal to an amount which
is other than 0.354142% of Lessor's Cost, (b) the Transaction Costs referred to
in Section 16(a) of the Participation Agreement paid by Owner Participant in
connection with the initial refinancing or refunding of the Certificates
pursuant to Section 18 of the Participation Agreement are equal to an amount
which is other than 0.623076% of Lessor's Cost, (c) a refinancing or refunding
of the Certificates pursuant to Section 17 of the Participation Agreement
occurs, or (d) any recalculation of Basic Rent, Stipulated Loss Value,
Termination Value and the Special Purchase Price is required by the terms of
the Tax Indemnity Agreement, then in each case, the Basic Rent percentages set
forth in Exhibit C, the Stipulated Loss Value percentages set forth in Exhibit
B-1 and the Termination Value percentages set forth in Exhibit B-2 shall be
recalculated by Owner Participant (i) in the case of a recalculation pursuant
to clause (a) or (b), on or prior to October 4, 1996, (ii) in the case of a
recalculation pursuant to clause (c), prior to the relevant Refinancing Date or
(iii) in the case of a recalculation pursuant to clause (d), prior to the Rent
Payment Date next following (by at least five Business Days) the event
described in clause (d), in each case in order to: (A) maintain Net Economic
Return and (B) minimize the Net Present Value of Rents to the extent possible
consistent with clause (A). In addition, in the event of an adjustment
pursuant to this Section 3.7, the
SALE AND LEASE AMENDMENT [N397SW]
-5-
<PAGE> 7
Special Purchase Price (including any installments thereof) shall be
recalculated in accordance with the terms of Section 18.2(b)."
(d) Section 3.8 is hereby deleted in its entirety, and all
provisions of the Lease (including, without limitation, the proviso to the
second sentence of Section 17) and of any other Operative Agreement referring
to Section 3.8 shall have no further force or effect.
Section 4. Amendment to Section 7. Section 7.3.3 of the Lease
is hereby amended to delete all references therein to the Original Loan
Participant.
Section 5. Amendment to Section 10. Section 10.1.3 of the Lease
is hereby amended to be and read in its entirety as follows:
"10.1.3 Payment of Stipulated Loss Value and Rent. On any Business
Day designated by Lessee upon 30 days' irrevocable notice to Lessor and the
Indenture Trustee, but in no event later than the Business Day next preceding
the earliest of (i) the 180th day following the date of the occurrence of such
Event of Loss, (ii) the second Business Day next succeeding the last day of the
Term or (iii) the later of 15 days following receipt of insurance proceeds with
respect to such occurrence or the date Lessee shall have made or shall have
deemed to have made its election under Section 10.1.1 to comply with Section
10.1.3, Lessee shall pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, (A) the Stipulated Loss Value for the Aircraft,
determined as of the date of payment (as described in the definition of
Stipulated Loss Value), (B) all unpaid Basic Rent due on or prior to the SLV
Determination Date with reference to which the Stipulated Loss Value is
computed (it being understood and agreed that Lessee shall not be required to
pay the portion, if any, of such Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date, unless attributable to
accrued interest on the Certificates), and (C) (without duplication) any other
Rent which is due and payable through and including the date of payment."
Section 6. Amendments to Section 11.
(a) Section 11.5 of the Lease is hereby amended to delete
all references therein to the Original Loan Participant.
(b) Section 11.6 of the Lease is hereby amended to be and
read in its entirety as follows:
"11.6 Lessor's Right to Maintain Insurance. In the event that Lessee
shall fail to maintain or cause to be maintained insurance as herein provided,
Lessor, Indenture Trustee, Owner Participant or, so long as Pass Through
Trustee is a Holder, Pass Through Trustee, may at its option (but shall not be
obligated to) provide such insurance and in such event, Lessee shall, upon
demand, reimburse such Person, as Supplemental Rent, for the cost thereof. No
such payment, performance or compliance shall be deemed to cure any Lease
Default hereunder or otherwise relieve Lessee of its obligations with respect
thereto."
SALE AND LEASE AMENDMENT [N397SW]
-6-
<PAGE> 8
Section 7. Amendment to Section 18. Section 18.2(b) of the
Lease is hereby amended by changing the Special Purchase Price specified
therein to 53.12877977% of Lessor's Cost.
Section 8. Ratification. Except as amended hereby, the Lease
continues and shall remain in full force and effect in all respects.
Section 9. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same instrument.
SALE AND LEASE AMENDMENT [N397SW]
-7-
<PAGE> 9
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Sale and Lease Agreement to be duly delivered in the State of New
York and executed as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By:/s/ Philip G. Kane, Jr.
Title: Vice President
SOUTHWEST AIRLINES CO., Lessee
By:/s/ John D. Owen
Treasurer
Approved and Consented to:
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By:/s/ David A. Vanaskey, Jr.
Title: Senior Financial Services Officer
SALE AND LEASE AMENDMENT [N397SW]
-8-
<PAGE> 10
EXHIBIT B-1 TO
SALE AND LEASE AGREEMENT
Stipulated Loss Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N397SW]
B-1
<PAGE> 11
EXHIBIT B-2 TO
SALE AND LEASE AGREEMENT
Termination Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N397SW]
B-2
<PAGE> 12
EXHIBIT C TO
SALE AND LEASE AGREEMENT
Part I
Rent Payment Schedule
Part II
EBO Installment Payment Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N397SW]
C-1
<PAGE> 13
SCHEDULE I
Names and Addresses
Lessee: Indenture Trustee and Pass Through
Southwest Airlines Co. Trustee and Holder:
2702 Love Field Drive Wilmington Trust Company
P.O. Box 36611 Rodney Square North
Dallas, Texas 75235-1611 1100 North Market Street
Attn: Treasurer Wilmington, Delaware 19890-0001
Telecopy: (214) 904-4022 Attn: Corporate Trust Administration
Telecopy: (302) 651-8882
Payment Instructions:
Owner Participant: Wilmington Trust Company
Ford Motor Credit Company Wilmington, Delaware
c/o USL Capital Corporation ABA No. 031100092
730 Front Street, Sixth Floor For the account of Southwest Airlines 1995-1
San Francisco, California 94111 Account No. 34522-0
Attn: Portfolio Management, Reference: N397SW
M.S. 610 Attn: David A. Vanaskey
Telephone: (415) 627-9345 Corporate Trust Administration
Telecopy: (415) 627-9241
Payment Instructions:
Citibank, N.A.
New York, New York
ABA No. 021000089
For the account of Ford Motor
Credit Company
Account Name: USL/FMCC DFO Wire
Account
Account No. 4060-1687
Reference: T&IF Southwest Airlines
1995 Transaction
Owner Trustee:
Shawmut Bank Connecticut, National
Association
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust Administration
Telecopy: (203) 240-7920
PARTICIPATION AGREEMENT [N397SW]
S-1
<PAGE> 1
EXHIBIT 4.19
________________________________________________________________________________
TRUST INDENTURE
AND SECURITY AGREEMENT
dated as of July 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly
set forth herein and otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N602SW
________________________________________________________________________________
Southwest Airlines Co.
Series SWA 1995 Trust N602SW-I and N602SW Certificates
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2
THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.01. Certificates; Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05. Holder Lists; Ownership of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 16
Section 2.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.08. Payment on Certificates; Defaulted Principal and Interest . . . . . . . . . . . . . . . . 16
Section 2.09. Payment from Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.10. Execution, Delivery and Dating of Certificates upon Issuance . . . . . . . . . . . . . . 19
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE . . . . . . . . . . . . . . . . . . . . 19
Section 3.01. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.02. Payment in Case of Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.03. Application of Rent When No Indenture Event of Default Is Continuing . . . . .. . . . . . 20
Section 3.04. Application of Certain Payments in Case of Requisition or Event of Loss . . . . . . . . . 20
Section 3.05. Payments During Continuance of Indenture Event of Default . . . . . . . . . . . . . . . . 21
Section 3.06. Payments for Which Application Is Provided in Other Documents . . . . . . . . . . . . . . 22
Section 3.07. Payments for Which No Application Is Otherwise Provided . . . . . . . . . . . . . . . . . 22
Section 3.08. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4
COVENANTS OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 23
Section 4.01. Covenants of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.02. Covenants of Shawmut Bank Connecticut, National Association . . . . . . . . . . . . . . . 24
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.01. Disposition, Substitution and Release of Property Included in the Indenture Estate
During Continuation of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.02. Certificates in Respect of Replacement Aircraft and Engines . . . . . . . . . . . . . . . 26
ARTICLE 6
REDEMPTION OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . 26
Section 6.01. Redemption of Certificates upon Certain Events . . . . . . . . . . . . . . . . . . . . . 26
Section 6.02. Redemption or Purchase of Certificates Upon Certain Indenture Events of Default . . . . . 27
Section 6.03. Notice of Redemption to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.04. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.05. Certificates Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7
MATTERS CONCERNING THE COMPANY . . . . . . . . . . . . . . . . . . . . 29
Section 7.01. Repayment of Monies for Certificate Payments Held by the Indenture Trustee . . . . . . . 29
Section 7.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.03. Assumption of Obligations of Owner Trustee by the Company . . . . . . . . . . . . . . . . 29
ARTICLE 8
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.01. Indenture Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.02. Acceleration; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.03. Other Remedies Available to Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.04. Waiver of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.05. Waiver of Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.06. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.07. Limitation on Suits by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.08. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.09. Indenture Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 9
INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent; Investments . . . . . . . . . . 42
Section 9.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.06. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.07. Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.08. Successor Indenture Trustee, Agents by Merger, Etc. . . . . . . . . . . . . . . . . . . . 45
Section 9.09. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.10. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.11. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.12. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.13. Certain Rights of Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . . . 46
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 47
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance; Termination of Obligations . . . . . 47
Section 10.02. Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.03. Monies to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.04. Monies to Be Returned to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.05. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 11
AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.01. Amendments to this Agreement Without Consent of Holders . . . . . . . . . . . . . . . . . 50
Section 11.02. Amendments to this Agreement with Consent of Holders . . . . . . . . . . . . . . . . . . 51
Section 11.03. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.04. Notation on or Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.05. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.06. Amendments, Waivers, Etc. of Other Operative Agreements . . . . . . . . . . . . . . . . . 52
Section 11.07. Trust Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.03. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.04. Rules by Indenture Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.05. Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.06. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.07. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.09. Applicability Only to Original Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 12.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE . . . . . . . . . . . . . . . . 57
Section 13.01. Actions to Be Taken upon Termination of Lease . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE] . . . . . . . . . . . . . . . . . . . 58
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N602SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N602SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N602SW-I
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 15.01. Conditions Precedent to Issuance of Series SWA 1995 Trust N602SW Certificates . . . . . . 58
Section 15.02. Payment upon Issuance of Series SWA 1995 Trust N602SW Certificates . . . . . . . . . . . 59
Section 15.03. Special Provision Governing Refinancing of the Series SWA 1995 Trust N602SW-I
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 15.04. Special Provision for Payments in Respect of the Series SWA 1995 Trust N602SW-I
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 15.05. Increased Costs, Break Amount, Additional Interest, Taxes, Etc . . . . . . . . . . . . . 60
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
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<PAGE> 6
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A - Form of Series SWA 1995 Trust N602SW-I Certificate
Exhibit A-1 - Form of Series SWA 1995 Trust N602SW Installment Certificates
Exhibit A-2 - Form of Series SWA 1995 Trust N602SW Serial Certificates
Exhibit B - Maturity Dates, Principal Amounts and Interest Rates on Series SWA 1995 Trust N602SW
Certificates
Exhibit B-1 - Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 - Issuance of Series SWA 1995 Trust N602SW Certificates
Exhibit C - [FORM OF] Trust Agreement and Trust Indenture and Security Agreement Supplement
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-v-
<PAGE> 7
TRUST INDENTURE AND SECURITY AGREEMENT
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of July
1, 1995, is between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association organized under the laws of the United States, in its
individual capacity only as expressly provided herein and otherwise solely as
Owner Trustee under the Trust Agreement (capitalized terms used herein having
the respective meanings specified therefor in Article 1), and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as Indenture Trustee hereunder.
W I T N E S S E T H:
WHEREAS, the Owner Participant and the Owner Trustee in its
individual capacity have entered into the Trust Agreement whereby, among other
things, (i) the Owner Trustee has established a certain trust for the use and
benefit of the Owner Participant, subject, however, to the Indenture Estate
created pursuant hereto for the use and benefit of, and with the priority of
payment to, the holders of the Certificates issued hereunder, and (ii) the
Owner Trustee has been authorized and directed to execute and deliver this
Agreement;
WHEREAS, the parties desire by this Agreement, among other
things, (i) to provide for the issuance by the Owner Trustee of the Series SWA
1995 Trust N602SW-I Certificates and for the potential issuance by the Owner
Trustee of the Series SWA 1995 Trust N602SW Certificates in respect of the
refinancing and redemption of the Series SWA 1995 Trust N602SW-I Certificates
and (ii) to provide for the assignment, mortgage and pledge by the Owner
Trustee to the Indenture Trustee, as part of the Indenture Estate hereunder,
among other things, of certain of the Owner Trustee's right, title and interest
in and to the Aircraft and the Operative Agreements and certain payments and
other amounts received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's obligations to
the Indenture Trustee, for the ratable benefit and security of the Holders; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner Trustee and the Indenture
Trustee, for the uses and purposes herein set forth, in accordance with its
terms, have been done and performed and have happened;
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
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<PAGE> 8
GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND SECURITY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal of, Premium, if
any, and interest on, Break Amount, if any, and all other amounts due with
respect to, all Certificates from time to time Outstanding and all other
amounts due to the Holders hereunder and under the Participation Agreement and
the performance and observance by each of the Company and the Owner Trustee of
all the agreements, covenants and provisions contained herein and in the
Operative Agreements to which it is a party, for the benefit of Indenture
Trustee and the Holders, and for the uses and purposes hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of the sum of $1 paid to the
Owner Trustee by the Indenture Trustee at or before the delivery hereof, the
receipt whereof is hereby acknowledged, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time, a
security interest in and mortgage lien on all estate, right, title and interest
of the Owner Trustee in, to and under the following described property, rights,
interests and privileges, other than Excluded Payments (which collectively,
including all property hereafter specifically subjected to the lien of this
Agreement by any instrument supplemental hereto, but excluding the Excluded
Payments, are herein called the "Indenture Estate"):
(1) the Aircraft (including the Airframe and the
Engines originally installed thereon on the Delivery Date), and all
replacements thereof and substitutions therefor in which the Owner
Trustee shall from time to time acquire an interest in accordance with
the Lease, as more particularly described in the Trust Supplement and
the Lease Supplement executed and delivered with respect to the
Aircraft or any such replacements or substitutions therefor, as
provided in this Agreement, and all Records maintained with respect to
the foregoing property;
(2) the Lease and all Rent thereunder, including,
without limitation, all amounts of Basic Rent, Supplemental Rent,
payments of any kind required to be made by the Company thereunder
(including the purchase price for the Aircraft pursuant to Section
18.2 of the Lease) and any sales proceeds of the Aircraft sold
pursuant to Section 9 of the Lease or otherwise; the Purchase
Agreement (to the extent assigned by the Purchase Agreement
Assignment); the Purchase Agreement Assignment; all subleases of the
Airframe and the Engines and all rent thereunder to the extent
assigned to the Owner Trustee by Lessee; the Bills of Sale; the
Participation Agreement; and the Manufacturer's Consent; including,
without limitation, in respect of each of the foregoing documents and
instruments, all rights of the Owner Trustee to receive any payments
or other amounts or to exercise any election or option or to make any
decision or determination or to give or receive any notice, consent,
waiver or approval or to take any other action under or in respect of
any such document or to accept surrender or redelivery of the Aircraft
or any part thereof, as well as all the rights, powers and remedies on
the part of the Owner Trustee, whether acting under any such document
or by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default;
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-2-
<PAGE> 9
(3) all rents, issues, profits, revenues and
other income of the property subjected or required to be subjected to
the Lien of this Agreement;
(4) all requisition proceeds with respect to the
Aircraft or any part thereof and all insurance proceeds with respect
to the Aircraft or any part thereof;
(5) all moneys and securities now or hereafter
paid or deposited or required to be paid or deposited to or with the
Indenture Trustee by or for the account of the Owner Trustee pursuant
to any term of any Operative Agreement and held or required to be held
by the Indenture Trustee hereunder; and
(6) all proceeds of the foregoing.
On the Delivery Date the Owner Trustee shall deliver to the
Indenture Trustee an executed chattel paper original counterpart of each of the
Lease and the Lease Supplement covering the Aircraft, together with executed
copies of the Trust Agreement and each of the other Indenture Documents (other
than the Purchase Agreement, the Participation Agreement and the FAA bills of
sale). All property referred to in this Granting Clause, whenever acquired by
the Owner Trustee, shall secure all obligations under and with respect to the
Certificates at any time Outstanding. Any and all properties referred to in
this Granting Clause which are hereafter acquired by the Owner Trustee, shall,
without further conveyance, assignment or act by the Owner Trustee or the
Indenture Trustee thereby become and be subject to the security interest hereby
granted as fully and completely as though specifically described herein.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Indenture Trustee and the Holders from time to
time, without any priority of any one Certificate over any other, and for the
uses and purposes and subject to the terms and provisions set forth in this
Agreement.
The Owner Trustee agrees that this Agreement is intended to
and shall create and grant a security interest in the Aircraft to the Indenture
Trustee, which security interest shall attach on the Delivery Date. The
security interest created by this Agreement and granted to the Indenture
Trustee hereunder in the Indenture Estate other than in the Aircraft shall
attach in the case of each other item of property included in the Indenture
Estate upon the delivery thereof or upon the Owner Trustee's acquiring rights
in such property.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Agreements to which it is a party, to perform all of the
obligations assumed by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Indenture Trustee and the Holders
shall have no obligation or liability under any of the Operative Agreements to
which the Owner Trustee is a party by reason of or arising out of the
assignment hereunder, nor shall the Indenture Trustee or the Holders be
required or obligated in any manner to perform or fulfill any obligations of
the Owner Trustee under any of
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the Operative Agreements to which the Owner Trustee is a party, or, except as
herein expressly provided, to make any payment, or to make any inquiry as to
the nature or sufficiency of any payment received by it, or present or file any
claim, or take any action to collect or enforce the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
The Owner Trustee does hereby constitute the Indenture Trustee
the true and lawful attorney of the Owner Trustee, irrevocably, with full power
(in the name of the Owner Trustee or otherwise) to ask, require, demand,
receive and, to the extent permitted by Article 8 hereof (if an Event of
Default shall have occurred and be continuing), give acquittance for any and
all moneys and claims for moneys due and to become due to the Owner Trustee
(other than Excluded Payments) under or arising out of any Indenture Document
and all other property which now or hereafter constitutes part of the Indenture
Estate, to endorse any checks or other instruments or orders in connection
therewith and, to file any claims or take any action or institute any
proceedings which the Indenture Trustee may deem to be necessary or advisable
in the premises. The Owner Trustee has directed the Company to make all
payments of Rent (other than Excluded Payments) payable to the Owner Trustee by
the Company and all other amounts which are required to be paid to or deposited
with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee
at such address as the Indenture Trustee shall specify, for application as
provided in this Agreement. The Owner Trustee agrees that promptly on receipt
thereof, it will transfer to the Indenture Trustee any and all moneys from time
to time received by it constituting part of the Indenture Estate, for
distribution by the Indenture Trustee pursuant to this Agreement, except that
the Owner Trustee shall accept for distribution pursuant to the Trust Agreement
any amounts distributed to it by the Indenture Trustee as expressly provided in
this Agreement and any Excluded Payments.
The Owner Trustee agrees that at any time and from time to
time, upon the written request of the Indenture Trustee, the Owner Trustee will
promptly and duly execute and deliver or cause to be duly executed and
delivered any and all such further instruments and documents as the Indenture
Trustee may reasonably deem desirable in obtaining the full benefits of the
assignment hereunder and of the rights and powers herein granted.
The Owner Trustee does hereby warrant and represent that it
has not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of its
right, title or interest hereby assigned, to anyone other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement
amending or supplementing any of the Operative Agreements, execute any waiver
or modification of, or consent under the terms of any of the Operative
Agreements, settle or compromise any claim (other than claims in respect of
Excluded Payments) against the Company arising under any of the Operative
Agreements, or submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Operative Agreements,
to arbitration thereunder.
The Owner Trustee does hereby ratify and confirm the Indenture
Documents and does hereby agree that (except as permitted herein) it will not
take or omit to take any action, the taking or omission of which would result
in an alteration or impairment of any of the Indenture Documents or of any of
the rights created by any thereof or the assignment hereunder.
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Notwithstanding the Granting Clause, any of the preceding
paragraphs or any other provision of this Indenture, there are hereby expressly
excluded from the foregoing grant, bargain, sale, assignment, transfer,
conveyance, mortgage, pledge and security interest all Excluded Payments.
Further, nothing in the Granting Clause or any of the preceding paragraphs
shall impair in any respect the rights of the Owner Trustee or the Owner
Participant under Section 9.13 or 11.06.
IT IS HEREBY COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article 1 have the
meanings assigned to them in this Article 1, and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(3) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision; and
(4) unless otherwise specified, all references in
this Agreement to Articles, Sections and Exhibits refer to Articles,
Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Bankruptcy Code" means the United States Bankruptcy Code of
1978, as amended, or any successor statute.
"Basis Point" shall have the meaning specified therefor in
Exhibit A.
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"Break Amount" shall have the meaning specified therefor in
Section 15.05(b).
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in the
City of Dallas, Texas; New York, New York; the city and state in which (i) so
long as any Certificates shall be Outstanding, the Indenture Trustee and (ii)
thereafter, the Owner Trustee, has its principal place of business; and the
city and state in which the Indenture Trustee or the Owner Trustee, as the case
may be, receives and disburses funds; provided, however, that so long as the
Series SWA 1995 Trust N602SW-I Certificates are Outstanding, such day must also
be a day on which dealings are carried on in the applicable offshore dollar
interbank market.
"Certificate" or "Certificates" means any certificate or other
debt instrument issued under this Agreement, including the Series SWA 1995
Trust N602SW-I Certificates and the Series SWA 1995 Trust N602SW Certificates,
if any, issued hereunder.
"Company" means Southwest Airlines Co., a Texas corporation,
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company
executed on its behalf by a Responsible Company Officer of the Company.
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Debt" means any liability for borrowed money, or any
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
"Debt Rate" shall have the meaning specified therefor in
Exhibit A.
"Defaulted Installment" shall have the meaning specified
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
in Section 2.08.
"Defeasance Trustee" shall have the meaning specified therefor
in Section 10.05.
"Deferred Equity Amount" shall have the meaning specified in
Section 8(dd) of the Participation Agreement.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System or
any governmental authority which is the successor thereto, as in effect from
time to time.
"Eurocurrency Reserve Percentage" for any day means the
reserve percentage applicable in respect of such day under Regulation D of the
Board of Governors of the Federal Reserve System (or any governmental authority
which is the successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
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marginal reserve requirement) for the Original Holder with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities.
"Excluded Payments" means (i) any right, title or interest of
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective, successors, permitted assigns,
directors, officers, employees, servants and agents to any indemnity payment,
including, but not limited to, any payment which by the terms of Section 7(b),
7(c), 7(f), 16, 17 or 18 of the Participation Agreement, Section 5.03 or 7.01
of the Trust Agreement or any section of the Tax Indemnity Agreement or any
corresponding payment under Section 3.5 of the Lease shall be payable to the
Owner Trustee in its individual capacity or to the Owner Participant, as the
case may be, pursuant to the terms of the Operative Agreements, (ii) any
insurance proceeds payable under insurance maintained by the Owner Trustee in
its individual or trust capacity or the Owner Participant (whether directly or
through the Owner Trustee), or to their respective Affiliates, successors,
permitted assigns, directors, officers, employees, servants and agents, (iii)
any insurance proceeds (or proceeds of governmental indemnities in lieu
thereof) payable to the Owner Trustee in its individual capacity or to the
Owner Participant or to their respective Affiliates, successors, permitted
assigns, directors, officers, employees, servants and agents, under any
liability insurance maintained by the Company pursuant to Section 11 of the
Lease or by any other Person (or proceeds of governmental indemnities in lieu
thereof), (iv) payments to the Owner Participant by the Owner Trustee pursuant
to Section 2 of the Participation Agreement and any funds held by the Owner
Trustee or payable to the Owner Participant pursuant to any funding letter
entered into in lieu of the provisions of Section 2 of the Participation
Agreement, (v) amounts paid or payable to the Owner Trustee from Lessee
pursuant to Section 18.2(c) of the Lease, (vi) Transaction Costs or other
amounts or expenses paid or payable to, or for the benefit of, the Owner
Participant pursuant to the Participation Agreement, (vii) the respective
rights of the Owner Trustee in its individual or trust capacity or the Owner
Participant to the proceeds of the foregoing, (viii) any payment of Rent
attributable to an indemnity payment under the Tax Indemnity Agreement, and
(ix) any right to demand, collect, sue or otherwise receive and enforce the
payment of any amount described in clauses (i) through (viii) above.
"Federal Aviation Act" means Subtitle VII of Title 49, U.S.C.,
as amended.
"Fixed Period" means the period after the Floating Period.
"Floating Period" means the period any Series SWA 1995 Trust
N602SW-I Certificate is Outstanding.
"Government Obligations" shall have the meaning specified
therefor in Section 10.05.
"Holder" or "Certificate Holder" means a Person in whose name
a Certificate is registered on the Register including, so long as it holds a
Series SWA 1995 Trust N602SW-I Certificate, the Original Holder.
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Documents" means each and every document or
instrument referred to in the Granting Clause hereof.
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"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Section 8.01.
"Indenture Trustee" means Wilmington Trust Company, and each
other Person which may from time to time be acting as Indenture Trustee in
accordance with the provisions of this Agreement.
"Independent" when used with respect to an engineer, appraiser
or other expert, means an engineer, appraiser or other expert who (i) is in
fact independent, (ii) does not have any direct financial interest or any
material indirect financial interest in the Company or any Affiliate of the
Company and (iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"Independent Investment Banker" means an Independent
investment banking institution of national standing appointed by the Company on
behalf of the Owner Trustee (and reasonably acceptable to the Owner
Participant, which acceptance shall not be unreasonably withheld after notice
to the Owner Participant); provided, that if the Indenture Trustee shall not
have received written notice of such an appointment at least 10 days prior to
the relevant Redemption Date or if a Lease Event of Default shall have occurred
and be continuing, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
"Installment Certificate" means a Certificate, other than a
Series SWA 1995 Trust N602SW-I Certificate, should any such Certificate be
issued hereunder which shall provide for the payments of principal in
installments.
"Installment Payment Amount" means, with respect to each
Installment Certificate, the amount of the installment payment of principal due
and payable on each Installment Payment Date, which amount shall be equal to
the product of the original principal amount of such Certificate and the
Installment Payment Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an
installment payment of principal is due and payable on the Certificates, as set
forth in Exhibit B-l as completed in accordance with Article 15.
"Installment Payment Percentage" means, with respect to each
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-l as completed in accordance with Article 15.
The term "interest" payable, or to be payable, on any date
during the Floating Period in respect of the Series SWA 1995 Trust N602SW-I
Certificates shall include, without limitation, any and all accrued and unpaid
compounded interest thereon.
"Interest Payment Date" means each July 1 and January 1
commencing on January 1, 1996.
"Interest Period" shall have the meaning specified therefor in
Exhibit A.
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"Lease" means the Sale and Lease Agreement, dated as of the
date hereof, between the Owner Trustee, as lessor, and the Company, as lessee,
relating to the Aircraft as such Sale and Lease Agreement may from time to time
be supplemented, amended or modified in accordance with the terms thereof and
this Agreement. The term "Lease" shall also include each Lease Supplement
entered into pursuant to the terms of the Lease.
"Lease Loss Payment Date" means the date on which Stipulated
Loss Value is payable pursuant to Section 10.1.4 of the Lease in connection
with an Event of Loss in respect of the Aircraft.
"Lease Termination Date" means the date the Lease terminates
pursuant to Section 9 of the Lease.
"Lending Office" of any Holder of a Series SWA 1995 Trust
N602SW-I Certificate means the office through which such Holder makes and/or
books and maintains the loan evidenced by its Certificate, which, in the case
of the Original Holder, is Concord, California, as of the date hereof.
"Maturity Date" means, with respect to the Series SWA 1995
Trust N602SW Certificates, each of the dates specified in Exhibit B as a
maturity date of such Certificates and shall have, in respect of the Series SWA
1995 Trust N602SW-I Certificates, the meaning specified therefor in Exhibit A.
"Officers' Certificate" means a certificate signed in the case
of the Company, by (i) the Chairman of the Board of Directors, the President,
or any Executive or Senior Vice President of the Company, signing alone, or
(ii) any Vice President signing together with the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer or the Controller of the
Company or, in the case of the Owner Trustee, a Responsible Officer of the
Owner Trustee.
"Offshore Rate" shall have the meaning specified therefor in
Exhibit A.
"Opinion of Counsel" means a written opinion of legal counsel,
who in the case of counsel for the Company may be (i) the senior corporate
attorney employed by the Company, (ii) Vinson & Elkins L.L.P. or (iii) other
counsel designated by the Company and who shall be reasonably satisfactory to
the Indenture Trustee or, in the case of legal counsel for the Owner Trustee,
may be (x) Shipman & Goodwin or (y) other counsel designated by the Owner
Trustee and who shall be reasonably satisfactory to the Indenture Trustee.
"Original Holder" means Bank of America Illinois, as the
original holder of the loan evidenced by the Series SWA 1995 Trust N602SW-I
Certificate and any branch or agency thereof in the United States to which the
Series SWA 1995 Trust N602SW-I Certificate held by it may be transferred.
"Outstanding", when used with respect to Certificates, means,
as of the date of determination, all Certificates theretofore executed and
delivered under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation
pursuant to Section 2.07 or otherwise;
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(ii) Certificates for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates; provided, that
if such Certificates are to be redeemed, notice of such redemption has
been duly given pursuant to this Agreement or provision therefor
satisfactory to the Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant to this
Agreement;
provided, however, that in determining whether the Holders of the requisite
aggregate principal amount of Certificates Outstanding have given any request,
demand, authorization, declaration, direction, notice, consent or waiver
hereunder, Certificates owned by or pledged to the Company or any Affiliate of
the Company or the Owner Trustee or the Owner Participant or any Affiliate
thereof, shall (unless all Certificates are then owned thereby) be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, declaration, direction, notice, consent or waiver, only
Certificates which the Indenture Trustee knows to be so owned or so pledged
shall be disregarded. Certificates owned by the Company, or the Owner Trustee
or the Owner Participant, which have been pledged in good faith may be regarded
as Outstanding if the Company, or the Owner Trustee or the Owner Participant,
as the case may be, establishes to the satisfaction of the Indenture Trustee
the pledgee's right to act with respect to such Certificates and that the
pledgee is not the Company, or the Owner Trustee or the Owner Participant or
any Affiliate thereof.
"Owner Trustee" means Shawmut Bank Connecticut, National
Association, not in its individual capacity, except as expressly provided
herein, but solely as trustee under the Trust Agreement, and each other Person
which may from time to time be acting as Owner Trustee in accordance with the
provisions of the Operative Agreements.
"Past Due Rate" means, in respect of any Certificate, the rate
of interest applicable pursuant to the provisions of such Certificate to any
amount of principal or interest payable thereunder not paid when due.
"Paying Agent" means any person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means any Installment Payment Date, Interest
Payment Date or Maturity Date.
"Permitted Investment" means any of the investments permitted
by Section 22.1 of the Lease.
"Premium" means, with respect to each Series SWA 1995 Trust
N602SW Certificate to be redeemed, purchased or otherwise prepaid pursuant to
Article 6, an amount determined as of the Business Day next preceding the
applicable Redemption Date which an Independent Investment Banker determines to
be equal to an excess, if any, of (i) the present values of all remaining
scheduled payments of such principal amount or portion thereof and interest
thereon (excluding interest accrued from the immediately preceding Interest
Payment Date to such Redemption Date) to the Maturity Date of such Certificate
in accordance with generally accepted financial practices
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assuming a 360-day year consisting of twelve 30-day months at a discount rate
equal to the Treasury Yield, all as determined by the Independent Investment
Banker over (ii) the unpaid principal amount of such Certificate. Premium
shall never be below zero.
"Premium Termination Date" means, with respect to each Series
SWA 1995 Trust N602SW Certificate, the date set forth as the "Premium
Termination Date" in Exhibit B hereto completed in accordance with Article 15
for Certificates of the Maturity Date of such Certificate.
"Principal Payment Date" shall have the meaning specified
therefor in Exhibit A.
"Record Date" for the interest or Installment Payment Amount
payable on any Interest Payment Date or Installment Payment Date (other than
the Maturity Date of the Certificates), as the case may be, means the calendar
day (whether or not a Business Day) which is 15 calendar days prior to the
related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are
to be redeemed or purchased pursuant to Section 6.01 or 6.02.
"Redemption Price" means the price at which any or all of the
Certificates (as the context may require) are to be redeemed or purchased,
determined as of the applicable Redemption Date, pursuant to Section 6.01, 6.02
or 15.03, as the case may be.
"Refinancing Date" means the date designated by the Company as
the date for a refinancing of the Certificates in accordance with Section 17 of
the Participation Agreement.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Remaining Weighted Average Life" means, for any Installment
Certificate, at the Redemption Date of such Certificate, the number of days
equal to the quotient obtained by dividing (a) the sum of the products obtained
by multiplying (i) the amount of each then remaining scheduled payment of
principal, including the payment due on the Maturity Date of such Certificate,
by (ii) the number of days from and including the Redemption Date to but
excluding the regularly scheduled date of such scheduled payment of principal;
by (b) the then unpaid principal amount of such Certificate.
"Responsible Company Officer" means, with respect to the
Company or Owner Participant, its Chairman of the Board, its President, the
Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (a) working under the direct supervision of such Chairman
of the Board, President, Chief Financial Officer, Vice President or Treasurer
and (b) whose responsibilities include the administration of the transactions
and agreements, including the Lease, contemplated by the Participation
Agreement.
"Responsible Officer", with respect to Shawmut Bank
Connecticut, National Association, the Owner Trustee or the Indenture Trustee,
means any officer in its Corporate Trust Administration Department or any
officer of the Owner Trustee or the Indenture Trustee, as the case may be,
customarily performing functions similar to those performed by the persons who
at the time
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shall be such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with a particular subject,
and in each case whose responsibilities include the administration of the
transactions and agreements, including the Lease, contemplated by the
Participation Agreement.
"SEC" means the Securities and Exchange Commission.
"Section 18 Refinancing Date" means the date specified by the
Company for the refinancing of the Series SWA 1995 Trust N602SW-I Certificates
in accordance with Section 18 of the Participation Agreement.
"Series SWA 1995 Trust N602SW Certificate" means any
certificate of such designation issued by the Owner Trustee under this
Agreement substantially in the form of Exhibit A-1 or A-2, should any of such
certificates be issued hereunder, and any such certificate issued in
replacement or exchange thereof in accordance with the provisions hereof.
"Series SWA 1995 Trust N602SW-I Certificate" means any
certificate issued by the Owner Trustee under this Agreement, substantially in
the form of Exhibit A, and any such certificate issued in replacement or
exchange thereof in accordance with the provisions hereof.
"Treasury Rate" shall have the meaning specified therefor in
Exhibit A.
"Treasury Yield" means (i) In the case of a Certificate having
a Maturity Date within one year after the Redemption Date the average yield to
maturity on a government bond equivalent basis of the applicable United States
Treasury Bill due the week of the Maturity of such Certificate and (ii) in the
case of a Certificate having a Maturity Date one year or more after the
Redemption Date, the average yield of the most actively traded United States
Treasury Notes (as reported by Cantor Fitzgerald Securities Corp. on page 5 of
Telerate Systems, Inc., a financial news service, or if such report is not
available, a source deemed comparable by the Independent Investment Banker
selected to determine the Premium and reasonably acceptable to the Company and
the Owner Participant) corresponding in maturity (x) for any Certificate issued
in serial form, the Maturity Date or (y) for any Certificate issued in
installment form, to the Average Life Date, in each case, of such Certificate
(or, if there is no corresponding maturity, an interpolation of maturities by
the Independent Investment Banker), in each case determined by the Independent
Investment Banker selected to determine the Premium based on the average of the
yields to stated maturity determined from the bid prices as of 10:00 A.M. and
2:00 P.M. New York time, on the second Business Day preceding the Redemption
Date. "Average Life Date" means, with respect to the redemption of an
Installment Certificate, the date which follows the Redemption Date by a period
equal to the Remaining Weighted Average Life of such Certificate.
"Trust Estate" shall have the meaning specified therefor in
the Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Security Agreement", "this Indenture" or
"this Agreement" means this Trust Indenture and Security Agreement, as the same
may from time to time be supplemented, amended or modified, including by any
Trust Supplement.
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"Trust Office" means the principal corporate trust office of
the Owner Trustee located at 777 Main Street, Hartford, Connecticut 06115,
Attention: Corporate Trust Administration, or at such other office at which the
Owner Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to the Company, the Indenture
Trustee and each Holder.
"Trust Supplement" means a supplement to the Trust Agreement
and this Agreement substantially in the form of Exhibit C.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
Section 1.02 Other Definitions. For all purposes of this
Agreement, terms defined in the heading and recitals of this Agreement are used
as so defined and capitalized terms used but not defined herein are used as
defined in the Lease.
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. One or more
Series SWA 1995 Trust N602SW-I Certificates in the aggregate face amount equal
to the Original Holder's Commitment under Section 1(b) of the Participation
Agreement shall be issued on the Delivery Date as provided in Section 3(e) of
the Participation Agreement in substantially the form set forth, and shall bear
interest as provided, in Exhibit A. In the event more than one such Certificate
is so issued, all references in this Indenture to a single Series SWA 1995
Trust N602SW-I Certificate shall be deemed to include each other such
Certificate. The Series SWA 1995 Trust N602SW-I Certificate shall be dated the
Delivery Date and shall be payable in installments on each Principal Payment
Date as set forth in Annex A to the Series SWA 1995 Trust N602SW-I Certificate.
In connection with a refinancing of the Series SWA 1995 Trust
N602SW-I Certificate in accordance with Section 18 of the Participation
Agreement and Section 15.01 hereof, an additional series of Certificates may be
issued hereunder. Such additional series of Certificates shall be designated as
Series SWA 1995 Trust N602SW Certificates. The Series SWA 1995 Trust N602SW
Certificates shall be substantially in the form set forth in Exhibit A-l or
A-2. The Series SWA 1995 Trust N602SW Certificates shall be dated the Delivery
Date, shall be issued in the maturities and principal amounts, and shall bear
the interest rates per annum (subject to Section 2.10 hereof), in each case as
specified in Exhibit B to be delivered in connection with such refinancing of
the Series SWA 1995 Trust N602SW-I Certificate in accordance with Section 15.01
of this Agreement. The principal of each Certificate, other than Installment
Certificates, shall be payable in full on the Maturity Date for such
Certificate. The principal of each Installment Certificate shall be payable in
installments, on each Installment Payment Date, in amounts equal to the
Installment Payment Amount for such Installment Payment Date.
The Series SWA 1995 Trust N602SW Certificates shall be issued
in denominations of $1,000 and integral multiples thereof, except that one of
such Certificates may be issued in any denomination. The Series SWA 1995 Trust
N602SW-I Certificates may be issued in any denomination.
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The Certificates shall be issued in registered form only. The
Certificates are not redeemable prior to maturity except as provided in this
Agreement. Interest accrued on the Certificates shall be calculated on the
basis set forth therein.
The principal of, Break Amount, if any, Premium, if any, and
interest on the Certificates shall be payable at the principal corporate trust
office of the Indenture Trustee or at any office or agency maintained for such
purpose pursuant to Section 2.03, provided, that subject to Section 15.04, all
such amounts (other than those payable on the Maturity Date of the Installment
Certificates) may be payable at the option of the Indenture Trustee or the
Paying Agent by check mailed on or before the due date by the Indenture Trustee
or the Paying Agent to the address of the Holder entitled thereto as such
address shall appear in the Register.
All payments in respect of the Certificates shall be made in
Dollars. Any payment due on any Certificate on a day that is not a Business
Day shall be made on the next succeeding day which is a Business Day and
(provided such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date.
Section 2.02. Execution and Authentication. (a)
Certificates shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its president, a senior vice president, a vice
president, an assistant vice president, its treasurer, its secretary, an
assistant secretary or an assistant treasurer.
(b) If any officer of the Owner Trustee executing the
Certificates by facsimile signature no longer holds that office at the time the
Certificate is executed on behalf of the Owner Trustee, the Certificate shall
be valid nevertheless.
(c) At any time and from time to time after the execution
of the Certificates, the Owner Trustee may deliver such Certificates to the
Indenture Trustee for authentication and, subject to the provisions of Section
2.10, the Indenture Trustee shall authenticate the Certificates by manual
signature upon written orders of the Owner Trustee. Certificates shall be
authenticated on behalf of the Indenture Trustee by any authorized officer or
signatory of the Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for
any purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner Trustee by the manual or facsimile signature of the officer
of the Owner Trustee specified in the first sentence of Section 2.02(a) and
until authenticated on behalf of the Indenture Trustee by the manual signature
of the officer or signatory of the Indenture Trustee specified in the second
sentence of Section 2.02(c). Such signatures shall be conclusive evidence that
such Certificate has been duly executed, authenticated and issued under this
Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
Trustee shall maintain an office or agency where the Certificates may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where (subject to Sections 2.04 and 2.08) the Certificates may
be presented for payment or for exchange (the "Paying Agent"). The Registrar
shall keep a register (the "Register") with respect to the Certificates and to
their transfer and exchange and the payments of Installment Payment Amounts
thereon, if any. The Indenture Trustee may appoint one or more co-registrars
(the "Co-Registrars") and one or more additional Paying Agents for the
Certificates and the Indenture Trustee may terminate the appointment of any
Co-Registrar or Paying
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Agent at any time upon written notice. The term "Registrar" includes any
Co-Registrar. The term "Paying Agent" includes any additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and
Paying Agent.
Section 2.04. Transfer and Exchange. At the option of the
Holder thereof, Series SWA 1995 Trust N602SW-I Certificates or Series SWA 1995
Trust N602SW Certificates may be exchanged for an equal aggregate initial
principal amount of other Series SWA 1995 Trust N602SW-I Certificates or Series
SWA 1995 Trust N602SW Certificates of the same maturity and type, dated the
Delivery Date, and of any authorized denominations or transferred upon
surrender of the Series SWA 1995 Trust N602SW-I Certificates or Series SWA 1995
Trust N602SW Certificates to be exchanged or transferred at the principal
corporate trust office of the Indenture Trustee, or at any office or agency
maintained for such purpose pursuant to Section 2.03. Whenever any Series SWA
1995 Trust N602SW-I Certificate or Series SWA 1995 Trust N602SW Certificate is
so surrendered for exchange, the Owner Trustee shall execute, and the Indenture
Trustee shall authenticate and deliver, the replacement Series SWA 1995 Trust
N602SW-I Certificate or Series SWA 1995 Trust N602SW Certificate which the
Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Owner Trustee,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Certificates surrendered upon such registration of
transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Holder or any transferee
for any registration of transfer or exchange of Certificates, but the Registrar
may, as a condition to any transfer or exchange hereunder require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of such transfer or exchange of
Certificates.
The Registrar shall not be required to register the transfer
of or to exchange any Certificate called for redemption or purchase pursuant to
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates. (a)
The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semiannually on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders.
(b) Ownership of the Certificates shall be proved by the
Register kept by the Registrar. Prior to due presentment for registration of
transfer of any Certificate, the Owner Trustee,
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the Owner Participant, the Company, the Indenture Trustee, the Paying Agent and
the Registrar shall deem and treat the Person in whose name any Certificate is
registered as the absolute owner of such Certificate for the purpose of
receiving payment of principal (including, subject to the provisions herein
regarding the applicable record dates, Installment Payment Amounts) of,
Premium, if any, and (subject to the provisions herein regarding the applicable
record dates), interest on such Certificate and for all other purposes
whatsoever, whether or not such Certificate is overdue, and none of the Owner
Trustee, the Owner Participant, the Company, the Indenture Trustee, the Paying
Agent or the Registrar shall be affected by notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen
Certificates. If any Certificate shall become mutilated, destroyed, lost or
stolen, the Owner Trustee shall, upon the written request of the Holder of such
Certificate, issue and execute, and the Indenture Trustee shall authenticate
and deliver, in replacement thereof, as applicable, a new Series SWA 1995 Trust
N602SW-I Certificate or a new Series SWA 1995 Trust N602SW Certificate of the
same type and having the same maturity, payable to the same Holder in the same
principal amount and dated the same date as the Certificate so mutilated,
destroyed, lost or stolen. If the Certificate being replaced has become
mutilated, such Certificate shall be surrendered to the Indenture Trustee. If
the Certificate being replaced has been destroyed, lost or stolen, the Holder
of such Certificate shall furnish to the Owner Trustee and the Indenture
Trustee such security or indemnity as may be required by it to save the Owner
Trustee and the Indenture Trustee harmless and evidence satisfactory to the
Owner Trustee and the Indenture Trustee of the destruction, loss or theft of
such Certificate and of the ownership thereof; provided, however, that if the
affected Holder is the Original Holder, the written notice of such destruction,
loss or theft and such ownership and the written undertaking of such Holder
delivered to the Owner Trustee and the Indenture Trustee to hold harmless the
Owner Trustee and the Indenture Trustee in respect of the execution,
authentication and delivery of such new Certificate shall be sufficient
evidence, security and indemnity.
Section 2.07. Cancellation. The Registrar and any Paying
Agent shall forward to the Indenture Trustee all Certificates surrendered to
them for replacement, redemption, registration of transfer, exchange or
payment. The Indenture Trustee shall cancel all Certificates surrendered for
replacement, redemption, registration of transfer, exchange, payment or
cancellation and shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal
and Interest. (a) The Indenture Trustee will arrange directly with any Paying
Agent for the payment, or the Indenture Trustee will make payment, all pursuant
to Section 2.09, of the principal of, the Break Amount, if any, Premium, if
any, and interest on, and any other amounts payable on or in respect of each
Certificate or to the Holder thereof hereunder. Interest, principal and other
amounts payable on or in respect of the Series SWA 1995 Trust N602SW-I
Certificate shall be paid as provided for therein and in Article 15. Payment on
Series SWA 1995 Trust N602SW Certificates in respect of interest and
Installment Payment Amounts, if any, payable on an Interest Payment Date or
Installment Payment Date, respectively (other than the Maturity Date of the
Series SWA 1995 Trust N602SW Certificates) shall be paid in Dollars on each
Interest Payment Date or Installment Payment Date (other than the Maturity Date
of such Series SWA 1995 Trust N602SW Certificates), as the case may be, to the
Holder thereof at the close of business on the relevant Record Date; provided,
however, that the Paying Agent will, at the request of the Indenture Trustee
and may, at its option, pay such interest and Installment Payment Amounts
(other than those payable on the Maturity Date of the Installment Certificate)
by check mailed on or before the due date to such Holder's address as it
appears on the
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Register. Otherwise, principal of Series SWA 1995 Trust N602SW Certificates
and Premium, if any, with respect thereto, shall be payable only against
presentation and surrender thereof at the principal corporate trust office of
the Indenture Trustee or at the office of the Paying Agent maintained for such
purpose pursuant to Section 2.03.
A Holder shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal amount of,
Premium, if any, Break Amount, if any, and interest on all Certificates held by
such Holder and all other sums payable to such Holder hereunder, under such
Certificates and under the Participation Agreement shall have been paid in
full.
(b) Any Installment Payment Amount payable on an
Installment Payment Date (other than the Maturity Date with respect to a
Certificate) or any interest payable on an Interest Payment Date on any Series
SWA 1995 Trust N602SW Certificate which is not punctually paid on such
Installment Payment Date or such Interest Payment Date, as the case may be
(herein called, respectively, a "Defaulted Installment" and "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Record Date by virtue of his having been such Holder; and such Defaulted
Installment or Defaulted Interest may be paid by the Indenture Trustee, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Indenture Trustee may elect to make
payment of any Defaulted Installment or Defaulted Interest, as the
case may be, to the Person in whose name any Series SWA 1995 Trust
N602SW Certificate is registered at the close of business on a special
record date for the payment of such Defaulted Installment or Defaulted
Interest, as the case may be, which shall be fixed in the following
manner. The Indenture Trustee shall notify the Paying Agent in writing
of the amount of Defaulted Installment or Defaulted Interest, as the
case may be, proposed to be paid on each such Certificate and the date
of the proposed payment, and at the same time the Indenture Trustee
shall make arrangements to set aside an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Installment or Defaulted Interest, as the case may be, prior to the
date of the proposed payment, to be held in trust for the benefit of
the Persons entitled to such Defaulted Installment or Defaulted
Interest, as the case may be, as this clause provides and shall fix a
special record date for the payment of such Defaulted Installment or
Defaulted Interest, as the case may be, which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment. The Indenture Trustee shall promptly notify the Owner
Trustee, the Company and the Registrar of such special record date and
shall cause notice of the proposed payment of such Defaulted
Installment or Defaulted Interest, as the case may be, and the special
record date therefor to be mailed, first class postage prepaid, to
each Holder of a Series SWA 1995 Trust N602SW Certificate at its
address as it appears in the Register, not less than 10 days prior to
such special record date. Notice of the proposed payment of such
Defaulted Installment or Defaulted Interest, as the case may be, and
the special record date therefor having been mailed, as aforesaid,
such Defaulted Installment or Defaulted Interest, as the case may be,
shall be paid to the Persons in whose names the applicable Series SWA
1995 Trust N602SW Certificates are registered on such special record
date and shall no longer be payable pursuant to the following clause
(2).
(2) The Indenture Trustee may make, or cause to
be made, payment of any Defaulted Installment or Defaulted Interest,
as the case may be, in any other lawful manner not inconsistent with
the requirements of any securities exchange on which Series SWA 1995
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Trust N602SW Certificates may be listed, and upon such notice as may
be required by such exchange, if such payment shall be deemed
practicable by the Indenture Trustee.
Any interest, principal or other amount payable on the Series
SWA 1995 Trust N602SW-I Certificates which is not punctually paid when due
shall be paid as provided in such Certificates.
(c) The Indenture Trustee shall require each Paying Agent
to agree in writing that such Paying Agent will hold in trust, for the benefit
of the Holders and the Indenture Trustee, all money held by such Paying Agent
for the payment of the principal of, Break Amount, if any, Premium, if any, or
interest or any other amounts payable to any Holder hereunder or under the
Participation Agreement and shall give to the Indenture Trustee notice of any
default in the making of any such payment upon the Certificates. The Indenture
Trustee at any time may require a Paying Agent to repay to the Indenture
Trustee all money held by it. Upon so doing the Paying Agent shall have no
further liability for the money so paid.
Section 2.09. Payment from Indenture Estate Only. All
amounts payable by the Indenture Trustee and the Owner Trustee under the
Certificates and this Agreement shall be made only from the income and proceeds
of the Indenture Estate and from the other amounts specified in Section 3.03.
Each Holder of a Certificate, by its acceptance of such Certificate, agrees
that (a) it will look solely to the income and proceeds of the Indenture Estate
and from the other amounts specified in Section 3.03 for the payment of such
amounts, to the extent available for distribution to it as herein provided, and
(b) none of the Owner Trustee, the Owner Participant or the Indenture Trustee
is or shall be personally liable to any Holder of any Certificate for any
amount payable under such Certificate or this Agreement or, except as expressly
provided in this Agreement in the case of the Owner Trustee and the Indenture
Trustee, for any liability thereunder.
Shawmut Bank Connecticut, National Association is entering
into this Agreement solely as Owner Trustee under the Trust Agreement and not
in its individual capacity, and in no case whatsoever shall Shawmut Bank
Connecticut, National Association (or any entity acting as successor trustee
under the Trust Agreement) be personally liable for, or for any loss in respect
of, any statements, representations, warranties, agreements or obligations
hereunder or thereunder; provided, that Shawmut Bank Connecticut, National
Association shall be liable hereunder in its individual capacity, (i) for the
performance of its agreements in its individual capacity hereunder and under
Section 8 of the Participation Agreement, and (ii) for its own willful
misconduct or gross negligence. If a successor Owner Trustee is appointed in
accordance with the terms of the Trust Agreement and the Participation
Agreement, such successor Owner Trustee shall, without any further act, succeed
to all of the rights, duties, immunities and obligations hereunder, and its
predecessor Owner Trustee and Shawmut Bank Connecticut, National Association
shall be released from all further duties and obligations hereunder, without
prejudice to any claims against Shawmut Bank Connecticut, National Association
or such predecessor Owner Trustee for any default by Shawmut Bank Connecticut,
National Association or such predecessor Owner Trustee, respectively, in the
performance of its obligations hereunder prior to such appointment.
Section 2.10. Execution, Delivery and Dating of
Certificates upon Issuance. The Owner Trustee shall issue and execute, and the
Indenture Trustee shall authenticate and deliver, the Certificates for original
issuance upon payment of an amount equal to the aggregate original principal
amount of the Series SWA 1995 Trust N602SW-I Certificates to be issued at such
time in the manner
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contemplated by Section 2 of the Participation Agreement. Each Certificate
issued hereunder shall be dated the Delivery Date, and the Indenture Trustee
shall note thereon, if issued after the Delivery Date, the date through which
has been paid interest thereon. Interest shall accrue on the Series SWA 1995
Trust N602SW Certificates only from the date of issuance of such Certificate
pursuant to Section 17 or 18.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption of
Certificates. (a) Except as otherwise provided in Section 3.05, in the event
the Certificates are redeemed in accordance with the provisions of Section
6.01(a) or (b), the Indenture Trustee will apply on the Redemption Date any
amounts then held by it in the Indenture Estate and received by it from or on
behalf of the Owner Trustee or, as assignee of the Owner Trustee, from the
Company, including, without limitation, pursuant to Section 9, 10, 11 or
(subject to Section 7.03) 18.2 of the Lease in the following order of priority:
first, so much thereof as was received by the Indenture
Trustee with respect to the amounts due to it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Outstanding
Certificates pursuant to Section 6.01(a) or (b), as the case may be,
on the Redemption Date shall be applied to the redemption of the
Certificates on the Redemption Date; and
third, the balance, if any, thereof remaining thereafter shall
be distributed to the Owner Trustee to be held or distributed to the
Owner Participant in accordance with the terms of the Trust Agreement.
(b) In the case of any refinancing or purchase of the
Certificates pursuant to Section 6.01(c) or 6.02, the Indenture Trustee will
apply on the Redemption Date the amounts received by it from or on behalf of
the Owner Trustee, or as assignee of the Owner Trustee, from the Company, to
the payment of the Redemption Price of the Outstanding Certificates pursuant to
Section 6.01(c) or 6.02, as the case may be, on the Redemption Date; it being
understood that any such payment shall be a refinancing or purchase of the
indebtedness represented by the Outstanding Certificates and is not, and shall
not be construed so as to be, a redemption thereof or payment or prepayment
thereon.
Section 3.03. Application of Rent When No Indenture Event
of Default Is Continuing. Except as otherwise provided in Section 3.02, 3.04,
3.05 or 3.06, each amount of Basic Rent or Advance (as defined in Section 3.8
of the Lease) received by the Indenture Trustee from the Owner Trustee or, as
assignee of the Owner Trustee, from the Company, any payment of interest
payable on any Interest Payment Date on overdue installments of Basic Rent, any
amount received
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from the Owner Participant pursuant to Section 8(dd) of the Participation
Agreement as the Deferred Equity Amount, together with any amount received by
the Indenture Trustee pursuant to Section 8.03(e)(i), shall be distributed by
the Indenture Trustee in the following order of priority:
first, so much of such aggregate amount as shall be required
to pay in full the interest, principal of, Premium, if any, Break
Amount, if any, and any other amounts then due on, all Outstanding
Certificates shall be distributed to the Persons entitled thereto; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Premium, if any, Break Amount, if any, such other
amounts payable to the Holders, and without any preference or priority
of one Certificate over another, ratably according to the aggregate
amount so due for interest, principal, Premium, if any, Break Amount,
if any, and such other amounts at the date fixed by the Indenture
Trustee for the distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall be
required to pay any amount due the Indenture Trustee pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such
amounts; and
third, the balance, if any, of such aggregate amount remaining
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement; provided, however,
that if an Indenture Default shall have occurred and be continuing,
then such balance shall not be distributed as provided in this clause
"third" but shall be held by the Indenture Trustee as part of the
Indenture Estate until whichever of the following shall first occur:
(i) all Indenture Events of Default shall have been cured, in which
event such balance shall, to the extent not theretofore distributed as
provided herein, be distributed as provided in this clause "third", or
(ii) Section 3.04 or Section 3.05 shall be applicable, in which event
such balance shall be distributed in accordance with the provisions of
said Section 3.04 or Section 3.05, as the case may be, or (iii) such
installment or payment shall have been held for a period in excess of
183 days (during which no Indenture Event of Default which is not a
Lease Event of Default shall have occurred and be continuing and
during which period the Indenture Trustee and the Holders shall not
have been stayed or otherwise precluded by operation of law from
taking action to accelerate the Certificates or to exercise remedies
hereunder or under the Lease), in which event such balance shall, to
the extent not theretofore applied as provided herein, be distributed
as provided in this clause "third".
Section 3.04. Application of Certain Payments in Case of
Requisition or Event of Loss. Except as otherwise provided in Section 3.05, any
amounts received directly or otherwise pursuant to the Lease from any
governmental authority or other Person pursuant to Section 10 of the Lease with
respect to the Airframe or the Airframe and the Engines or engines then
installed on the Airframe as the result of an Event of Loss, to the extent that
such amounts are not required to be paid to the Company pursuant to said
Section 10, and any amounts of insurance proceeds for damage to the Indenture
Estate received directly or otherwise pursuant to the Lease (and not
constituting Excluded Payments) from any insurer pursuant to Section 11 of the
Lease with respect thereto as the result of an Event of Loss, to the extent
such amounts are not required to be paid to the Company pursuant to said
Section 11, shall, except as otherwise provided in the next sentence, be
applied by the Indenture Trustee on behalf of, and as assignee of, the Owner
Trustee in reduction of the Company's obligations to pay Stipulated Loss Value
and the other amounts payable by the Company
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pursuant to Section 10 of the Lease and the remainder, if any, shall, except as
provided in the next sentence, be distributed to the Owner Trustee to be held
or distributed in accordance with the terms of the Lease and the Trust
Agreement. Any portion of any such amount referred to in the preceding
sentence which is not required to be so paid to the Company pursuant to the
Lease, solely because a Lease Default of the type referred to in Section 14.1
or 14.5 of the Lease or Lease Event of Default shall have occurred and be
continuing, shall, subject to Section 10.04 hereof, be held by the Indenture
Trustee on behalf of the Owner Trustee as security for the obligations of the
Company under the Lease and at such time as there shall not be continuing any
Lease Default of the type referred to in Section 14.1 or 14.5 of the Lease or
Lease Event of Default or such earlier time as shall be provided for in the
Lease, or upon satisfaction and discharge of this Indenture as provided herein,
such portion shall be paid to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease, unless the Indenture Trustee (as
assignee from the Owner Trustee of the Lease) shall have theretofore commenced
to exercise remedies pursuant to Section 15 thereof, in which event such
portion shall be distributed in accordance with the provisions of Section 3.05
hereof.
Section 3.05. Payments During Continuance of Indenture
Event of Default. All payments (except Excluded Payments) received and amounts
held or realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and so long as such an Indenture Event of Default shall be
continuing, and after the Indenture Trustee shall foreclose or enforce this
Indenture or after the Certificates shall have become due and payable as
provided in Section 8.02 (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as
all payments or amounts then held or thereafter received by the Indenture
Trustee as part of the Indenture Estate while such Indenture Event of Default
shall be continuing, shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such payments or amounts as shall be
required to pay the Indenture Trustee all amounts then due it pursuant
to Section 9.06 shall be applied to pay the Indenture Trustee such
amounts;
second, so much of such payments or amounts remaining as shall
be required to (i) pay the expenses incurred (including unbilled
expenses in respect of property delivered or contracted for or
services rendered or contracted for if the amount of such expenses is
liquidated) in using, operating, storing, leasing, controlling or
managing the Indenture Estate, and of all maintenance, insurance,
repairs, replacements, alterations, additions and improvements of and
to the Indenture Estate and to make all payments which the Indenture
Trustee may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the Indenture
Estate or any part thereof (including the employment of engineers and
accountants to examine and make reports upon the properties, books and
records of the Owner Trustee and, to the extent permitted under the
Lease, the Company), all in accordance with Section 8.03(c), shall be
applied for such purposes and (ii) reimburse the Holders in full for
payments made pursuant to Section 9.01(c) (to the extent not
previously reimbursed) shall be distributed to such Holders, and if
the aggregate amount remaining shall be insufficient to reimburse all
such payments in full, it shall be distributed ratably, without
priority of any Certificate over any other, in the proportion that the
aggregate amount of the unreimbursed payments made by each such Holder
pursuant to Section 9.01(c) bears to the aggregate amount of the
unreimbursed payments made by all Holders pursuant to Section 9.01(c);
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third, so much of such payments or amounts remaining as shall
be required to pay the principal of, Break Amount, if any, and accrued
interest on all Certificates Outstanding and all other amounts payable
to the Holders hereunder or under the Participation Agreement and then
due and payable, whether by declaration of acceleration pursuant to
Section 8.02 or otherwise, shall be applied to the payment of such
interest, principal, Break Amount, if any, and such other amounts; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Break Amount, if any, such other amounts and
interest, without any preference or priority of one Certificate over
another, ratably according to the aggregate amount so due for
interest, principal, Break Amount, if any, and such other amounts at
the date fixed by the Indenture Trustee for the distribution of such
payments or amounts; and
fourth, the balance, if any, of such payments or amounts
remaining thereafter shall be distributed to the Owner Trustee to be
held or distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement.
Section 3.06. Payments for Which Application Is Provided in
Other Documents. Except as otherwise provided in this Agreement, any payment
received by the Indenture Trustee for which provision as to the application
thereof is made in the Lease or the Participation Agreement shall be
distributed to the Person for whose benefit such payments were made in
accordance with, and subject to the terms, thereof and hereof. The Indenture
Trustee shall be obligated to distribute any Excluded Payments received by the
Indenture Trustee promptly upon receipt thereof by the Indenture Trustee to the
Person entitled thereto.
Section 3.07. Payments for Which No Application Is
Otherwise Provided. Except as otherwise provided in Section 3.05:
(a) any payment received by the Indenture Trustee for
which no provision as to the application thereof is made elsewhere in
this Agreement, and
(b) any payment received and amounts realized by the
Indenture Trustee with respect to the Aircraft to the extent received
or realized at any time after the conditions set forth in Article 10
for the satisfaction and discharge of this Agreement or for the
defeasance of the Certificates shall have been duly satisfied, as well
as any other amounts remaining as part of the Indenture Estate after
such satisfaction shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance, if any, of such aggregate amount
remaining thereafter shall be distributed to the Owner Trustee
to be held or distributed in accordance with the terms of the
Trust Agreement.
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Section 3.08. Application of Payments. Each payment of
principal and interest or other amounts due hereunder to the Indenture Trustee
or any Holder or in respect of each Certificate shall, except as otherwise
expressly provided herein, be applied, first, to the payment of any amount
(other than the principal of or Premium, Break Amount or interest on such
Certificate) due hereunder or in respect of such Certificate, second, to the
payment of Premium or Break Amount, if any, and interest on such Certificate
(as well as any interest on overdue principal and, to the extent permitted by
law, interest and other amounts payable hereunder and thereunder) due
thereunder, third, to the payment of the principal of such Certificate then due
and fourth, the balance, if any, remaining thereafter, to the payment of the
principal of such Certificate remaining unpaid (provided, that such Certificate
shall not be subject to prepayment or purchase without the consent of the
affected Holder except as expressly permitted hereby). The amounts paid
pursuant to clause fourth above shall be applied to the installments of
principal of such Certificate in inverse order of maturity.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner
Trustee hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually
perform its obligations under the Lease and will duly and punctually
pay the principal of, Premium, if any, Break Amount, if any, and
interest on and other amounts due hereunder and under the Certificates
and all other amounts payable by it to the Holders under the
Participation Agreement and the other Operative Agreements;
(ii) the Owner Trustee will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it with respect to any of the properties or assets of
the Indenture Estate and shall, at its own cost and expense, promptly
take such action as may be necessary to discharge duly any such Lessor
Lien, and the Owner Trustee will cause restitution to be made to the
Indenture Estate in the amount of any diminution of the value thereof
as the result of any Lessor Liens attributable to it;
(iii) in the event a Responsible Officer of the
Owner Trustee shall have actual knowledge of an Indenture Event of
Default or Indenture Default or an Event of Loss, the Owner Trustee
will give prompt written notice of such Indenture Event of Default or
Indenture Default or Event of Loss to the Indenture Trustee, the Owner
Participant, the Company and, so long as the Series SWA 1995 Trust
N602SW-I Certificate shall be Outstanding, the Original Holder;
(iv) except as contemplated by the Operative
Agreements, the Owner Trustee will not contract for, create, incur,
assume or permit to exist any Debt, and will not guarantee (directly
or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so
doing, or otherwise), endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the Debt of any
other Person;
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(v) the Owner Trustee will not enter into any
activity other than owning the Aircraft, the leasing thereof to the
Company and the carrying out of the transactions contemplated hereby
and by the Participation Agreement, the Trust Agreement and the other
Operative Agreements;
(vi) the Owner Trustee will furnish to the
Indenture Trustee, and the Indenture Trustee will furnish to each
Holder at the time outstanding, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to
the Owner Trustee under the Lease, including, without limitation, a
copy of each report or notice received pursuant to Section 11 of the
Lease, to the extent that the same shall not have been furnished
directly to such Holder or the Indenture Trustee pursuant to the
Lease; and
(vii) the Owner Trustee will not (except as
permitted herein) assign or pledge or otherwise dispose of, so long as
this Indenture shall remain in effect and shall not have been
terminated pursuant to Section 10.01, any of its right, title or
interest hereby assigned to anyone other than the Indenture Trustee,
and, with respect to such right, title and interest hereby assigned,
will not, except as provided in this Indenture, (1) accept any payment
that is subjected to the Lien of this Indenture from the Lessee or any
sublessee, enter into any agreement amending or supplementing any of
the Indenture Documents, execute any waiver or modification of, or
consent under, the terms of any of the Indenture Documents, (2)
exercise any rights with respect to the Indenture Estate, (3) settle
or compromise any claim arising under any of the Indenture Documents,
or (4) submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Indenture
Documents to arbitration thereunder.
Section 4.02. Covenants of Shawmut Bank Connecticut,
National Association. Shawmut Bank Connecticut, National Association, hereby
covenants and agrees that it will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Liens attributable to it with respect to
any of the properties or assets of the Indenture Estate and it shall, at its
own cost and expense, promptly take such action as may be necessary to
discharge duly any such Lessor Lien. Shawmut Bank Connecticut, National
Association, will cause restitution to be made to the Indenture Estate in the
amount of any diminution of the value thereof as the result of any Lessor Liens
thereon attributable to it.
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of
Property Included in the Indenture Estate During Continuation of Lease. So
long as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the lien of this
Agreement and be leased to the Company under the Lease; provided, that
to the extent permitted by and as provided in the Lease, the Company
shall have the right,
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at any time and from time to time, without any release from or consent
by the Owner Trustee or the Indenture Trustee, to remove, replace and
pool Parts and to make alterations, improvements and modifications in,
and additions to, the Aircraft. The Indenture Trustee agrees that, to
the extent permitted by and as provided in the Lease, title to any
such Part shall vest in the Company. The Indenture Trustee shall from
time to time execute an appropriate written instrument or instruments
to confirm the release of the security interest of the Indenture
Trustee in any Part as provided in this Section 5.01, in each case
upon receipt by the Indenture Trustee of a Company Request stating
that said action was duly taken by the Company in conformity with this
Section 5.01 and that the execution of such written instrument or
instruments is appropriate to evidence such release of a security
interest under this Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
Occurring to Airframe or Engines or upon Voluntary Termination of
Lease with Respect to Engines. Upon (i) the occurrence of an Event of
Loss occurring to the Airframe or an Engine, or (ii) a voluntary
termination of the Lease with respect to an Engine, the Company, in
accordance with the Lease, may, in the case of an Event of Loss which
has occurred to the Airframe, or shall, except as provided in Section
10.2 of the Lease, in the case of an Event of Loss which has occurred
to or termination of the Lease with respect to an Engine, substitute
an airframe or engine, as the case may be, in which case, upon due
satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of
its right, interest and lien in and to the Airframe or such Engine in
accordance with the provisions of the following sentence. The
Indenture Trustee shall execute and deliver to the Owner Trustee an
instrument releasing its lien in and to the Airframe or such Engine
and shall execute for recording in public offices, at the expense of
the Owner Trustee (if requested by the Owner Trustee) or the Company
(if requested by the Company), such instruments in writing as the
Owner Trustee or the Company shall reasonably request and as shall be
reasonably acceptable to the Indenture Trustee in order to make clear
upon public records that such lien has been released under the laws of
the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and
all rights existing or that may be acquired to any penalties, forfeit or
damages from or against the Indenture Trustee for failure to execute and
deliver any document in connection with the release of a lien or to file any
certificate in compliance with any law or statute requiring the filing of the
same in connection with the release of a lien, except for failure by the
Indenture Trustee to execute and deliver any document or to file any
certificate as may be specifically requested in writing by the Owner Trustee or
the Company and with respect to which the Owner Trustee or the Company shall be
duly entitled.
Section 5.02. Certificates in Respect of Replacement
Aircraft and Engines. Upon the execution and delivery of a Trust Supplement
covering a Replacement Airframe and/or Replacement Engine, as provided in
Section 5.01(b), each Certificate shall be deemed to have been issued in
connection with such Replacement Airframe and/or Replacement Engine and each
Certificate issued thereafter upon a transfer or exchange of, or as a
replacement for, a Certificate, shall be designated as having been issued in
connection with such Replacement Airframe and/or Replacement Engine, but
without any other change therein.
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ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain
Events. (a) If there shall be an Event of Loss to the Aircraft and the
Aircraft is not replaced pursuant to Section 10.1.2 of the Lease, each
Outstanding Certificate shall be redeemed in whole at a Redemption Price equal
to 100% of the outstanding principal amount of such Certificate plus accrued
and unpaid interest thereon to but excluding the applicable Redemption Date
plus, in the case of the Series SWA 1995 Trust N602SW-I Certificates, Break
Amount, if any, and all other amounts payable to the Holders hereunder or under
the Participation Agreement. The Redemption Date for Certificates to be
redeemed pursuant to this Section 6.01(a) shall be the Lease Loss Payment Date.
No Premium shall be paid in the case of a redemption pursuant to any provision
of this Section 6.01(a).
(b) The Certificates shall be redeemed on the Lease
Termination Date or upon the purchase of the Aircraft by the Company at its
option on the Special Purchase Option Date pursuant to Section 18.2(b) of the
Lease (unless the Company shall have elected to assume the rights and
obligations of the Owner Trustee hereunder to the extent and as provided for in
Section 7.03). In the case of any Series SWA 1995 Trust N602SW-I Certificate,
the Redemption Price therefor shall be equal to the unpaid principal amount of
such Certificate as at such date plus accrued and unpaid interest thereon to
but excluding the Redemption Date, the Break Amount, if any, and all other
amounts payable to the Holder thereof hereunder or under any other Operative
Agreement, but without any other premium or penalty. In the case of any Series
SWA 1995 Trust N602SW Certificate, such Redemption Price therefor shall be
equal to the unpaid principal amount of such Certificate as at such Redemption
Date together with an amount equal to the accrued but unpaid interest thereon
and, in the case of each Certificate redeemed prior to the Premium Termination
Date applicable to such Certificate, the Premium, if any. The Redemption Date
for Certificates to be redeemed shall be (A) in the case of a termination of
the Lease pursuant to Section 9 thereof, on the Lease Termination Date or (B)
in the case of purchase of the Aircraft by the Company pursuant to Section
18.2(b) of the Lease, on the Special Purchase Option Date.
(c) (i) The Series SWA 1995 Trust N602SW-I
Certificates may be refinanced in accordance with the provisions of Article 15
hereof and Sections 17 and 18 of the Participation Agreement and (ii) the
Series SWA 1995 Trust N602SW Certificates may be refinanced if all the
conditions to such refunding or refinancing set forth in Section 17 of the
Participation Agreement shall have been satisfied. In any such event, each
Outstanding Certificate may be so refinanced at a Redemption Price determined
in accordance with the procedures described above in Section 6.01(b); provided,
however, that the applicable Redemption Date for the Series SWA 1995 Trust
N602SW-I Certificates to be refinanced pursuant to clause (i) of this Section
6.01(c) shall be the applicable Refinancing Date under Section 17 of the
Participation Agreement or the Section 18 Refinancing Date under Section 18 of
the Participation Agreement, as the case may be, and the applicable Redemption
Date for Certificates to be redeemed pursuant to clause (ii) of this Section
6.01(c) shall be the applicable Refinancing Date under Section 17 of the
Participation Agreement.
Section 6.02. Redemption or Purchase of Certificates Upon
Certain Indenture Events of Default. If the Owner Trustee shall have given
notice of redemption or purchase to the Indenture Trustee pursuant to Section
8.03(e)(ii) at any time (x) after the Certificates shall have been accelerated
pursuant to Section 8.02 or (y) after one or more Lease Events of Default shall
have occurred and
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be continuing for a period of 180 days or more, each Outstanding Certificate
shall be redeemed or purchased in whole at a Redemption Price equal to 100% of
its principal amount plus accrued and unpaid interest thereon (including,
without limitation, interest on overdue interest) to but excluding the
applicable Redemption Date as determined below and all other amounts payable to
the Holders hereunder or under the Participation Agreement and, in the case of
the Series SWA 1995 Trust N602SW-I Certificate, the Break Amount, if any, and,
in the case of the Series SWA 1995 Trust N602SW Certificates, if to be
purchased or redeemed pursuant to clause (y) above prior to the one year
anniversary of the first occurrence of the relevant Lease Event of Default, the
Premium, if any. The Redemption Date for Certificates to be redeemed or
purchased pursuant to this Section 6.02 shall be the date specified in the
notice given by the Owner Trustee to the Indenture Trustee pursuant to Section
8.03(e)(ii) (provided, however, that in the case of the Series SWA 1995 Trust
N602SW-I Certificates, if such date is the last day of the then current
Interest Period therefor, no Break Amount shall be payable). If the Owner
Trustee elects to purchase the Certificates under Section 8.03(e)(ii), nothing
herein, including use of the terms "Redemption Date" and "Redemption Price",
shall be deemed to result in a redemption of the Certificates.
Section 6.03. Notice of Redemption to Holders. (a) Notice
of redemption or purchase with respect to the Series SWA 1995 Trust N602SW
Certificates shall be given by first-class mail, postage prepaid, mailed not
less than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of such Certificates to be redeemed or purchased, at such Holder's address
appearing in the Register; provided, that in the case of a redemption pursuant
to Section 6.01(b) related to Lessee's exercise of its option pursuant to
Section 9 of the Lease, such notice shall be revocable and shall be deemed
revoked in the event the Lease does not in fact terminate on the related Lease
Termination Date.
All notices of redemption or purchase shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption
Price,
(3) that on the Redemption Date, the Redemption Price
will become due and payable upon each such Certificate, and that
interest on Certificates shall cease to accrue on and after such
Redemption Date, and
(4) the place or places where such Certificates are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
(b) Notice of redemption of the Series SWA 1995 Trust
N602SW-I Certificate shall be given by the Owner Trustee (or by the Company on
behalf of the Owner Trustee) not less than three Business Days prior to the
Redemption Date, shall be irrevocable and shall be given by telephone, telex,
telecopy, cable or other customary means of communication by the Owner Trustee
or the Company, as the case may be, to the other and to the Indenture Trustee
and to the Original Holder at each such Person's address designated in Section
12.01(a). Notwithstanding any provision to the contrary contained in this
Article 6, the Series SWA 1995 Trust N602SW-I Certificate shall
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be redeemable as set forth in this Article 6 and in Article 15 without any
premium, prepayment penalty or other cost or expense except for the Break
Amount, if any, and the payment of all other amounts payable to the Holders
thereof hereunder and under the Participation Agreement.
Section 6.04. Deposit of Redemption Price. On or before
the Redemption Date, the Owner Trustee (or any Person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 Noon in immediately available
funds (i) the Redemption Price of the Certificates to be redeemed, refinanced
or purchased, as the case may be, on the Redemption Date and (ii) all other
amounts due and payable hereunder, including any amounts payable to the
Indenture Trustee pursuant to Section 9.06.
Section 6.05. Certificates Payable on Redemption Date.
Notice of redemption, refinancing or purchase having been given as aforesaid
(and not deemed revoked as contemplated in the proviso to Section 6.03(a)), the
Certificates (or the purchase or refinancing price therefor) shall, on the
applicable Redemption Date, become due and payable at the Redemption Price
therefor at the principal corporate trust office of the Indenture Trustee or at
any office or agency maintained for such purposes pursuant to Section 2.03, and
from and after such Redemption Date (unless there shall be a default in the
payment of the Redemption Price) any Certificates then Outstanding shall cease
to bear interest. Unless payment prior to surrender is expressly provided for
herein or in the Participation Agreement, upon surrender of any such
Certificate for redemption or purchase in accordance with said notice such
Certificate shall be paid at the Redemption Price. The Certificates shall not
be subject to prepayment, redemption, refunding or refinancing except as
provided in this Article 6 and in Section 8.02 hereof.
If any Certificate called for redemption or purchase shall not
be so paid upon surrender thereof for redemption or purchase, the principal
amount thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments
Held by the Indenture Trustee. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Premium, if any, or
interest on any Series SWA 1995 Trust N602SW Certificate, including without
limitation any money deposited pursuant to Article 10 and remaining unclaimed
for two years and eleven months after the due date for such payment, shall be
paid to the Owner Trustee; and the Holders of any Outstanding Certificates
shall thereafter, as unsecured general creditors, look only to the Owner
Participant (to the extent the Owner Trustee distributed any such trust money
to the Owner Participant) and to the Company on behalf of the Owner Trustee for
payment thereof, and all liability of the Indenture Trustee or any such Paying
Agent with respect to such trust money shall thereupon cease; provided, that
the Indenture Trustee or such Paying Agent, before being required to make any
such repayment, may at the expense of the Company cause to be mailed to each
such Holder notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
mailing, any unclaimed balance of such money then remaining will be repaid to
the Owner Trustee as provided herein.
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Section 7.02. [Reserved for Potential Future Use]
Section 7.03. Assumption of Obligations of Owner Trustee by
the Company. In the event that the Company shall have elected to assume all of
the rights and obligations of the Owner Trustee under this Agreement in respect
of the Certificates pursuant to Section 8(r) of the Participation Agreement in
connection with the purchase by the Company of the Aircraft, and if on or prior
to the Special Purchase Option Date (the "Assumption Date") the Indenture
Trustee shall have received:
(a) an instrument of assumption (the "Assumption
Agreement") pursuant to which the Company irrevocably and unconditionally
assumes and undertakes, with full recourse to the Company, the Owner Trustee's
obligations with respect to principal, interest, Break Amount, Premium and all
other amounts payable to the Holders or the Indenture Trustee under the
Certificates then Outstanding, this Agreement, and the Participation Agreement
and which incorporates therein events of default substantially similar in scope
and effect to those set forth in the Lease and covenants substantially similar
to the covenants of the Company under the Lease and the Participation
Agreement;
(b) a supplement to this Agreement and/or such other
instruments and documents (including, without limitation, Uniform Commercial
Code financing statement(s)) covering all of the security interests created by
or pursuant to this Indenture that are not covered by the recording system
established by the Federal Aviation Act as may be necessary (or reasonably
requested by the Indenture Trustee) for the security interest of the Indenture
Trustee in the Aircraft and in the other rights, property and interests
included in the Indenture Estate (other than those rights, property and
interests that depend on the existence of the Trust Estate and the
participation of the Owner Trustee and Owner Participant in the transactions
contemplated by the Participation Agreement and this Indenture) to continue to
be perfected and duly recorded with the Federal Aviation Administration and in
all other places necessary or, in the reasonable opinion of the Indenture
Trustee, advisable under the Uniform Commercial Code;
(c) an insurance report dated the Assumption Date of the
independent insurance broker referred to in Section 11.5 of the Lease and the
certificates of insurance, each in form and substance reasonably satisfactory
to the Indenture Trustee as to the due compliance as of the Assumption Date
with the terms of Section 11 of the Lease (as it relates to the Holders and the
Indenture Trustee) relating to the insurance with respect to the Aircraft;
(d) evidence that as of the Assumption Date, and after
giving effect to the transactions contemplated hereby, the Company has good
title to the Aircraft free and clear of all Liens other than the Lien of, and
the security interest created by, this Indenture and other Permitted Liens
(other than Lessor Liens);
(e) a copy of the application that was filed with the FAA
on the Assumption Date regarding the registration of the Aircraft in the name
of the Company;
(f) a certificate from a Responsible Company Officer of
the Company that no Lease Default of the type referred to in Section 14.1 or
14.5 of the Lease or Lease Event of Default shall have occurred and be
continuing as of the Assumption Date;
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(g) an opinion of the General Counsel of the Company (or
other counsel reasonably satisfactory to the Indenture Trustee) in form and
substance reasonably satisfactory to the Indenture Trustee, addressed to the
Indenture Trustee and dated the Assumption Date, to the effect that (i) the
execution, delivery and performance of the Assumption Agreement and the
supplement to this Indenture referred to in paragraph (b) of this Section 7.03
(and all other instruments and documents the execution of which are necessary
for and directly related to the assumption of the obligations contemplated by
this Section 7.03 or the continued perfection of the security interests
referred to in paragraph (b) of this Section 7.03) have been duly authorized by
the Company by all necessary action; (ii) the Assumption Agreement, such
supplement to this Indenture, all such other documents and instruments referred
to above and the security interests arising therefrom are legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, and except as limited by
applicable laws which may affect the remedies provided for in this Indenture,
which laws, however, do not in the opinion of such counsel make the remedies
provided for in this Indenture inadequate for the practical realization of the
rights and benefits purported to be provided thereby; (iii) the Assumption
Agreement, such supplement and all such other documents and instruments
referred to above do not and will not contravene any provision of the Company's
articles of incorporation or by-laws or any law or regulation applicable to the
Company or any agreement, mortgage or instrument to which the Company is a
party or by which the Company is bound; and (iv) the Indenture Trustee (on
behalf of the Certificate Holders) should continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft
upon and after the assumption of the obligations by the Company, provided, that
the opinion referred to in this clause (iv) need not be delivered to the extent
that the benefits of Section 1110 of the Bankruptcy Code were not, by reason of
a change of law or governmental interpretation thereof, available to the
Indenture Trustee with respect to the Aircraft immediately prior to such
assumption and provided, further, that such opinion may contain qualifications
of the tenor contained in the opinion of Vinson & Elkins L.L.P. relating to
said Section 1110 delivered pursuant to Section 4(a)(xi) of the Participation
Agreement on the Delivery Date;
(h) an opinion of Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City (or other counsel reasonably satisfactory to the
Indenture Trustee), in form and substance reasonably satisfactory to the
Indenture Trustee, addressed to the Indenture Trustee and dated the Assumption
Date, (i) to the effect that all documents executed in connection with the
assumption of the obligations contemplated by this Section 7.03 and required to
be filed with the Federal Aviation Administration are in proper form, and all
steps necessary have been taken, for the Aircraft to be duly registered in the
name of the Company and for the Lien of this Agreement with respect to the
Aircraft and Engines to continue to be duly perfected and of first priority;
and
(i) such other documentation reasonably requested by the
Indenture Trustee (in form and substance reasonably satisfactory to the
Indenture Trustee) to amend the Operative Agreements to give effect to the
foregoing;
then, automatically and without the requirement of further action by any
Person, effective as of the Assumption Date, the Owner Trustee shall be
released from all of its obligations under this Agreement in respect of the
Certificates or otherwise (other than any obligations or liabilities of the
Owner Trustee in its individual capacity incurred on or prior to the Assumption
Date or arising out of or based upon events occurring on or prior to the
Assumption Date, which obligations and
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liabilities shall remain the sole responsibility of the Owner Trustee in such
capacity). Promptly upon the filing and recording of the documents referred to
in the opinion of counsel specified in Section (h) above with the FAA, the
Company shall cause such counsel to deliver to the Indenture Trustee an opinion
addressed to the Indenture Trustee, in form and substance reasonably
satisfactory to the Indenture Trustee, as to due recording of said documents
with the FAA.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following
events shall constitute "Indenture Events of Default" under this Agreement
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Indenture Event of Default
shall be deemed to exist so long as, but only so long as, it shall not be
waived or remedied:
(a) the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any payment of principal
of or Premium or Break Amount, if any, or interest on any Certificate
and such failure shall have continued unremedied for seven Business
Days, or the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any other amount due and
payable hereunder, or under any Certificate, and such failure shall
have continued unremedied for 10 Business Days after notice thereof to
the Owner Trustee; or
(b) any Lessor Lien required to be discharged by Shawmut
Bank Connecticut, National Association, pursuant to Section 4.02 or
required to be discharged by the Owner Trustee pursuant to Section
4.01(ii) or required to be discharged or bonded (in a manner
reasonably satisfactory to the Indenture Trustee) by the Owner
Participant pursuant to Section 8(g) of the Participation Agreement
shall remain undischarged for a period of 30 calendar days after a
Responsible Officer or Responsible Company Officer, as the case may
be, of Shawmut Bank Connecticut, National Association, the Owner
Trustee or the Owner Participant, as the case may be, shall have
actual knowledge of such Lessor Lien; or
(c) any representation or warranty made by the Owner
Trustee or the Owner Participant or Shawmut Bank Connecticut, National
Association, herein or in the Participation Agreement, or made by any
Person guaranteeing or supporting the obligations of the Owner
Participant under the Operative Agreements in its guarantee or support
agreement, shall prove to have been false or incorrect when made in
any material respect to the Certificate Holders, is material at the
time of discovery and, if curable, is not cured within 30 days of
notice thereof to the Owner Participant and the Owner Trustee from the
Indenture Trustee; or
(d) any failure by the Owner Trustee to observe its
covenant in Section 4.01(iii), insofar as it relates to the Owner
Trustee's obligation to the Indenture Trustee only, or in Section
4.01(vi), and such failure shall have continued unremedied for ten
Business Days; or any failure by the Owner Trustee to observe any of
its other covenants in Section 4.01 or any failure by the Owner
Participant to observe any of its covenants in Section 8(b), 8(l),
8(v) or 10 of the Participation Agreement, or disaffirmance or
repudiation by any Person guaranteeing
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or supporting the obligations of the Owner Participant under the
Operative Agreements of its obligations under its guarantee or support
agreement; or
(e) any failure by the Owner Trustee or Shawmut Bank
Connecticut, National Association, to observe or perform any other
covenant or obligation of the Owner Trustee or Shawmut Bank
Connecticut, National Association, as the case may be, contained in
this Indenture or in the Participation Agreement or any failure by the
Owner Participant to observe or perform any other covenant or
obligation of the Owner Participant contained in the Participation
Agreement or any failure by any Person guaranteeing or supporting the
obligations of the Owner Participant under the Operative Agreements to
perform any covenant or obligation of such Person under its guarantee
or support agreement which, in any case, is not remedied within a
period of 30 calendar days after notice thereof has been given to the
Owner Trustee and the Owner Participant or such Person, as the case
may be; or
(f) there shall be a Lease Event of Default other than,
without the consent of the Owner Trustee in its sole discretion, a
Lease Event of Default arising by reason of nonpayment when due of any
Excluded Payments; or
(g) either the Trust Estate or the Owner Trustee with
respect thereto (and not in its individual capacity) or the Owner
Participant or any Person guaranteeing or supporting the obligations
of the Owner Participant under the Operative Agreements shall (i)
file, or consent by answer or otherwise to the filing against it of a
petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (ii) make an
assignment for the benefit of its creditors, or (iii) consent to the
appointment of a custodian, receiver, trustee or other officer with
similar powers of itself or any substantial part of its property;
provided, that an event referred to in this Section 8.01(g) with
respect to the Owner Participant shall not constitute an Indenture
Event of Default if (A) an order, judgment or decree shall be entered
in a proceeding by a court or a trustee, custodian, receiver or
liquidator which is either final and non-appealable or has not been
stayed pending any appeal, or (B) an opinion of counsel satisfactory
to the Indenture Trustee shall be provided by the Owner Participant,
in each case to the effect that no part of the Trust Estate created by
the Trust Agreement (except for the Owner Participant's beneficial
interest in such Trust Estate) and no right, title or interest under
the Indenture Estate shall be included in, or be subject to, any
declaration or adjudication of, or proceedings with respect to, the
bankruptcy, insolvency or liquidation of the Owner Participant
referred to in this Section 8.01(g); or
(h) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Trust Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant or any Person
guaranteeing or supporting the obligations of the Owner Participant
under the Operative Agreements, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Trust Estate or the
Owner Trustee with respect thereto (and not in its individual
capacity) or the Owner Participant or any Person guaranteeing or
supporting the obligations of the Owner Participant under the
Operative
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Agreements and any such order or petition is not dismissed or stayed
within 90 days after the earlier of the entering of any such order or
the approval of any such petition; provided, that an event referred to
in this Section 8.01(h) with respect to the Owner Participant shall
not constitute an Event of Default if (A) an order, judgment or decree
shall be entered in a proceeding by a court or a trustee, custodian,
receiver or liquidator which is either final and non-appealable or has
not been stayed pending any appeal, or (B) an opinion of counsel
satisfactory to the Indenture Trustee shall be provided by the Owner
Participant, in each case to the effect that no part of the Trust
Estate created by the Trust Agreement (except for the Owner
Participant's beneficial interest in such Trust Estate) and no right,
title or interest under the Indenture Estate shall be included in, or
be subject to, any declaration or adjudication of, or proceedings with
respect to, the bankruptcy, insolvency or liquidation of the Owner
Participant referred to in this Section 8.01(h).
Section 8.02. Acceleration; Rescission and Annulment. If an
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee and the Owner Trustee may declare the
principal of all the Certificates to be due and payable, whereupon the same
shall be accelerated and be and become due and payable; provided, that if an
Indenture Event of Default referred to in clause (g) or (h) of Section 8.01
shall have occurred or a Lease Event of Default of the type referred to in
clause (g) or (h) of said Section 8.01 shall have occurred with respect to the
Company, then and in every such case the unpaid principal of all Certificates
then Outstanding shall, unless the Indenture Trustee acting upon instructions
of at least 25% in aggregate principal amount of Outstanding Certificates shall
otherwise direct, immediately and without further act become due and payable,
without presentment, demand, protest or notice, all of which are hereby waived.
Upon such declaration (or automatic acceleration, as the case may be), the
principal of all Certificates together with accrued interest thereon from the
date in respect of which interest was last paid hereunder to the date payment
of such principal has been made or duly provided for, plus, in the case of the
Series SWA 1995 Trust N602SW-I Certificates, the Break Amount, if any, and all
other amounts payable to the Holders hereunder as at such date of payment shall
be immediately due and payable (but not including any Premium). At any time
after such declaration and prior to the sale or disposition of the Indenture
Estate, the Holders of a majority in aggregate principal amount of all of the
Outstanding Certificates, by notice to the Indenture Trustee, the Company and
the Owner Trustee, may rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal of, and, in the
case of the Series SWA 1995 Trust N602SW-I Certificates, the Break Amount, if
any, on any Certificates which have become due otherwise than by such
declaration and any interest thereon and interest due or past due, if any, and
all sums due and payable to the Indenture Trustee have been deposited with the
Indenture Trustee, (ii) the rescission would not conflict with any judgment or
decree and (iii) all existing Indenture Defaults and Indenture Events of
Default under this Agreement have been cured or waived except nonpayment of
principal of, or interest on, the Certificates that has become due solely
because of such acceleration.
Section 8.03. Other Remedies Available to Indenture
Trustee. (a) After an Indenture Event of Default shall have occurred and so
long as such Indenture Event of Default shall be continuing, then and in every
such case the Indenture Trustee, as trustee of an express trust and as assignee
hereunder of the Lease or as holder of a security interest in the Aircraft or
Engines or otherwise, may, and when required pursuant to the provisions of
Article 9 shall, exercise, subject to Sections 8.03(b) and 8.03(e), any or all
of the rights and powers and pursue any and all of the
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remedies accorded to the Owner Trustee pursuant to Section 15 of the Lease and
this Article 8, may recover judgment in its own name as Indenture Trustee
against the Indenture Estate and may take possession of all or any part of the
Indenture Estate and may exclude the Owner Trustee and the Owner Participant
and all Persons claiming under any of them wholly or partly therefrom. The
Indenture Trustee shall have and may exercise all of the rights and remedies of
a secured party under the Uniform Commercial Code as in effect in any
applicable jurisdiction.
(b) After an Indenture Event of Default, subject to
Section 8.03(e), the Indenture Trustee may, if at the time such action may be
lawful and always subject to compliance with any mandatory legal requirements,
either with or without taking possession, and either before or after taking
possession, and without instituting any legal proceedings whatsoever, and
having first given notice of such sale to the Owner Trustee, the Owner
Participant and the Company at least 10 days prior to the date of such sale,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public or private auction, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as the Indenture
Trustee may determine, and at any place (whether or not it be the location of
the Indenture Estate or any part thereof) and time designated in the notice
above referred to; provided, however, that notwithstanding any provision herein
to the contrary, the Indenture Trustee may not provide the notice provided for
above of its intention to sell any of the Indenture Estate or exercise other
remedies against the Indenture Estate seeking to deprive the Owner Trustee or
the Owner Participant of its rights therein unless a declaration of
acceleration has been made pursuant to Section 8.02 or the Certificates have
otherwise theretofore become due and payable through redemption or otherwise.
Any such sale or sales may be adjourned from time to time by announcement at
the time and place appointed for such sale or sales, or for any such adjourned
sale or sales, without further notice, and the Indenture Trustee and the Holder
or Holders of any Certificates, or any interest therein, may bid and become the
purchaser at any such sale, and each Holder shall be entitled, at any such
sale, to credit against the purchase price bid thereby all or any part of the
unpaid obligations owing to such Holder and secured by the Lien of this
Agreement. The Indenture Trustee may exercise such right without possession or
production of the Certificates or proof of ownership thereof, and as
representative of the Holders may exercise such right without notice to the
Holders or including the Holders as parties to any suit or proceeding relating
to foreclosure of any property in the Indenture Estate. The Owner Trustee
hereby irrevocably constitutes the Indenture Trustee the true and lawful
attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee or
otherwise) for the purpose of effectuating any sale, assignment, transfer or
delivery for enforcement of the Lien created under this Agreement, whether
pursuant to foreclosure or power of sale or otherwise, to execute and deliver
all such bills of sale, assignments and other instruments as the Indenture
Trustee may consider necessary or appropriate, with full power of substitution,
the Owner Trustee hereby ratifying and confirming all that such attorney or any
substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by
the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and
confirm any such sale, assignment, transfer or delivery, by executing and
delivering to the Indenture Trustee or such purchaser all bills of sale,
assignments, releases and other proper instruments to effect such ratification
and confirmation as may be designated in any such request.
(c) Subject to Sections 8.03(b) and 8.03(e), if an
Indenture Event of Default has occurred and is continuing, the Owner Trustee
shall, at the request of the Indenture Trustee, promptly execute and deliver to
the Indenture Trustee such instruments of title or other documents as the
Indenture Trustee may deem necessary or advisable to enable the Indenture
Trustee or an agent or representative designated by the Indenture Trustee, at
such time or times and place or places as the
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Indenture Trustee may specify, to obtain possession of all or any part of the
Indenture Estate. If the Owner Trustee shall for any reason fail to execute and
deliver such instruments and documents after such request by the Indenture
Trustee, the Indenture Trustee shall be entitled to a judgment for specific
performance of the covenants contained in the foregoing sentence, conferring
upon the Indenture Trustee the right to immediate possession and requiring the
Owner Trustee to execute and deliver such instruments and documents to the
Indenture Trustee. The Indenture Trustee shall also be entitled to pursue all
or any part of the Indenture Estate wherever it may be found and may enter any
of the premises of the Owner Trustee or any other Person wherever the Indenture
Estate may be or be supposed to be and search for the Indenture Estate and take
possession of any item of the Indenture Estate pursuant to this Section
8.03(c). The Indenture Trustee may, from time to time, at the expense of the
Indenture Estate, make all such expenditures for maintenance, insurance,
repairs, replacements, alterations, additions and improvements to and of the
Indenture Estate, as it may deem proper. In each such case, the Indenture
Trustee shall have the right to use, operate, store, lease, control or manage
the Indenture Estate, and to exercise all rights and powers of the Owner
Trustee relating to the Indenture Estate as the Indenture Trustee shall deem
appropriate, including the right to enter into any and all such agreements with
respect to the use, operation, storage, leasing, control or management of the
Indenture Estate or any part thereof; and the Indenture Trustee shall be
entitled to collect and receive directly all tolls, rents (including Rent),
issues, profits, products, revenues and other income of the Indenture Estate
and every part thereof, without prejudice, however, to the right of the
Indenture Trustee under any provision of this Agreement to collect and receive
all cash held by, or required to be deposited with, the Indenture Trustee
hereunder. In accordance with the terms of this Section 8.03(c), such tolls,
rents (including Rent), issues, profits, products, revenues and other income
shall be applied to pay the expenses of using, operating, storing, leasing,
controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect
to make, if any, for taxes, assessments, insurance or other proper charges upon
the Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine, inspect and make reports upon the properties and
books and records of the Owner Trustee and, to the extent permitted by the
Lease, the Company), and all other payments which the Indenture Trustee may be
required or authorized to make under any provision of this Agreement, including
this Section 8.03(c), as well as just and reasonable compensation for the
services of the Indenture Trustee, and of all persons properly engaged and
employed by the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and
the Indenture Trustee shall have obtained possession of or title to the
Aircraft, the Indenture Trustee shall not be obligated to use or operate the
Aircraft or cause the Aircraft to be used or operated directly or indirectly by
itself or through agents or other representatives or to lease, license or
otherwise permit or provide for the use or operation of the Aircraft by any
other Person unless (i) the Indenture Trustee shall have been able to obtain
insurance in kinds, at rates and in amounts satisfactory to it in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all liability for loss or damage to
the Aircraft and for public liability and property damage resulting from use or
operation of the Aircraft and (ii) funds are available in the Indenture Estate
to pay for all such insurance or, in lieu of such insurance, the Indenture
Trustee is furnished with indemnification from the Holders or any other Person
upon terms and in amounts satisfactory to the Indenture Trustee in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all such liabilities.
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(d) Subject to Sections 8.03(b) and 8.03(e), the
Indenture Trustee may proceed to protect and enforce this Agreement and the
Certificates by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Indenture Estate or any part thereof, or for the recovery of judgment
for the indebtedness secured by the Lien created under this Agreement or for
the enforcement of any other power, legal or equitable remedy available under
applicable law.
(e) (i) If the Company shall fail to make any payment
of Basic Rent under the Lease and such failure shall have become a Lease Event
of Default then as long as no other Indenture Event of Default shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the expiration of
a period of ten Business Days (the "10-Day Period") after such failure shall
have become a Lease Event of Default (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee) exercise any of the rights, powers or remedies pursuant to
Section 15 of the Lease or this Article 8), an amount equal to the full amount
of such payment of Basic Rent, together with any interest due thereon under the
Lease on account of the delayed payment thereof to the date of such payment,
and such payment by the Owner Participant or the Owner Trustee shall be deemed
to cure any Indenture Event of Default which arose from such failure of the
Company as of such date of payment (but such cure shall not relieve the Company
of any of its obligations). If the Company shall fail to perform or observe any
covenant, condition or agreement to be performed or observed by it under the
Lease (other than its obligation to pay Basic Rent), and if (but only if) the
performance or observance thereof can be effected by the payment of money alone
(it being understood that actions such as the obtaining of insurance and the
procurement of maintenance services can be so effected), then as long as no
other Indenture Event of Default (other than those arising from a Lease Event
of Default) shall have occurred and be continuing, the Owner Participant or the
Owner Trustee may (but need not) pay to the Indenture Trustee (or to such other
Person as may be entitled to receive the same), at any time prior to the
expiration of a period of ten Business Days after the expiration of the grace
period, if any, provided with respect to such failure on the part of the
Company in Section 14 of the Lease (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee) exercise any of the rights, powers or remedies pursuant to
Section 15 of the Lease or this Article 8), all sums necessary to effect the
performance or observance of such covenant or agreement of the Company,
together with any interest due thereon under the Lease on account of the
delayed payment thereof to the date of such payment, and such payment by the
Owner Participant or the Owner Trustee shall be deemed to cure any Indenture
Event of Default which arose from such failure of the Company as of such date
of payment (but such cure shall not relieve the Company of any of its
obligations). If, on the basis specified in the preceding sentences, any Lease
Events of Default shall have been remedied, then any declaration pursuant to
this Indenture that the Certificates are due and payable or that an Indenture
Event of Default exists hereunder, based solely upon such Lease Events of
Default, shall be deemed to be rescinded, and, in the case of the first and
second sentences of this Section 8.03(e)(i), the Owner Participant or the Owner
Trustee shall (to the extent of any such payments made by it) be subrogated to
the rights of the Holders of the Certificates under Section 3.03, to receive
from the Indenture Trustee such payment of overdue Basic Rent or other amount
(and the payment of interest on account of such Basic Rent or other amount
being overdue) and shall be entitled, so long as no other Indenture Event of
Default or Indenture Default shall have occurred and be continuing or would
result therefrom, to receive, subject to the provisions of this Indenture, such
payment upon receipt thereof by the Indenture Trustee; provided, that the Owner
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Participant shall not otherwise attempt to recover any such amount paid by it
on behalf of the Company pursuant to this Section 8.03(e)(i) except by
demanding of payment of such amount or by commencing an action at law against
the Company for the payment of such amount; and provided, further, that:
(x) this Section 8.03(e)(i) shall not apply with respect
to any default in the payment of Basic Rent due under the Lease if the
Lessee itself shall have theretofore failed to pay Basic Rent in the
manner required under the Lease (after giving effect to any applicable
grace period) (i) due on each of the two Rent Payment Dates
immediately preceding the date of such default, or (ii) due on a total
of four Rent Payment Dates; and
(y) neither the Owner Trustee nor the Owner Participant
shall have the right to cure any Lease Event of Default except as
specified in this Section 8.03(e)(i).
(ii) In the event that (A) at any time one or more
Lease Events of Default shall have occurred and be continuing for a period of
180 days during which the Holders or the Indenture Trustee shall not have been
stayed or otherwise precluded by operation of law from taking action to
accelerate the Certificates or to exercise remedies hereunder or under the
Lease or (B) the Certificates shall have been accelerated pursuant to Section
8.02, the Owner Trustee or the Owner Participant may, at its option, give at
least 30 days' prior irrevocable notice to the Indenture Trustee that the Owner
Trustee or the Owner Participant will redeem (except subsequent to the
establishment of the Redemption Date in respect of the Certificates) or
purchase all Certificates then Outstanding on a date determined consistently
with the applicable provisions of Article 6 and, concurrently with such notice,
the Owner Trustee or the Owner Participant will deposit with the Indenture
Trustee an amount sufficient to redeem (except subsequent to the establishment
of the Redemption Date in respect of the Certificates) or purchase at the
applicable Redemption Price determined in accordance with Article 6 all
Certificates then Outstanding (including, when applicable, an estimate of the
Premium to be paid on the Redemption Date computed using the Treasury Yield
determined as if the Redemption Date were the date of such notice) and to pay
the Indenture Trustee all amounts then due it hereunder, which funds shall be
held by the Indenture Trustee as provided in Section 9.04. Subject to the
subsequent satisfaction by the Owner Trustee of its obligations pursuant to the
next following sentence, upon the giving of such notice and the receipt by the
Indenture Trustee of such deposit, the Indenture Trustee shall deem all
instructions received from the Owner Trustee as having been given by the
Holders of 100% of the Outstanding principal amount of Certificates for all
purposes of this Indenture. If such notice is given, the Owner Trustee further
agrees that it will deposit or cause to be deposited with the Indenture
Trustee, on or prior to the applicable Redemption Date, whether or not an
Indenture Event of Default is then continuing, funds sufficient, when added to
the funds already held by the Indenture Trustee for such purpose, to redeem or
purchase at the applicable Redemption Price (including the Break Amount or
Premium (if the Redemption Price includes Premium) actually payable in respect
thereof, if any, and all other amounts payable to the Holders hereunder or
under any other Operative Agreement on such Redemption Date) all Certificates
then Outstanding and to pay the Indenture Trustee all amounts then due it
hereunder.
(iii) Anything in this Agreement to the contrary
notwithstanding, the Indenture Trustee shall not be entitled to exercise any
remedy hereunder as a result of an Indenture Event of Default which arises
solely by reason of one or more events or circumstances which constitute a
Lease Event of Default unless the Indenture Trustee as security assignee of the
Owner Trustee shall have exercised or concurrently be exercising one or more of
the remedies provided for
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in Section 15 of the Lease with respect to the Aircraft, provided, that the
requirement to exercise such remedies under the Lease shall not apply in
circumstances where the Indenture Trustee is involuntarily stayed or otherwise
prohibited by applicable law or court order from exercising such remedies under
the Lease after the Section 1110 Period. The "Section 1110 Period" shall mean
the period commencing on the date of such stay or prohibition and ending on the
earlier of (x) the 60th day thereafter (or such longer period (A) as may be
specified in Section 1110(a)(1) of the Bankruptcy Code, (B) equal to the period
of an extension with the consent of the Indenture Trustee of the 60-day period
specified therein pursuant to Section 1110(b) of the Bankruptcy Code, or (C)
resulting from the Indenture Trustee's own failure to give any requisite notice
to any Person) and (y) the date of repossession of the Aircraft. References in
this sentence to particular sections of the Bankruptcy Code as in effect on the
date hereof shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to
the contrary, including, without limitation, Sections 8.03(b), 8.03(c) and
8.03(d), as long as no Lease Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee shall take any
action in violation of the Company's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Company's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given
to the Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the
Indenture Trustee in the exercise of any right, remedy or power or in pursuing
any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of the Owner Trustee or the Company or to be
an acquiescence therein.
Section 8.04. Waiver of Owner Trustee. To the extent now
or at any time hereafter enforceable under applicable law, the Owner Trustee
covenants that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Indenture
Estate or any part thereof, prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or prior to any applicable decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute now or hereafter made
or enacted by any state or otherwise to redeem the property so sold or any part
thereof, and hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of the Owner Trustee acquiring any
interest in or title to the Indenture Estate or any part thereof subsequent to
the date of this Agreement, all benefit and advantage of any such law or laws,
and covenants that it will not invoke or utilize any such law or laws, but will
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Nothing in this Section 8.04 shall be deemed to
be a waiver by the Owner Trustee of its rights under Section 8.03(e).
The Indenture Trustee may maintain such a pleading, or in any
manner whatsoever claim or take any benefit or advantage of or from any law now
or hereafter in force even if it does
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
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not possess any of the Certificates or does not produce any of them in the
proceeding. A delay or omission by the Indenture Trustee or any Holder in
exercising any right or remedy accruing upon an Indenture Event of Default
under this Agreement shall not impair the right or remedy or constitute a
waiver of or acquiescence in such Indenture Event of Default.
Section 8.05. Waiver of Existing Defaults. The Holders of
a majority in aggregate principal amount of the Outstanding Certificates by
notice to the Indenture Trustee may waive on behalf of the Holders an existing
Indenture Default or Indenture Event of Default and its consequences except (i)
an Indenture Default or Indenture Event of Default in the payment of the
principal of or interest on any Certificate or (ii) in respect of a covenant or
provision hereof which pursuant to Section 11.02 cannot be amended or modified
without the consent of the Holder affected.
Section 8.06. Control by Majority. The Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee or exercising any trust or power conferred
on it by this Agreement. However, the Indenture Trustee may refuse to follow
any direction that conflicts with law or this Agreement, that is unduly
prejudicial to the rights of the Holders so affected, or that would, without
satisfactory indemnity from the Holders, subject the Indenture Trustee to
personal liability.
Section 8.07. Limitation on Suits by Holders. A Holder of
a Certificate may pursue a remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written
notice of a continuing Indenture Event of Default under this
Agreement;
(2) the Holders of at least 25% in aggregate principal
amount of the Outstanding Certificates make a written request to the
Indenture Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss,
liability or expense to be, or which may be, incurred by the Indenture
Trustee in pursuing the remedy;
(4) the Indenture Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a majority
in aggregate principal amount of the Outstanding Certificates do not
give the Indenture Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Agreement the right of any Holder
to receive payment of principal of, Premium or Break Amount, if any, and
interest on such Holder's Certificate on or after the respective due dates
expressed in such Certificate, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
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Section 8.09. Indenture Trustee May File Proofs of Claim.
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Holders allowed in any judicial proceedings
relating to any obligor on the Certificates, its creditors, or its property.
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee.
(a) The Indenture Trustee will furnish to each
Certificate Holder promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and
other instruments furnished to the Indenture Trustee under any Operative
Agreement or received from the Owner Trustee pursuant to Section 4.01(vi) to
the extent the same shall not have been otherwise directly distributed to the
Holders pursuant to the express provision of any other Operative Agreement.
(b) Subject to the terms of Sections 8.03(e), 8.05, 8.06,
9.01(c), 11.02 and 11.06, upon the written instructions at any time and from
time to time of Holders of a majority in aggregate principal amount of the
Outstanding Certificates, the Indenture Trustee shall take such of the
following actions as may be specified in such instructions: (i) exercise such
election or option, or make such decision or determination, or give such
notice, consent, waiver or approval or exercise such right, remedy or power or
take such other action hereunder or under any other Operative Agreement or in
respect of any part or all of the Indenture Estate as shall be specified in
such instructions; (ii) take such action with respect to, or to preserve or
protect, the Indenture Estate (including the discharge of Liens) as shall be
specified in such instructions and as are consistent with this Indenture; and
(iii) take such other action in respect of the subject matter of this Indenture
as is consistent with the terms hereof and the other Indenture Documents. The
Indenture Trustee will execute and the Owner Trustee will file or cause to be
filed such continuation statements with respect to financing statements
relating to the security interest created hereunder in the Indenture Estate as
may be specified from time to time in written instructions of Holders of a
majority in aggregate principal amount of the Outstanding Certificates (which
instructions may, by their terms, be operative only at a future date and which
shall be accompanied by the execution form of such continuation statement so to
be filed).
(c) The Indenture Trustee shall not be required to take
any action or refrain from taking any action under Section 8.06 or 9.01(b)
unless the Indenture Trustee shall have been indemnified by the Holders against
any liability, cost or expense (including counsel fees) which may be incurred
in connection therewith. The Indenture Trustee shall not be under any
obligation to take any action under this Agreement and nothing in this
Agreement contained shall require the Indenture Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. The Indenture Trustee shall not be required to take any action under
Section 8.06 or 9.01(b), nor shall any other provision of this Indenture be
deemed to impose a duty on the Indenture Trustee to take any action, if the
Indenture Trustee shall have been advised by counsel that such action is
contrary to the terms hereof or is otherwise contrary to law.
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(d) The Indenture Trustee shall not have any duty or
obligation to use, operate, store, lease, control, manage, sell, dispose of or
otherwise deal with the Aircraft or any other part of the Indenture Estate, or
to otherwise take or refrain from taking any action under, or in connection
with, this Indenture or any part of the Indenture Estate, except as expressly
provided by the terms of this Indenture or as expressly provided in written
instructions from Holders as provided in this Indenture; and no implied duties
or obligations shall be read into this Indenture against the Indenture Trustee.
(e) The Owner Trustee and the Indenture Trustee agree
that they will not use, operate, store, lease, control, manage, sell, dispose
of or otherwise deal with the Aircraft or any other part of the Indenture
Estate except (i) in accordance with the terms of the Lease or the
Participation Agreement, or (ii) in accordance with the powers granted or
reserved to, or the authority conferred upon, the Owner Trustee and the
Indenture Trustee pursuant to this Indenture and in accordance with the express
terms hereof.
(f) Subject to the provisions of Section 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Agreement. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to be
extent required by law.
Section 9.02. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may consult with counsel or require an Officer's Certificate or an
Opinion of Counsel from the Company or the Owner Trustee after which it will
take such action or refrain from acting as it deems appropriate. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith and in accordance herewith in reliance on a resolution of the Board of
Directors of the Company, the written advice of counsel acceptable to the Owner
Trustee, the Company and the Indenture Trustee, officer's certificates or
opinions of counsel provided by the Company or the Owner Trustee.
(c) The Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care; provided, that so long as no Indenture Event of
Default shall have occurred and be continuing no such agents shall be appointed
by the Indenture Trustee without the consent of the Company and the Owner
Trustee, which consent shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) If an Indenture Event of Default under this Agreement
has occurred and is continuing, the Indenture Trustee shall exercise its rights
and powers under this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
Section 9.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates and may otherwise
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deal with the Owner Trustee, the Company or an Affiliate of the Owner Trustee
or the Company or a subsidiary of the Owner Trustee or the Company with the
same rights it would have if it were not the Indenture Trustee. Any Agent may
do the same with like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or
Paying Agent; Investments. Any monies (including without limitation for
purposes of this Section 9.04 Permitted Investments constituting the proceeds
of the maturity, sale or other disposition of any Permitted Investment) held by
the Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its account
with any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
States thereof having combined capital and surplus and retained earnings of at
least $100,000,000, and neither the Indenture Trustee nor the Paying Agent
shall have any liability for interest upon any such monies except as otherwise
agreed in writing or (ii) at any time and from time to time, so long as no
Lease Default (of the type described in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, at the request
(given directly by the Company to the Indenture Trustee) of the Company acting
as the agent of the Owner Trustee, shall be invested and reinvested in
Permitted Investments as specified in such request (if such investments are
reasonably available for purchase) and sold, in any case at such prices,
including accrued interest or its equivalent, as are set forth in such request,
and such Permitted Investments shall be held by the Indenture Trustee in trust
as part of the Indenture Estate until so sold; provided, that the Company, on
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity,
sale or other disposition of any such Permitted Investment and, so long as no
Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, be entitled to
receive from the Indenture Trustee, and the Indenture Trustee on behalf of the
Owner Trustee, shall promptly pay to the Company pursuant to Section 22.1 of
the Lease, any profit, income, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment. If any Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing, any net income, profit,
interest, dividend or gain realized upon maturity, sale or other disposition of
any Permitted Investment shall be held as part of the Indenture Estate and
shall be applied by the Indenture Trustee at the same time, on the same
conditions and in the same manner as the amounts in respect of which such
income, profit, interest, dividend or gain was realized are required to be
distributed in accordance with the provisions hereof or of the Lease pursuant
to which such amounts were required to be held. The Indenture Trustee shall not
be responsible for any losses on any investments or sales of Permitted
Investments made pursuant to the procedure specified in this Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event of
Default under this Agreement occurs and is continuing and the Indenture Trustee
has actual knowledge of same, the Indenture Trustee shall (i) promptly send
written notice thereof to the Company, the Owner Trustee and the Owner
Participant and, so long as the Series SWA 1995 Trust N602SW-I Certificates
shall be Outstanding, the Holders thereof and (ii) within 90 days after it
occurs, mail to each other Holder notice of all uncured Indenture Events of
Default under this Agreement. Except in the case of a default in the payment of
the principal of, Premium, if any, or interest on any Certificates or during
any period when the Series SWA 1995 Trust N602SW-I Certificate shall be
Outstanding, Break Amount, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii)
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above if and so long as the executive committee or trust committee of directors
of the Indenture Trustee and/or Responsible Officers thereof in good faith
determines that withholding such notice is in the interest of the Holders. In
addition, if an Indenture Default under this Agreement occurs and is continuing
and if the Indenture Trustee has actual knowledge of same, the Indenture
Trustee shall promptly send written notice thereof to the Company, the Owner
Trustee and the Owner Participant and, so long as the Series SWA 1995 Trust
N602SW-I Certificates shall be Outstanding, the Holders thereof.
Section 9.06. Compensation and Indemnity. (a) The Owner
Trustee shall pay to the Indenture Trustee from time to time (i) reasonable
compensation for its services, which compensation shall not be limited by any
law on compensation of a trustee of an express trust, (ii) reimbursement for
all reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the reasonable compensation and expenses of the Indenture Trustee's counsel and
any agent appointed in accordance with Section 9.02(c)), and (iii)
indemnification against any loss or liability incurred by it arising out of or
in connection with its acceptance or administration of the trust or trusts
hereunder except (A) as such expenses or loss or liability might result from
the gross negligence or willful misconduct of the Indenture Trustee or the
inaccuracy of any representation or warranty of the Indenture Trustee in its
individual capacity in Section 8 of the Participation Agreement or failure by
the Indenture Trustee to perform its payment and investment obligations
hereunder, (B) as otherwise provided in Section 9.10 and (C) as otherwise
excluded by the terms of Sections 7(b) and 7(c) of the Participation Agreement
from the Company's indemnities under said Sections; provided, that the
Indenture Trustee shall not make any claim under this Section 9.06(a) for any
claim or expense indemnified against by the Company under the Participation
Agreement without first making demand on, and pursuing such demand on a
reasonable basis for a reasonable length of time, the Company for payment of
such claim or expense. The Indenture Trustee shall notify the Owner Trustee and
the Company promptly of any claim for which it is entitled to be indemnified
hereunder. Subject to the conditions and procedures equivalent to those set
forth in Sections 7(b) and 7(c) of the Participation Agreement, the Owner
Trustee shall defend the claim and the Indenture Trustee shall cooperate in the
defense. The Indenture Trustee may have separate counsel and the Owner Trustee
shall pay the reasonable fees and expenses of such counsel. The Owner Trustee
need not pay for any settlement made without its and the Company's consent.
(b) To secure the payment obligations of the Owner
Trustee pursuant to this Section 9.06, the Indenture Trustee shall have a lien
prior to that of the Holders of the Certificates on all money or property
constituting a part of the Indenture Estate held or collected by the Indenture
Trustee, except that held in trust to pay the principal of, and interest on,
the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least
30 days' prior written notice to the Company, the Owner Trustee and the Holders
of a majority in aggregate principal amount of the Outstanding Certificates.
The Holders of a majority in aggregate principal amount of the Outstanding
Certificates may remove the Indenture Trustee by giving at least 30 days' prior
written notice to the Indenture Trustee, the Owner Trustee and the Company and
may appoint a successor Indenture Trustee with the Owner Trustee's and the
Company's consent. At such time as
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Series SWA 1995 Trust N602SW Certificates are Outstanding, the Owner Trustee
may remove the Indenture Trustee if:
(1) the Indenture Trustee fails to comply with
Section 9.09, fails to perform its payment obligations hereunder or
otherwise fails to perform any of its material obligations hereunder;
(2) the Indenture Trustee is adjudged a bankrupt
or an insolvent;
(3) a receiver or public officer takes charge of
the Indenture Trustee or its property; or
(4) the Indenture Trustee becomes incapable of
acting.
(c) If the Indenture Trustee resigns or is removed, or if
a vacancy exists in the office of Indenture Trustee for any reason, Holders of
a majority in aggregate principal amount of the Certificates or, at such time
as Series SWA 1995 Trust N602SW Certificates are Outstanding, the Owner
Trustee, shall promptly appoint a successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Company, the Owner Trustee or the Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Holder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Company
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the lien provided for in Section 9.06. The successor
Indenture Trustee shall give notice of each appointment of a successor
Indenture Trustee if there are Certificates Outstanding, by mailing written
notice of such event by first-class mail to the Holders.
(g) All provisions of this Section 9.07 except
subparagraphs (b)(l) and (e) and the words "subject to the lien provided for in
Section 9.06" in subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by
Merger, Etc. If the Indenture Trustee or any Agent consolidates with, merges
or converts into, or transfers all or substantially all of its corporate trust
business assets to, another corporation, the successor corporation, without any
further act, shall be the successor Indenture Trustee or Agent, as the case may
be.
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Section 9.09. Eligibility; Disqualification. This
Agreement shall at all times have an Indenture Trustee which shall have a
combined capital and surplus of at least $100,000,000 and shall be a "citizen
of the United States" as defined in the Federal Aviation Act. If such
corporation publishes reports of conditions at least annually, pursuant to law
or to the requirements of Federal, State, Territorial, or District of Columbia
supervising or examining authority, then for the purposes of this Section 9.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
conditions so published.
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in
its individual capacity agrees that it will at its own cost and expense
promptly take such action as may be necessary to duly discharge and satisfy in
full all Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Agreements, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting.
Without limitation of subsections 15.05(d) and 15.05(e), the Indenture Trustee
shall exclude and withhold from each distribution of principal, Premium, if
any, Break Amount, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect to the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders, that
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to
each Holder appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such Holders may reasonably
request from time to time. The Indenture Trustee agrees to file any other
information reports as it may be required to file under United States law. Such
withholding by the Indenture Trustee shall in no event give rise to an
Indenture Event of Default.
Section 9.12. [Reserved for Potential Future Use]
Section 9.13. Certain Rights of Owner Trustee and Owner
Participant. Notwithstanding any other provisions of this Indenture, including
the Granting Clause, the following rights shall be reserved to the Owner
Trustee or the Owner Participant, as the case may be (as separate and
independent rights) to the extent described herein:
(a) at all times the Owner Trustee and the Owner
Participant shall have the right, together with the Indenture Trustee,
to receive from the Lessee all notices, certificates, reports,
filings, opinions of counsel and other documents and all information
which the Company is permitted or required to give or furnish to the
Owner Trustee or the Lessor pursuant to any Indenture Document;
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(b) at all times (unless otherwise specified) the Owner
Trustee shall have the right (1) to the exclusion of the Indenture
Trustee but subject to and without affecting the provisions of Section
11.06, (i) to exercise the rights, elections and options of the Lessor
to make any decision or determination and to give any notice, consent,
waiver or approval with respect to any adjustments under Section 3.7
of the Lease and Sections 17 and 18 of the Participation Agreement,
(ii) to exercise the rights, elections and options of the Lessor with
respect to the termination of the Lease and solicitations of bids and
appraisals pursuant to Section 9 of the Lease, or with respect to
renewals or purchase options and terminations to take effect upon or
after the payment in full (or assumption by the Company) of the
obligations secured hereby, (iii) subject to the terms of Section
8.03(e)(i), to effect cures pursuant to Section 20 of the Lease, and
(iv) to maintain and exercise all rights regarding separate insurance
with respect to the Aircraft for its own account pursuant to Section
11.7 of the Lease (provided, that no such insurance impairs or reduces
coverage under any insurance required to be maintained by the Company
under Section 11 of the Lease) and (2) so long as no Indenture Event
of Default shall have occurred and be continuing, (x) during the
Floating Period, together with the Indenture Trustee (agreement of
both being required) and (y) during the Fixed Period, to the exclusion
of the Indenture Trustee (i) to approve as satisfactory any other
accountants, inspectors, engineers or counsel to render services for
or issue opinions to the Owner Trustee, together with the contents of
any certificates and opinions to be delivered by such Persons, in each
case pursuant to express provisions of the Operative Agreements and
(ii) to grant such consents, approvals and waivers as may be requested
under the Indenture Documents and (3) together with the Indenture
Trustee (each acting separately), to request all certificates and
documents of Lessee, to request assignment of any sublease of the
Aircraft and to exercise inspection rights pursuant to Section 12 of
the Lease;
(c) at all times, the Owner Trustee shall have the
non-exclusive right, as Lessor, to seek specific performance of the
covenants of the Company under the Lease relating to the protection,
insurance, maintenance, possession and use of the Aircraft and to
obtain performance by Lessee under Sections 11(a) and (b) of the
Participation Agreement; and
(d) at all times each of the Owner Trustee (as Owner
Trustee, individually and as Lessor) and the Owner Participant shall
have the right, to the exclusion of the Indenture Trustee, to demand,
collect, sue for or receive the payment of, and waive, modify or
otherwise deal with Excluded Payments due and payable to it, and, in
the case of the Owner Participant, to give the written notice referred
to in the proviso to Section 14.1 of the Lease.
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement;
Defeasance; Termination of Obligations. Subject to Section 10.02, this
Agreement shall cease to be of further effect, and the Owner Trustee and the
Indenture Trustee shall, except as herein provided, be deemed to have been
discharged from their respective obligations with respect to the Certificates
(and the Indenture Trustee, on demand and at the expense of the Owner Trustee,
shall execute proper instruments acknowledging satisfaction and discharge of
this Agreement in respect of the Certificates), when
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(a) (i) all Certificates theretofore executed and
delivered (other than (A) Certificates which have been mutilated, destroyed,
lost or stolen and which have been replaced or exchanged as provided in Section
2.06 and (B) Certificates for the payment of which money held in trust
hereunder has been paid and discharged from such trust, as provided in Section
7.01) have been delivered to the Indenture Trustee for cancellation; or
(ii) all Certificates not theretofore delivered to
the Indenture Trustee for cancellation have become due and payable (whether
upon stated maturity or as a result of redemption or upon acceleration), or
will become due and payable (including as a result of redemption in respect of
which irrevocable notice has been given to the Indenture Trustee on or prior to
the date of such deposit) at maturity within one year, and there has been
deposited with the Indenture Trustee in trust for the purpose of paying and
discharging the entire indebtedness on the Certificates not theretofore
canceled by the Indenture Trustee or delivered to the Indenture Trustee for
cancellation, an amount of cash and/or Government Obligations sufficient to
discharge such indebtedness, including the principal of, Premium, if any, and
interest on the Certificates to the date of such deposit (in the case of
Certificates which have become due and payable), or to the maturity thereof, as
the case may be and, in the case of the Series SWA 1995 Trust N602SW-I
Certificate, Break Amount, if any, and all other amounts payable to the
Original Holder hereunder or under any other Operative Agreement; or
(iii) the Certificates shall have been defeased as
provided in Section 10.05; provided, however, that upon the making of the
deposit referred to in subsection A of Section 10.05, the right of the Owner
Trustee or the Company to cause the redemption of Certificates (except a
redemption in respect of which irrevocable notice has theretofore been given)
shall terminate;
(b) all other amounts then due and payable hereunder have
been paid; and
(c) the Company on behalf of the Owner Trustee has
delivered to the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for or relating to
the satisfaction and discharge of this Agreement contemplated by this Section
10.01 have been complied with.
Section 10.02. Survival of Certain Obligations.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, 2.10, Section 7.01,
Section 9.11, Section 10.03 and Section 10.04, and the rights, duties,
immunities and privileges hereunder of the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All money and
Government Obligations deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment in the case
of the Series SWA 1995 Trust N602SW-I Certificates, as provided for in Section
15.04 or, in the case of the Series SWA 1995 Trust N602SW Certificates, either
directly or through any Paying Agent as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, Premium,
if any, interest, and, in the case of the Series SWA 1995 Trust N602SW-I
Certificates, Break Amount, if any, and all other amounts payable to the
Holders hereunder or under any other Operative Agreement, but such money need
not be segregated from other funds except to the extent required by law.
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Section 10.04. Monies to Be Returned to Owner Trustee. The
Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or Government
Obligations held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Certificates for which
money or Government Obligations have been deposited pursuant to Section 10.01.
Section 10.05. Defeasance. The Owner Trustee may, at any
time, defease the interest of the Indenture Trustee in the Indenture Estate in
whole, but not in part, through the deposit with the Defeasance Trustee, in
accordance with the provisions of this Section 10.05, of cash and/or Government
Obligations; provided, however, that such defeasance shall not be applicable in
respect of the Series SWA 1995 Trust N602SW-I Certificates. Such deposit shall
be made pursuant to a declaration or other appropriate instrument of trust
satisfactory in form and substance to the Defeasance Trustee and the Indenture
Trustee; such deposit shall be absolute and irrevocable and the instrument of
trust shall expressly provide that the Owner Trustee shall have no further
title to or interest in or power to direct the use or application of the cash
and/or Government Obligations so deposited or any of the proceeds arising
therefrom; such instrument shall state that the trust created thereby and the
cash and/or Government Obligations deposited pursuant thereto are for the sole
and exclusive benefit of the Holders and shall expressly provide that the
Defeasance Trustee shall apply such cash and payments of principal and/or
interest on such Government Obligations to, and only to, the punctual payment
of the principal and interest on the Certificates as and when such payments
become due (such declaration or instrument to contain appropriate provisions
for the recording of transfers of Certificates and the names and addresses of
the Holders); and the Owner Trustee shall agree to pay, as the same shall
become due and payable, all fees, costs and charges of the Defeasance Trustee
under such instrument of trust, including those which may become payable after
the date the conditions hereinbelow specified have been met. Upon compliance
with the following conditions, and provided, that no Indenture Event of Default
or Indenture Default shall have occurred and be continuing on a date 91 days
after the date of the deposit of Government Obligations and/or cash with the
Defeasance Trustee as provided in Subsection A below, the Owner Trustee's
obligations with respect to the Certificates will be discharged and this
Indenture shall terminate as provided in Section 10.01:
A. the Owner Trustee shall have deposited with the
Defeasance Trustee absolutely and irrevocably (irrespective of whether
the conditions in Subsections B, C, D and E of this Section 10.05 have
been satisfied) (1) cash and/or (2) Government Obligations which
through the payment of principal and interest in respect thereof in
accordance with their terms, without any reinvestment or further
investment of the principal of or interest earned on such Government
Obligations, will absolutely and unconditionally provide in any and
all circumstances not later than one day before each Payment Date an
amount sufficient to pay and discharge the payment of principal and
interest to be due and payable on such Payment Date;
B. no Indenture Event of Default or Indenture Default
shall have occurred and be continuing on the date of the deposit of
cash and/or Government Obligations as contemplated hereby;
C. the Owner Trustee shall have delivered to the
Defeasance Trustee and to the Certificate Holders written confirmation
by a nationally recognized firm of independent public accountants
(other than the accounting firm then serving as Shawmut Bank
Connecticut,
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National Association's or the Owner Participant's regular auditors)
selected by the Owner Trustee, the form and substance of which
confirmation and the identity of such accounting firm shall be
satisfactory to the Indenture Trustee, that the Government Obligations
deposited for payment of the Certificates, together with any cash
deposited by the Owner Trustee, are sufficient to satisfy the
requirements of Subsection A hereof;
D. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate Holders
an opinion of counsel in form and substance satisfactory to the
Indenture Trustee to the effect that (1) the trust declaration or
other instrument, as the case may be, is legal, valid, binding and
enforceable in accordance with its terms for the sole benefit and use
of the Holders, is irrevocable and the Government Obligations and/or
cash deposited thereunder and the proceeds thereof and therefrom are
held by the Defeasance Trustee thereunder in trust solely for the
benefit of the Holders and will not be subject to any valid interest,
lien, claim or encumbrance of any other Person, including the Owner
Trustee or the Owner Participant or any Person claiming by, through,
under or in the name or on behalf of the Owner Trustee or the Owner
Participant or any creditor or beneficiary of the Owner Trustee or the
Owner Participant, or by any court or trustee in bankruptcy and (2)
such deposit will not constitute a preferential transfer or a
fraudulent conveyance under any bankruptcy or other similar law and
shall cover such other matters as the Indenture Trustee may reasonably
require in connection with such final deposit and matters relating
thereto;
E. the Owner Trustee shall have delivered to the Defeasance
Trustee, the Indenture Trustee and the Certificate Holders an
Officers' Certificate and an Opinion of Counsel (1) to the effect that
there has been published by the Internal Revenue Service a ruling, or
(2) since the date of this Agreement that there has been a change in
or clarification of the applicable Federal income tax law, in either
case to the effect that Holders will not recognize income, gain or
loss for Federal income tax purposes as a result of the exercise by
the Owner Trustee of its option under Section 10.01(a)(iii) and will
be subject to Federal income tax on the same amounts and in the same
manner and at the same times, as would have been the case if such
option had not been exercised; and
F. the Owner Trustee shall have (1) taken such further action
and executed such further documents as may be reasonably required by
any Holder, the Indenture Trustee or the Defeasance Trustee and (2)
delivered to the Defeasance Trustee, the Indenture Trustee and to the
Holders a certificate of a Responsible Officer of the Owner Trustee
stating that all conditions precedent herein to the defeasance of the
Certificates contemplated by this Section 10.05 have been satisfied.
The Owner Participant will pay all expenses (including,
without limitation, reasonable legal fees) incident to the implementation of
the transactions contemplated by this Section 10.05.
For the purpose of this Article 10, the following terms have
the following definitions:
"Defeasance Trustee" shall mean an institution authorized to
transact in the State of New York the business of a trust company
selected by the Owner Trustee and approved by the Indenture Trustee;
provided, that at the time of the delivery of cash and/or Government
Obligations pursuant to this Section 10.05, the institution selected
shall have a combined
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capital and surplus of at least $500,000,000 and shall not be an
Affiliate of the Company, the Owner Participant or Shawmut Bank
Connecticut, National Association.
"Government Obligations" shall mean direct U.S. Dollar
obligations of the United States of America which are not callable,
redeemable or prepayable, directly or indirectly, by any Person.
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent
of Holders. The Owner Trustee and the Indenture Trustee may enter into one or
more agreements supplemental hereto without the consent of any Holder for any
of the following purposes:
(1) to correct any mistake or cure any ambiguity,
defect or inconsistency herein or in the Certificates or to make any
change not inconsistent with the provisions hereof; provided, that
such change does not adversely affect the interests of any Holder;
(2) to evidence the succession of another party
as the Owner Trustee in accordance with the terms of the Trust
Agreement or to evidence (in accordance with Article 9) the succession
of a new trustee hereunder, the removal of the trustee hereunder or
the appointment of any co-trustee or co-trustees or any separate or
additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee or to make any
other provisions with respect to matters or questions arising
hereunder so long as such action shall not adversely affect the
interests of the Holders;
(4) to correct or amplify the description of any
property at any time subject to the Lien of this Agreement or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subject to the Lien of this Agreement or to
subject to the Lien of this Agreement the Airframe or Engines or
airframe or engines substituted for the Airframe or Engines in
accordance herewith or with the Lease; provided, that Trust
Supplements entered into for the purpose of subjecting to the Lien of
this Agreement the Airframe or Engines (or the Replacement Airframe or
any Replacement Engines) in accordance with the Lease need only be
executed by the Owner Trustee;
(5) to add to the covenants of the Owner Trustee,
for the benefit of the Holders, or to surrender any rights or power
herein conferred upon the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
(7) to provide for the assumption by the Company
of the obligations of the Owner Trustee hereunder in accordance with
the terms and conditions applicable thereto specified in Section 7.03;
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(8) to provide for the redemption of the Series
SWA 1995 Trust N602SW-I Certificate and the issuance of the Series SWA
1995 Trust N602SW Certificates in accordance with the terms and
conditions applicable thereto specified in Article 15; or
(9) to include on the Certificates any legend as
may be required by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
Holders. (a) With the written consent of the Holders of a majority of the
aggregate principal amount of the Outstanding Certificates, the Owner Trustee
and the Indenture Trustee may enter into such supplemental agreements to add
any provisions to or to change or eliminate any provisions of this Agreement or
of any such supplemental agreements or to modify the rights of the Holders;
provided, however, that without the consent of each Holder affected thereby, an
amendment under this Section 11.02 may not:
(1) reduce the principal amount of, Premium or
Break Amount, if any, or any installment of interest on, any
Certificate; or
(2) change the date on which any principal amount
of, any Installment Payment Amount payable with respect to, Premium or
Break Amount, if any, or interest on any Certificate, is due or
payable; or
(3) create any Lien on the Indenture Estate prior to
or pari passu with the Lien thereon under this Agreement except such
as are permitted by this Agreement, or deprive any Holder of the
benefit of the Lien on the Indenture Estate created by this Agreement;
or
(4) reduce the percentage in principal amount of
the Outstanding Certificates, the consent of whose holders is required
for any such supplemental agreement, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of
this Agreement or of certain defaults hereunder or their consequences)
provided for in this Agreement; or
(5) make any change in Section 8.05, 8.08, or
(but only for so long as the Series SWA 1995 Trust N602SW-I
Certificates shall be Outstanding) Article 15, or this Section
11.02(a).
(b) It is not necessary under this Section 11.02 for the
Holders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and
the Indenture Trustee of any supplemental agreement pursuant to the provisions
of this Section 11.02, the Indenture Trustee shall transmit by first-class mail
a notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of such Holders appear on
the Register. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental agreement.
Section 11.03. Revocation and Effect of Consents. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every
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subsequent Holder, even if notation of the consent is not made on any
Certificate. However, any such Holder or subsequent Holder may revoke the
consent as to his Certificate if the Indenture Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Holder affected by
such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates. The
Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Certificate thereafter executed. The Indenture Trustee in
exchange for such Certificates may execute new Certificates that reflect the
amendment or waiver.
Section 11.05. Indenture Trustee Protected. The Indenture
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, Etc. of Other Operative
Agreements. (a) Subject to Section 11.01, without the consent of the Holders
of a majority in principal amount of Outstanding Certificates, the respective
parties to the Participation Agreement, the Lease and the Trust Agreement may
not modify, amend or supplement any of said agreements, or give any consent,
waiver, authorization or approval thereunder, for any purpose, including adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or modifying in any manner the rights of the respective
parties thereunder; provided, however, that the actions specified in subsection
(b) of this Section 11.06 may be taken without the consent of the Indenture
Trustee or any Holder.
(b) Subject to the provisions of subsection (c) of this
Section 11.06, the respective parties to the Participation Agreement, the Lease
and the Trust Agreement, at any time and from time to time without the consent
of the Indenture Trustee or of any Holder may:
(1) so long as no Indenture Event of Default
shall have occurred and be continuing, modify, amend or supplement the
Lease, or give any consent, waiver, authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 (except as specifically provided below) the parties
to the Lease shall not modify, amend or supplement, or give any
consent, waiver, authorization or approval for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the
respective parties thereunder, with respect to the following
provisions of the Lease as originally executed: Sections 2, 3.1, 3.2
(if the result thereof would be to shorten the Term of the Lease to a
period shorter than the period ending with the final Principal Payment
Date, Installment Date or Maturity Date of the Certificates), 3.3,
3.4, 3.5 (except to the extent such Section relates to Excluded
Payments and amounts payable to the Indenture Trustee in its
individual capacity), 3.6 (except insofar as it relates to the address
or account information of the Owner Trustee or the Indenture Trustee),
the first sentence of Section 3.8 or any proviso in said Section, 4, 5
(but only insofar as it relates to return condition upon termination
of the Lease pursuant to Section 15), 6, 7 (except that further
restrictions may be imposed on the Company), 9, 10 (except that
additional requirements may be imposed on the Company), 11 (except for
Section 11.6 insofar as such Section relates to the Owner Participant
and the Lessor and except that additional insurance requirements may
be imposed on the Company), 12 (except in order to increase the
Company's liabilities or enhance the Lessor's rights thereunder), 13
(except in the case of an assignment by the Lessor in circumstances
where the
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Aircraft shall remain registrable under the Federal Aviation Act), 14
(except to impose additional or more stringent Lease Events of
Default), 15 (except to impose additional remedies), 16, 17, 18.2(b)
(except to impose additional requirements on the Company), 19, 20, 21
and 22, and (i) any definition of terms used in the Lease, to the
extent that any modification of such definition would result in a
modification of the Lease not permitted pursuant to this subsection
(b) and (ii) any other provision of the Lease not hereinabove referred
to if the modification, amendment or supplement thereto, or consent,
waiver, authorization or approval in respect thereof would adversely
affect the Indenture Trustee's interest in the Trust Estate, reduce
Lessee's obligations in respect of maintaining the Aircraft or
otherwise impair the value of the Trust Estate; provided, that in the
event an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as Lessor under the Lease to modify, amend or supplement the
Lease or give any consent, waiver, authorization or approval
thereunder, for any purpose, including, adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or
of modifying in any manner the rights of the Lessor thereunder;
provided, further, that without the prior consent of the Owner
Trustee, and whether or not an Indenture Event of Default shall have
occurred and be continuing, no such action shall be taken with respect
to any of the provisions of Sections 1 (to the extent any modification
of a definition contained therein would result in a modification of
the Lease not permitted by this proviso), 3.7, 3.8, 4, 5 (to the
extent not related to return upon termination of the Lease pursuant to
Section 15 of the Lease), 6 (to the extent such action would reduce
the Company's obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16
(insofar as it relates to the Lessor), 18, 19, 20, 21 and 22 of the
Lease, or any other Section of the Lease to the extent such action
shall affect the amount or timing of any amounts payable by the
Company under the Lease as originally executed (or as subsequently
modified with the consent of the Owner Trustee) which, absent the
occurrence and continuance of an Indenture Event of Default, will be
distributable to the Owner Trustee under Article 3; and provided,
further, that the parties to the Lease may take any such action
without the consent of the Indenture Trustee or any Holder to the
extent such action relates to the payment of amounts constituting, or
the Owner Trustee's, the Owner Participant's or the Company's rights
or obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, in each case only to the extent any such action shall
not adversely affect the interests of the Holders;
(3) modify, amend or supplement the Participation
Agreement, or give any consent, waiver authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 the parties to the Participation Agreement shall
not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to the following provisions of the
Participation Agreement as originally executed: Sections 1(b), 7
(insofar as such Section 7 relates to the Indenture Trustee and the
Holders), 8, 11, 13, 17, 18 and 19 and (i) any definition of terms
used in the Participation Agreement, to the extent that any
modification of such definition would result in a modification of the
Participation Agreement not permitted pursuant to this subsection (b)
and (ii) any other provision of the Participation Agreement not
hereinabove referred to if the
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modification, amendment or supplement thereto, or consent,
authorization or approval in respect thereof would adversely affect
the Indenture Trustee's interest in the Trust Estate or otherwise
impair the value of the Trust Estate; and
(4) modify, amend or supplement any of said
agreements in order to cure any ambiguity, to correct or supplement
any provisions thereof which may be defective or inconsistent with any
other provision thereof or of any provision of this Indenture, or to
make any other provision with respect to matters or questions arising
thereunder or under this Agreement which shall not be inconsistent
with the provisions of this Agreement, provided the making of any such
other provision shall not adversely affect the interests of the
Holders.
(c) No modification, amendment, supplement, consent,
waiver, authorization or approval with respect to the Lease or the
Participation Agreement, whether effected pursuant to subsection (a) or
pursuant to subsection (b) of this Section 11.06 and anything in such
subsections or elsewhere in this Agreement to the contrary notwithstanding,
shall, without the consent of the holder of each Outstanding Certificate
affected thereby,
(1) modify, amend or supplement the Lease in such
a way as to extend the time of, or the manner of making any, payment
of any Advance or Basic Rent, or Stipulated Loss Value or any other
amounts payable to the Indenture Trustee for its own account or for
the account of the Holders (subject in any event to the last paragraph
of Section 3.3 of the Lease) upon the occurrence of an Event of Loss
or Termination Value and any other amounts payable to the Indenture
Trustee for its own account or for the account of the Holders (subject
in any event to the last paragraph of Section 3.3 of the Lease) upon
termination of the Lease with respect to the Aircraft, payable under,
or as provided in, the Lease as originally executed, or reduce the
amount of any installment of any Advance or Basic Rent or Supplemental
Rent so that the same is less than the payment of principal of,
Premium, if any, Break Amount, if any, and interest on the
Certificates, as the case may be, to be made from such installment of
any Advance or Basic Rent or Supplemental Rent, or reduce the
aggregate amount of Stipulated Loss Value, or any other amounts
payable under, or as provided in, the Lease as originally executed
upon the occurrence of an Event of Loss so that the same is less than
the accrued interest on and the principal as of the Lease Loss Payment
Date, and Break Amount, if any, of the Certificates at the time
Outstanding or reduce the amount of Termination Value or Special
Purchase Price and any other amounts payable under, or as provided in,
the Lease as originally executed upon termination of the Lease so that
the same is less than the accrued interest on and principal as of the
date of any such termination and Premium, if any, and Break Amount, if
any of Certificates at the time Outstanding, or
(2) modify, amend or supplement the Lease in such
a way as to, or consent to any assignment of the Lease or give any
consent, waiver, authorization or approval which would, release the
Company from its obligations in respect of payment of Basic Rent or
Supplemental Rent, or Stipulated Loss Value and any other amounts
payable to the Indenture Trustee for its own account or the account of
the Holders (subject in any event to the last paragraph of Section 3.3
of the Lease) upon the occurrence of any Event of Loss, or Termination
Value or Special Purchase Price and any other amounts payable to the
Indenture Trustee for its own account or the account of the Holders
(subject in any event to the last paragraph of Section 3.3 of the
Lease), payable under, or as provided in, the Lease as
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originally executed, except for any such assignment pursuant to
Section 8(s) of the Participation Agreement, and except as provided in
the Lease as originally executed.
Section 11.07. Trust Supplement. The Owner Trustee and the
Indenture Trustee hereby confirm and agree that upon execution and delivery of
any Trust Supplement covering the Aircraft by the Owner Trustee substantially
in the form attached hereto as Exhibit C or any trust supplement covering a
sublease of the Aircraft, this Agreement shall be supplemented by such Trust
Supplement or such trust supplement without further action by the Owner Trustee
or Indenture Trustee.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically
provided herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by courier service, telegram, telex, telemessage, telecopy, telefax, cable or
facsimile (confirmed by telephone or in writing in the case of notice by
telegram, telex, telemessage, telecopy, telefax, cable or facsimile) or any
other customary means of written communication, and any such notice shall be
effective when delivered,
if to the Indenture Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telex: 835437 WILM TR
Facsimile: (302) 651-8882
Telephone: (302) 651-1000
if to the Owner Trustee, to:
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telex: 221086 CTNB-HFD
Facsimile: (203) 240-7920
Telephone: (203) 722-9079
or if to any other Person, addressed to such Person as provided in the
Participation Agreement.
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(b) The Company, the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Original Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Holders of the Series
SWA 1995 Trust N602SW Certificates shall be mailed by first-class mail to the
addresses for Holders shown on the Register kept by the Registrar and to
addresses filed with the Indenture Trustee for other Holders. Failure so to
mail a notice or communication or any defect in such notice or communication
shall not affect its sufficiency with respect to other Holders of such
Certificates of that or any other series entitled to receive notice.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) Notwithstanding the foregoing, all communications or
notices to the Indenture Trustee shall be deemed to be given only when received
by a Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. [Reserved for Potential Future Use]
Section 12.04. Rules by Indenture Trustee and Agents. The
Indenture Trustee may make reasonable rules for action by or a meeting of the
Holders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
Section 12.05. Non-Business Days. With respect to the
Series SWA 1995 Trust N602SW Certificates only, if a payment date is not a
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for
the intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
Section 12.07. No Recourse Against Others. No director,
officer, employee or stockholder, as such, of the Company, the Owner Trustee or
the Owner Participant, as the case may be, shall have any liability for any
obligations of the Company, the Owner Trustee or the Owner Participant, as the
case may be, under this Agreement or for any claim based on, in respect of or
by reason of such obligations or their creation. Each Holder by accepting a
Certificate waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute but one instrument.
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Section 12.09. Applicability Only to Original Holder.
Notwithstanding any provision to the contrary herein, Sections 15.03 through
15.05 shall only be applicable to the Holders of Series SWA Trust N602SW-I
Certificates.
Section 12.10. Severability. Any provision of this
Indenture which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of
Lease. Upon any of:
(a) the voluntary termination of the Lease by the Company
pursuant to Section 9 thereof on the Lease Termination Date, and upon payment
to the Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its
option pursuant to Section 18.2 of the Lease on the Special Purchase Option
Date (unless the Company shall have elected to assume all of the rights and
obligations of the Owner Trustee hereunder as provided for in Section 8(r) of
the Participation Agreement), and upon payment to the Indenture Trustee of an
amount equal to the Redemption Price as at the applicable Redemption Date of
all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss
Payment Date, following an Event of Loss suffered by the Airframe under
circumstances where the Company does not exercise its option to substitute a
Replacement Airframe therefor pursuant to Section 10.1.2 of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price as
at the Redemption Date of all Outstanding Certificates, or
(d) the satisfaction, discharge, defeasance and
termination of obligations under this Agreement in accordance with Section
10.01,
the Lien of this Agreement on the Indenture Estate shall terminate (except for
the Lien on funds held by the Indenture Trustee to pay the Certificates and the
Lien on amounts due from the Company under the Lease necessary to pay the
Certificates or the Indenture Trustee) and the Indenture Trustee shall execute
such instruments as may be requested by the Company or the Owner Trustee to
evidence such termination (at the Company's or the Owner Trustee's expense).
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE]
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ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N602SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N602SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N602SW-I
CERTIFICATES
Section 15.01. Conditions Precedent to Issuance of Series
SWA 1995 Trust N602SW Certificates. The issuance of the Series SWA 1995 Trust
N602SW Certificates pursuant to Section 18 of the Participation Agreement is
subject to all conditions specified in such section.
Simultaneously with the satisfaction of such conditions, the
Owner Trustee shall deliver to the Indenture Trustee a completed version of
Exhibits B, B-l and B-2 with respect to the Series SWA 1995 Trust N602SW
Certificates, which completed Exhibits B, B-l and B-2 shall specify the
maturities and principal amounts of the Series SWA 1995 Trust N602SW
Certificates and the applicable interest rates, together with the reference
dates for purposes of determining the Owner Trustee's rights to redeem such
Certificates as provided for in the Operative Agreements. Such completed
Exhibits B, B-l and B-2 shall be deemed upon such delivery automatically to
have been incorporated herein without further action of the parties hereto.
Section 15.02. Payment upon Issuance of Series SWA 1995
Trust N602SW Certificates. Simultaneously with the receipt of the proceeds of
the issuance of the Series SWA 1995 Trust N602SW Certificates, the Indenture
Trustee, on behalf of the Owner Trustee, shall apply an amount equal to the
Redemption Price of the Series SWA 1995 Trust N602SW-I Certificates to the
redemption of the Series SWA 1995 Trust N602SW-I Certificates in accordance
with Section 15.03.
Section 15.03. Special Provision Governing Refinancing of
the Series SWA 1995 Trust N602SW-I Certificate. Notwithstanding any other
provision of this Agreement, as long as any Series SWA 1995 Trust N602SW-I
Certificate is Outstanding, if a refinancing shall be effected pursuant to
Section 17 or 18 of the Participation Agreement and if all the conditions to
such refinancing set forth herein and in such Section 17 or 18 shall have been
satisfied, the Series SWA 1995 Trust N602SW-I Certificates may be refinanced in
whole at a Redemption Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to, but excluding, the applicable
Redemption Date plus the Break Amount, if any, and any other amounts payable to
the Holders thereof hereunder or under the Participation Agreement, but without
any other premium or penalty; provided, however, that the applicable Redemption
Date for the redemption of the Series SWA 1995 Trust N602SW-I Certificates
pursuant to this Section 15.03 shall be the applicable Refinancing Date or
Section 18 Refinancing Date, as the case may be.
Section 15.04. Special Provision for Payments in Respect of
the Series SWA 1995 Trust N602SW-I Certificate. Notwithstanding any other
provision of this Agreement, all amounts payable in respect of the Series SWA
1995 Trust N602SW-I Certificates shall be paid by the Indenture Trustee (i) if
to the Original Holder by FedWire transfer in immediately available funds
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-58-
<PAGE> 65
in Dollars through the Federal Reserve Bank of San Francisco for the account of
Bank of America National Trust and Savings Association ABA #121000358, for
credit to GPO Account Administration #5693, Account No. 12330-14364, ref:
Southwest Airlines Interim Debt, or (ii) if to any other Holder of such
Certificates (or as may otherwise be directed by the Original Holder), to such
account maintained by such Holder with any bank located in the United States
and designated by such Holder to the Indenture Trustee, in any case without
presentment or surrender of any Certificate, except that in the case of any
final payment with respect to any Series SWA 1995 Trust N602SW-I Certificate,
such Certificate shall be surrendered promptly thereafter to the Indenture
Trustee by the Holder thereof for cancellation. Such payment shall be made by
the Indenture Trustee, in the case of any such designated account in New York,
New York, prior to 2:00 P.M., New York time, on the due date thereof if such
payment is received by the Indenture Trustee by 1:00 P.M., New York time, or by
12:00 Noon, New York time on the next succeeding Business Day if such payment
is received after 1:00 P.M., New York time. In the event the Indenture Trustee
shall fail to make any such payment as provided in the immediately foregoing
sentence after its receipt of funds at the place and prior to the time
specified above, the Indenture Trustee, in its individual capacity and not as
trustee, agrees to compensate the Certificate Holders for loss of use of funds
in a commercially reasonable manner.
Section 15.05. Increased Costs, Break Amount, Additional
Interest, Taxes, Etc. (a) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements which are provided for in subsection (c), below) after the
Delivery Date in any law or regulation or in the interpretation thereof by any
government or central bank or other governmental department, agency, board,
service or governmental body charged with responsibility for the administration
or interpretation thereof or (ii) the compliance with any guideline or request
made after the Delivery Date by any government or central bank or other
governmental department, agency, board, service or other governmental body
(whether or not having the force of law), there shall be any increase in the
cost to, or any reduction of the rate of return on assets or equity of, any
Holder (or any of its Affiliates) of the Series SWA 1995 Trust N602SW-I
Certificate of agreeing to make or making, funding or maintaining the loan
evidenced by its Series SWA 1995 Trust N602SW-I Certificate in respect of (x)
any period as to which the applicable Debt Rate is determined by reference to
the Offshore Rate and (y) capital adequacy requirements, then the Owner Trustee
shall from time to time pay to such Holder such amount as shall be necessary to
reimburse such Holder for such increase in cost within 10 Business Days after
delivery to the Owner Trustee, the Indenture Trustee and the Company of a
certificate of an officer of such Holder setting forth in reasonable detail the
event by reason of which it claims such increase in cost and the basis for the
determination of the amount of such increase in cost; provided, however, that
the Original Holder shall not be entitled to assert any claim under this
subsection 15.05(a) in respect of taxes (including Taxes (as defined in the
Participation Agreement) and the taxes referred to in subsections (d) and (e)
of this Section 15.05). Such certificate shall, in the absence of manifest
error, be binding and conclusive. Such Holder shall notify the Owner Trustee,
the Indenture Trustee and the Company as soon as possible of the occurrence of
any event by reason of which it is entitled to make a claim as described in
this subsection (a), but the failure to give such notice shall not affect the
obligations of the Owner Trustee hereunder.
(b) In the event that any Holder of the Series SWA 1995
Trust N602SW-I Certificate incurs any Break Amount (as defined below) in
connection with any payment, prepayment, acceleration, redemption, refinancing
or purchase, in whole or in part, of the principal of its Series SWA 1995 Trust
N602SW-I Certificate in accordance with the provisions of this Agreement or
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-59-
<PAGE> 66
otherwise on a date other than the last day of an Interest Period, then the
Owner Trustee shall pay to such Holder such Break Amount on the date of such
payment, prepayment, acceleration, redemption, refinancing or purchase, as the
case may be.
For the purposes hereof, "Break Amount" means an amount equal
to the net funding loss or additional expense which any Holder of a Series SWA
1995 Trust N602SW-I Certificate sustains or incurs or will sustain or incur as
a result of any payment, prepayment, acceleration, redemption, refinancing or
purchase (whether by mandatory or voluntary prepayment, optional purchase,
acceleration or otherwise) of any principal of its Series SWA 1995 Trust
N602SW-I Certificate on a date other than the last day of an Interest Period,
as reasonably determined by such Holder and set forth in a certificate of such
Holder which includes in reasonable detail the basis or the calculations of the
amount being claimed.
(c) The Owner Trustee agrees to pay to any Holder of a
Series SWA 1995 Trust N602SW-I Certificate, to the extent that such Holder
shall require, due to either (i) the introduction of or any change after the
Delivery Date in any law or regulation or in the interpretation thereof by the
Federal Reserve Board (or any governmental authority succeeding thereto) or
(ii) compliance with any guideline or request made after the Delivery Date by
the Federal Reserve Board (whether or not having the force of law), to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
the loan evidenced by its Series SWA 1995 Trust N602SW-I Certificate, in
respect of any period to which such reserve maintenance requirement is so
applicable and the applicable Debt Rate is determined by reference to the
Offshore Rate, in an amount as to any such period equal to the amount obtained
by applying to the outstanding principal amount of such loan during such period
an interest rate equal at all times to the remainder obtained by subtracting
(A) the applicable Offshore Rate from (B) the rate obtained by dividing such
Offshore Rate by a percentage equal to 100% minus the Eurocurrency Reserve
Percentage, if any, applicable from time to time to such Holder. Such
additional interest shall be paid by the Owner Trustee to any Holder of a
Series SWA 1995 Trust N602SW-I Certificate from time to time as and when
interest is payable under such Holder's Certificate, subject to receipt of
notice of the amount of such additional interest for such Holder.
(d) Should any Holder of a Series SWA 1995 Trust N602SW-I
Certificate fail to qualify for a complete exemption from withholding of United
States Federal income tax because of a change in the provisions of the Code or
other relevant laws from those in effect on the Delivery Date, and the
Indenture Trustee is required by law to deduct or withhold United States
Federal income tax from amounts paid to such Holder, the amounts payable
hereunder and under its Series SWA 1995 Trust N602SW-I Certificate shall be
increased as may be necessary so that, after all required deductions and
withholdings for United States Federal income tax resulting from any such
change in the Code, such Holder receives an amount equal to the excess of (i)
the amount it would have received had no such deduction or withholding been
made over (ii) the additional amount of United States Federal income tax that
would have been payable by it under Section 882 of the Code in the absence of
such change in the Code.
(e) Each Holder of a Series SWA 1995 Trust N602SW-I
Certificate by its acceptance of such Series SWA 1995 Trust N602SW-I
Certificate, agrees that it will, promptly after it becomes aware of any event
or the existence of a condition that would give rise to reimbursement or
payment pursuant to subsection 15.05(a), 15.05(c) or 15.05(d) or to increased
payment hereunder and under the Series SWA 1995 Trust N602SW-I Certificate
pursuant to subsection 15.05(d), to the
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-60-
<PAGE> 67
extent not inconsistent with such Holder's internal policies, use reasonable
efforts to make, fund or maintain the loan evidenced by the Series SWA 1995
Trust N602SW-I Certificate through a different Lending Office if, as a result
thereof, the amount of such reimbursement or payment or increased payment, as
the case may be, which would otherwise be required to be made would be
materially reduced and if, as determined by such Holder in its reasonable
discretion the making, funding or maintaining of such loan through such
different Lending Office would not otherwise adversely affect such loan or such
Holder. Each Holder agrees that it will consult with the Owner Trustee in
connection with any relocation of its Lending Office. The Owner Trustee hereby
agrees to pay all reasonable expenses incurred by each such Holder in
considering or taking action pursuant to this subsection (e).
(f) Amounts payable to the Holder of any Series SWA 1995
Trust N602SW-I Certificate pursuant to this Article 15 that are not paid when
due shall bear interest from the due date thereof to, but excluding the date
paid, at the Past Due Rate.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-61-
<PAGE> 68
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as expressly
provided herein and otherwise solely as
Owner Trustee
By: /s/ Pablo de la Canal
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity, except as
otherwise expressly provided herein, but
solely as Indenture Trustee
By: /s/ James P. Lawler
Title: Vice President
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
<PAGE> 69
Exhibit A
to Trust Indenture
and Security Agreement
Form of Series SWA 1995 Trust N602SW-I Certificate
THIS CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS CERTIFICATE MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
$________________ No. ________________
SERIES SWA 1995 TRUST N602SW-I CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but solely as Owner Trustee under a
Trust Agreement
Dated as of July 1, 1995
Issued in Connection with Aircraft N602SW
Leased to
SOUTHWEST AIRLINES CO.
Date: _________ ___, 1995
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement, dated as of July 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (such agreement as the same
may be modified, amended or supplemented being referred to herein as the "Trust
Agreement"), for value received hereby promises to pay to BANK OF AMERICA
ILLINOIS (the "Bank"), the principal sum of ________________ Dollars on or
before _____________________ (the "Maturity Date"), together with interest on
such principal amount remaining unpaid from time to time from the date hereof
until such principal amount is paid in full. The principal amount of this
Certificate shall be payable in installments on the dates (each a "Principal
Payment Date") set forth in Annex A hereto equal to the corresponding
percentage of the original principal amount of this Certificate set forth in
Annex A hereto.
Notwithstanding the foregoing, the final payment made on this
Certificate shall be in an amount sufficient to discharge in full the unpaid
principal amount and all accrued and unpaid
<PAGE> 70
interest on, and any other amounts due under this Certificate or as provided
for in the Trust Indenture and Security Agreement, dated as of July 1, 1995
relating to the Aircraft (such agreement as the same may be modified, amended
or supplemented being referred to herein as the "Indenture"; the defined terms
used therein and not otherwise defined herein being used herein with the same
meanings), between the Owner Trustee and Wilmington Trust Company, as Indenture
Trustee thereunder.
Interest on the principal amount of this Certificate shall
accrue at the applicable Debt Rate (as defined below). The "Debt Rate"
applicable in respect of any day in any Interest Period (as defined below)
selected by the Owner Trustee or Southwest Airlines Co. (the "Company") (acting
on behalf of the Owner Trustee) as provided for below, or portion thereof,
shall be the Offshore Rate (as defined below) applicable to such Interest
Period as selected by the Owner Trustee or the Company (acting on behalf of the
Owner Trustee) as provided for below, plus in each case the margin applicable
from time to time determined pursuant to the following table:
<TABLE>
<CAPTION>
Interest Period:
---------------------------------------------------
Ending on Margin in Basis
Commencing On: And Including: Points Per Annum:
-------------- -------------- -----------------
<S> <C> <C>
Delivery Date April 3, 1996 40
April 4, 1996 October 3, 1996 50
October 4, 1996 April 3, 1997 75
April 4, 1997 April 3, 1998 500
April 4, 1998 April 3, 1999 600
April 4, 1999 Any date subsequent to 700
April 4, 1999
</TABLE>
provided, however, for any Interest Period beginning after the second
anniversary of the Delivery Date, the Debt Rate shall never be less than the
Treasury Rate applicable to such Interest Period, plus in each case the margin
applicable from time to time determined pursuant to the foregoing table.
Interest accrued and unpaid on any Interest Payment Date shall
be paid on such Interest Payment Date; provided, however, that all interest
accrued and unpaid on this Certificate on the date this Certificate shall be
paid in full shall be paid on such date; provided, however, that if any
Interest Period Date (as defined below) is not also an Interest Payment Date,
all interest accrued during the Interest Period relevant thereto and unpaid as
at such Interest Period Date shall be compounded until the next succeeding
Interest Payment Date and shall bear interest at the Debt Rate applicable from
time to time hereunder during the period from such Interest Period Date to the
next succeeding Interest Payment Date and all such compounded interest shall be
due and payable on such next succeeding Interest Payment Date; provided,
finally, that any amount of principal or interest payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest,
payable on demand, from the due date therefor until the date of payment at an
interest rate
A-2
<PAGE> 71
equal to the Debt Rate plus 2% per annum. All computations of interest shall be
made by the Original Holder on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring
in the period for which such interest is payable.
Notwithstanding any provision hereof to the contrary, this
Certificate shall not constitute an obligation to pay nor shall the Bank be
entitled hereunder to collect any amount of interest to the extent not
permitted by applicable law.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
For purposes of this Certificate, the following capitalized
terms used herein shall have the following meanings:
"Basis Point" shall mean one one-hundredth of one percent
(1/100 of 1%).
"Interest Payment Date" shall mean each July 1 and January 1
commencing on January 1, 1996.
"Interest Period" shall mean, with reference to the Offshore
Rate, a period of up to 30 consecutive days, as available, or one,
two, three or six months, as selected by the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) as provided for below,
and shall mean, with reference to the Treasury Rate, a period of 30,
60, 90 or 180 days, corresponding to the one, two, three or six month
Interest Period, as the case may be, which shall have been so selected
with reference to the Offshore Rate; provided, however, that (i) the
initial Interest Period shall commence on the Delivery Date; (ii) each
Interest Period immediately succeeding an Interest Period shall
commence on the last day of the preceding Interest Period; (iii) if
any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day; and (iv) notwithstanding anything to the contrary
contained herein, no Interest Period shall extend beyond a date which
is a Principal Payment Date.
"Interest Period Date" shall mean each Business Day on which
an Interest Period expires.
"Offshore Rate" shall mean, for each Interest Period, the rate
at which deposits in U.S. dollars in same day funds would be offered
at 11:00 A.M., New York time, two Business Days prior to the
commencement of such Interest Period by the Bank's Grand Cayman Branch
(or such other office as the Bank may designate for such purpose,
including its London Branch, but in that case such time shall be
London rather than New York time) to major banks in the offshore
interbank market upon request of such major banks for a period equal
to the relevant interest period and in the amount of the advance
scheduled to be outstanding during such interest period. The exact
length of interest periods shall be determined in accordance with
standard practices of the offshore dollar interbank market.
"Treasury Rate" shall mean, as to any Interest Period, the
yield to maturity (rounded to the nearest 1/100 of 1%) of the most
recently auctioned United States Treasury securities
A-3
<PAGE> 72
having maturities most closely corresponding (linearly interpolating
between the next preceding and next succeeding maturities) to the
Maturity Date, as determined at 11 a.m. (New York City time) on the
first day of such Interest Period by reference to the Telerate Trading
Assistant or, if such Telerate Trading Assistant is not available to
provide such data, the average (rounded upwards to the nearest 1/100
of 1%), as determined by the Bank, of quotes furnished at (or as
proximately thereto as is reasonably practicable) such time by two
reputable dealers in United States Treasury securities, which shall be
selected by the Bank.
The selection of the Offshore Rate and the duration of the
Interest Period related thereto shall be made by telephonic notice (followed by
telex, telecopy or other written confirmation) from the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) to the Original Holder or its
designee by not later than (i) 11:00 A.M. (New York time) on the second
Business Day preceding the first day of the relevant Interest Period or (ii)
11:00 A.M. (New York time) on the third Business Day preceding the first day
of the relevant Interest Period, if such Offshore Rate is to relate to the
Bank's London Branch; provided, however, that if a Lease Default shall have
occurred or be continuing or no such notice shall have been given, the Debt
Rate will be deemed, effective upon the last day of the then current Interest
Period, to be determined by reference to the Offshore Rate for an Interest
Period of one month.
All payments of principal, interest and other amounts, if any,
to be made by the Owner Trustee hereunder and under the Indenture shall be made
only from the income and proceeds from the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture and only to the extent
that the Indenture Trustee shall have sufficient income or proceeds from the
Indenture Estate and such other amounts to make such payments in accordance
with the terms of the Indenture, and the Bank, by its acceptance of this
Certificate, agrees that it will look solely to the income and proceeds from
the Indenture Estate and the other amounts referred to in Section 3.03 of the
Indenture to the extent available for distribution to the Holder hereof as
above provided and that none of the Owner Participant, the Owner Trustee or the
Indenture Trustee is personally liable or liable in any manner extending to any
assets, other than the Indenture Estate, to the Bank for any amounts payable
under this Certificate or the Indenture or, except as provided in the
Indenture, for any liability under the Indenture; provided, however, that
nothing herein contained shall limit, restrict or impair the right of the
Indenture Trustee, subject always to the terms and provisions of the Indenture,
to accelerate the maturity of this Certificate upon an Indenture Event of
Default, to bring suit and obtain a judgment against the Owner Trustee on this
Certificate for purposes of realizing upon the Indenture Estate and to exercise
all rights and remedies provided under the Indenture or otherwise realized upon
the Indenture Estate.
Both the original amount of principal due hereunder and
interest and other amounts due hereunder shall be payable in United States
currency in immediately available funds pursuant to Section 15.04 of the
Indenture. Each such payment shall be made on the date such payment is due and
without any presentment or surrender of this Certificate, except that in the
case of any final payment with respect to this Certificate, the Certificate
shall be surrendered promptly thereafter to the Indenture Trustee by the Bank
for cancellation.
The Bank, by its acceptance of this Certificate, agrees that
each payment received by it hereunder shall be applied in the manner provided
in Section 3.08 of the Indenture.
A-4
<PAGE> 73
This Certificate is one of the Series SWA 1995 Trust N602SW-I
Certificates referred to in the Indenture which has been or is to be issued by
the Owner Trustee pursuant to the terms of the Indenture. The Indenture Estate
is held by the Indenture Trustee as security for the Certificates. The rights
of the Owner Trustee under the Indenture, as well as the beneficial interest of
the Owner Participant in and to the properties of the Owner Trustee assigned,
pledged or mortgaged as part of the Indenture Estate, are subject and
subordinate to the rights of the Holders of the Certificates to the extent
provided for in the Indenture. Reference is hereby made to the Indenture for a
statement of the rights of the Bank in respect of, and the nature and extent of
the security for, this Certificate, and the rights of the Owner Trustee, as
well as for a statement of the terms and conditions of the trusts created by
the Indenture, to all of which terms and conditions in the Indenture the Bank
agrees by its acceptance of this Certificate.
Any Holder of this Certificate shall be deemed to have made
the following representation by its acquisition of this Certificate: either
that (a) no part of the funds used by it to acquire this Certificate
constitutes "plan assets" of any "employee benefit plan" within the meaning of
ERISA or any "plan" within the meaning of Section 4975(e)(1) of the Code, or
(b) its purchase or acquisition of this Certificate will not result in a
non-exempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA.
This Certificate is subject to prepayment by redemption or
acceleration as provided in Articles 6 and 15 of the Indenture.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK.
A-5
<PAGE> 74
IN WITNESS WHEREOF, the Owner Trustee has caused this
Certificate to be executed in its corporate name by its officer thereunto duly
authorized on the date hereof.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By:__________________________________
Title:_______________________________
A-6
<PAGE> 75
[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred to in the within-
mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By:__________________________________
Title:_______________________________
A-7
<PAGE> 76
Annex A to
Equipment Trust
Certificate
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
---------------------- ----------------------
<S> <C>
</TABLE>
A-8
<PAGE> 77
Exhibit A-1 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N602SW Installment Certificates
$________________ No. ________________
Dated as of_____________ __, 199_
SERIES SWA 1995 TRUST N602SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of July 1, 1995
Issued in connection with Aircraft N602SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- ------------- -------------
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of July 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars in
installments on each Installment Payment Date as set forth herein with the
final installment due and payable on the Maturity Date specified above and to
pay interest on the principal amount remaining unpaid from time to time at the
rate per annum specified above from ________________, 1995 or from the most
recent date to which interest has been paid or duly provided for, semiannually,
on __________________ and ________ in each year, commencing __________________,
1995, until the principal hereof is paid or made available for payment in full.
All amounts payable by the Owner Trustee hereunder and under the Trust
Indenture and Security Agreement dated as of July 1, 1995, as supplemented (as
amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and the other amounts referred to in Section
3.03 of the Indenture for payment of such amounts, to the extent available for
distribution to the Holder hereof as provided in the
<PAGE> 78
Indenture and (b) neither the Owner Trustee, the Owner Participant nor the
Indenture Trustee is or shall be personally liable to the Holder hereof for any
amount payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payments Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more
A-1-2
<PAGE> 79
complete statement of the terms and provisions thereof, including a statement
of the properties thereby conveyed, pledged and assigned, the nature and extent
of the security, the respective rights thereunder of the Owner Trustee, the
Indenture Trustee and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, the terms upon which
the Certificates may be redeemed, as well as for a statement of the terms and
conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein.
<TABLE>
<CAPTION>
Installment Installment
Payment Payment
Date Percentage
----------- ----------
<S> <C>
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
</TABLE>
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Certificates may be
declared due and payable in the manner and with the effect provided in the
Indenture. If, and only if, such an Indenture Event of Default constitutes a
Lease Event of Default by the Company under the Lease, the Indenture Trustee
may, to the exclusion of the Owner Trustee, exercise one or more of the
remedies of the Owner Trustee provided in the Lease. Such remedies include (but
are not limited to) the right to repossess and use or operate the Aircraft, to
sell or relet the Aircraft free and clear of the Company's rights and retain
the proceeds and to require the Company to pay as liquidated damages (i) any
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
Value of the Aircraft over the aggregate fair market rental value thereof for
the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under
A-1-3
<PAGE> 80
the Lease, provided, that such failure of the Company is not the third
consecutive such failure, or the fifth or subsequent cumulative such failure.
The Owner Trustee or the Owner Participant may (but need not) cure any other
default by the Company in the performance of its obligations under the Lease
which can be cured by the payment of money, by making such payment on behalf of
the Company, subject, however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate
A-1-4
<PAGE> 81
and for all other purposes whatsoever whether or not this Certificate be
overdue, and neither the Owner Trustee, the Indenture Trustee, the Paying
Agent, the Registrar, the Owner Participant nor the Company shall be affected
by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-1-5
<PAGE> 82
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but solely
as Owner Trustee
By:________________________________________
Title:_____________________________________
Issue Date:
A-1-6
<PAGE> 83
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By:__________________________________
Authorized officer or signatory
A-1-7
<PAGE> 84
Exhibit A-2 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N602SW Serial Certificates
$________________ No. ________________
Dated as of _________________ __, 199_
SERIES SWA 1995 TRUST N602SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of July 1, 1995
Issued in connection with Aircraft N602SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- ------------- -------------
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of July 1, 1995 between the Owner Trustee
in its individual capacity and the institution referred to therein as the
"Owner Participant" relating to the Aircraft (herein as such Trust Agreement
may be amended or supplemented from time to time called the "Trust Agreement"),
for value received, hereby promises to pay to ________________ or registered
assigns the principal sum of ________________ Dollars on the Maturity Date
specified above and to pay interest thereon at the rate per annum specified
above from ________________, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on __________________
and ______________________ in each year, commencing _____________________, 1995,
until the principal hereof is paid or made available for payment. All amounts
payable by the Owner Trustee hereunder and under the Trust Indenture and
Security Agreement dated as of July 1, 1995, as supplemented (as amended or
supplemented from time to time referred to herein as the "Indenture", the
defined terms therein not otherwise defined herein being used herein with the
same meanings), by and among the Owner Trustee and Wilmington Trust Company, as
Indenture Trustee thereunder, shall be made only from the income and proceeds
of the Indenture Estate and the other amounts referred to in Section 3.03 of
the Indenture. Each Holder hereof, by its acceptance of this Certificate,
agrees that (a) it will look solely to the income and proceeds of the Indenture
Estate and the other amounts referred to in Section 3.03 of the Indenture for
payment of such amounts, to the extent available for distribution to the Holder
hereof as provided in the Indenture and (b) neither the Owner Trustee, the
Owner Participant nor the Indenture Trustee is or shall be personally liable to
the Holder hereof for any amount payable hereunder or under the Indenture or,
except as provided in the Indenture, for any liability under the Indenture.
<PAGE> 85
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, the terms upon which the Certificates may be
redeemed, as well as for a statement of the terms and conditions of the trust
created by the Indenture, to all of which terms and conditions in the Indenture
each Holder hereof agrees by its acceptance of this Certificate.
A-2-2
<PAGE> 86
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the right
to repossess and use or operate the Aircraft, to sell or relet the Aircraft
free and clear of the Company's rights and retain the proceeds and to require
the Company to pay as liquidated damages (i) any unpaid Basic Rent plus an
amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
A-2-3
<PAGE> 87
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
CertifiCate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-2-4
<PAGE> 88
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By:_________________________________
Title:______________________________
Issue Date:
A-2-5
<PAGE> 89
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By:__________________________________
Authorized officer or signatory
A-2-6
<PAGE> 90
Exhibit B to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts and
Interest Rates of Series SWA 1995 Trust N602SW Certificates
<TABLE>
<CAPTION>
Premium
Principal Termination
Maturity Date Amount Interest Rate Date
- ------------- --------- ------------- -----------
<S> <C> <C> <C>
</TABLE>
[To be completed at time of issuance of Series SWA 1995 Trust N602SW
Certificates, if any shall be issued hereunder.]
<PAGE> 91
Exhibit B-1 to
Trust Indenture and
Security Agreement
Installment Payment Dates and Installment Payment Percentages
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N602SW Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
Installment Certificate No. 2 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N602SW Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
<PAGE> 92
Exhibit B-2 to
Trust Indenture and
Security Agreement
Issuance of Series SWA 1995 Trust N602SW Certificates
The Series SWA 1995 Trust N602SW Certificates issued hereunder
shall be issued to and shall be payable to _________ under the __________ with
respect to the [grantor trusts created thereby], in each case as set forth
below:
<PAGE> 93
Exhibit C to
Trust Indenture and
Security Agreement
[FORM OF]
TRUST AGREEMENT AND TRUST INDENTURE AND
SECURITY AGREEMENT SUPPLEMENT
This TRUST AGREEMENT AND TRUST INDENTURE AND SECURITY
AGREEMENT SUPPLEMENT, is dated ________________, 1995 (herein called the
"Supplement") of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee (herein called the "Owner
Trustee"), under the Trust Agreement, dated as of July 1, 1995 (herein called
the "Trust Agreement"), between the Owner Trustee and the Owner Participant
named therein,
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and
delivery of one or more supplements thereto substantially in the form hereof,
which shall particularly describe the Aircraft (such term and other terms
defined in the Trust Indenture referred to below, or in the Lease therein
referred to, being used herein as therein defined) included in the property
covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Security Agreement, dated as
of July 1, 1995 (herein called the "Trust Indenture"), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee (herein called the
"Indenture Trustee"), provides for the execution and delivery of a supplement
thereto substantially in the form hereof, which shall particularly describe the
Aircraft, and shall specifically mortgage such Aircraft to the Indenture
Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture
relates to the Airframe and Engines described below, and a counterpart of the
Trust Indenture is attached hereto and made a part hereof and this Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, This Supplement Witnesseth, that, to secure
the prompt payment of the principal of, Break Amount, if any, Premium, if any,
and interest on, and all other amounts due with respect to, all Certificates
from time to time Outstanding and all other amounts due to the Holders under
the Trust Indenture and the Participation Agreement and the performance and
observance by each of the Company and the Owner Trustee of all the agreements,
covenants and provisions in the Trust Indenture and in the other Operative
Agreements for the benefit of the Indenture Trustee and the Holders of the
Certificates and in the Certificates contained, and the prompt payment of all
amounts from time to time owing under the Operative Agreements to the Holders
of the Certificates, and for the uses and purposes of the Trust Indenture, and
in consideration of the premises and of the covenants contained in the Trust
Indenture, and of the acceptance of the Certificates by the Holders thereof,
and of the sum of $1.00 paid to the Owner Trustee by the Indenture Trustee at
or before the delivery hereof, the receipt whereof is hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm unto the Indenture Trustee, its
successors and assigns, for the security
<PAGE> 94
and benefit of the Holders from time to time of the Certificates, upon the
trusts created by the Trust Indenture, all right, title and interest of the
Owner Trustee in, to and under the following described property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ --------------
<S> <C> <C> <C>
The Boeing Company 737-3H4 N602SW 27953
</TABLE>
together with all Parts relating to such airframe.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, whether or not such
engines shall be installed in or attached to the Airframe or any other
airframe, identified as follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ ----- --------------
<S> <C> <C>
CFM International CFM56-3-B1 858183
CFM International CFM56-3-B1 858184
</TABLE>
together with all Parts relating to such engines.
Together with all substitutions or replacements of and
additions, improvements, accessories and accumulations to the property above
described for which title vests in the Owner Trustee under the Operative
Agreements and all property which shall hereafter become physically attached to
or incorporated in the property above described, whether the same are now owned
by the Owner Trustee or shall hereafter be acquired by it for which title vests
in the Owner Trustee under the Operative Agreements.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, in the trust created by the Trust Indenture, all of the right,
title and interest of the Owner Trustee in, to and under the Lease Supplement
of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment
shall constitute security for any of the aforementioned obligations.
C-2
<PAGE> 95
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Holders from time to time of the Certificates for
the uses and purposes and subject to the terms and provisions set forth in the
Trust Indenture.
This Supplement shall be construed as supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
AND, FURTHER, the Owner Trustee hereby acknowledges that the
Aircraft referred to in this Supplement and the aforesaid Lease Supplement has
been delivered to the Owner Trustee and is included in the property of the
Owner Trustee covered by all the terms and conditions of the Trust Agreement,
subject to the pledge and mortgage thereof under the Trust Indenture.
THIS SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
C-3
<PAGE> 96
IN WITNESS WHEREOF, the Owner Trustee has caused this
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By:__________________________________
Title:_______________________________
C-4
<PAGE> 1
Exhibit 4.20
________________________________________________________________________________
FIRST AMENDMENT
TO
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly set forth herein and
otherwise solely as Owner Trustee
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
One Boeing 737-3H4 Aircraft N602SW
Southwest Airlines Co.
Series 1995 Trust N602SW Certificates
(Southwest Airlines 1995 Trust N602SW)
________________________________________________________________________________
<PAGE> 2
FIRST AMENDMENT TO
TRUST INDENTURE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO TRUST INDENTURE AND SECURITY AGREEMENT dated
as of October 1, 1995 (this "Amendment") between SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual capacity only as expressly set forth
herein and otherwise solely as Owner Trustee under that certain Trust Agreement
establishing the Southwest Airlines 1995 Trust N602SW and dated as of July 1,
1995 (in such capacity, the "Owner Trustee") and WILMINGTON TRUST COMPANY, as
Indenture Trustee (the "Indenture Trustee"), amends that certain related Trust
Indenture and Security Agreement dated as of July 1, 1995 (the "Original
Indenture") between the Owner Trustee and the Indenture Trustee (the Original
Indenture, as supplemented by Trust Agreement and Trust Indenture and Security
Agreement Supplement dated July 13, 1995 by the Owner Trustee, relating to the
aircraft having U.S. registration number N602SW, being referred to herein as
the "Indenture"),
W I T N E S S E T H :
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Indenture;
WHEREAS, a counterpart to the Indenture was recorded by the Federal
Aviation Administration on August 21, 1995 and assigned Conveyance No.
EE010086;
WHEREAS, the Owner Trustee has agreed to refinance the Series SWA 1995
Trust N602SW-1 Certificates with Series 1995 Trust N602SW Certificates; and
WHEREAS, in order to effect such refinancing, the Owner Trustee and
the Indenture Trustee have agreed to amend the Indenture as provided for below;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to the Indenture. The Indenture is, effective
as of the date hereof, hereby amended as follows:
(a) The definitions of "Business Day" and "Holder" in
Section 1.01(b) of the Indenture are amended in their entirety to read
as follows:
"Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or
authorized to close in the City of Dallas, Texas; New York,
New York; or the city and state in which (i) so long as any
Certificates shall be Outstanding, each of the Indenture
Trustee and the Pass Through Trustee and (ii) thereafter, the
Owner Trustee, has its principal place of business; or the
city and state in which the Indenture Trustee, the Pass
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
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<PAGE> 3
Through Trustee or the Owner Trustee, as the case may be,
receives and disburses funds.
"Holder" or "Certificate Holder" means a Person in
whose name a Certificate is registered on the Register
including, so long as it holds a Series SWA 1995 Trust N602SW
Certificate, the Pass Through Trustee.
(b) The following new definitions are inserted in Section
1.01(b) of the Indenture after the definition of "Owner Trustee":
"Pass Through Certificates" means any of the Pass
Through Certificates issued pursuant to the Pass Through Trust
Agreements.
"Pass Through Trust" means each pass through trust
created pursuant to the Pass Through Trust Agreements.
"Pass Through Trust Agreements" means the Pass
Through Trust Agreement dated as of February 1, 1993, between
the Company and the Pass Through Trustee, as supplemented by
the four Trust Supplements Nos. 1995-A1, 1995-A2, 1995-A3 and
1995-A4 each dated as of October 1, 1995, as the same may from
time to time be further amended, supplemented or otherwise
modified.
"Pass Through Trustee" means Wilmington Trust Company
in its capacity as trustee under each Pass Through Trust
Agreement, and such other Person that may from time to time be
acting as successor trustee under any such Pass Through Trust
Agreement.
(c) The first sentence of Section 6.02 of the Indenture
is amended by adding at the end thereof ", in respect of any
Certificate, if such purchase or redemption is effected prior to the
Premium Termination Date in respect of such Certificate".
(d) Exhibits A-1, A-2, B, B-1 and B-2 to the Indenture
are replaced in their entirety by Exhibits A-1, A-2, B, B-1 and B-2
hereto. Said revised Exhibits B, B-1 and B-2 shall, for all purposes,
be deemed to have been, and are, completed in accordance with Article
15 of the Indenture.
Section 2. Lease Amendment. As of the date hereof, the Lessee
and the Owner Trustee are entering into First Amendment to Sale and Lease
Agreement (the "Lease Amendment") to the Sale and Lease Agreement dated as of
July 1, 1995 relating to the Aircraft, which Sale and Lease Agreement (together
with Sale and Lease Agreement Supplement No. One, dated July 13, 1995 thereto)
was recorded with the Federal Aviation Administration on August 21, 1995 and
assigned Conveyance No. EE010087. The Lease Amendment is attached hereto and,
without limiting the generality of the Granting Clause of the Indenture, is
covered by the Lien of the Indenture and is made part of the Indenture Estate.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
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<PAGE> 4
Section 3. Amendment and Incorporation by Reference. This
Amendment is and shall be construed as an amendment and supplement to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated herein by reference and is hereby ratified, approved and
confirmed.
Section 4. GOVERNING LAW. THIS AMENDMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 5. Execution in Counterparts. This Amendment may be
executed by the Owner Trustee and the Indenture Trustee in separate
counterparts, each of which when so executed and delivered is an original, but
all such counterparts shall together constitute but one and the same
instrument.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
-3-
<PAGE> 5
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity
only as expressly set forth
herein and otherwise solely as
Owner Trustee
By: /s/ Philip G. Kane, Jr.
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual
capacity, except as otherwise
expressly provided herein,
but solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
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<PAGE> 6
Exhibit A-1 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N602SW Installment Certificates
$______________ No._____________
Dated as of July 13, 1995
SERIES SWA 1995 TRUST N602SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of July 1, 1995
Issued in connection with Aircraft N602SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ ____________, ____
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of July 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to _______________ or
registered assigns the principal sum of ______________ Dollars in installments
on each Installment Payment Date as set forth herein with the final installment
due and payable on the Maturity Date specified above and to pay interest on the
principal amount remaining unpaid from time to time at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment in full. All amounts payable by the Owner
Trustee hereunder and under the related Trust Indenture and Security Agreement
dated as of July 1, 1995, as supplemented and amended
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-1-1
<PAGE> 7
by Trust Agreement and Trust Indenture and Security Agreement Supplement dated
July 13, 1995 and First Amendment to Trust Indenture and Security Agreement
dated as of October 1, 1995 (as further amended or supplemented from time to
time referred to herein as the "Indenture", the defined terms therein not
otherwise defined herein being used herein with the same meanings), by and
among the Owner Trustee and Wilmington Trust Company, as Indenture Trustee
thereunder, shall be made only from the income and proceeds of the Indenture
Estate and the other amounts referred to in Section 3.03 of the Indenture.
Each Holder hereof, by its acceptance of this Certificate, agrees that (a) it
will look solely to the income and proceeds of the Indenture Estate and the
other amounts referred to in Section 3.03 of the Indenture for payment of such
amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) neither the Owner Trustee, the Owner
Participant nor the Indenture Trustee is or shall be personally liable to the
Holder hereof for any amount payable hereunder or under the Indenture or,
except as provided in the Indenture, for any liability under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-1-2
<PAGE> 8
debts; provided, however, that payment of interest and Installment Payment
Amounts (other than that payable on the Maturity Date hereof) may be made at
the option of the Indenture Trustee or the Paying Agent by check mailed on or
before the due date to the address of the Holder entitled thereto as such
address shall appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of any authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein, all as shown on Exhibit A hereto.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Interim Rent or
Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of
the Aircraft over the aggregate fair market rental value thereof for the
remainder of the term for the Aircraft, (ii) any unpaid Interim Rent or Basic
Rent plus the excess of the Stipulated Loss Value of the Aircraft over the fair
market sales value thereof or (iii) if the Aircraft has been sold, any unpaid
Interim Rent or Basic Rent plus the excess of the Stipulated Loss Value thereof
over the net sales proceeds.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-1-3
<PAGE> 9
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Interim Rent or Basic Rent under the Lease, provided
that such failure of the Company is not the third consecutive such failure, or
the fifth or subsequent cumulative such failure. The Owner Trustee or the
Owner Participant may (but need not) cure any other default by the Company in
the performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company, subject,
however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-1-4
<PAGE> 10
No service charge shall be made for any such registration or
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-1-5
<PAGE> 11
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-1-6
<PAGE> 12
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: ___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-1-7
<PAGE> 13
Exhibit A-2 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N602SW Serial Certificates
$___________________ No._______________
Dated as of July 13, 1995
SERIES SWA 1995 TRUST N602SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of July 1, 1995
Issued in connection with Aircraft N602SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, ______
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of July 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ___________ or
registered assigns the principal sum of ___________ Dollars on the Maturity
Date specified above and to pay interest thereon at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment. All amounts payable by the Owner Trustee
hereunder and under the related Trust Indenture and Security Agreement dated as
of July 1, 1995, as supplemented and amended by Trust Agreement and Trust
Indenture and Security Agreement Supplement dated July 13, 1995 and First
Amendment to Trust Indenture and Security Agreement dated as of
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-2-1
<PAGE> 14
October 1, 1995 (as further amended or supplemented from time to time referred
to herein as the "Indenture", the defined terms therein not otherwise defined
herein being used herein with the same meanings), by and among the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder, shall be
made only from the income and proceeds of the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture. Each Holder hereof, by
its acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and other amounts referred to in
Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for any amount
payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-2-2
<PAGE> 15
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Interim Rent or
Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of
the Aircraft over the aggregate fair market rental value thereof for the
remainder of the term for the Aircraft, (ii) any unpaid Interim Rent or Basic
Rent plus the excess of the Stipulated Loss Value of the Aircraft over the fair
market sales value thereof or (iii) if the Aircraft has been sold, any unpaid
Interim Rent or Basic Rent plus the excess of the Stipulated Loss Value thereof
over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Interim Rent or Basic Rent under the Lease, provided
that such failure of the Company is not the third consecutive such failure, or
the fifth or subsequent cumulative such failure. The Owner Trustee or the
Owner Participant may (but need not) cure any other default by the Company in
the performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company, subject,
however, to certain limitations.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-2-3
<PAGE> 16
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-2-4
<PAGE> 17
absolute owner hereof for the purpose of receiving payment of the principal of
and interest on this Certificate and for all other purposes whatsoever whether
or not this Certificate be overdue, and neither the Owner Trustee, the
Indenture Trustee, the Paying Agent, the Registrar, the Owner Participant nor
the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-2-5
<PAGE> 18
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-2-6
<PAGE> 19
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: ___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
A-2-7
<PAGE> 20
Exhibit B to
First Amendment to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N602SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A1 July 1, 1997 $428,307 6.16% * Serial
1995-A2 July 1, 1998 $454,690 6.29% * Serial
1995-A3 January 1, 2013 $18,069,063 7.22% October 4, 2007 Installment
1995-A4 January 1, 2018 $4,611,619 7.64% January 4, 2016 Installment
</TABLE>
_____________
* Not applicable.
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
B-1
<PAGE> 21
Exhibit B-1 to
First Amendment to
Trust Indenture and
Security Agreement
PAYMENT DATES AND PAYMENT PERCENTAGES AND AMOUNTS
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
B-1-1
<PAGE> 22
Exhibit B-2 to
First Amendment to
Trust Indenture and
Security Agreement
ISSUANCE OF SERIES SWA 1995 TRUST N602SW CERTIFICATES
The Series SWA 1995 Trust N602SW Certificates issued hereunder
shall be issued to and shall be payable to the Pass Through Trustee under each
Pass Through Trust Agreement with respect to the grantor trust created thereby,
in each case as set forth below:
1995-A1 Trust:
6.16% Certificate due July 1, 1997
1995-A2 Trust:
6.29% Certificate due July 1, 1998
1995-A3 Trust:
7.22% Certificate due January 1, 2013
1995-A4 Trust:
7.64% Certificate due January 1, 2018
TRUST INDENTURE AND SECURITY AGREEMENT [N602SW]
B-2-1
<PAGE> 1
EXHIBIT 4.22
PARTICIPATION AGREEMENT
dated as of July 1, 1995
among
SOUTHWEST AIRLINES CO.,
Lessee,
NATIONSBANK, N.A.
Owner Participant,
BANK OF AMERICA ILLINOIS,
Original Loan Participant,
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N602SW
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Certain Definitions; Participations in Lessor's Cost of the
Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. Lessee's Notice of Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee . . . . . . . . . . . . . . . . . . . 5
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the Aircraft . . . . . . . . . . . . . . 6
(i) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ii) No Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(iii) Original Loan Participant's Commitment . . . . . . . . . . . . . . . . . . . 7
(iv) Owner Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Authorization, Execution and Delivery of Documents . . . . . . . . . . . . . 7
(vi) UCC-1's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(vii) Proof of Corporate Action, Etc . . . . . . . . . . . . . . . . . . . . . . . 8
(viii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . 9
(x) Representations and Warranties Accurate; No Event of
Default; No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xi) Opinions of Lessee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 10
(xii) Opinion of Manufacturer's Counsel . . . . . . . . . . . . . . . . . . . . . . 10
(xiii) Opinion of Owner Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . 10
(xiv) Opinions of Owner Participant's Counsel . . . . . . . . . . . . . . . . . . . 10
(xv) Opinion of Oklahoma City Counsel . . . . . . . . . . . . . . . . . . . . . . 11
(xvi) Opinion of Indenture Trustee's Counsel . . . . . . . . . . . . . . . . . . . 11
(xvii) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xviii) Lessee's Bringdown Certificate . . . . . . . . . . . . . . . . . . . . . . . 11
(xix) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) No Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiii) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiv) Bringdown of Other Parties' Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxv) Opinion of Owner Participant's Tax Counsel . . . . . . . . . . . . . . . . . 12
(xxvi) No Tax Law Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxvii) Copy of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxviii) Withholding Tax Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Conditions Precedent to the Obligations of Lessee . . . . . . . . . . . . . . . . . . 13
SECTION 5. Confidentiality of Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6. Extent of Interest of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . 15
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 15
(iii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(iv) Valid Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vi) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vii) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(viii) Registration and Recordation . . . . . . . . . . . . . . . . . . . . . . . . 16
(ix) Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(x) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xi) No Misstatement or Omission . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xii) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiv) Effective Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xv) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xvii) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xviii) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xix) No Federal Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xx) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(iii) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(iv) Notice and Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(v) Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iii) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iv) Right to Defend; Subrogation; Fees and Expenses of
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Owner Participant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8. Other Representations, Warranties, Covenants and Indemnities . . . . . . . . . . . . . . . . 28
(a) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Chief Executive Office of SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Owner Participant's Representations and Warranties . . . . . . . . . . . . . . . . . . 30
</TABLE>
PARTICIPATION AGREEMENT [N602SW]
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
(g) Lessor Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Indenture Trustee Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) Termination Instructions to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . 31
(j) Excess Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) Representations and Warranties of Indenture Trustee in Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(l) Transfers of Equity Interests; Rights of Owner Participant and
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(m) Obligations of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(n) Compliance with Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(o) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(p) SBC's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 34
(q) Owner Participant's Lease Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(r) Lessee's Assumption of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(s) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(t) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(u) Lease Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(v) Revocation of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(w) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(x) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(y) Discharge of Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(z) Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(aa) Special Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(cc) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(dd) Deferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(ee) Lessee as Pricing Agent for Certificate . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9. Payments to Lessee of Trust Indenture Monies . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10. Other Documents; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 11. Certain Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) FAA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(e) Engine Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(f) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(h) Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(i) No Certificate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 12. Ownership of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 13. Notices; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 14. Change of Situs of Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
PARTICIPATION AGREEMENT [N602SW]
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) Consents under Lease and Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Counterparts; Waivers; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) No Recourse Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(e) Duties Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Binding on Parties and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) Enforceability Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(h) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 16. Transaction Costs; Invoices and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 48
SECTION 17. Optional Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 18. Interim Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 19. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
SCHEDULE III
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
EXHIBIT A - Form of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B - Form of Assignment and Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
PARTICIPATION AGREEMENT [N602SW]
-iv-
<PAGE> 6
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of July 1, 1995 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) NATIONSBANK, N.A., a national banking association (the "Owner
Participant"), (iii) BANK OF AMERICA ILLINOIS, an Illinois banking corporation
(the "Original Loan Participant"), (iv) SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, in its individual capacity, only
as expressly provided herein (in such capacity, "SBC") and otherwise, solely as
Owner Trustee under the Trust Agreement (in such capacity, the "Owner
Trustee"), and (v) WILMINGTON TRUST COMPANY, a Delaware banking corporation, in
its individual capacity and as Indenture Trustee under the Trust Indenture (the
"Indenture Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, one of which having U.S. Registration No. N602SW and Manufacturer's
serial number 27953 has been recently purchased by Lessee and is the subject of
this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, on the Delivery Date,
(i) Lessee and the Owner Trustee will enter
into a Purchase Agreement Assignment whereby Lessee agrees to assign
to the Owner Trustee certain rights and interests of Lessee under the
Purchase Agreement with respect to the Aircraft; and
(ii) the Manufacturer will have executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and
WHEREAS, the Indenture Trustee and the Owner Trustee
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
PARTICIPATION AGREEMENT [N602SW]
-1-
<PAGE> 7
WHEREAS, as described in Section 2 hereof, the Owner Trustee
and Lessee are entering into the Lease whereby, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to purchase the Aircraft
from Lessee and to lease the same back to Lessee, and Lessee agrees to sell the
Aircraft to the Owner Trustee and to lease the same back from the Owner
Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "Owner Trustee" and "Indenture Trustee" shall have
the further meanings attributed thereto in the Sale and Lease Agreement dated
as of the date hereof (the "Lease") between the Owner Trustee and Lessee
relating to the Aircraft referred to in the first recital herein, and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease or the Trust Indenture.
The term "Trust Supplement" has the meaning attributed to the term "Indenture
and Trust Supplement" in the Lease and to the term "Trust Supplement" in the
Trust Indenture. The terms "Indenture Estate," "Outstanding," "Permitted
Investments," "Register" and "Trust Office" shall have the meanings set forth
in the Trust Indenture, and the term "Trust Estate" shall have the meaning set
forth in the Trust Agreement. Unless the context otherwise requires, any
reference herein to any of the Operative Agreements refers to such document as
it may be amended from time to time in accordance with its terms and the terms
of each other agreement restricting the amendment thereof.
(b) Subject to the terms and conditions of this
Agreement, (i) the Original Loan Participant agrees to finance, in part, the
Owner Trustee's payment of Lessor's Cost for the Aircraft by making a secured
loan to the Owner Trustee (herein called the "Loan") on a date to be designated
pursuant to Section 2 hereof, but in no event later than September 30, 1995, in
the amount in Dollars equal to the percentage of Lessor's Cost set forth
opposite its name on Schedule II hereto and (ii) the Owner Participant hereby
agrees, in connection with its equity investment in the beneficial ownership of
the Aircraft and the sale of the Aircraft by Lessee to the Owner Trustee
pursuant to the Lessee FAA Bill of Sale and Lessee Warranty Bill of Sale, as
contemplated hereby, to make its equity investment in the beneficial ownership
of the Aircraft on a date to be designated pursuant to Section 2 hereof, but in
no event later than September 30, 1995, in an amount in Dollars equal to the
percentage of Lessor's Cost set forth opposite its name on Schedule II hereto.
In the case of the Owner Participant, the amount of its participation to be
made as provided above in the payment of Lessor's Cost and, in the case of the
Original Loan Participant, the aggregate principal amount of the Series SWA
1995 Trust N602SW-I Certificate to be simultaneously issued to it, is
hereinafter called such Participant's "Commitment" for the Aircraft. In case
either Participant shall default in its obligation to make the amount of its
Commitment available pursuant to Section 2 hereof in respect of the Aircraft,
the other Participant shall have no obligation to make any portion of such
amount available or to increase the amount of its Commitment and the obligation
of the nondefaulting Participant shall remain subject to the terms and
conditions set forth in this Agreement.
PARTICIPATION AGREEMENT [N602SW]
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(c) In the event that either Participant shall for any
reason fail or refuse to make the full amount of its Commitment available to
the Owner Trustee in accordance with the terms of paragraph (b) of this Section
1 (such Participant, for the purpose of this Agreement, being called a
"Defaulting Participant"), the Owner Trustee shall give, at the earliest
practicable time (which may be the next Business Day), each party hereto
telephonic notice (to be confirmed promptly in writing) of such failure or
refusal and the funds received by the Owner Trustee in connection with the
Aircraft will be held in accordance with the terms of, and for the period
provided in, paragraph (b) of Section 2. In such event the Defaulting
Participant will have no further right to participate in, or make a loan for,
as the case may be, the payment of Lessor's Cost for the Aircraft. Lessee
shall have the right to designate a financial institution (which term, as used
in this paragraph (c), shall mean any banking or financial institution,
institutional investor or fund which is not affiliated with Lessee or with
Owner Participant) to be substituted for the Defaulting Participant; provided,
however, that (i) such substituted financial institution shall sign and deliver
an amendment to this Agreement, in form and substance satisfactory to the Owner
Trustee, the Indenture Trustee and the remaining Participant, whereby such
financial institution agrees to be a party to this Agreement, to be bound by
all the terms hereof and to undertake all the obligations of the Defaulting
Participant contained herein, other than obligations, if any, arising from the
aforesaid failure or refusal by such Defaulting Participant, (ii) if the
Defaulting Participant is Owner Participant (A) such substituted financial
institution shall have been approved by all Original Loan Participants, (B)
each such substituted financial institution shall be domiciled in the United
States and shall be a citizen of the United States within the meaning of the
Act and shall have the requisite power and authority to enter into and carry
out the transactions contemplated by this Agreement and the Trust Agreement,
(C) such substituted financial institution shall enter into amendments to the
Trust Agreement, in form and substance satisfactory to the Owner Trustee, the
Indenture Trustee and the Original Loan Participants, whereby such substituted
financial institution agrees to be a party to the Trust Agreement, to be bound
by all the terms thereof and to undertake all the obligations of the Defaulting
Participant contained therein, and (D) the substitution of such substituted
financial institution as above provided shall not violate any provisions of the
Act or the regulations promulgated thereunder, or create a relationship which
would be in violation thereof and such substituted financial institution shall
so represent in writing to each other party hereto, and (iii) if the Defaulting
Participant is an Original Loan Participant, such substituted financial
institution shall be approved in writing by Owner Participant. No action by
Lessee in finding a financial institution to be substituted as above provided
shall be deemed to constitute a waiver or release of any right which Lessee may
have against the Defaulting Participant. Each financial institution
substituted for an Original Loan Participant pursuant to this paragraph (c)
shall be deemed an Original Loan Participant for all purposes of this
Agreement; and each financial institution substituted for the Owner Participant
pursuant to this paragraph (c) shall (collectively, if more than one) be deemed
the Owner Participant for all purposes of this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. (a)
Lessee agrees to give the Owner Participant, the Owner Trustee, the Original
Loan Participant and the Indenture Trustee at least three (3) Business Days'
written notice of the Delivery Date for the Aircraft, which Delivery Date shall
be a Business Day not later than September 30, 1995, which notice shall specify
(i) the amount of Lessor's Cost, (ii) the amount of each Participant's
Commitment for the Aircraft, and (iii) the model and FAA registration number of
the Aircraft and the manufacturer's serial numbers of the Airframe and each
Engine. As to each Participant, the making of its Commitment for such Aircraft
PARTICIPATION AGREEMENT [N602SW]
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available in the manner required by this Section 2 shall constitute a waiver of
such notice. The Owner Trustee and the Indenture Trustee shall be deemed to
have waived such notice if the Owner Trustee shall have received from the Owner
Participant funds in the full amount of the Owner Participant's Commitment and
the proceeds of the sale of the Series SWA 1995 Trust N602SW-I Certificate in
the full amount of the Original Loan Participant's Commitment.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue and the Indenture Trustee shall
authenticate the Series SWA 1995 Trust N602SW-I Certificate which shall be
delivered simultaneously to the Original Loan Participant. On the Delivery
Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. 98120109 at Bank One, Dallas, N.A., ABA No. 111000614,
1717 Main Street, Dallas, Texas.
The Original Loan Participant and the Owner Participant each
agree to make its Commitment available to Shawmut Bank Connecticut, National
Association, Hartford, Connecticut, Account No. 0067548290, ABA No.
011-900-445, Reference: Southwest Airlines 1995 Trust N602SW, at or before
10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's notice
referred to in the first paragraph of this Section 2 (such specified Delivery
Date being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than September 30, 1995. In the event that
no Delayed Delivery Date is designated or, if designated, such closing does not
occur on the Delayed Delivery Date, or if any Participant shall so request,
such funds of each Participant shall be promptly returned to it by the Owner
Trustee or the Indenture Trustee, as the case may be.
If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
for the period from and including the Scheduled Delivery Date to but excluding
the Delayed Delivery Date, or, as the case may be, to but excluding the
Business Day on which such Participant's funds are returned if such return is
made by 10:00 a.m. (New York City time) or to but excluding the next following
Business Day if such return is not made by such time and, in the case of the
Original Loan Participant, for the Break Amount, if any, applicable to the
Series SWA 1995 Trust N602SW-I Certificate.
PARTICIPATION AGREEMENT [N602SW]
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"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Original
Loan Participant, the rate per annum borne by the Series SWA 1995 Trust
N602SW-I Certificate in respect of which such Original Loan Participant's
Commitment is made available. "Federal Funds Effective Rate" means, for any
period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for the day of such
transactions received by the Owner Participant from three federal funds brokers
of recognized standing selected by it; provided, that the "Federal Funds
Effective Rate" for any non-Business Day shall be the "Federal Funds Effective
Rate" for the previous Business Day.
SBC agrees that in the event it has received telephonic notice
(to be confirmed promptly in writing) from Lessee on the Scheduled Delivery
Date that the closing of the transactions contemplated hereby will not be
consummated on the Scheduled Delivery Date, it will, if instructed in the
notice from Lessee in regard to the funds received by it from the Participants,
use reasonable efforts to invest, at the risk, expense and direction of Lessee,
the funds received by it from the Participants in marketable direct obligations
of the United States of America or obligations of any of its agencies that are
guaranteed as to principal and interest by the United States of America, in any
such case having a stated maturity not later than 91 days from the date of
acquisition. Any such investment may be made through a repurchase agreement in
commercially reasonable form with SBC or a bank or other financial institution
having capital, surplus and undivided profits of at least $100,000,000;
provided, that title to the underlying obligations shall pass to SBC and that
such underlying securities shall be segregated in a custodial or trust account
of or for the benefit of the Owner Trustee. Any such obligations purchased by
SBC, whether directly or through a repurchase agreement, shall be held in trust
by SBC (but not as part of the Trust Estate or Trust Indenture Estate) for the
benefit of the respective Participants. Lessee shall, on the Delayed Delivery
Date or the date the funds furnished by the Participants are required to be
returned to the Participants, as the case may be, reimburse SBC for the benefit
of the respective Participant, for any losses incurred on such investments.
All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the respective accounts of the
Participants (such income and profits to be credited against Lessee's
obligation to reimburse the Participants for the loss of use of funds made
available to SBC) and all other income and profits and all losses on the
investment of such funds shall be for the account of Lessee; and SBC shall not
be liable for failure to invest such funds or for any losses incurred on such
investments except for its own willful misconduct or negligence.
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee. Subject to the terms and conditions of this Agreement, the
Owner Trustee, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with instructions from such Participant or its special
counsel to release such funds to Lessee, shall transfer such funds to Lessee
and the Owner Trustee shall purchase the Aircraft from Lessee and lease the
Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
PARTICIPATION AGREEMENT [N602SW]
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(a) to pay to Lessee (on behalf of the Owner Trustee) the
Lessor's Cost in the manner set forth in Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
(c) to accept from Lessee the Lessee Warranty Bill of
Sale and the Lessee FAA Bill of Sale and the invoice with respect to the
Aircraft;
(d) to execute an aircraft registration application, a
Lease Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow the Loan from the Holders to finance a
portion of Lessor's Cost and to issue to the Original Loan Participant a Series
SWA 1995 Trust N602SW-I Certificate in a principal amount equal to the amount
borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be
taken by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. Conditions. (a) Conditions
Precedent to the Participations in the Aircraft. It is agreed that the
respective obligations of the Participants to participate in the payments of
Lessor's Cost are subject to the satisfaction prior to or on the Delivery Date
of the following conditions precedent, except that paragraphs (iii), (xx),
(xxiv) (insofar as it relates to the Original Loan Participant), (xxv) and
(xxvi) shall not be a condition precedent to the obligation of the Original
Loan Participant, and paragraphs (iv), (x) (insofar as it relates to the Owner
Participant), (xiv), (xxiv) (insofar as it relates to the Owner Participant)
and (xxvii) shall not be a condition precedent to the obligation of the Owner
Participant:
(i) Notice. Each Participant shall have
received due notice with respect to such participation pursuant to
Section 2 hereof (or shall have waived such notice either in writing
or as provided in Section 2).
(ii) No Change in Law. No change shall have
occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is a party or (y) the
Original Loan Participant or the Owner Participant to make its
Commitment available or, in the case of the Original Loan Participant,
to acquire the Series SWA 1995 Trust N602SW-I Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
PARTICIPATION AGREEMENT [N602SW]
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(iii) Original Loan Participant's Commitment.
In the case of the Owner Participant, the Original Loan Participant
shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(iv) Owner Participant's Commitment. In the
case of the Original Loan Participant, the Owner Participant shall
have made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(v) Authorization, Execution and Delivery of
Documents. The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto,
shall each be satisfactory in form and substance to the Participants
and shall be in full force and effect and executed counterparts shall
have been delivered to each Participant and its respective counsel;
provided, that only the Original Loan Participant shall receive an
executed original of the Series SWA 1995 Trust N602SW-I Certificate,
only the Indenture Trustee, acting on behalf of the Holders, shall
receive the original counterpart of the Lease and the initial Lease
Supplement, and only Lessee and the Owner Participant shall receive
copies of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering
the Aircraft and dated the Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering
the Aircraft and dated the Delivery Date;
(6) the Bills of Sale and an
invoice from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement
Assignment;
(8) an acceptance certificate
covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate") duly
completed and executed by the Owner Trustee or its agent,
which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1995 Trust
N602SW-I Certificate; and
(11) the Manufacturer's Consent.
PARTICIPATION AGREEMENT [N602SW]
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(vi) UCC-1's. Uniform Commercial Code
financing statement or statements covering all of the security
interests created by or pursuant to the Granting Clause of the Trust
Indenture and precautionary Uniform Commercial Code financing
statement or statements with respect to the Lease shall have been
executed and delivered, and all such financing statement or statements
shall have been duly filed in all places necessary or advisable, and
any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Original Loan Participant
shall have been executed and delivered by Lessee, the Indenture
Trustee or the Owner Trustee and duly filed.
(vii) Proof of Corporate Action, Etc. Each
Participant and the Indenture Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(1) a certified copy of the
Restated Articles of Incorporation and Bylaws of Lessee and a
copy of resolutions of the board of directors of Lessee or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of Lessee, duly authorizing the execution,
delivery and performance by Lessee of this Agreement, the
Lease, the Purchase Agreement Assignment, the Lessee Warranty
Bill of Sale, the Lessee FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with
the provisions hereof and thereof;
(2) such other documents and
evidence with respect to Lessee, the Manufacturer, the Owner
Trustee, the Indenture Trustee and the Participants, as the
Original Loan Participant or the Owner Participant, or their
respective counsel, may reasonably request in order to
establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the
compliance with the conditions herein set forth;
(3) a certificate of Lessee as
to the person or persons authorized to execute and deliver
this Agreement, the other Lessee Documents, and any other
documents to be executed on behalf of Lessee in connection
with the transactions contemplated hereby and as to the
signature of such person or persons;
(4) a copy of the Purchase
Agreement (to the Owner Participant and the Indenture Trustee
only) certified by the Treasurer, the Assistant Treasurer or
an Assistant Secretary of Lessee as being a true and accurate
copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations
or any right in such Agreement assigned by Lessee to the Owner
Trustee pursuant to the Purchase Agreement Assignment; and
(5) a copy of the general
authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of
authorization of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, certified as of the
Delivery Date by the Secretary or an Assistant
PARTICIPATION AGREEMENT [N602SW]
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Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the
Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, respectively, of all of the Operative
Agreements to which it is a party, together with such other
documents and evidence with respect to the Indenture Trustee
(in its individual capacity), SBC and the Owner Participant as
either the Original Loan Participant (or its counsel) or the
Owner Participant (or its counsel) may reasonably request in
order to establish the consummation of the transactions
contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and compliance with the
conditions herein set forth; provided, this clause shall not
be a condition precedent as to any Participant as to documents
to be provided by that Participant.
(viii) Governmental Approvals. All appropriate
action required to have been taken by the Federal Aviation
Administration, or any other governmental or political agency,
subdivision or instrumentality of the United States, prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders, permits, waivers, authorizations, exemptions and approvals
shall be in full force and effect on the Delivery Date.
(ix) Title, Registration, Airworthiness, Etc.
On the Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:
(1) the Owner Trustee has good
and marketable title (subject to filing and recording of the
Lessee FAA Bill of Sale with the Federal Aviation
Administration in accordance with the Act) to the Aircraft,
free and clear of Liens other than the rights of Lessee under
the Lease and Lease Supplement covering the Aircraft, the
mortgage and security interest created by the Trust Indenture,
the rights of the Owner Participant under the Trust Agreement
and the Trust Supplement and Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the
Lease;
(2) application for registration
of the Aircraft in the name of the Owner Trustee (together
with any required affidavits), the FAA Bill of Sale and the
Lessee FAA Bill of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the
Trust Indenture and the Trust Supplement and the Lease and the
Lease Supplement have been duly filed with the FAA for
recordation pursuant to the Act;
(4) each of the Owner Trustee,
as lessor under the Lease, and the Indenture Trustee, as
assignee thereof, is entitled to the protection of
PARTICIPATION AGREEMENT [N602SW]
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Section 1110 of the United States Bankruptcy Code in
connection with its right to take possession of the Airframe
and Engines in the event of a case under Chapter 11 of the
United States Bankruptcy Code in which Lessee is a debtor; and
(5) the Aircraft has been duly
certificated by the FAA as to type and airworthiness in
accordance with the terms of the Lease and has a current,
valid U.S. standard certificate of airworthiness issued by the
FAA.
(x) Representations and Warranties Accurate;
No Event of Default; No Adverse Change. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties shall be true and
accurate on and as of such earlier date), (B) no event shall have
occurred and be continuing, or would result from the purchase, sale,
lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) a
Lease Event of Default or an Indenture Event of Default, and (C) no
material adverse change shall have occurred in the consolidated
financial condition of Lessee and its subsidiaries from that shown in
the consolidated financial statements of Lessee and its subsidiaries
as of December 31, 1994.
(xi) Opinions of Lessee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee and the Owner Trustee from Deborah Ackerman,
Associate General Counsel for Lessee.
(xii) Opinion of Manufacturer's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee, the Indenture Trustee and Lessee from counsel to the
Manufacturer.
(xiii) Opinion of Owner Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Shipman &
Goodwin, counsel for the Owner Trustee.
(xiv) Opinions of Owner Participant's Counsel.
The Original Loan Participant shall have received a favorable opinion,
in form and substance satisfactory to it, addressed to the Indenture
Trustee, the Original Loan Participant, the Owner Trustee and Lessee
from (a) Morgan, Lewis & Bockius, special counsel to the Owner
Participant and (b) in-house or other counsel for the Owner
Participant in a position to address the Owner Participant's due
incorporation and due authorization and execution of the Operative
Agreements to which the Owner Participant is a party.
PARTICIPATION AGREEMENT [N602SW]
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(xv) Opinion of Oklahoma City Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma.
(xvi) Opinion of Indenture Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee and Lessee from Potter Anderson & Corroon, special counsel for
the Indenture Trustee.
(xvii) [Intentionally Reserved].
(xviii) Lessee's Bringdown Certificate. Each
Participant and the Indenture Trustee shall have received a
certificate signed by the President, any Vice President, the Treasurer
or the Assistant Treasurer of Lessee, dated the Delivery Date,
certifying as to the fulfillment of all conditions in this Section
4(a) insofar as they relate to Lessee and as to the matters stated in
paragraphs (x) (insofar as it relates to Lessee), (xxii) and (xxiii)
(to the knowledge of Lessee, except in regard to matters relating to
the Participants, Indenture Trustee or the Owner Trustee, in which
event such representation shall be to the knowledge of Lessee without
any investigation whatsoever) of this Section 4(a).
(xix) [Intentionally Reserved].
(xx) Appraisal. The Owner Participant shall
have received an opinion, in form and substance reasonably
satisfactory to the Owner Participant, from Aero Economics, Inc.,
independent aircraft appraisers, or such other recognized aircraft
appraiser selected by the Owner Participant, to the effect set forth
in Schedule III hereto.
(xxi) Insurance Certificates. Each
Participant, the Owner Trustee and the Indenture Trustee shall have
received an independent insurance broker's report and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of
the Lease relating to insurance with respect to the Aircraft.
(xxii) No Event of Loss. On the Delivery Date,
it shall be true that no Event of Loss (or event which with the
passage of time would become an Event of Loss) with respect to the
Airframe or any Engine has occurred.
(xxiii) No Proceedings. No action or proceeding
shall have been instituted, nor shall action or proceeding be
threatened before any court or governmental agency, nor shall any
order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency at the time of the Delivery Date to
set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
PARTICIPATION AGREEMENT [N602SW]
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(xxiv) Bringdown of Other Parties'
Representations and Warranties. The respective representations and
warranties of each Participant, the Indenture Trustee and the Owner
Trustee contained in Section 8 hereof shall be true and accurate as of
the Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date) and (a)
each Participant shall, by making its Commitment available as provided
in Section 1(b) of this Agreement, (b) the Indenture Trustee shall, by
authenticating the Series SWA 1995 Trust N602SW-I Certificate issued
on the Delivery Date, and (c) the Owner Trustee shall, by accepting
the Lessee Warranty Bill of Sale and the Lessee FAA Bill of Sale, be
respectively deemed to have reaffirmed as of the Delivery Date the
representations and warranties made by it (individually or in its
trust capacities, as the case may be) in Section 8 of this Agreement.
(xxv) Opinion of Owner Participant's Tax
Counsel. The Owner Participant shall have received from Morgan, Lewis
& Bockius, special counsel to the Owner Participant, a favorable
opinion, in form and substance satisfactory to the Owner Participant,
with respect to income tax aspects of the transactions contemplated by
the Operative Agreements.
(xxvi) No Tax Law Change. In the opinion of
the Owner Participant and its special counsel, there shall have been,
since July 1, 1995, no amendment, modification, addition or change in
or to the provisions of the Code (including for this purpose, any
non-Code provisions of legislation affecting the Code such as
transition rules or effective date provisions), the regulations
promulgated under the Code (including temporary or proposed
regulations), Internal Revenue Service Revenue Procedures or Revenue
Rulings, or other administrative interpretations, applicable judicial
precedents or Executive Orders of the President of the United States
which would adversely affect the accuracy of the Tax Assumptions set
forth in Section 2 of the Tax Indemnity Agreement.
(xxvii) Copy of Appraisal. The Original Loan
Participant shall have received a copy of the opinion referred to in
paragraph (xx) above (without any tax-sensitive provisions) in form
and substance reasonably satisfactory to the Original Loan Participant
to the effect that the fair market value of the Aircraft on the
Delivery Date is at least equal to Lessor's Cost, and that the
assumptions made in reaching such conclusion are fair and reasonable,
but otherwise without regard to the form and substance thereof.
(xxviii) Withholding Tax Forms. If the Original
Loan Participant is required to execute any form or document in order
for payments to it to qualify for exemption from, or reduction of,
withholding tax imposed by the Government, in respect to such
payments, such Original Loan Participant shall have executed such form
or document (including, without limitation, United States Internal
Revenue Forms 1001, W-8 and/or 4224) and delivered it to the Indenture
Trustee in accordance with applicable regulations to qualify for such
exemption or reduction.
Promptly upon the registration of the Aircraft and the
recording of the Lease, the Trust Indenture, the Trust Agreement, the Lease
Supplement and the Trust Supplement covering the
PARTICIPATION AGREEMENT [N602SW]
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Aircraft pursuant to the Federal Aviation Act, Lessee will request Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to deliver to
the Owner Participant, the Indenture Trustee, the Original Loan Participant,
the Owner Trustee and Lessee an opinion as to the due and valid registration of
the Aircraft in the name of the Owner Trustee, the due recording of the FAA
Bill of Sale, the Lessee FAA Bill of Sale, the Trust Indenture, the Lease
Supplement, the Trust Supplement, the Lease and the Trust Agreement and the
lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee.
It is agreed that the obligations of Lessee (A) to participate in the sale of
the Aircraft to the Owner Trustee, (B) to accept delivery of the Aircraft under
the Lease, and (C) to enter into its other Operative Agreements, are all
subject to the fulfillment to the satisfaction of Lessee prior to or on the
Delivery Date of the following conditions precedent:
(i) The conditions specified in Sections
4(a)(iii), 4(a)(iv), 4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and
4(a)(xxviii) hereof shall have been satisfied, unless such
nonsatisfaction is the result of the actions of Lessee.
(ii) Those documents described in Section
4(a)(v) shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Lessee) in the manner
specified in Section 4(a)(v), shall each be satisfactory in form and
substance to Lessee, shall be in full force and effect on the Delivery
Date, and an executed counterpart of each thereof (other than the
Series SWA 1995 Trust N602SW-I Certificate) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of the Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the Indenture
Trustee (in its individual capacity), SBC and the Owner Participant,
respectively, of all the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to the
Indenture Trustee (in its individual capacity), SBC and the Owner
Participant as Lessee or its counsel may reasonably request in order
to establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and compliance with the conditions herein set forth.
(iv) The representations and warranties of
each Participant, the Indenture Trustee and the Owner Trustee
contained in Section 8 hereof shall be true and accurate as of the
Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date).
PARTICIPATION AGREEMENT [N602SW]
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(v) Lessee shall have received the opinions
set forth in Sections 4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv) and
4(a)(xvi), in each case addressed to Lessee and dated the Delivery
Date.
(vi) No change shall have occurred after the
date of the execution and delivery of this Agreement in applicable law
or regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of Lessee,
would make it a violation of law or regulations for Lessee to execute,
deliver or perform the Operative Agreements to which it is a party.
(vii) In the opinion of Lessee and its
counsel, there shall have been, since July 1, 1995, no amendment,
modification, addition or change in or to the Code (including for this
purpose, any non-Code provisions of legislation affecting the Code
such as transition rules or effective date provisions), the
regulations promulgated under the Code (including temporary or
proposed regulations), Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, applicable
judicial precedents or Executive Orders of the President of the United
States which might give rise to an indemnity obligation under any of
the Operative Agreements, or as a result of which any adjustments to
the Lease payments are requested by the Owner Participant which would
adversely affect the accuracy of the Tax Assumptions set forth in
Section 2 of the Tax Indemnity Agreement.
SECTION 5. Confidentiality of Purchase Agreement.
The Owner Trustee, the Participants and the Indenture Trustee shall keep the
Purchase Agreement confidential and shall not disclose the same to any Person,
except (A) to prospective and permitted transferees of the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
interest who agree to hold such information confidential, (B) to the
aforementioned prospective and permitted transferees', the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
counsel or special counsel, independent insurance brokers or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, including federal or state banking examiners, tax auditors or
taxing authorities, or (D) as may be necessary or desirable for purposes of
protecting the interest of any such Person or for enforcement of any Operative
Agreement by the Owner Trustee, the Original Loan Participant, the Owner
Participant or the Indenture Trustee; provided, however, that any disclosures
of any part of the Purchase Agreement which are permitted by clause (C) or (D)
above shall be made only to the extent necessary to meet the specific
requirements or needs of the Persons to whom such disclosures are hereby
permitted.
SECTION 6. Extent of Interest of Holders. No
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
outstanding principal amount of, Break Amount, if any, Premium, if any, and
interest on all Certificates held by such Holder and all other sums payable to
such Holder hereunder, under the Trust Indenture and under such Certificates
shall have been paid in full. Each Holder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to such Holder as
provided in Section 2.09 of the Trust Indenture and that neither the Owner
Participant nor the Owner Trustee shall be personally liable to any Holder for
any amounts payable under the Certificates, the Trust
PARTICIPATION AGREEMENT [N602SW]
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Indenture, hereunder, or under any other Operative Agreement (including,
without limitation, amounts payable as Premium or Break Amount), except as
expressly provided in this Agreement or (in the case of the Owner Trustee) in
the Trust Indenture.
SECTION 7. Lessee's Representations and Warranties;
Indemnities.
(a) In General. Lessee represents warrants, covenants
and agrees that:
(i) Organization, Citizenship, Etc. Lessee
(A) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, (B) is a "citizen of
the United States" (as defined in Section 40102 of Title 49, U.S.C.)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties
and to enter into and perform its obligations under this Agreement and
the other Operative Agreements to which Lessee is or will be a party,
and (D) is duly qualified to do business as a foreign corporation in
good standing in each state in which the nature of its business makes
such qualification necessary or the failure to be so qualified or so
to be in good standing would have a material adverse effect on its
business or operations or would impair its ability to perform its
obligations under the Operative Agreements.
(ii) Corporate Authorization, Etc. The
execution, delivery and performance of this Agreement and the other
Operative Agreements to which Lessee is or will be a party (A) have
been duly authorized by all necessary corporate action on the part of
Lessee, (B) do not require any shareholder approval, or approval or
consent of any trustee or holders of indebtedness or obligations of
Lessee or of any lessor under any lease to Lessee except such as have
been duly obtained, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) Governmental Approvals. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
and 4(a)(ix)(3), and
PARTICIPATION AGREEMENT [N602SW]
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(C) such federal and state securities law approvals or filings that
will be required in connection with the public offering, if any, of
the Certificates.
(iv) Valid Agreements. This Agreement and
the other Operative Agreements to which Lessee is or will be a party,
as and when entered into, do or will, assuming due authorization,
execution and delivery by the party or parties thereto other than
Lessee, constitute legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
(v) No Proceedings. There are no pending
or, to Lessee's knowledge, threatened actions or proceedings before
any court or administrative agency which, having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to materially adversely affect the consolidated financial
condition of Lessee and its subsidiaries, or the ability of Lessee to
perform its obligations under this Agreement and the other Operative
Agreements to which Lessee is or will be a party.
(vi) Taxes. Lessee and its subsidiaries have
filed or caused to be filed all federal, state, local and foreign tax
returns which are required to be filed and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessment received by Lessee or any of its subsidiaries to the extent
that such taxes have become due and payable (except to the extent
being contested in good faith and by appropriate proceedings and for
the payment of which adequate provisions have been made).
(vii) Financial Condition. The audited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Annual Report to Shareholders for the year ended
December 31, 1994 and the unaudited consolidated financial statements
of Lessee and its subsidiaries contained in the Lessee's Quarterly
Report on Form 10-Q for the period ended March 31, 1995 (copies of
each of which have been furnished to each Participant) have been
prepared in accordance with generally accepted accounting principles,
present fairly, in all material respects, the consolidated financial
position of Lessee and its subsidiaries as of such dates and the
consolidated results of their operations and their cash flows for the
periods then ended, and since December 31, 1993, there has been no
material adverse change in such consolidated financial position.
(viii) Registration and Recordation. Except
for (A) the registration of the Aircraft with the FAA pursuant to the
Act in the name of Owner Trustee, (B) the filing for recordation of
the instruments referred to in Section 4(a)(ix)(2) and (3) and this
Agreement, if deemed necessary due to the incorporation by reference
in such other instruments of terms defined herein, (C) the filing of
the UCC financing statements referred to in Section 4(a)(vi) and
continuation statements at periodic intervals, (D) the taking of
possession by the Indenture Trustee of the original counterparts of
the Lease and the initial Lease Supplement, and (E) the affixation of
the nameplate referred to in Section 7.1.2 of the Lease, no further
action, including any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the
Uniform Commercial Code of any applicable jurisdiction), is necessary
or advisable in order to establish and perfect the right, title or
interest of Owner Trustee in the property constituting the Trust
Estate, or of
PARTICIPATION AGREEMENT [N602SW]
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<PAGE> 22
Indenture Trustee in the property constituting the Trust Indenture
Estate, in any applicable jurisdiction within the United States of
America.
(ix) Chief Executive Office. The chief
executive office (as such term is defined in Article 9 of the UCC) of
Lessee is 2702 Love Field Drive, Dallas, Texas 75235, and Lessee
agrees to give the Participants, Owner Trustee and Indenture Trustee
10 days' prior written notice of any relocation of said chief
executive office from its present location.
(x) Securities Laws. Neither Lessee nor
anyone acting on behalf of Lessee has directly or indirectly offered
any beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, or any similar interest or
security, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security
to, any Person other than the Participants and not more than 27 other
leasing companies or other institutional investors (in the case of
such beneficial interest or securities), or six other institutional
investors (in the case of the Certificates and other similar interests
and securities) or (assuming the accuracy of the representations in
Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii)) to any Person in
violation of the Securities Act or applicable state securities laws,
or both, and Lessee will take no action which would constitute or
cause such violation.
(xi) No Misstatement or Omission. Neither
the financial statements referred to in Section 7(a)(vii) nor any
other documents furnished by Lessee to Owner Trustee, Indenture
Trustee or any Participant in connection with the transactions
contemplated by this Agreement or the other Operative Agreements
contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein (in the case
of statements referred to in Section 7(a)(vii), as of the date made)
not misleading; there is no fact known by Lessee which Lessee has not
disclosed to such parties in writing which materially adversely
affects or, so far as Lessee can now reasonably foresee, will
materially adversely affect the ability of Lessee to carry on its
business and perform its obligations under this Agreement or the other
Operative Agreements to which it is a party.
(xii) Investment Company. Neither Lessee nor
any subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) No Event of Default. No Lease Event of
Default or Lease Default has occurred and is continuing under the
Lease.
(xiv) Effective Sale. On the Delivery Date,
the Aircraft will be situated in Texas and the sale of the Aircraft by
Lessee to Owner Trustee shall be complete and effective and not
voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee
PARTICIPATION AGREEMENT [N602SW]
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Retirement Income Security Act of 1974, as amended ("ERISA"), and (in
reliance upon the Participants' representations in Section 8(o)) the
transactions contemplated by this Agreement do not constitute a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available by
statute, regulation or class exemption. The execution and delivery of
this Agreement and the other Operative Agreements and the consummation
of the transactions contemplated hereby and thereby will not involve
any non-exempt prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code (such representation being
made solely in reliance upon and subject to the accuracy of the
representations contained in Section 8(o)).
(xvi) Title to Aircraft, etc. Good and
marketable title to the Aircraft will be at the time of delivery to
Owner Trustee vested in Lessee free and clear of all Liens other than
the rights of Lessee under the Lease and the Lease Supplement covering
the Aircraft, the Lien of the Trust Indenture, the beneficial interest
of the Owner Participant in the Aircraft and the Liens permitted by
clause (d) (solely for taxes not yet due) or (e) of Section 6 of the
Lease; and, subject to the filing for recordation of the Lessee FAA
Bill of Sale in accordance with the Act, good and marketable title to
the Aircraft will have been duly conveyed by Lessee to Owner Trustee,
free and clear of all Liens other than the rights of Lessee under the
Lease and the Lease Supplement covering the Aircraft, the Lien of the
Trust Indenture, the beneficial interest of the Owner Participant in
the Aircraft, and the Liens permitted by clause (d) (solely for taxes
not yet due) or (e) of Section 6 of the Lease.
(xvii) Condition of Aircraft. The Aircraft has
been duly certificated by the FAA as to type and airworthiness, is
fully equipped to operate in commercial service and complies with all
material governmental requirements governing such service; the
Aircraft has been continuously operated and maintained by Lessee (in a
manner that would satisfy the provisions of Sections 7.1.3 and 8.1 of
the Lease) since its delivery to Lessee by Manufacturer, Lessee is
unaware of any material mechanical or structural defects in or damage
to the Aircraft since its delivery to Lessee by Manufacturer and there
has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event
of Loss.
(xviii) Use of Proceeds. None of the proceeds
from the issuance of the Certificates or from the acquisition by the
Owner Participant of its beneficial interest in the Trust Estate will
be used directly or indirectly by Lessee so as to result in a
violation of Regulation G or U of the Board of Governors of the
Federal Reserve System.
(xix) No Federal Approvals. No governmental
approval in the United States of any kind is required of the Owner
Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance
under this Agreement or any agreement contemplated hereby solely by
reason of any fact or circumstance peculiar to: (a) Lessee (as
contrasted to other airlines), (b) the nature of the Aircraft, or (c)
Lessee's proposed operations or use of the Aircraft.
(xx) Section 1110. Owner Trustee, as lessor
under the Lease, and the Indenture Trustee, as assignee thereof, are
entitled to the protection of Section 1110 of the
PARTICIPATION AGREEMENT [N602SW]
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United States Bankruptcy Code in connection with their right to take
possession of the Airframe and Engines in the event of a case under
Chapter 11 of the United States Bankruptcy Code in which Lessee is a
debtor. Southwest acquired the Aircraft new from the Manufacturer
after October 22, 1994, and Southwest first placed the Aircraft in
service after such date.
(b) General Tax Indemnity.
(i) Indemnity. Lessee hereby agrees to pay,
to indemnify, and, on written demand, reimburse and hold each
Indemnified Party (which, unless otherwise indicated herein, for
purposes of this Section 7(b) shall include any Affiliate of any
Participant, and all entities which are included in a consolidated,
combined or unitary return with such Indemnified Party) harmless from,
any and all license, documentation, recording and registration fees
and any and all taxes (including, without limitation, sales, use,
turnover, value-added, property (tangible and intangible), ad valorem,
consumption, rental, license, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature
whatsoever together with any and all penalties, fines, additions to
tax or interest thereon or computed with reference thereto
(collectively "Taxes"), howsoever imposed by any federal, state or
local government or governmental subdivision or taxing authority in or
of the United States of America (including any possession or territory
of the United States of America), or by any foreign government, taxing
authority or governmental subdivision of a foreign country, upon,
against, or with respect to any Indemnified Party, Lessee, the
Aircraft, Airframe, any Engine, any other engine installed on the
Airframe, Part or any other part thereof or interest therein or upon
or with respect to the purchase, acquisition, acceptance, rejection,
mortgaging, financing, refinancing, manufacture, sale, transfer of
title, ownership, delivery, nondelivery, insuring, inspection,
leasing, possession, use, registration, reregistration,
deregistration, operation, repair, replacement, abandonment,
redelivery, modification, rebuilding, importation, exportation, return
or other disposition thereof, or the imposition of any Lien (or the
occurrence of any liability to refund or pay over any amount as a
result of any Lien) thereon, or upon or with respect to the rentals,
receipts or earnings arising therefrom, or upon or with respect to
this Agreement, the Trust Agreement, the Trust Indenture, the Lease, a
Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Certificates or the issuance, reissuance, acquisition,
redemption, expiration or subsequent transfer thereof under the Trust
Indenture, or the beneficial interests in the Trust Estate or the
creation thereof, or any payment made pursuant to any such agreement
or instrument or upon or with respect to the property, held by Owner
Participant or by the Trust Estate or by Indenture Trustee under the
Trust Indenture, or otherwise with respect to or in connection with
the transactions contemplated by the Operative Agreements.
(ii) Exceptions. The indemnity set forth in
Section 7(b)(i) shall not extend in the case of any Indemnified Party
to Taxes (1) on, based on, or measured by, the receipts, gross or net
income, capital or net worth of such Indemnified Party (whether
denominated as franchise, excess profits, conduct of business, capital
gains, minimum and/or alternative minimum taxes) or accumulated
earnings, personal holding company, succession taxes and estate or
franchise taxes (other than taxes which are in the nature of sales or
use taxes, value-added taxes, rental taxes, license taxes, consumption
taxes, ad valorem taxes or
PARTICIPATION AGREEMENT [N602SW]
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property taxes) imposed by (A) the federal government of the United
States (including without limitation any taxes collected by
withholding) (but specifically excluding any excise taxes imposed in
connection with the occurrence of a "prohibited transaction", within
the meaning of Section 406 of ERISA or Section 4975 of the Code, for
which an exemption is not available by statute, regulation or class
exemption) or (B) any state or local government or governmental
subdivision or state or local taxing authority in the United States of
America (including any possession or territory of the United States of
America) other than in the case of (B) any such tax which is a Covered
Income Tax, as defined below; (2) on, based on, or measured by, any
fees or compensation received by Owner Trustee or Indenture Trustee in
its individual capacity for services rendered in connection with the
transactions contemplated hereby; (3) relating to the Aircraft for any
period after the later of (A) the expiration or early termination of
the Lease and the return of the Aircraft in connection therewith in
accordance with the terms thereof and (B) payment in full of
Stipulated Loss Value or Termination Value, as the case may be, and
all Rent due and owing in accordance with the Lease; (4) arising out
of or caused by the wilful misconduct or gross negligence of such
Indemnified Party or the inaccuracy or breach of any representation,
warranty or covenant of such Indemnified Party contained in any
Operative Agreement; (5) imposed on the income of such Indemnified
Party by a foreign government or taxing authority, except to the
extent such Taxes are imposed by reason of the location, operation,
use or rental of the Aircraft or any Part thereof in such jurisdiction
or the presence of Lessee or Sublessee or other user in such
jurisdiction or the making of payments from such jurisdiction; (6)
which may become payable in connection with the occurrence of a
"prohibited transaction", within the meaning of Section 406(b) of
ERISA or Section 4975(c)(1)(E) or (F) of the Code, involving the
assets of any "employee benefit plan" within the meaning of Section
3(3) of ERISA, or of any "plan" within the meaning of Section
4975(e)(1) of the Code, with respect to which the Owner Participant is
the "plan sponsor" within the meaning of Section 3(16)(B) of ERISA;
and (7) which become payable as a result of any involuntary
disposition attributable to the bankruptcy of the Owner Participant or
Owner Trustee or any voluntary sale, transfer, mortgaging, pledging or
financing by such Indemnified Party of all or a portion of its
interest in the Aircraft, the Trust Estate, the Trust Indenture
Estate, the Lease, or any other Operative Agreement in a transaction
not contemplated by the Operative Agreements (it being understood that
any disposition of the Aircraft or any Part as a result of a
substitution, replacement or modification thereof or thereto by Lessee
shall not be treated as voluntary) unless, in each case, such transfer
shall occur (A) pursuant to the exercise of remedies under Section 15
of the Lease or (B) pursuant to Section 7, 8, 9, 10 or 18 thereof. As
used in clause (1)(B) of this Section 7(b)(ii), the term "Covered
Income Tax" means a Tax described in said clause (1)(B) imposed on an
Indemnified Party by any taxing authority (A) in whose jurisdiction
such Indemnified Party (including for this purpose all entities with
which it is combined, integrated or consolidated in such taxing
authority's jurisdiction) did not engage in business, did not maintain
an office or other place of business and was not otherwise located, if
such Tax resulted from the operation of the Aircraft or any Engine in
such jurisdiction or the transactions contemplated by the Operative
Agreements, or (B) in whose jurisdiction such Indemnified Party in
fact is doing business, maintaining an office or other place of
business or is otherwise located, if such circumstance was no factor
in the imposition of such Tax.
PARTICIPATION AGREEMENT [N602SW]
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(iii) Calculation. Lessee agrees that, with
respect to any payment or indemnity pursuant to Section 7(b)(i)
hereof, such payment or indemnity shall include an amount payable to
the Indemnified Party sufficient to hold such Indemnified Party
harmless on an after-tax basis from all Taxes required to be paid by
such Indemnified Party with respect to such payment or indemnity under
the laws of any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America,
including any possession or territory of the United States, or under
the laws of any foreign government, taxing authority or governmental
subdivision of a foreign country; provided, that if any Indemnified
Party realizes a reduction in Taxes not subject to indemnification
hereunder (a "tax benefit") by reason of such payment or indemnity
(whether such tax benefit shall be by means of investment tax credit,
foreign tax credit, depreciation deduction or otherwise), such
Indemnified Party shall, so long as no Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred or be continuing, pay Lessee (but not
before Lessee shall have made all payments or indemnities to such
Indemnified Party then due under the Operative Agreements) an amount
equal to the sum of such tax benefit plus any other tax benefit
realized by such Indemnified Party as the result of any payment made
pursuant to this proviso; provided, however, that such payment by an
Indemnified Party shall not exceed the aggregate payments by Lessee to
such Indemnified Party under Section 7(b)(i) hereof (but any such
excess shall be carried forward and shall reduce Lessee's obligation
to make any subsequent payments to such Indemnified Party pursuant to
Section 7(b) or 7(c) hereof). Each such Indemnified Party shall in
good faith use reasonable efforts in filing its tax returns and in
dealing with taxing authorities to seek and claim any such tax benefit
of which it is actually aware or of which it has been given notice.
Any Taxes that are imposed on any Indemnified Party as a result of the
disallowance or reduction of such tax benefit referred to in the next
preceding sentence in a taxable year subsequent to the year of
allowance and utilization by such Indemnified Party (including the
expiration of any tax credit carryovers or carrybacks of such
Indemnified Party that would not otherwise have expired) shall be
indemnifiable pursuant to the provisions of Section 7(b)(i) without
regard to Section 7(b)(ii). In determining the amount of any net
reduction in Taxes which is attributable to more than one transaction,
an Indemnified Party shall be deemed to have utilized its deductions
and credits attributable first, to all transactions other than
leveraged equipment leasing transactions and then to this transaction
and to all such other leveraged equipment leasing transactions on a
pari passu basis.
If as a result of any Advance (as hereinafter
defined) to an Indemnified Party the aggregate taxes paid or accrued
by such Indemnified Party for any taxable year shall be more than the
amount of such taxes which would have been payable by the Indemnified
Party had no such Advance been made, and if such increase in taxes was
not taken into account in determining the amount of the Advance, then
such increase in taxes will be treated as Taxes for which Lessee must
indemnify the Indemnified Party pursuant to this Section 7(b). Upon
the final determination of any contest pursuant to Section 7(b)(iv)
hereof in respect of any Taxes for which Lessee has made an Advance,
the amount of Lessee's obligation shall be determined under this
Section 7(b)(iii) as if such Advance had not been made. Any
obligation of Lessee under this Section 7(b) and the Indemnified
Party's obligation to repay
PARTICIPATION AGREEMENT [N602SW]
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the Advance will be satisfied first by set off against each other and
any difference owing by either party will be paid within 10 days of
such final determination.
(iv) Notice and Contest. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 15 days after its receipt; provided, that failure to provide
such notice within 15 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of Vinson & Elkins L.L.P. or other independent counsel selected by
Lessee and reasonably satisfactory to Indemnified Party to the effect
that a reasonable basis in law and fact exists under ABA opinion
85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or permit Lessee, if desired by Lessee, to contest in
the name of Lessee) if permissible under applicable laws, the
validity, applicability or amount of such Taxes by (i) resisting
payment thereof if practicable, (ii) not paying the same except under
protest, if protest shall be necessary and proper, (iii) if payment
shall be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings, and (iv) taking
such other action as is reasonably requested by Lessee from time to
time. The Indemnified Party shall determine the method of any contest
and (in good faith consultation with Lessee) control the conduct
thereof. Notwithstanding anything contained in this Section 7(b)(iv),
an Indemnified Party will not be required to contest, or to continue
to contest, the validity, applicability or amount of any Tax (or
portion thereof) (w) unless Lessee shall have acknowledged in writing
its obligation to indemnify the Indemnified Party hereunder in the
event the Indemnified Party does not prevail in such contest, (x) if
such contest would result in any material risk of criminal penalties
or any material risk of sale, forfeiture or loss (or loss of use) of
the Aircraft, the Airframe or any Engine or any Part or any interest
therein, (y) if a Lease Event of Default has occurred and is
continuing or (z) if the claim (when aggregated with related or
correlative adjustments with respect to such Indemnified Party) will
not exceed $10,000. The Owner Participant shall not be required to
appeal, or seek leave to appeal, an adverse judicial determination
with respect to such Taxes to the United States Supreme Court. If an
Indemnified Party contests a Tax by making a payment and seeking a
refund thereof, then Lessee shall advance to such Indemnified Party,
on an interest-free basis, an amount equal to the Taxes and any
penalties, additions to tax, fines and interest thereon (which shall
collectively be known, only for the purpose of this Section 7(b), as
an "Advance") that are paid by such Indemnified Party in connection
with such contest. Such Advance shall be repayable to Lessee at the
time and in the manner specified in the last paragraph of Section
7(b)(iii). If any Indemnified Party shall obtain a refund of all or
any part of such Taxes for which an indemnity was paid by Lessee, such
Indemnified Party shall pay Lessee the
PARTICIPATION AGREEMENT [N602SW]
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amount of such refund as is attributable to the Taxes for which such
indemnity was paid; provided, however, that such amount shall not be
payable before such time as Lessee shall have made all payments or
indemnities to such Indemnified Party then due under this Section 7(b)
and under the Lease. If in addition to such refund such Indemnified
Party shall receive an amount representing interest on the amount of
such refund, Lessee shall be paid that proportion of such interest
which is fairly attributable to Taxes paid with an indemnity payment
or Advance by Lessee prior to the receipt of such refund, reduced by
taxes imposed on such Indemnified Party on receipt of such refund or
interest and increased by any taxes saved by reason of the
deductibility of such payment by the Indemnified Party. Any
subsequent determination that such Indemnified Party was not entitled
to all or any portion of any refund paid to Lessee shall be treated as
a Tax indemnifiable under Section 7(b)(i) without regard to Section
7(b)(ii). Lessee shall not be deemed to be in default under any of
the indemnification provisions under this Section 7(b) so long as it
or any Indemnified Party shall diligently prosecute such contest;
provided, that Lessee shall nonetheless be required to pay all
Advances and expenses required hereunder. In case any report or
return is required to be made with respect to any obligation of Lessee
under this Section 7(b) or arising out of this Section 7(b), Lessee
will either timely make such report or return in such manner as will
show the ownership of the Aircraft in Owner Trustee, and send a copy
of such report or return to Owner Trustee (except for any report or
return that an Indemnified Party has notified Lessee that the
Indemnified Party intends to file or that the Indemnified Party is
required by law to file), or will notify Owner Trustee of such
requirement and prepare and deliver such report or return to the
Indemnified Party in such manner as shall be satisfactory to such
Indemnified Party and Owner Trustee.
Notwithstanding the above provisions of this Section 7(b), any
Indemnified Party in its sole discretion (by written notice to Lessee) may
unconditionally waive its rights to the indemnities provided for in this
Section 7(b) with respect to any Taxes, and refrain from contesting, or
continuing the contest of such Taxes, in which event Lessee shall have no
liability to such Indemnified Party hereunder with respect to such Taxes. In
addition, if an Indemnified Party shall agree to a settlement of any contest
under this Section 7(b) without the prior written consent of Lessee, then the
Indemnified Party shall be deemed to have waived its rights to the indemnities
provided in this Section 7(b) with respect to the subject matter of such
settlement.
(v) Withholdings. Notwithstanding the exceptions in
Section 7(b)(ii), Lessee agrees that each payment of Rent and any amount
payable on the Certificates shall be free of all withholdings (other than a
U.S. withholding tax, except to the extent described in Section 15.05(d) of
the Trust Indenture) of any nature whatsoever except to the extent otherwise
required by law, and in the event that any such withholding is so required,
Lessee shall pay an additional amount of Rent such that after the deduction of
all amounts required to be withheld, the net amount actually received by each
Indemnified Party will equal the amount that would be due absent such
withholding. In the event additional Rent is paid by Lessee to provide for
withholdings pursuant to the preceding sentence in respect of Taxes that are
excepted from indemnification hereunder pursuant to Section 7(b)(ii), the
Indemnified Party on whom the Tax is imposed by way of withholding on payments
to such person shall, promptly upon receipt of notice from Lessee, reimburse
Lessee for such additional Rent. As used in this Section 7(b)(v), a "U.S.
withholding tax" shall mean any withholding tax imposed by the United States of
America (A) with respect to interest payments under any
PARTICIPATION AGREEMENT [N602SW]
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Certificate pursuant to treaty or federal law imposing withholding tax
generally on interest payments to Persons not resident in the United States or
(B) in the nature of backup withholding under section 3406 of the Code and the
regulations thereunder, or any successor or similar provision of the Code,
federal tax law or regulations thereunder. All U.S. withholding taxes with
respect to interest payments shall be borne by the Holder of the relevant
Certificate and none of Lessee, Owner Participant, Indenture Trustee or Owner
Trustee shall be responsible for any U.S. withholding tax with respect to
interest payments on such Certificate. Owner Trustee may (or, if Lessee is
making any payment directly to the Holder of any Certificate or to the
Indenture Trustee, Lessee shall) withhold any applicable U.S. withholding tax
from the amount of the interest payment then due and pay (and, if Lessee is
making any payment to the Holder or the Indenture Trustee, Lessee shall pay)
any amount withheld to the appropriate federal taxing authority; provided, that
Lessee shall indemnify and hold the Owner Trustee and the Owner Participant
harmless on an after-tax basis from and against any and all liability arising
from any failure by any Person to withhold any U.S. withholding taxes with
respect to payments required to be made with respect to the Certificates, and
Lessee shall timely prepare and file, or, if required by applicable law,
present to the Owner Trustee for filing, all information returns required to be
prepared with respect to any such withholding tax payments or otherwise with
respect to payments under the Certificates.
(c) General Indemnity.
(i) Indemnity. Lessee hereby agrees,
whether or not any of the transactions contemplated hereby shall be
consummated, to pay, assume liability for and indemnify, protect,
defend, save and keep harmless each Indemnified Party from and
against, on a net after-tax basis as provided in Section 7(b)(iii),
any and all liabilities, obligations, losses, damages, settlements,
claims, actions, suits, penalties, costs, expenses and disbursements
(including but not limited to reasonable legal and investigative fees
and expenses and Transaction Costs to the extent not required to be
paid by Owner Participant pursuant to Section 16 hereof, and all costs
and expenses relating to amendments, supplements, waivers and consents
to and under the Operative Agreements, but excluding internal overhead
costs and expenses such as salaries (other than a reasonable
allocation in respect of the Original Loan Participant's in-house
counsel)) of whatsoever kind and nature, including but not limited to
negligence, liability of an owner, strict or absolute liability,
liability without fault and liability in tort (any of the foregoing
being called a "Loss") which may from time to time be imposed on,
incurred by or asserted against any Indemnified Party or the Aircraft,
Airframe, any Engine or any Part or any portion of the Trust Estate or
the Trust Indenture Estate (whether or not any such Loss is also
indemnified or insured against by any other Person or such Indemnified
Party has also indemnified any other Person against such Loss) in any
way relating to or arising out of (a) any Operative Agreement, the
enforcement thereof or any of the transactions contemplated thereby
(including, without limitation, the performance or observance of all
obligations and conditions of Lessee thereunder, or the falsity of any
representations or warranties of Lessee therein or thereunder or in
any document or certificate delivered pursuant thereto), (b) the
purchase, acceptance or rejection of the Aircraft, (c) the Aircraft,
the Airframe, any Engine, any engine or any Part, any data or any
other thing delivered or to be delivered under an Operative Agreement,
including without limitation, the ownership, financing, refinancing,
delivery, nondelivery, lease, sublease, assignment, registration,
reregistration, deregistration, possession, use, non-
PARTICIPATION AGREEMENT [N602SW]
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use, presence, operation, condition, storage, preparation,
installation, testing, manufacture, design, fitness for use,
merchantability, modification, replacement, substitution, alteration,
maintenance, repair, re-lease, sale, return, transportation, transfer,
abandonment or other disposition thereof or any portion thereof
(including, without limitation, latent and other defects, whether or
not discoverable, and any claim for patent, trademark or copyright
infringement, or arising under environmental control, noise or
pollution laws or regulations, and loss of or damage to any property
or the environment or death or injury to any person), or (d) the
offer, sale or delivery of the Certificates, whether before or after
the Delivery Date (the indemnity in this clause (d) to extend also to
any Person who controls an Indemnified Party, its successors, assigns,
employees, servants and agents within the meaning of Section 15 of the
Securities Act).
(ii) Exceptions. The indemnity set forth in
Section 7(c)(i) shall not extend to any Loss with respect to such
Indemnified Party (A) to the extent that such Loss is caused by acts,
omissions or events which occur after full and final compliance by
Lessee with all the terms of the Operative Agreements, (B) to the
extent such Loss is caused by acts, omissions or events which occur
following the earlier of: (I) acceptance of possession of the Airframe
or any Engine or Part by Lessor or its designee pursuant to the terms
of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long
as Lessor shall be entitled to exercise remedies under such Section
15), (II) the termination of the Term in accordance with Section 9 of
the Lease, or (III) the transfer of title to the Aircraft to Lessee
(or its designee) pursuant to Section 10.1.4 or Section 18.2 of the
Lease, (C) to the extent that such Loss is a Tax or a loss of tax
benefits, whether or not Lessee is required to indemnify therefor
pursuant to Section 7(b) hereof, (D) to the extent that such Loss is
caused by the willful misconduct or gross negligence of such
Indemnified Party (other than willful misconduct or gross negligence
imputed to such Indemnified Party solely by reason of its interest in
the Aircraft) or any material misrepresentation or violation or breach
of any obligations of such Indemnified Party contained in the
Operative Agreements then in force unless such misrepresentation,
violation or breach is a result of Lessee's failure to comply with the
terms of any Operative Agreement to which it is a party, or (E) to the
extent such Loss is associated with a sale, assignment or transfer by
such Indemnified Party of its respective interest in the Aircraft, the
Certificates or the transactions contemplated hereby (other than (1)
as required by the Operative Agreements and (2) during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of
the Lease) or a Lease Event of Default or the exercise of remedies
under the Lease). This Section 7(c) does not constitute a guarantee
of the useful life or residual value of the Aircraft or a guarantee
that the Certificates will be paid.
(iii) Notice. If any Indemnified Party or
Lessee has knowledge of any Loss for which Lessee is obligated to
indemnify under this Section 7(c), it shall give prompt written notice
thereof to Lessee or such Indemnified Party, as the case may be, but
failure to give such notice shall not relieve Lessee of its
obligations hereunder or from any other obligation that Lessee may
have to such Indemnified Party at law or in equity, and no payment by
Lessee to an Indemnified Party pursuant to this Section 7(c) shall be
deemed to constitute a waiver or release of any right or remedy which
Lessee may have against such
PARTICIPATION AGREEMENT [N602SW]
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Indemnified Party for any actual damages as a result of the failure by
such Indemnified Party to give Lessee such notice.
(iv) Right to Defend; Subrogation; Fees and
Expenses of Trustees. Lessee shall be entitled (and, at the
Indemnified Party's election, shall be obligated), at its sole cost
and expense, acting through counsel selected by Lessee reasonably
acceptable to the respective Indemnified Party, (A) in any judicial or
administrative proceeding that involves solely a claim for which
payment or indemnity is sought under this Section 7(c), to assume
responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for which payment or
indemnity is sought under this Section 7(c), and other claims related
or unrelated to the transactions contemplated by the Operative
Agreements, to assume responsibility for and the control of such claim
for which payment or indemnity is sought under this Section 7(c) to
the extent that the same may be and is severed from such other claims
(and such Indemnified Party shall use its reasonable best efforts to
obtain such severance), and (C) in any other case, to be consulted by
such Indemnified Party with respect to judicial proceedings subject to
the control of such Indemnified Party. Notwithstanding any of the
foregoing to the contrary, Lessee shall not be entitled to assume
responsibility for and control of any such judicial or administrative
proceedings (1) while any Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or Lease Event of Default shall
have occurred and be continuing, (2) if such proceedings will involve
a material risk of the sale, forfeiture or loss of, or the creation of
any Lien (other than a Permitted Lien) on, the Aircraft or the Trust
Estate or the Trust Indenture Estate or any part thereof or the loss
or impairment of the Lien of the Trust Indenture on all or any part of
the Trust Indenture Estate, (3) if such proceedings could, in the good
faith opinion of the Indemnified Party, entail any risk of material
criminal liability or material civil penalty or (4) if in the written
opinion of counsel to such Indemnified Party an actual or potential
material conflict of interest exists making it advisable for such
Indemnified Party to be represented by separate counsel. The
Indemnified Party may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to
the preceding provisions.
The Indemnified Party shall supply Lessee, at Lessee's
expense, with such information within its possession reasonably requested by
Lessee as is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c). Such Indemnified
Party shall not enter into a settlement or other compromise with respect to any
Loss without the prior written consent of Lessee (except during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default when such consent shall not be required if such
Indemnified Party gives 10 days' prior written notice to Lessee describing the
proposed settlement or other compromise), which consent shall not be
unreasonably withheld or delayed, unless such Indemnified Party waives its
right to be indemnified with respect to such Loss under this Section 7(c).
Lessee shall supply the Indemnified Party with such
information reasonably requested by the Indemnified Party as is necessary or
advisable for the Indemnified Party to control or participate in any proceeding
to the extent permitted by this Section 7(c).
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Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.
In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person seeking indemnification from Lessee pursuant to any provision of
this Agreement may proceed directly against Lessee without first seeking to
enforce any other right of indemnification.
Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 9.02(c) of
the Trust Indenture) and, as provided in Section 6.07 of the Trust Agreement,
the Owner Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel), without cost, on a net after-tax basis, to the Owner
Participant, for acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay the reasonable
fees and expenses of any separate owner trustee or co-trustee appointed
pursuant to Section 9.02 of the Trust Agreement as a result of any requirement
of law or if otherwise required by any Operative Agreement or if requested, or
consented to, by the Lessee.
(d) Owner Participant's Indemnity. Owner Participant
covenants and agrees that if (i) Lessee has elected pursuant to Section 9.1 of
the Lease to terminate the Lease by causing the Aircraft to be sold pursuant to
Section 9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of
the Lease, given to Lessee written notice of Lessor's election to retain title
to the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
on or before the proposed termination date over the price for which the
Aircraft may subsequently be sold (but disregarding any portion of such bid or
such price in excess of the applicable Termination Value), any additional Rent
paid by Lessee (less an amount representing the fair value to Lessee of its use
of the Aircraft for the period of time in respect of which such Rent was paid)
and any reasonable
PARTICIPATION AGREEMENT [N602SW]
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fees and expenses of lawyers, appraisers, brokers or accountants) incurred as a
consequence of such failure by Owner Trustee.
(e) Payments. Any payments made pursuant to this Section
7 shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.
(f) Interest on Overdue Amounts. If any amount payable
by Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.
(g) Survival. All indemnities, obligations, adjustments
and payments provided for in this Section 7 shall survive, and remain in full
force and effect, notwithstanding the expiration or other termination of this
Agreement, the Lease or any other Operative Agreement. The obligations of
Lessee in respect of all such indemnities, obligations, adjustments and
payments are expressly made for the benefit of, and shall be enforceable by,
each Indemnified Party or other indemnitee entitled thereto, without taking any
action under the Lease.
SECTION 8. Other Representations, Warranties,
Covenants and Indemnities. (a) Securities Laws. The Owner Participant
represents that it is acquiring its interest in the Trust Estate for investment
purposes only and not with a present intent as to any resale or distribution
thereof except as otherwise permitted by Rule 144A under the Securities Act,
(subject nonetheless to any requirement of law that the disposition of its
properties shall at all times be and remain within its control) and that
neither it nor anyone acting on its behalf has directly or indirectly offered
any interest in the Trust Estate or any Certificates or any similar securities
for sale to, or solicited any offer to acquire any of the same from, anyone in
a manner which would result in a violation of the Securities Act or the
securities laws, rules and regulations of any state.
(b) Citizenship. Each of the Owner Participant and SBC,
in its individual capacity, represents and warrants to the other parties to
this Agreement that it is a "citizen of the United States" as defined in 49
U.S.C. Section 40102(a)(15)(C). The Owner Participant agrees, solely for the
benefit of Lessee, each Sublessee, the Indenture Trustee and the Holders, that
if at any time (i) it shall not be a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) and (ii) the Aircraft shall be, or
would therefore become, ineligible for registration in the name of the Owner
Trustee under the Act and regulations then applicable thereunder (it being
understood that the effect of any such status shall be determined without
giving consideration to any provision of the Act (or any superseding statute)
which permits United States registration of an aircraft based on conditions
which impose restrictions on the location and use of such aircraft or otherwise
restrict the ability of an air carrier to operate an aircraft in the ordinary
course of its business), then the Owner Participant shall (at its own expense
and without any reimbursement or indemnification from Lessee) as soon as is
reasonably practicable but in any event within 30 days
PARTICIPATION AGREEMENT [N602SW]
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after a Responsible Company Officer of the Owner Participant shall obtain
actual knowledge of such loss of citizenship (A) effect voting trust or other
similar arrangements or take any other action as may be necessary to prevent
any deregistration or to maintain the United States registration of the
Aircraft and (to the extent such recordation is dependent on the U.S.
registration of the Aircraft) the recordation with the FAA of the Trust
Indenture and the Lease, or (B) transfer its beneficial interest in the Trust
Estate in accordance with Section 8(l) hereof. It is understood that: (1) the
Owner Participant shall be liable to any of the other parties hereto for any
damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section
8(b) proving to be untrue as of the Delivery Date; and (2) the Owner
Participant shall be liable to Lessee, any Sublessee and any Holder for any
damages which may be incurred by Lessee, any Sublessee or such Holder as a
result of such loss of citizenship by the Owner Participant and the inability
to register (or maintain the registration of) the Aircraft in the name of the
Owner Trustee under the Act and regulations then applicable thereunder as a
result of such loss of citizenship. Each of Lessee (as provided in Section
11(b)), the Original Loan Participant, the Owner Trustee and the Indenture
Trustee agrees, upon the request and at the sole expense of the Owner
Participant, to take all reasonable acts requested by the Owner Participant in
complying with its obligations under clause (A) or (B) of the second sentence
of this Section 8(b). SBC, in its individual capacity, agrees that if at any
time a responsible officer of SBC shall obtain actual knowledge that SBC has
ceased to be a "citizen of the United States" within the meaning of the Act, it
will promptly resign as Owner Trustee (if and so long as such citizenship is
necessary under the Act as in effect at such time or, if it is not necessary,
if and so long as the Owner Trustee's citizenship would have any adverse effect
on a Holder, Lessee, a Sublessee or the Owner Participant), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of the
Trust Agreement.
(c) Chief Executive Office of SBC. SBC in its individual
capacity represents and warrants that both the principal place of business of
the Owner Trustee and the place where its records concerning the Aircraft and
all of its interest in, to and under the Operative Agreements to which it is a
party are or will be kept is Hartford, Connecticut (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture)
and has its chief executive office (as such term is used in Article 9 of the
Uniform Commercial Code) in Hartford, Connecticut. SBC in its individual
capacity agrees that it will not change the location of such office to a
location outside of Hartford, Connecticut, without 10 days' prior written
notice to Lessee, Indenture Trustee and the Owner Participant.
(d) Securities Laws. The Original Loan Participant
represents and warrants that the Series SWA 1995 Trust N602SW-I Certificate to
be issued to it pursuant to the Trust Indenture is being acquired by it with no
present intent to make any resale or distribution thereof which would require
registration under the Securities Act and it will not offer or sell any
Certificate in violation of the Securities Act; provided, that the disposition
of its property shall at all times be and remain within its control, and that
neither it nor anyone acting on its behalf has offered any Certificates or any
similar securities relating to the Aircraft for sale to, or solicited any offer
to buy any Certificates or any similar securities relating to the Aircraft
from, any person or entity other than in a manner required by the Securities
Act and the rules and regulations thereunder and the securities laws, rules and
regulations of any state.
PARTICIPATION AGREEMENT [N602SW]
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(e) [Intentionally Reserved].
(f) Owner Participant's Representations and Warranties.
The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a national
banking association duly organized and validly existing and in good
standing under the laws of the United States and has the corporate
power and authority to carry on its business as now conducted, to own
or hold under lease its properties and to enter into and perform its
obligations under the Owner Participant Agreements;
(ii) the Owner Participant Agreements have
been duly authorized by all necessary corporate action on the part of
the Owner Participant, do not require any approval not already
obtained of stockholders of the Owner Participant or any approval or
consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been
duly executed and delivered by the Owner Participant, and, subject to
and in reliance upon the representations made by the Original Loan
Participant and Lessee in Sections 8(o) and 7(a)(xv), respectively,
and compliance with the covenants of Section 8(d), neither the
execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions contemplated thereby by the Owner
Participant, nor compliance by the Owner Participant with any of the
terms and provisions thereof will contravene any United States federal
or state law, judgment, governmental rule, regulation or order
applicable to or binding on the Owner Participant (it being understood
that no representation or warranty is made with respect to laws, rules
or regulations relating to aviation or to the nature of the equipment
owned by the Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of the Owner Participant
under applicable aviation law) or contravene or result in any breach
of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a)
of the definition thereof) upon the Trust Estate under any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement, corporate charter, by-law or other
agreement or instrument to which the Owner Participant is a party or
by which it or its properties may be bound or affected;
(iii) assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, each
of the Owner Participant Agreements constitutes a legal, valid and
binding obligation of the Owner Participant enforceable against the
Owner Participant in accordance with the terms thereof;
(iv) there are no pending or, to the
knowledge of the Owner Participant, threatened actions or proceedings
against the Owner Participant before any court or administrative
agency which, if determined adversely to the Owner Participant, would
materially adversely affect the financial condition of the Owner
Participant or the ability of the Owner Participant to perform its
obligations under the Owner Participant Agreements;
(v) on the Delivery Date, there will be no
Lessor Liens attributable to the Owner Participant;
PARTICIPATION AGREEMENT [N602SW]
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(vi) the Owner Participant's net worth (as
defined in Section 8(l)) is at least $75,000,000; and
(vii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to the Owner
Participant and which is presently continuing.
(g) Lessor Liens. Each of SBC in its individual capacity
and the Owner Participant severally covenants and agrees (i) that it shall not
cause or permit to exist a Lessor Lien attributable to it with respect to the
Aircraft or any other portion of the Trust Estate, (ii) that it will promptly,
at its own expense, take such action as may be necessary duly to discharge such
Lessor Lien attributable to it, and (iii) that it will make restitution to the
Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it.
(h) Indenture Trustee Liens. Wilmington Trust Company in
its individual capacity covenants and agrees that it shall not cause or permit
to exist any Lien, arising as a result of (i) claims against the Indenture
Trustee not related to its interest in the Aircraft or the administration of
the Trust Estate pursuant to the Trust Indenture, (ii) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to take any
action required by, the Operative Agreements to the extent such acts arise or
such failure arises from or constitutes gross negligence or willful misconduct,
(iii) claims against the Indenture Trustee relating to Taxes or Losses which
are excluded from the indemnification provided by Section 7 hereof pursuant to
said Section 7, or (iv) claims against the Indenture Trustee arising out of the
transfer by the Indenture Trustee of all or any portion of its interest in the
Aircraft, the Trust Estate, the Trust Indenture Estate or the Operative
Agreements other than (A) a transfer of the Aircraft pursuant to Section 9, 10
or 18 of the Lease or Article 5 or 8 of the Trust Indenture, (B) any borrowing
pursuant to Section 17 hereof, or (C) a transfer of the Aircraft pursuant to
Section 15 of the Lease while a Lease Event of Default is continuing and prior
to the time that the Indenture Trustee has received all amounts due pursuant to
the Trust Indenture.
(i) Termination Instructions to Owner Trustee. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.
(j) Excess Payment. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly (other than the recourse liability of
the Owner Participant under this Agreement), to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and (iii) any such Holder or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects
any payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Holder or the Indenture
Trustee shall promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made
PARTICIPATION AGREEMENT [N602SW]
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such payment) such Excess Payment. For purposes of this Section 8(j), "Excess
Payment" means the amount by which such payment exceeds the amount which would
have been received by such Holder or the Indenture Trustee if the Owner Trustee
(in its individual capacity) or the Owner Participant had not become subject to
the recourse liability referred to in clause (ii) above. Nothing contained in
this Section 8(j) shall prevent such Holder or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant
under this Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) Representations and Warranties of Indenture Trustee
in Individual Capacity. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States"
as defined in the Act, that it will notify promptly all parties to
this Agreement if in its reasonable opinion its status as a "citizen
of the United States" is likely to change and that it will resign as
Indenture Trustee as provided in Section 9.07 of the Trust Indenture
if it should cease to be a "citizen of the United States";
(ii) it is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and
the authentication of the Certificates have been duly authorized by
all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation governing its banking or trust powers or any judgment or
order binding on it or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it or its properties may be bound or affected;
(iv) each of the Indenture Trustee Agreements
has been duly executed and delivered by it and, assuming that each
such agreement is the legal, valid and binding obligation of each
other party thereto, is the legal, valid and binding obligation of the
Indenture Trustee, enforceable against it in accordance with its
terms;
(v) neither the execution and delivery by
it, in its individual capacity or as Indenture Trustee, as the case
may be, of this Agreement or the Trust Indenture nor the consummation
of any of the transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, or the registration
with, any governmental authority or agency pursuant to any law of the
State of Delaware or the United States governing the banking or trust
powers of the Indenture Trustee; and
(vi) neither it nor anyone authorized to act
on its behalf has directly or indirectly offered any beneficial
interest or security relating to the ownership of the
PARTICIPATION AGREEMENT [N602SW]
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Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, for sale to, or solicited any
offer to acquire any such interest or security from, or has sold any
interest or security to, any Person, and it will not directly or
indirectly make any such offer, solicitation or sale.
(l) Transfers of Equity Interests; Rights of Owner
Participant and Owner Trustee. So long as the Aircraft shall be leased to
Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion (in
form, scope and substance reasonably satisfactory to the Indenture Trustee and
Lessee) of counsel reasonably satisfactory to the Indenture Trustee and Lessee
to the effect that the agreement referred to in clause (O) below and any
guaranty required by clause (B) or (C) below, are the legal, valid, binding and
enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital, surplus and undivided profits of
at least $75,000,000 or a limited partnership or corporation whose net worth is
at least $75,000,000, (B) any subsidiary of such a bank, financial institution,
limited partnership or corporation; provided, that such bank, financial
institution, limited partnership or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty substantially in the form of
Exhibit A with respect to the Owner Participant's obligations, in the case of
the Owner Trustee, under the Trust Agreement and, in the case of the Indenture
Trustee and Lessee, the Owner Participant's obligations hereunder, or (C) any
other corporation or limited partnership, provided such obligations are
guaranteed (such guaranty to be substantially in the form of Exhibit A) by the
transferor Owner Participant; provided, however, that unless otherwise
consented to by Lessee any Transferee shall not be an air carrier, an air
freight forwarder or other similar Person or a corporation controlling,
controlled by or under common control with such an air carrier, an air freight
forwarder or other similar Person. Each such transfer to a Transferee shall be
subject to the conditions that (M) upon giving effect to such transfer, the
Transferee is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) or the Transferee, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), shall
have entered into a voting trust or similar arrangement which permits the
registration of the Aircraft under the Act in the name of the Owner Trustee
without any restriction on the operation of the Aircraft, (N) the Transferee
has the full power and authority to enter into and carry out the transactions
contemplated hereby, (O) the Transferee enters into an agreement or agreements
substantially in the form of Exhibit B, (P) such transfer does not result in a
nonexempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA with respect to such Holders about which the Owner Participant shall
have received such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Original Loan Participant and the Indenture Trustee shall cooperate
in providing such information as may be available), (Q) such transfer does not
violate any applicable law including, without limitation, the Act, or any rules
or regulations promulgated thereunder, the Securities Act or the Trust
Indenture Act of 1939, (R) after giving effect to such transfer, there shall be
no more than one Owner Participant of record at that time and (S) such transfer
will not give rise to an Indenture Default or Indenture Event of Default; and
Lessee or the Indenture Trustee may
PARTICIPATION AGREEMENT [N602SW]
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request such Transferee to provide an opinion of counsel (who shall be
reasonably satisfactory to Lessee and the Indenture Trustee) in form, scope and
substance reasonably satisfactory to Lessee and the Indenture Trustee as to any
matter set forth in clause (Q) and as to such other matters as Lessee or the
Indenture Trustee may reasonably request. Upon any such transfer by the Owner
Participant as above provided, the Transferee shall be deemed the Owner
Participant for all purposes hereof and of the other Operative Agreements and
each reference herein to the transferor Owner Participant shall be deemed for
all purposes, with respect to circumstances existing and requirements arising
thereafter, to be to the Transferee and the transferor Owner Participant shall
be relieved of all obligations of the transferring Owner Participant under the
Owner Participant Agreements arising after the date of such transfer except to
the extent fairly attributable to acts or events occurring prior thereto and
not assumed by the transferee Owner Participant. If the Owner Participant
intends to transfer its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than ten (10) Business
Days prior thereto, to the Indenture Trustee, the Owner Trustee and Lessee,
specifying the name and address of the proposed Transferee and the facts
necessary to determine whether or not the requirements for a Transferee, as set
forth herein, are satisfied. The Owner Participant shall pay, or shall cause
the transferee Owner Participant to pay, all of the reasonable costs and
expenses (including, without limitation, legal fees and expenses) of the other
parties hereto (except the costs and expenses of Lessee if such transfer is
effected during the continuance of a Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or a Lease Event of Default or in connection
with the exercise of remedies under the Lease), on a net after-tax basis, of
any such transfer. For purposes of this Agreement, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined
in accordance with generally accepted accounting principles consistently
applied.
(m) Obligations of Trustees. The Indenture Trustee shall
be responsible for the payment, performance and discharge of, and shall fully
and completely pay, perform and discharge, all of its obligations under the
Trust Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Trust Agreement, the Owner Trustee shall be responsible for
the payment, performance and discharge of, and shall fully and completely pay,
perform and discharge, all of its obligations under the Lease in accordance
with the terms thereof.
(n) Compliance with Trust Indenture. SBC and Wilmington
Trust Company, each in its individual capacity, agrees for the benefit of
Lessee to comply with the terms of the Trust Indenture which it is required to
comply with in its individual capacity.
(o) ERISA. The Owner Participant represents and warrants
that no part of the funds used by it to acquire its interest in the Trust
Estate constitutes "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4975(e)(1) of
the Code, as interpreted by the Department of Labor. The Original Loan
Participant represents and warrants that no part of the funds used by it to
acquire the Certificates or any interest therein (including any participation
in such Certificates) constitutes "plan assets" of any "employee benefit plan"
within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code.
(p) SBC's Representations and Warranties. SBC, in its
individual capacity, represents, warrants and covenants that:
PARTICIPATION AGREEMENT [N602SW]
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(i) each of the Owner Trustee Documents has
been duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such instruments on behalf of the
Owner Trustee or SBC, as the case may be;
(ii) the Trust Estate is free and clear of
Lessor Liens attributable to SBC in its individual capacity, and there
are no Liens affecting the title of the Owner Trustee to the Aircraft
or resulting from any act or claim against SBC in its individual
capacity arising out of any event or condition not related to the
ownership, leasing, use or operation of the Aircraft or to any other
transaction contemplated by this Agreement or any of the other
Operative Agreements, including any Lien resulting from the nonpayment
by SBC in its individual capacity of any Taxes imposed or measured by
its net income;
(iii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to SBC in its
individual capacity and which is presently continuing;
(iv) it is a national banking association
duly organized, validly existing and in good standing under the laws
of the United States and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has the
corporate power and authority to enter into and perform its
obligations under the Trust Agreement and this Agreement (in its
individual capacity), and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has full
right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the
other Owner Trustee Documents;
(v) each of the Trust Agreement and this
Agreement (in its individual capacity) and the Owner Trustee Documents
(in its trust capacity) has been duly authorized by all necessary
corporate action on its part, and neither the execution and delivery
thereof nor its performance of any of the terms and provisions thereof
will violate any federal or Connecticut law or regulation relating to
its banking or trust powers or contravene or result in any breach of,
or constitute any default under, its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution
and delivery of the Trust Agreement by the Owner Participant, each of
the Owner Trustee Documents has been duly executed and delivered by it
and, each of the Trust Agreement and this Agreement (to the extent
executed by the Owner Trustee in its individual capacity) is a legal,
valid and binding obligation of SBC in its individual capacity and as
Owner Trustee, as the case may be, enforceable against such party in
accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee
shall have received whatever title to the Aircraft as was conveyed to
it by Lessee;
PARTICIPATION AGREEMENT [N602SW]
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(viii) neither it nor anyone acting on its
behalf has offered any interest in the Trust Estate or any
Certificates or any similar securities for sale to, or solicited any
offer to acquire the same from, anyone, and no responsible officer or
responsible employee of SBC has knowledge of any such offer or
solicitation, except as set forth in Section 7(a)(x) hereof;
(ix) assuming due authorization, execution
and delivery of each of the Owner Trustee Documents by each of the
parties thereto (other than the Owner Trustee), each of the Owner
Trustee Documents is a legal, valid and binding obligation of the
Owner Trustee, enforceable against the Owner Trustee in accordance
with its respective terms;
(x) there are no proceedings pending or, to
the best knowledge of SBC, threatened, against SBC in any court or
before any governmental authority or arbitration board or tribunal
which, if adversely determined, would materially and adversely affect
the right, power and authority of SBC to enter into or perform its
obligations under the Owner Trustee Documents;
(xi) neither the due execution and delivery
of the Owner Trustee Documents by SBC, in its individual capacity or
as Owner Trustee under the Trust Agreement, as the case may be, nor
the consummation by it of any of the transactions contemplated thereby
require the consent or approval of, the giving of notice to, or the
registration with, any federal or Connecticut governmental authority
or agency pursuant to any federal or Connecticut law governing the
banking or trust powers of SBC; and
(xii) no later than sixty (60) days after
Lessee shall so request, Owner Trustee shall execute and deliver to
Lessee (on a form to be supplied by Lessee) a Texas Sales and Use Tax
Certificate of Resale reflecting Owner Trustee's Texas or Connecticut
sales tax permit number and Owner Trustee's purchase of the Aircraft
pursuant to the Lease for lease to Lessee thereunder, and, if
necessary to permit Owner Trustee to issue such Certificate, Owner
Trustee shall apply for (on a form to be supplied by Lessee) a Texas
sales tax permit.
(q) Owner Participant's Lease Expenses. The Owner
Participant covenants and agrees to pay or cause the Owner Trustee to pay those
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) Lessee's Assumption of Debt. Subject to compliance
by Lessee with all of its obligations under the Operative Agreements and
provided that the Series SWA 1995 Trust N602SW-I Certificate is no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense on a net after-tax
basis (including, without limitation, reasonable attorneys' fees and expenses
of each of such parties), (i) if Lessee elects to terminate the Lease and to
purchase the Aircraft pursuant to Section 18.2(b) of the Lease, each of such
parties will, subject to due compliance by Lessee with the provisions of said
Section 18.2(b), execute and deliver appropriate documentation to Transfer to
Lessee the Aircraft, and (ii) Lessee, in connection with such purchase, may (if
no Lease Event of Default shall have occurred and be continuing, unless such
Lease Event of Default is waived by the Indenture Trustee)
PARTICIPATION AGREEMENT [N602SW]
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assume (and, as set forth in Section 18.2(c) of the Lease, receive a credit in
an amount equal to the principal amount of the debt assumed, against the
purchase price payable by Lessee pursuant to Section 18.2(b) of the Lease) the
obligations of the Owner Trustee pursuant to Section 7.03 of the Trust
Indenture and the Certificates (and the Lease, to the extent that the Owner
Trustee's obligations thereunder are incorporated into the Trust Indenture or
the Certificates), and in such event each of the parties shall execute and
deliver appropriate documentation as contemplated by Section 7.03 of the Trust
Indenture.
(s) [Intentionally Reserved].
(t) [Intentionally Reserved].
(u) Lease Adjustments. Section 3.7 of the Lease
contemplates that, under certain circumstances, the Owner Participant will make
certain recalculations and the Owner Participant hereby agrees to promptly take
such actions as may be necessary or desirable to give effect to and to cause
the Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.
(v) Revocation of Trust Agreement. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee that it will not
revoke or otherwise terminate the Trust Agreement as long as the Trust
Indenture is in effect, and (ii) solely for the benefit of Lessee that it will
not revoke or otherwise terminate the Trust Agreement during the Term without
the prior written consent of Lessee, except that, notwithstanding the foregoing
clauses (i) and (ii), or any other provision of the Operative Agreements to the
contrary, the Owner Participant shall have the right to terminate the trusts
set forth in the Trust Agreement without the consent of any other party to the
Operative Agreements, at any time, if in connection therewith the Owner
Participant shall simultaneously create a new trust upon substantially the same
terms and conditions as the trusts so terminated and shall cause the Trust
Estate to be vested in the Owner Trustee under the new trust upon the same
terms and conditions so applied to such terminated trust; provided, however,
that in connection with any such termination (A) none of the creation of such
new trust, the termination of the trust set forth in the Trust Agreement or the
transactions consummated in connection therewith will have any adverse impact
on any of Lessee's rights or the Indenture Trustee's rights under the Operative
Agreements (including the first priority lien status of the Lien of the Trust
Indenture), (B) Lessee shall have no responsibility to indemnify any
Indemnified Party under any provision of any Operative Agreement for any Taxes
or other consequences that in either case would not have been incurred but for
such termination and transfer, (C) the Owner Participant shall indemnify Lessee
and the Indenture Trustee for any costs, expenses, taxes or other consequences
that in either case would not have been incurred but for such termination and
transfer, (D) the Owner Participant shall provide Lessee and the Indenture
Trustee with an opinion in form and substance reasonably satisfactory to them
as to the effect of such termination and transfer, and (E) immediately after
such transfer, the beneficiary of the new trust shall be the same as the
beneficiary of the trust set forth in the Trust Agreement. The Owner
Participant further agrees (x) promptly to provide instructions to the Owner
Trustee, upon the request of the Owner Trustee and as otherwise required or
permitted under the Trust Agreement, so as to enable the Owner Trustee to
perform its duties and obligations under the Operative Agreements in accordance
with the terms and provisions thereof and (y) not to remove the institution
acting as Owner Trustee, and not to replace the institution acting as Owner
Trustee in the event that
PARTICIPATION AGREEMENT [N602SW]
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such institution resigns as Owner Trustee, unless the Owner Participant shall
have consulted in good faith with Lessee prior to such removal or replacement;
provided, that no such consultation shall be required if a Lease Event of
Default shall have occurred and be continuing.
(w) [Intentionally Reserved].
(x) Withholding Taxes. The Original Loan Participant
represents that it is exempt from United States withholding taxes, and
covenants that, if required to obtain or renew such exemption, it will properly
prepare and promptly furnish to each of the Owner Trustee, the Indenture
Trustee and Lessee Internal Revenue Service Form 1001, Form 4224 (with respect
to each tax year) or Form W-8, whichever is applicable. The Original Loan
Participant represents, warrants and covenants that it will promptly notify the
Owner Trustee, the Indenture Trustee and Lessee if it transfers any interest in
its Series SWA 1995 Trust N602SW-I Certificate to any Person, other than
pursuant to Section 17 or 18 hereof or Section 8.03(e)(ii) of the Indenture.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee, Lessee and
the Owner Participant against any United States withholding taxes (and related
interest and penalties) which the Indenture Trustee fails to withhold on
payments to it as a result of its failure to provide the required certificate
or form or the invalidity of any certificate or form provided by it pursuant to
this Section 8(x) or as a result of any inaccuracy of the representations set
forth in the immediately preceding paragraph. Any amount payable hereunder
shall be paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor and shall include interest at the Overdue Rate from
the date any withholding tax has been paid by such party until the date
indemnified by the Original Loan Participant.
(y) Discharge of Trust Indenture. The Owner Participant
agrees that, at Lessee's expense (including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses of the Owner Trustee and Owner
Participant), upon request of Lessee, the Owner Participant will negotiate
promptly in good faith with respect to any arrangements pursuant to which the
Trust Indenture may be satisfied and discharged in respect of the Certificates
in accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that it will
not, and the Owner Participant agrees that during such time as a Lease Event of
Default has not occurred it will not cause the Owner Trustee to, take any
action to effect such satisfaction and discharge except upon the request of
Lessee made pursuant to this Section 8(y).
(z) Permitted Investments. The Owner Trustee agrees that
(i) so long as the Trust Indenture has not been duly discharged, any profit,
income, interest, dividend or gain realized upon the maturity, sale or other
disposition of any Permitted Investment made by the Indenture Trustee pursuant
to Section 9.04 of the Trust Indenture, and paid to Lessee on behalf of the
Owner Trustee by the Indenture Trustee in accordance with the terms of such
Section 9.04, shall be entirely for the account of, and the sole property of,
Lessee who, for such purposes, shall not be deemed to be acting as agent of the
Owner Trustee, and Lessee shall have no obligation to pay over such profit,
income, interest, dividend or gain to the Owner Trustee, (ii) any such profit,
income, interest,
PARTICIPATION AGREEMENT [N602SW]
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dividend or gain not theretofore distributed shall, upon discharge of the Trust
Indenture, be paid by the Indenture Trustee to Lessee, unless instructed by the
Owner Participant to distribute such funds to the Owner Participant or the
Owner Trustee to the extent the Owner Participant or the Owner Trustee is owed
any amounts under the Operative Agreements that have not been paid when due,
and (iii) except to the extent the Owner Trustee or Owner Participant is owed
any amounts under the Operative Agreements by Lessee and such amounts are not
paid when due, the Owner Participant may cause the Indenture Trustee to
distribute and apply such profit, income, interest, dividend or gain realized
upon the maturity, sale or other disposition of investment of funds pursuant to
Section 22.1 of the Lease, in satisfaction or partial satisfaction of the
amounts so due.
(aa) Special Purchase Option. If Lessee shall have
elected both (i) to assume all of the rights and obligations of Lessor under
the Trust Indenture in accordance with Section 7.03 of the Trust Indenture and
(ii) to pay to Lessor the installments specified in the proviso to Section
18.2(c) of the Lease, then, as further conditions precedent to those specified
in paragraphs (c) and (d) of Section 18.2 of the Lease to such assumption:
(1) the Indenture Trustee shall have
received evidence reasonably satisfactory to it that the Trust
Indenture, after giving effect to the transactions contemplated by
Section 18.2(d) of the Lease, constitutes a first priority and
perfected security interest in the Aircraft, which evidence shall
include an opinion of the tenor contemplated by Section 7.03(h) of the
Trust Indenture; and (2) the Indenture Trustee and the Owner Trustee
shall execute and deliver an intercreditor agreement that covers the
following matters:
(x) the Owner Trustee shall not,
notwithstanding any Lease Event of Default, exercise any
remedy accorded to it pursuant to Section 15 of the Lease
until the Trust Indenture shall have been discharged pursuant
to Section 10.01 of the Trust Indenture;
(y) payment of the Supplemental
Rent under the Lease in respect of the installments specified
in Section 18.2(c) of the Lease, and all other amounts owing
to the Owner Trustee (other than Excluded Payments)
(collectively, "Equity Payments"), shall be fully and
unconditionally subordinated to the payment in full in cash of
principal, interest, Break Amount or Premium, if any, and all
other amounts owing to the Holders or the Indenture Trustee
under or in respect of the Certificates or the Trust Indenture
(collectively, "Debt Payments"), all pursuant to such terms of
subordination as shall be effectively and substantively
equivalent to the manner in which Debt Payments are paid or
payable in priority to the Equity Payments, and such other
customary terms of subordination as shall be reasonably
required by the Indenture Trustee; and
(z) the Owner Trustee shall have
the substantive equivalent of the cure and buy-out rights
specified in clauses (e)(i) and (e)(ii) of Section 8.03 of the
Trust Indenture.
(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or Section 8.03(e)(ii)
of the Indenture, the Original Loan Participant
PARTICIPATION AGREEMENT [N602SW]
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covenants that it will not (i) transfer or (ii) grant participations in, its
Certificate to any Person unless such Person represents, warrants and covenants
in writing to the Original Loan Participant and, in the case of a transfer, to
the Owner Participant and Lessee, (A) to the effect set forth in Section 8(x)
hereof and (B) further represents and warrants to the Original Loan Participant
and, in the case of a transfer, to the Owner Participant and Lessee either that
(a) no part of the funds used by it to acquire its Series SWA 1995 Trust
N602SW-I Certificate or participation constitutes "plan assets" of any
"employee benefit plan" within the meaning of ERISA or any "plan" within the
meaning of Section 4975(e)(1) of the Code, or (b) its purchase or acquisition
of such Series SWA 1995 Trust N602SW-I Certificate or participation will not
result in a nonexempt prohibited transaction under Section 4975 of the Code or
Section 406 of ERISA. Any such Person shall require any transferee of its
interest to make the representations, warranties and covenants in the preceding
sentence.
(cc) [Intentionally Reserved].
(dd) Deferred Equity. The Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and not with any
other party to this Agreement or the Holders of any Certificates), that, so
long as no Lease Event of Default or Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) shall have occurred and be continuing, it
will pay or cause to be paid to the Indenture Trustee on the Deferred Equity
Date sufficient funds to effect the payment of an amount (the "Deferred Equity
Amount") equal to the amount due on such date in respect of accrued interest on
the Certificates from their date of issuance to and including the Deferred
Equity Date. The Owner Participant and the Owner Trustee hereby direct the
Indenture Trustee, and the Indenture Trustee hereby agrees, to apply the
Deferred Equity Amount to the payment of interest on the Certificates which may
be due and payable pursuant to the provisions of the Trust Indenture on the
Deferred Equity Date. The Owner Participant agrees to make payment of the
Deferred Equity Amount in immediately available funds on or before 11:00 a.m.,
New York City time, on the Deferred Equity Date; provided, that the Owner
Participant agrees to give Lessee notice by 11:00 a.m., New York City time, on
the second Business Day prior to the Deferred Equity Date if it shall not make
such payment. The Indenture Trustee agrees to give Lessee prompt notice if it
shall not have received such payment by noon, New York City time, on the
Deferred Equity Date. The Owner Participant further agrees to fund the
obligations of the Owner Trustee arising pursuant to clause (5) of Section
18(a). In the event the Owner Participant fails to make such payment, or if
the Owner Trustee shall fail to make the payment required pursuant to clause
(5) of Section 18(a), and in either case Lessee shall make an Advance as
required by Section 3.8 of the Lease, Lessee may obtain reimbursement in the
manner and to the extent provided in Section 3.8 of the Lease for the Advance,
together with interest on such amount at the rate described below from (and
including) the date of the making of such Advance to (but excluding) the date
of reimbursement by the Owner Participant or the date Lessee deducts such
Advance from other payments to the extent and as provided in Section 3.8 of the
Lease and, without duplication of the foregoing, shall have such remedies as
may be available to it against the Owner Participant at law or in equity in
respect of the recovery of any such Advance. Interest shall accrue on the
amount of the Advance at an annual rate equal to 5% in excess of the Base Rate,
unless the Advance is made when any Lease Event of Default or Lease Default (of
the type described in Section 14.1 or 14.5 of the Lease) shall have occurred
and be continuing, in which event interest shall accrue on the amount of the
Advance at the Base Rate, but in each case not to exceed to maximum rate
permitted by applicable law. All amounts paid to Lessee by the Owner
Participant in respect of the Advance or deducted by Lessee
PARTICIPATION AGREEMENT [N602SW]
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pursuant to Section 3.8 of the Lease shall be applied first to payment to
Lessee of interest and then to payment to Lessee of amounts equal to the
Advance.
(ee) Lessee as Pricing Agent for Certificate. The Owner
Trustee hereby appoints Lessee as its agent to select the pricing provisions
and related Interest Periods in respect of the Series SWA 1995 Trust N602SW-I
Certificate, such appointment to be effective so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing.
SECTION 9. Payments to Lessee of Trust Indenture
Monies. The Owner Participant hereby agrees to instruct the Owner Trustee to
promptly distribute any money received by it pursuant to Section 7.01 or 10.04
of the Trust Indenture to Lessee to the extent such amounts were paid by Lessee
or on behalf of Lessee and the Owner Trustee or the Owner Participant is not
owed any amounts under any of the Operative Agreements by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and reinvest all money
so held by it in such Permitted Investments as Lessee deems appropriate.
Lessee will apply such money to the payment of previously unclaimed payments
with respect to the Certificates when and as claims for payment are made by the
Holders of such Certificates. As compensation for its services pursuant to
this Section 9, Lessee shall be entitled to an annual fee from the Owner
Participant in an amount to be agreed to at the time by Lessee and the Owner
Participant but in no event shall such fee exceed at any time the amount of
earnings on the monies so held in trust distributable at such time to the Owner
Participant. Any net losses on such investment shall be for the account of
Lessee. Any net earnings on such investment shall be distributed from time to
time by Lessee to the Owner Participant after deducting therefrom any portion
of such fee then due and unpaid. Upon the date required by applicable law
dealing with unclaimed property, Lessee will distribute to the Owner
Participant any amount held by it pursuant to this Section 9 and not previously
applied to the payment of the Certificates, after deducting therefrom any
portion of such fee then due and unpaid.
SECTION 10. Other Documents; Amendment. Lessee
acknowledges receipt of executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to the execution and delivery of
the Trust Agreement and Trust Indenture and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, to the extent the same purports or
is stated to bind the Owner Participant, the Trust Indenture (each as the same
may hereafter be amended or supplemented from time to time in accordance with
the terms thereof) applicable to it, to the extent such non-compliance would be
adverse to such party; and (B) subject to Section 8(v), agrees with Lessee and
the Indenture Trustee not to amend, supplement or otherwise modify any
provision of the Trust Agreement in a manner adversely affecting such party
without the prior written consent of such party. In addition, unless a Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing and so long as the Lease
has not been terminated, the Indenture Trustee and the Owner Trustee hereby
agree for the benefit of Lessee that without the consent of Lessee they will
not (and the Owner Participant agrees that it will not cause the Owner Trustee
to) amend, supplement or
PARTICIPATION AGREEMENT [N602SW]
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otherwise modify any provision of the Trust Indenture in a manner adversely
affecting Lessee. The Indenture Trustee and the Owner Trustee agree to
promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Agreements to which Lessee is not a party.
Each Holder agrees that it will not take any action in respect of the Trust
Indenture Estate except through the Indenture Trustee pursuant to the Trust
Indenture or as otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee
covenants and agrees with the Participants, the Indenture Trustee and the Owner
Trustee, in its capacity as such and in its individual capacity, as follows:
(a) Further Assurances. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of the Owner Trustee, or shall furnish to the Owner Trustee such information as
may be required to enable the Owner Trustee to make application for such
registration (at the expense of Lessee, including, without limitation,
reasonable attorneys' fees and expenses), and shall promptly furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to timely file any reports required to be filed by it as the lessor under the
Lease or as the owner of the Aircraft with any governmental authority
(including tax authorities), it being understood that Lessee shall not be
required to comply with this covenant to the extent that SBC's or the Owner
Participant's failure to comply with its covenant in Section 8(b) with regard
to its citizenship makes such compliance by Lessee impossible.
(b) Filing and Recording, Etc. Lessee, at its expense,
will, at the request of any party hereto, take, or cause to be taken, such
action with respect to the recording, filing, rerecording and refiling of the
Trust Agreement, the Lease, all Lease Supplements, the Trust Indenture, all
Trust Supplements and any financing statements or other instruments as are
necessary to maintain, so long as the Trust Indenture or the Lease is in
effect, the perfection of the security interests created by the Trust Indenture
and any security interest that may be claimed to have been created by the Lease
and the ownership interest of the Owner Trustee in the Aircraft. Lessee
agrees, upon the request and at the sole expense of the Owner Participant, to
take all reasonable acts requested by the Owner Participant in complying with
its obligations under clause (A) or (B) of the second sentence of Section 8(b).
(c) FAA Filings. Upon the execution and delivery of the
Lessee FAA Bill of Sale, the Lease Supplement and Trust Supplement covering the
Aircraft, the Lease and the Trust Indenture shall be filed for recording with
the FAA in the following order of priority: first, the Lessee FAA Bill of
Sale; second, the FAA registration application; third, the Trust Indenture,
with the Trust Agreement and the Trust Supplement covering the Aircraft
attached; and fourth, the Lease, with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement covering the Aircraft
attached. Lessee agrees to furnish the Participants and the Indenture Trustee
with copies of the foregoing documents with recording data as promptly as
practicable following the issuance of same by the FAA.
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(d) Annual Compliance Opinions. Lessee will furnish to
Owner Trustee and Indenture Trustee annually after the execution hereof (but
not later than December 1 of each year), commencing with the year 1996,
opinions of counsel for Lessee selected by Lessee and reasonably satisfactory
to Owner Trustee and Indenture Trustee stating that, in the opinion of such
counsel, either (a) such action has been taken (or specifying any action which
must be taken) with respect to the recording, filing, rerecording and refiling
of (i) the appropriate Operative Agreements and any supplements and amendments
thereto, (ii) UCC financing statements, and (iii) such other filings or
recordings as are necessary to maintain for the 15-month period succeeding the
date of such opinion the perfection of Owner Trustee's and Indenture Trustee's
title to and interest in the Aircraft and the Operative Agreements and the
ownership interest of Owner Trustee in the Aircraft, reciting the details of
such actions, or (b) no such action is necessary to maintain for the 15-month
period succeeding the date of such opinion the perfection of such title and
interest.
(e) Engine Purchase Agreement. Lessee agrees to furnish
the Owner Trustee and the Indenture Trustee, promptly upon demand therefor, an
agreement (the "Engine Purchase Agreement Assignment") assigning the rights of
Lessee under the purchase agreement pursuant to which Lessee originally
acquired the Engines (the "Engine Purchase Agreement") to the Owner Trustee
(which rights are collaterally assigned to the Indenture Trustee),
substantially in the form of the Purchase Agreement Assignment, and to use its
best efforts to obtain from the Engine Manufacturer a consent and agreement in
substantially the form of the Manufacturer's Consent.
(f) Merger. Lessee will not consolidate with or merge
into any other corporation or convey, transfer or lease all or substantially
all of its assets to any Person unless:
(i) the corporation formed by such
consolidation or into which Lessee is merged or the Person which
acquires by conveyance, transfer or lease all or substantially all of
the assets of Lessee as an entirety, as the case may be (the
"Successor") shall be (i) a corporation organized and existing under
the laws of the United States of America or any state thereof or the
District of Columbia, (ii) a "citizen of the United States" as defined
in the Act, and (iii) a United States certificated air carrier;
(ii) the Successor shall execute and deliver
to the Owner Trustee, the Indenture Trustee and the Participants an
agreement in form reasonably satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant containing an assumption by the
Successor of the due and punctual performance and observance of each
covenant and condition of the Operative Agreements to be performed or
observed by Lessee;
(iii) immediately after giving effect to such
transaction and as a result of giving effect to such transaction, no
Lease Default or Lease Event of Default shall have occurred and be
continuing;
(iv) Lessee shall have delivered to the Owner
Trustee, the Indenture Trustee and each Participant an Officer's
Certificate and an opinion of counsel to the Successor reasonably
satisfactory to the Owner Trustee, the Indenture Trustee and each
Participant, each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
subparagraph (ii) above comply with this
PARTICIPATION AGREEMENT [N602SW]
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Section 11(f) (except that such opinion need not refer to subparagraph
(iii) above), that the agreements entered into to effect such
consolidation, merger, conveyance, transfer or lease and such
assumption agreement are legal, valid and binding obligations of the
Successor, enforceable against the Successor in accordance with their
respective terms (subject to applicable bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally
and to general principles of equity), and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the Successor shall make such filings
and recordings with the FAA pursuant to the Act, as shall be necessary
or desirable to evidence such consolidation, merger, conveyance,
transfer or lease with or to such Successor.
Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor corporation or Person which shall theretofore have become such in the
manner prescribed in this Section 11(f) from its liability in respect of any
Operative Agreement to which it is a party. Nothing contained herein shall
permit any lease, sublease or other arrangement for the use, operation or
possession of the Aircraft except in compliance with the applicable provisions
of the Lease (or any assignment by Lessee of its rights under the Lease, except
in connection with a transaction in compliance with the express provisions of
this Section 11(f)).
(g) Corporate Existence. Except as permitted by Section
11(f) hereof, Lessee shall at all times maintain its corporate existence.
Lessee covenants and agrees that it will at all times be a "citizen of the
United States" within the meaning of the Act.
(h) Certificate Schedule. Lessee will provide on behalf
of the Owner Trustee the amortization schedule for the Certificate to be issued
to the Original Loan Participant at least two days before the Delivery Date.
(i) No Certificate Ownership. Lessee agrees that it will
not, at any time, hold any Certificates.
SECTION 12. Ownership of Aircraft. It is hereby
agreed among Lessee, the Owner Participant and the Owner Trustee that for all
purposes the Owner Trustee will be the owner of the Aircraft (except that the
Owner Participant will be the owner for income tax purposes and except under
the circumstances contemplated by the proviso to Section 18.2(d) of the Lease)
and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes and all other
relevant purposes (subject to the election referred to above).
SECTION 13. Notices; Consent to Jurisdiction. (a)
Except as otherwise provided in this Agreement respecting telephone notices,
all notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be in writing and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, or
PARTICIPATION AGREEMENT [N602SW]
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by prepaid telex, TWX or telegram (with messenger delivery specified in the
case of a telegram), or by telecopier, or by prepaid courier service, and shall
be deemed to be given for purposes of this Agreement on the day that such
writing is delivered or, if given by certified mail, three (3) Business Days
after being deposited in the mails, in accordance with the provisions of this
Section 13(a). Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this Section 13(a), notices,
demands, instructions and other communications in writing shall be given to or
made upon the respective parties hereto at their respective addresses (or to
their respective telex, TWX or telecopier numbers) as follows: (A) if to
Lessee, the Owner Trustee, the Original Loan Participant, the Indenture Trustee
or the Owner Participant, to the respective addresses set forth on Schedule I
hereto (and in the case of Owner Trustee a copy shall be sent to the Owner
Participant) or (B) if to a subsequent Owner Participant, addressed to such
subsequent Owner Participant at such address as such subsequent Owner
Participant shall have furnished by notice to the parties hereto or (C) if to
any subsequent Holder, addressed to such Holder at its address set forth in the
Register maintained pursuant to Section 2.03 of the Trust Indenture.
(b) Each party to this Agreement (individually a "Party"
and collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises solely out of or relates
solely to the Operative Agreements or any of the transactions contemplated
hereby or thereby or any document referred to herein or therein, may be
instituted in the competent courts of the State of New York in New York County
or the United States District Court for the Southern District of New York and
that they, to the maximum extent permitted by law, hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
parties in the same or different jurisdictions. The agreement set forth in
this Section 13(b) is given solely for the benefit of the Parties, and such
agreement is not intended to and shall not (i) confer exclusive jurisdiction on
any court or (ii) inure to the benefit of any other Person.
SECTION 14. Change of Situs of Owner Trust. The
Owner Participant agrees that if, at any time, the Trust Estate becomes subject
to any Taxes for which it is indemnified pursuant to Section 7(b) hereof and
if, as a consequence thereof, Lessee should request that the situs of the trust
be moved to another state in the United States from the state in which it is
then located, the situs of the trust may be moved and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided, that (A) Lessee shall provide such additional tax
indemnification as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Agreements of the Owner Participant shall
not be adversely altered as a result of the taking of such action, or the Owner
Participant shall be indemnified by Lessee to its reasonable satisfaction for
any such alteration, (C) the lien of the Trust Indenture on the Trust Indenture
Estate shall not be adversely affected by such action, and Lessee shall execute
and deliver such documents as may be requested by the Indenture Trustee to
continue the perfection and priority of the lien on the Trust Indenture Estate,
(D) the Owner Participant shall have received an opinion or opinions of counsel
(reasonably satisfactory to the Owner Participant) in scope, form and substance
reasonably satisfactory to the Owner Participant to the effect that (I) the
trust, as thus removed, shall remain a validly established trust and the Trust
Agreement and other Operative
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Agreements shall remain valid, binding and enforceable in accordance with their
terms, (II) any amendments to the Trust Agreement necessitated by such removal
shall have been duly authorized, executed and delivered by the parties thereto
and shall constitute the legal, valid and binding obligations of such parties,
enforceable in accordance with their terms, (III) such removal will not result
in the imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify the Owner Participant, the Owner Trustee or the Trust
Estate pursuant to Section 7(b) hereof (taking into account any additional
indemnification provided by Lessee pursuant to clause (A) of this sentence),
(IV) such removal will not result in any Loss of MACRS Deductions, Transaction
Expense Deductions, Interest Deductions or an Inclusion (as defined in the Tax
Indemnity Agreement) with respect to which Lessee is not required to indemnify
the Owner Participant pursuant to Section 6 of the Tax Indemnity Agreement
(taking into account any additional indemnification provided by Lessee pursuant
to clause (A) of this sentence), and (V) covering such other matters as the
Owner Participant may reasonably request, (E) if such removal involves the
replacement of the Owner Trustee, the Owner Participant shall have received an
opinion of counsel to such successor Owner Trustee in form and substance
reasonably satisfactory to the Owner Participant covering the matters addressed
by the opinion delivered pursuant to Section 4(a)(xiii) hereof, and (F) Lessee
shall indemnify and hold harmless the Owner Participant on a net after-tax
basis against any and all reasonable and actual costs and expenses including
attorneys' fees and disbursements, registration, recording or filing fees
incurred by the Owner Trustee or Owner Participant, in connection with such
change of situs.
SECTION 15. Miscellaneous.
(a) Consents under Lease and Trust Indenture. Each of
the Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.
(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, the Owner Trustee, the Indenture Trustee,
the Owner Participant and the Original Loan Participant provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, the
Original Loan Participant's and the Owner Participant's obligations under any
and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement, except as
otherwise expressly provided herein or therein.
(c) Counterparts; Waivers; Governing Law. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. Neither this
Agreement nor any of the terms hereof may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing signed by the party
against which the
PARTICIPATION AGREEMENT [N602SW]
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enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, the Indenture Trustee and the Owner Trustee. The terms of
this Agreement shall be binding upon, and inure to the benefit of and shall be
enforceable by, Lessee, the Participants, the Indenture Trustee and the Owner
Trustee. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS AGREEMENT IS BEING
DELIVERED IN THE STATE OF NEW YORK.
(d) No Recourse Against Owner Trustee. The parties
hereto agree that all of the statements, representations, covenants and
agreements made by the Owner Trustee (when made in such capacity) contained in
this Agreement and any agreement referred to herein other than the Trust
Agreement, unless expressly otherwise stated, are made and intended only for
the purpose of binding the Trust Estate and establishing the existence of
rights and remedies which can be exercised and enforced against the Trust
Estate. Therefore, anything contained in this Agreement or such other
agreements to the contrary notwithstanding (except for any express provisions
that the Owner Trustee is responsible for or is acting in or making
representations or agreements in its individual capacity), no recourse shall be
had with respect to this Agreement or such other agreements against the Owner
Trustee in its individual capacity or against any institution or person which
becomes a successor trustee or co-trustee or any officer, director, trustee,
servant or direct or indirect parent or controlling person or persons of any of
them; provided, however, that this Section 15(d) shall not be construed to
prohibit any action or proceeding against any party hereto for its own willful
misconduct or grossly negligent conduct; and provided, further, that nothing
contained in this Section 15(d) shall be construed to limit the exercise and
enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement and the other Operative Agreements.
(e) Duties Limited. No Participant shall have any
obligation or duty to Lessee, to any other Participant or to others with
respect to the transactions contemplated hereby except those obligations or
duties of such Participant expressly set forth in this Agreement and the other
Operative Agreements and no Participant shall be liable for performance by any
other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever (except as provided in Section 7(d) hereof) shall any Participant be
liable to Lessee, nor shall any Participant be liable to any other Participant,
for any action or inaction on the part of the Indenture Trustee or the Owner
Trustee in connection with the transactions contemplated herein, whether or not
such action or inaction is caused by the willful misconduct or gross negligence
of the Indenture Trustee or the Owner Trustee.
(f) Binding on Parties and Successors. This Agreement
shall be binding upon and shall inure to the benefit of and shall be
enforceable against, the parties hereto and their respective successors and
permitted assigns including each successive holder of the Owner Participant's
interest and each successive holder of any Certificate issued and delivered
pursuant to this Agreement or the Trust Indenture whether or not an express
assignment to such holder of rights and obligations under this Agreement has
been made.
PARTICIPATION AGREEMENT [N602SW]
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(g) Enforceability Representations. Every representation
or warranty contained herein as to the enforceability of any Operative
Agreement shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity.
(h) Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred and be continuing during the Term, none of the
Participants, the Indenture Trustee or the Owner Trustee will, through its own
actions or breaches of any of its obligations under the Operative Agreements,
interfere in the quiet enjoyment of the Aircraft by Lessee or any Permitted
Sublessee.
SECTION 16. Transaction Costs; Invoices and Payment
of Expenses. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the
subsequent placement of the permanent debt pursuant to Section 17 or 18 hereof,
the reasonable and actual fees, expenses and disbursements of (1) Potter
Anderson & Corroon, special counsel for the Indenture Trustee, (2) Shipman &
Goodwin, counsel for the Owner Trustee, (3) Daugherty, Fowler & Peregrin,
special counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special
counsel for the underwriters in a potential refinancing transaction pursuant to
Section 18 hereof, (5) Vinson & Elkins L.L.P., special counsel for Lessee, but
only to the extent of their expenses and disbursements and (6) Office of the
General Counsel of the Original Loan Participant, (ii) all fees, taxes and
other charges payable in connection with the recording or filing of instruments
and financing statements, (iii) the initial fee and initial reasonable and
actual disbursements of the Owner Trustee under the Trust Agreement, (iv) the
initial fee and initial reasonable and actual disbursements of the Indenture
Trustee under the Trust Indenture, (v) the fee and expenses of Aero Economics,
Inc. (or of such other appraiser as shall be acceptable to Lessee and the Owner
Participant) with respect to the appraisal of the Aircraft required on or
before the Delivery Date pursuant to Section 4(a) hereof, (vi) the advisory
fees and expenses of Babcock & Brown Financial Corporation, (vii) the
reasonable out-of-pocket disbursements, costs and expenses of the Original Loan
Participant relating to the transactions contemplated hereby, (viii) the
reasonable out-of-pocket expenses of the Owner Participant relating to the
transactions contemplated hereby, excluding the fees and expenses of Owner
Participant's counsel, (ix) the initial fee, if any, of the Original Loan
Participant, (x) the placement or underwriting fees, commissions and expenses,
if any, in placing the permanent debt pursuant to Section 18 hereof and all
costs and expenses associated with a public offering, if any, pursuant thereto,
and (xi) printing and distribution costs.
(b) Each of the Owner Trustee, the Indenture Trustee,
Lessee and the Participants shall promptly submit to the Owner Participant
copies of invoices of the Transaction Costs as they are received. Lessee shall
also be provided with a copy of any bill for legal expenses, with an
opportunity to review and approve it (such approval not to be unreasonably
withheld or delayed). The Owner Participant agrees to pay such amounts
directly or to transfer to the Owner Trustee from time to time promptly upon
receipt of invoices of Transaction Costs such amount as shall be necessary in
order to enable the Owner Trustee to pay such Transaction Costs. To the extent
of funds received by it, the Owner Trustee agrees to pay all invoices of
Transaction Costs that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, Lessee, (x) at its option, may pay directly any
Transaction Costs in excess of (i) 0.365% of Lessor's Cost incurred in
connection with the closing of this transaction on the Delivery Date and (ii)
0.625% of Lessor's Cost incurred in connection with the refinancing or
refunding of the Certificates pursuant to Section
PARTICIPATION AGREEMENT [N602SW]
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18, (y) shall pay the fees of its special counsel and, (z) in the event that
the transactions contemplated hereby shall not be consummated, Lessee shall pay
all Transaction Costs, plus the fees and expenses of Owner Participant's
counsel, except that the fees and expenses referred to in clause (a) (viii)
above, and the fees, expenses and disbursements of the Owner Participant's
counsel, shall be borne by the Owner Participant if such failure to consummate
the transactions results from the failure of the Owner Participant to close
after all conditions precedent to the Owner Participant's funding (other than
those conditions within the control of the Owner Participant) of its Commitment
set forth herein have been satisfied. In any and all events, Lessee agrees to
pay on a net after-tax basis the reasonable out-of-pocket costs and expenses
(including counsel fees) of each Indemnified Party incurred in connection with
the entering into or giving or withholding of any future waiver, modification,
supplement, consent, amendment or other action with respect to any Operative
Agreement which (a) is requested by Lessee, (b) results from any adjustment
pursuant to Section 3.7 of the Lease, or (c) is necessary to effectuate the
intent of any Operative Agreement. In addition, upon such failure to
consummate, Lessee shall pay the Original Loan Participant any applicable Break
Amount.
SECTION 17. Optional Redemption of Certificates.
(a) Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of the
Outstanding Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith to conclude an agreement with Lessee as to the terms of such
refunding or refinancing transaction (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new debt to be issued and the other aspects of such
refunding or refinancing transaction to be consummated (such date, the
"Refinancing Date", which date shall be determined so as to comply
with Section 6.03(a) of the Trust Indenture) and (ii) the following
information: (A) subject to the limitations set forth in this Section
17, the proposed adjusted ratio of debt evidenced by the Certificates
to the Owner Participant's investment in the beneficial ownership of
the Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date, and (C) the proposed revised debt amortization and schedules of
Basic Rent, Stipulated Loss Value percentages and Termination Value
percentages and the revised Special Purchase Price (including any
installments thereof). The Refinancing Certificate shall not provide
for a Debt/Equity ratio of more than 4:1. Within ten (10) Business
Days of its receipt of the Refinancing Certificate, Lessee may demand
a verification of the information set forth in the Refinancing
Certificate in the manner described in Section 3.7 of the Lease. Upon
the acceptance by Lessee of the accuracy of the information set forth
in the Refinancing Certificate or the determination of such
information pursuant to such verification procedures (such
information, the "Refinancing
PARTICIPATION AGREEMENT [N602SW]
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Information") the appropriate parties will take the actions specified
in subparagraphs (2) through (6) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities) or the sale of the Owner
Trustee's interest in the Trust Estate and/or the Aircraft and its
simultaneous resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities in an aggregate principal
amount specified in the Refinancing Information, which amount shall be
at least equal to the aggregate principal amount of all Certificates
Outstanding on the Refinancing Date (such debt securities, the "New
Debt"), (ii) the application of the proceeds of the sale of the New
Debt to the redemption of all such Certificates on the Refinancing
Date and the payment of any other amounts payable to the Holders under
the Operative Agreements on the Refinancing Date, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Interim Rent (if applicable) and Basic
Rent payable in respect of the period from and after the Refinancing
Date shall be as provided in the Refinancing Information (and shall
take into account any variation of the Deferred Equity Amount paid by
or on behalf of the Owner Participant pursuant to Section 8(dd), if
applicable, from the corresponding Assumed Interest Amount with
respect to the Deferred Equity Date), (ii) amounts payable in respect
of Stipulated Loss Value and Termination Value from and after the
Refinancing Date shall be as provided in the Refinancing Information,
and (iii) in the event that the Series SWA 1995 Trust N602SW
Certificates shall have been publicly issued, the early termination
notice revocation and payment provisions shall be modified to comport
with the applicable notice and payment requirements of The Depository
Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the New Debt in
like manner as the Certificates and will enter into such amendments
and supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to or required
by the Owner Participant to be paid as a Transaction Cost and whether
or not such refunding or refinancing transaction is consummated,
Lessee shall pay on a net after-tax basis all of the reasonable
out-of-pocket expenses of all parties to such refunding or
refinancing, including, without limitation, the reasonable fees and
expenses of such parties' counsel (including allocated costs of the
Original Loan Participant's in-house counsel) and any related loan or
commitment fees; and
PARTICIPATION AGREEMENT [N602SW]
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(6) subject to compliance by the Owner
Trustee with all applicable terms and conditions for voluntary
redemption under the Trust Indenture and this Agreement, each Holder
of a Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
interest thereon, Premium, if any, plus in the case of the Series SWA
1995 Trust N602SW-I Certificates, Break Amount, if any, together with
payment in full of all other amounts then payable to such Holder and
the Indenture Trustee hereunder or under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a
public offering of the New Debt, the Owner Participant shall have the right
(but not the obligation) to review and approve (which approval shall not be
unreasonably withheld) any registration statement filed with the SEC to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as required by Lessee, contain any restrictions on the sale to
Holders who may use ERISA funding sources. It is expressly understood that the
Owner Participant shall have no obligation hereunder to consent to such public
refunding or refinancing if, in its good faith judgment, such refunding or
refinancing increases its or any of its Affiliates' exposure to (i) liabilities
under federal or state securities laws, (ii) regulation under state or federal
securities laws, (iii) the need to disclose publicly information that is not
generally available to the public, or (iv) being adversely affected in its
ability to engage in any other financing transaction, in each case to a level
unacceptable to it in its reasonable, good faith judgment. Any trustee of
public debt shall be (i) Wilmington Trust Company or (ii) a bank or trust
company in the United States and having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of trustee upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least
thirty (30) days' irrevocable written notice of the proposed date of the
optional refunding or refinancing.
(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee shall be
required to execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would result in any unreimbursed
increased costs or liability, including any adverse tax consequences or risk
thereof (unless indemnified against to its reasonable satisfaction) or would
result in any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional investment in
connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
(f) Any refunding or refinancing pursuant to this Section
17 shall be of all Certificates then Outstanding and shall be effected in
accordance with Section 6.03(a) of the Trust Indenture.
PARTICIPATION AGREEMENT [N602SW]
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(g) When calculating any of the information required to
be set forth in a Refinancing Certificate, the Owner Participant shall make
such calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or
any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) uses the same methodology
and assumptions used by the Owner Participant in determining Interim Rent,
Basic Rent, Stipulated Loss Values, Termination Values and Special Purchase
Price on the Delivery Date (except to the extent such assumptions have been
altered since the Delivery Date in connection with an adjustment to Rent
pursuant to Section 3.7 of the Lease).
(h) No refinancing or refunding pursuant to this Section
17 shall be permitted during the continuance of a Lease Default or a Lease
Event of Default.
SECTION 18. Interim Debt. (a) The parties hereto
acknowledge and agree that each Series SWA 1995 Trust N602SW-I Certificate
originally issued to the Original Loan Participant on the Delivery Date
represents interim debt financing and that it is intended that the Series SWA
1995 Trust N602SW-I Certificates be refinanced by Series SWA 1995 Trust N602SW
Certificates issued to new Holders. In connection therewith, in the event that
Lessee shall have given written notice to the Owner Trustee, the Indenture
Trustee, the Owner Participant and the Original Loan Participant that Lessee is
requesting a voluntary redemption of the Series SWA 1995 Trust N602SW-I
Certificates (in compliance with the provisions of Articles 6 and 15 of the
Trust Indenture) by the Owner Trustee as part of a refunding or refinancing
transaction, the Owner Participant agrees to negotiate promptly in good faith
with Lessee in connection therewith (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Agreements as may be necessary in order to
facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within five (5) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Section 18 Refinancing Certificate") setting forth
(i) the proposed date on which the Outstanding Series SWA 1995 Trust
N602SW-I Certificates will be redeemed, describing the new debt to be
issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, to be determined so as to
comply with Section 6.03(a) or 6.03(b) of the Trust Indenture (as
appropriate), the "Section 18 Refinancing Date") and (ii) the
following information: (A) the principal amount of debt to be issued
by the Owner Trustee on the Section 18 Refinancing Date, (B) and, if
such amount is less than the principal amount of the Outstanding
Series SWA 1995 Trust N602SW-I Certificates, then the amount of any
additional contribution to the Trust Estate to be made by the Owner
Participant on the Section 18 Refinancing Date and (C) the proposed
revised debt amortization and schedules of Interim Rent, Basic Rent,
Stipulated Loss Value percentages and Termination Value percentages
and the revised Special Purchase Price (including any installments
thereof). The principal amount of debt to be issued by the Owner
Trustee on the Section 18 Refinancing Date shall not equal more than
80.00% of Lessor's
PARTICIPATION AGREEMENT [N602SW]
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Cost. Within five (5) Business Days of its receipt of the Section 18
Refinancing Certificate, Lessee may demand a verification of the
information set forth in the Section 18 Refinancing Certificate in the
manner described in Section 3.7 of the Lease. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Section 18
Refinancing Certificate or the determination of such information
pursuant to such verification procedures (such information, the
"Section 18 Refinancing Information") the appropriate parties will
take the actions specified in paragraphs (2) through (10) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to Lessee, the Owner Participant and the Owner Trustee
(which, subject to subsection (d) below, may involve an underwriting
agreement in connection with a public offering of such debt or the
purchase of such debt by a publicly funded entity (or entities)) with
the institution or institutions to be named therein (A) providing for
(i) the issuance and sale by the Owner Trustee to such institution or
institutions on the Section 18 Refinancing Date of Series SWA 1995
Trust N602SW Certificates in an aggregate principal amount specified
in the Section 18 Refinancing Information (such debt securities, the
"Section 18 New Debt"), (ii) the application of the proceeds of the
sale of the Section 18 New Debt, plus any additional contribution to
the Trust Estate, to the redemption of the Series SWA 1995 Trust
N602SW-I Certificates Outstanding on the Section 18 Refinancing Date
and the payment of any other amounts payable to the Holders under the
Operative Agreements on the Section 18 Refinancing Date, all in
accordance with Section 6.03(b) of the Trust Indenture, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt (other than any
representations, warranties and covenants deemed made by such Holders
by virtue of their accepting any Certificate issued to them)) make
such representations, warranties and covenants as the Owner
Participant or Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Interim Rent (if applicable) and Basic
Rent payable in respect of the period from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information (and shall take into account any variation of the sum of
any interest payment made pursuant to paragraph (5) or (5A) of this
Section 18(a) and the Deferred Equity Amount paid by or on behalf of
the Owner Participant pursuant to Section 8(dd), if applicable, from
the Assumed Interest Amount with respect to the Deferred Equity Date),
(ii) amounts payable in respect of Stipulated Loss Value, Termination
Value and Special Purchase Price from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information, and (iii) in the event that the Series SWA 1995 Trust
N602SW Certificates shall have been publicly issued, the early
termination notice revocation and payment provisions shall be modified
to comport with the applicable notice and payment requirements of The
Depository Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the Section 18 New
Debt in like manner as the Series SWA 1995
PARTICIPATION AGREEMENT [N602SW]
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Trust N602SW-I Certificates and will enter into such amendments and
supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) if such refunding or refinancing shall
be consummated on or prior to the Deferred Equity Date, the Owner
Trustee shall pay to the Original Loan Participant the Break Amount,
if any (as indemnification for the loss resulting from such refunding
or refinancing), and all accrued and unpaid interest on the
Certificates, subject to Lessee's obligations under Section 3.4 of the
Lease;
(5A) if such refunding or refinancing shall
be consummated after the Deferred Equity Date, Lessee on behalf of the
Owner Trustee shall pay to the Original Loan Participant as
Supplemental Rent the Break Amount, if any (as indemnification for the
loss resulting from such refunding or refinancing), and all accrued
and unpaid interest on the Certificates (in each case, without
duplication of other amounts, if any, payable pursuant to any other
provision of the Operative Agreements);
(6) except as provided in paragraph (5)
above, the Owner Trustee shall pay all of the costs of any such
refunding or refinancing so consummated, such costs shall be
considered as Transaction Costs and paid in accordance with and
subject to the limitations of Section 16 above and such Transaction
Costs shall be appropriately considered in calculating the proposed
revised debt amortization and schedules of Basic Rent, Stipulated Loss
Value percentages and Termination Value percentages;
(7) each Holder of the Series SWA 1995 Trust
N602SW-I Certificates will deliver to the Owner Trustee the Series SWA
1995 Trust N602SW-I Certificate held by it immediately prior to such
refunding or refinancing for cancellation (and the Owner Trustee shall
cancel the same), against simultaneous receipt by such Holder of
payment of the then outstanding principal amount of such Series SWA
1995 Trust N602SW-I Certificate, accrued and unpaid interest thereon
plus Break Amount, if any, together with payment in full of all other
amounts then payable to such Holder hereunder or under the Series SWA
1995 Trust N602SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such
of the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee
shall be required to execute and deliver any such agreement or
instrument or to make any other arrangements which in its opinion
would result in any unreimbursed increased costs or liability,
including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would result in
any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional
investment in connection with any such refinancing (other than the
Deferred Equity Amount, if applicable);
PARTICIPATION AGREEMENT [N602SW]
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(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel; and
(10) the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 if, in
its opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax consequences);
provided, however, that the Owner Participant will be obligated to
proceed with such refinancing if Lessee agrees to indemnify the Owner
Participant for such unindemnified adverse consequences (any such
indemnity to be satisfactory to the Owner Participant).
Notwithstanding the foregoing, the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 unless
(i) the Lessee requires in the case of a private refinancing, each
Holder to represent to the Lessee that it is not using ERISA funding
sources, or that an exemption is available with respect to its
purchase and holding of the debt, or (ii) in the case of a public
refinancing, an exemption with respect to pass through certificates
(such as Prohibited Transaction Exemption 89-89 or 90-24 or any other
comparable exemption) is available.
(b) Only one optional refinancing or refunding pursuant
to this Section 18 shall be permitted during the Term and such refinancing
shall occur on or prior to the second anniversary of the Delivery Date.
(c) Any refinancing or refunding pursuant to this Section
18 shall be of all Series SWA 1995 Trust N602SW-I Certificates then
Outstanding.
(d) Any public refinancing pursuant to this Section 18
shall comply with all the restrictions, limitations and conditions applicable
in the case of a public refinancing pursuant to Section 17(b) hereof.
(e) No refunding or refinancing pursuant to this Section
18 shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to
be set forth in a Section 18 Refinancing Certificate, the Owner Participant
shall make such calculations in a manner which (A) maintains its Net Economic
Return, (B) minimizes the Net Present Value of Rents to the extent possible
consistent with clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev.
Proc. 75-28 (or any successor thereto) and would not cause the Lease to
constitute a "disqualified leaseback or long term agreement" within the meaning
of Section 467 of the Code (or any successor thereto), and (D) uses the same
methodology and assumptions used by the Owner Participant in determining
Interim Rent, Basic Rent, Stipulated Loss Values, Termination Values and
Special Purchase Price on the Delivery Date (except to the extent such
assumptions have been altered since the Delivery Date in connection with an
adjustment to Rent pursuant to Section 3.7 of the Lease).
PARTICIPATION AGREEMENT [N602SW]
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SECTION 19. Section 1110 Compliance. The
Participants and Lessee agree that the transactions contemplated by this
Agreement and the other Operative Agreements are intended to be, shall be and
should be construed so as to be, entitled to the full benefits of 11 U.S.C.
Section 1110.
PARTICIPATION AGREEMENT [N602SW]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ John D. Owen
Treasurer
NATIONSBANK, N.A.
Owner Participant
By: /s/ George L. Robinson, Jr.
Vice President
BANK OF AMERICA ILLINOIS,
Original Loan Participant
By: /s/ Timothy C. Hintz
Managing Director
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual
capacity only as expressly provided herein
and otherwise solely as Owner Trustee,
By: /s/ Michelle K. Blezard
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as otherwise
expressly provided herein, but solely as
Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services
Officer
PARTICIPATION AGREEMENT [N602SW]
<PAGE> 63
SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee: Payment Instructions:
------ Federal Reserve Bank of S.F.
Southwest Airlines Co. ABA No. 121000358
2702 Love Field Drive For the account of Bank of America National
P.O. Box 36611 Trust and Savings Association
Dallas, Texas 75235-1611 For credit to GPO Account Administration #5693
Attn: Treasurer Account No. 12330-14364
Telecopy: (214) 904-4022 Reference: Southwest Airlines Interim Debt
Attn: Mandy Sneary
Owner Participant:
-----------------
NationsBank, N.A.
c/o NationsBanc Lease Investments, Inc.
NationsBanc Corp. Center, 12th Floor Owner Trustee:
101 North Tryon Street -------------
NC-1007-12-01 Shawmut Bank Connecticut, National
Charlotte, NC 28255 Association
Telecopy: (704) 386-3271 777 Main Street
Attn: Alison Dubbs Hartford, Connecticut 06115
Payment Instructions: Attn: Corporate Trust Administration
NationsBank of North Carolina Telecopy: (203) 240-7920
ABA No. 053000196
For the account of
NationsBanc Indenture Trustee:
Lease Investments, Inc. -----------------
Account No. 001608249 Wilmington Trust Company
Reference: Southwest Airlines Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Original Loan Participant: Telecopy: (302) 651-8882
------------------------- Payment Instructions:
Bank of America Illinois Wilmington Trust Company
GPO Account Admin. #5693 Wilmington, Delaware
1850 Gateway Boulevard ABA No. 031100092
Concord, California 94520 For the account of Southwest Airlines 1995-1
Attn: Mandy Sneary Account No. 30875-0
Telecopy: (510) 675-7531 Reference: N602SW
Telephone: (510) 675-7480 Attn: David A. Vanaskey
With a copy to: Corporate Trust Administration
Timothy C. Hintz, Managing Director
Bank of America National Trust and
Savings Association
Unit 5618
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Telephone: (213) 228-2810
</TABLE>
PARTICIPATION AGREEMENT [N602SW]
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SCHEDULE II
Commitments
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
---------------- ------------- -------------
<S> <C> <C>
Bank of America Illinois 73.63652053% $23,563,686.57
Owner Participant:
- -----------------
NationsBank, N.A. 26.36347947% $ 8,436,313.43
------------ --------------
Total Commitments: 100% $32,000,000.00
================= ==== ==============
</TABLE>
PARTICIPATION AGREEMENT [N602SW]
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SCHEDULE III
Appraisal
1. The fair market value of the Aircraft on the Delivery Date is equal to
Lessor's Cost.
2. The Aircraft is reasonably estimated to have:
(A) a useful life of 30.5 years;
(B) a residual value as of November 6, 2019 of more than 20% of
Lessor's Cost (without taking into account any increase or
decrease for inflation or deflation); and
(C) an estimated fair market value (taking into account expected
inflation or deflation) of not more than the Special Purchase
Price on January 1, 2015.
3. The Aircraft will not be "limited use property" as described in Rev.
Proc. 76-30, 1976-7. CB. 647.
4. Such other matters as may be reasonably requested by the Owner
Participant.
PARTICIPATION AGREEMENT [N602SW]
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EXHIBIT A
TRANSFEREE OP GUARANTY
TRANSFEREE OP GUARANTY, dated as of
________________by___________________________, a ___________ ________
corporation ("Transferee OP Guarantor") to and for the benefit of the Indenture
Trustee, the Owner Trustee, individually and as Owner Trustee, the Lessee and
the Original Loan Participant referred to in the Participation Agreement
described below (collectively, together with their permitted successors and
assigns, "Beneficiaries" and, individually, a "Beneficiary").
WITNESSETH:
WHEREAS, _________________ a _____________
[corporation] ("Transferor"), is Owner Participant under that certain
Participation Agreement, dated as of _______________ among Southwest Airlines
Co., as Lessee, Nationsbank, N.A., as Owner Participant [and Transferor's
predecessor in interest], Bank of America Illinois, as the Original Loan
Participant, Shawmut Bank Connecticut, National Association, in its individual
capacity only as expressly provided therein and otherwise solely as Owner
Trustee, and Wilmington Trust Company, in its individual capacity and as
Indenture Trustee (the "Participation Agreement");
WHEREAS, Transferor wishes to transfer, except to the
extent expressly reserved to Transferor, all of its right, title and interest
in and to the Participation Agreement, the Trust Estate and the other Operative
Agreements to which Transferor is a party, and all proceeds therefrom as set
forth in the Assignment and Assumption Agreement dated the date hereof between
Transferor and ________________________, a _______________________corporation
("Transferee"); and
WHEREAS, the terms of the Participation Agreement
provide that the aforementioned transfer is conditioned upon the execution and
delivery of this Guaranty by Transferee OP Guarantor;
NOW, THEREFORE, Transferee OP Guarantor hereby agrees
with and for the benefit of Beneficiaries as follows:
1. Definitions. Capitalized terms used herein and
not otherwise defined herein shall have the meanings given such terms in the
Sale and Lease Agreement, dated as of July 1, 1995 between the Owner Trustee
and Lessee, and the rules of usage set forth therein shall apply hereto.
2. Guaranty. (a) Transferee OP Guarantor hereby
unconditionally and irrevocably guarantees, as primary obligor and not as a
surety, to Beneficiaries and their respective successors, endorsees,
transferees and assigns, the prompt and complete payment by Transferee when due
(whether at the stated maturity, by acceleration or otherwise) of, and the
faithful performance of and compliance with, all payment obligations of
Transferee under the Participation Agreement and
PARTICIPATION AGREEMENT [N602SW]
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each other Operative Agreement to which Owner Participant is a party or by
which it is bound (collectively, the "Relevant Documents"), strictly in
accordance with the terms thereof and the timely performance of all other
obligations of Transferee thereunder (such payment and other obligations, the
"Obligations"), and Transferee OP Guarantor further agrees to pay all expenses
(including, all fees and disbursements of counsel) that may be paid or incurred
by Beneficiaries in enforcing any rights with respect to, or collecting, any or
all of the Obligations and/or enforcing any rights with respect to, or
collecting against, Transferee OP Guarantor under this Guaranty.
(b) No payment or payments made by Transferee,
Transferee OP Guarantor, any other guarantor or any other Person or received or
collected by any Beneficiary from Transferee, Transferee OP Guarantor, any
other guarantor or any other person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of Transferee OP Guarantor
hereunder until the Obligations are paid and performed in full.
(c) If for any reason any Obligation (whether
affirmative or negative in character) shall not be observed or performed or
paid promptly when due and payable, Transferee OP Guarantor shall promptly
perform or observe or cause to be performed or observed each such Obligation or
undertaking and shall forthwith pay such amount at the place and to the person
or entity entitled thereto pursuant to the Relevant Documents regardless of
whether or not any Beneficiary or anyone on behalf of any Beneficiary shall
have instituted any suit, action or proceeding or exhausted its remedies or
taken any steps to enforce any rights against Transferee or any other person or
entity to compel any such performance or to collect all or any part of such
amount pursuant to the provisions of the Relevant Documents or at law or in
equity, or otherwise, and regardless of any other condition or contingency.
3. No Subrogation. Notwithstanding any payment or
payments made by Transferee OP Guarantor hereunder or any set-off or
application of funds of Transferee OP Guarantor by any Beneficiary, Transferee
OP Guarantor shall not be entitled to be subrogated to any of the rights of any
Beneficiary against Transferee or any collateral, security or guarantee or
right of set-off held by any Beneficiary for the payment of the Obligations,
nor shall Transferee OP Guarantor seek or be entitled to seek any reimbursement
from Transferee in respect of payments made by Transferee OP Guarantor
hereunder, unless all amounts and performance then owing to Beneficiaries by
Transferee on account of the Obligations shall have been paid and performed in
full.
4. Amendments, etc., with respect to the Obligations;
Waiver of Rights. The Transferee OP Guarantor shall remain fully obligated
hereunder notwithstanding that, without any reservation of rights against the
Transferee OP Guarantor and without notice to or further assent by the
Transferee OP Guarantor, any demand for payment or performance of any of the
Obligations made by any Beneficiary may be rescinded by such party and any of
the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by any Beneficiary and any
Relevant Document, and/or any collateral security document or other guarantee
or document in connection therewith may be amended,
PARTICIPATION AGREEMENT [N602SW]
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modified, supplemented or terminated, in whole or in part, as the parties
thereto may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by any Beneficiary for the
payment or performance of the Obligations may be sold, exchanged, waived,
surrendered or released. No Beneficiary shall have any obligation to protect,
secure, perfect or insure any lien at any time held by it as security for the
Obligations or for this Guaranty or any property subject thereto. When making
any demand hereunder against the Transferee OP Guarantor, a Beneficiary may,
but shall be under no obligation to, make a similar demand on the Transferee or
any other guarantor, and any failure by a Beneficiary to make any such demand
or to collect any payments from the Transferee or any such other guarantor or
any release of the Transferee or such other guarantor shall not relieve the
Transferee OP Guarantor of its obligations or liabilities hereunder, and shall
not impair or affect the rights and remedies, express or implied, or as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. For
purposes hereof, "demand" shall include the commencement and continuance of any
legal proceedings.
5. Guaranty Absolute and Unconditional. The
Transferee OP Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by any Beneficiary upon this Guaranty or acceptance of this Guaranty;
the Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Guaranty; and all dealings between the Transferee or the
Transferee OP Guarantor and any Beneficiary shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Guaranty. The
Transferee OP Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Transferee or the
Transferee OP Guarantor with respect to the Obligations. The Transferee OP
Guarantor understands and agrees that this Guaranty shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
(and not merely of collectibility) without regard to (a) the validity,
regularity or enforceability of any Relevant Document, any of the Obligations
or any collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by any Beneficiary, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by the
Transferee against any Beneficiary, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Transferee or the Transferee OP
Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of the Transferee for the Obligations, or of the Transferee
OP Guarantor under this Guaranty, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against the Transferee OP Guarantor,
any Beneficiary may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Transferee or any other person or
entity or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by any Beneficiary to
pursue such other rights or remedies or to collect any payments from the
Transferee or any such other person or entity or to realize upon any such
collateral security or guarantee or exercise any such right of offset, or any
release of the Transferee or any such other person or entity or any such
collateral security, guarantee or right of offset, shall not relieve the
Transferee 0P Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. This
Guaranty shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Transferee OP Guarantor and the
successors and assigns thereof, and shall inure to the benefit of the
Beneficiaries, and their respective
PARTICIPATION AGREEMENT [N602SW]
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successors, endorsees, transferees and assigns, until all of the Obligations
and the obligations of the Transferee OP Guarantor under this Agreement shall
have been satisfied by payment and performance in full. The Transferee OP
Guarantor further agrees that, without limiting the generality of this
Guaranty, if any Beneficiary (or any assignee thereof) shall be prevented by
applicable law from exercising its remedies (or any of them) against the
Transferee under any Operative Document, such Beneficiary (or any assignee
thereof) shall be entitled to receive hereunder from the Transferee OP
Guarantor, upon demand therefor, the sums that would have otherwise been due
from the Transferee had such remedies been able to be exercised.
6. Reinstatement. This Guaranty shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, or any of the Obligations is rescinded or must otherwise be
restored or returned by any Beneficiary upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Transferee or the Transferee
OP Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Transferee
or the Transferee OP Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made. The Transferee OP
Guarantor shall not commence any "case" (as defined in Title 11 of the United
States Code) against the Transferee.
7. Payments. The Transferee OP Guarantor hereby
guarantees that payments hereunder shall be paid without set-off, counterclaim,
deduction or withholding, except as required by applicable law, and shall be
made in Dollars, provided, if any withholding Taxes are so imposed under
applicable law, the Transferee OP Guarantor shall pay an additional amount such
that the net amount actually received by the Person entitled thereto, free of
withholding, will equal the amount then due absent such withholding.
8. Representations and Warranties. The Transferee OP
Guarantor hereby represents and warrants that:
(a) it is a [corporation] duly organized and
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power
and authority to carry on its business as now conducted, to
own or hold under lease its properties and to enter into and
perform its obligations under this Guaranty;
(b) this Guaranty has been duly authorized by all
necessary corporate action on the part of the Transferee OP
Guarantor, does not require any approval not already obtained
of stockholders of the Transferee OP Guarantor or any approval
or consent not already obtained of any trustee or holders of
any indebtedness or obligations of the Transferee OP
Guarantor, and has been duly executed and delivered by the
Transferee OP Guarantor;
(c) this Guaranty constitutes a legal, valid and
binding obligation of the Transferee OP Guarantor enforceable
in accordance with its terms;
PARTICIPATION AGREEMENT [N602SW]
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(d) there are no pending or, to the knowledge of
the Transferee OP Guarantor, threatened actions or proceedings
against the Transferee OP Guarantor before any court or
administrative agency which, if determined adversely to the
Transferee OP Guarantor, would materially adversely affect the
financial condition of the Transferee OP Guarantor or the
ability of the Transferee OP Guarantor to perform its
obligations under this Guaranty;
(e) its net worth (as defined in Section 8(l) of
the Participation Agreement) is at least $75,000,000; and
(f) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the
passage of time or the giving of notice or both, constitute)
an Indenture Event of Default which has been caused by or
relates to the Transferee OP Guarantor and which is presently
continuing.
9. Severability. Any provision of this Guaranty
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
10. No Waiver; Cumulative Remedies . No
Beneficiary shall by any act (except by a written instrument pursuant to
Section 12 hereof), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any Beneficiary, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by a Beneficiary of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy that such Beneficiary
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
11. Integration. This Guaranty represents the
entire agreement of Transferee OP Guarantor with respect to the subject matter
hereof and there are no promises or representations by any Beneficiary relative
to the subject matter hereof not reflected herein.
12. Amendments and Waivers. None of the terms or
provisions of this Guaranty may be waived, amended or supplemented or otherwise
modified except by a written instrument executed by Transferee OP Guarantor and
each Beneficiary.
13. Section Headings. The Section headings used
in this Guaranty are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
PARTICIPATION AGREEMENT [N602SW]
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14. Successors and Assigns. This Guaranty shall be
binding upon the successors and assigns of Transferee OP Guarantor and shall
inure to the benefit of Beneficiaries and their respective successors and
assigns.
15. GOVERNING LAW. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO ANY CONFLICT OF
LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION.
16. Notices. All notices and other
communications required under the terms and conditions hereof shall be given
and shall be effective in accordance with the provisions of Section 13(a) of
the Participation Agreement; provided that notices to the Transferee OP
Guarantor shall be sent to _______________________.
PARTICIPATION AGREEMENT [N602SW]
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IN WITNESS WHEREOF, the undersigned has caused this
Transferee OP Guaranty to be duly executed and delivered by its duly authorized
officer as of the day and the year first above written.
[NAME OF TRANSFEREE OP GUARANTOR]
By:__________________________________
Title:_______________________________
PARTICIPATION AGREEMENT [N602SW]
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<PAGE> 73
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of _______, between
______________________, a ______________ [corporation] ("Assignor") and
______________________________, a ________________[corporation] ("Assignee")
(the "Agreement").
WITNESSETH:
WHEREAS, the parties hereto desire to effect (a) the transfer by
Assignor to Assignee of all of the right, title and interest of the Assignor
(except as reserved below) in, under and with respect to, among other things,
(i) the Participation Agreement, dated as of July 1, 1995, among Southwest
Airlines Co., as Lessee, Nationsbank, N.A., as Owner Participant, Bank of
America Illinois, as Original Loan Participant, Shawmut Bank Connecticut,
National Association, in its individual capacity only as expressly provided
therein and otherwise solely as Owner Trustee, and Wilmington Trust Company, in
its individual capacity and as Indenture Trustee, as the same may be amended,
modified or supplemented from time to time (the "Participation Agreement"),
(ii) the Trust Agreement identified in the Participation Agreement, (iii) the
Trust Estate (as defined in the Trust Agreement) and (iv) the proceeds
therefrom and (b) the assumption by Assignee of the obligations of Assignor
accruing thereunder;
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings given such terms in the Sale and Lease
Agreement, dated as of July 1, 1995 between the Owner Trustee and Lessee, and
the rules of usage set forth therein shall apply hereto.
2. Assignment. Assignor does hereby sell, convey, assign, transfer
and set over unto Assignee, as of the date hereof, all of its right, title and
interest in, under and with respect to the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement, the Trust Estate or any other contract,
agreement, document or instrument relating to the Trust Estate by which
Assignor is bound, and any proceeds therefrom, together with all other
documents and instruments evidencing any of such right, title and interest,
except such rights of Assignor as have accrued to Assignor prior to the date
hereof (including the right to receive any amounts due or accrued to Assignor
under the Trust Agreement as of a date prior to such date and the right to
receive any indemnity payment pursuant to the Participation Agreement or the
Tax Indemnity Agreement with respect to events occurring prior to such date).
3. Assumption. Assignee hereby undertakes, for the benefit of
Assignor, Indenture Trustee, Owner Trustee, Original Loan Participant and
Lessee and their successors and assigns, all of the duties and obligations of
Assignor whenever accrued (other than duties and obligations of Assignor
required to be performed by it on or prior to the date hereof under the
Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement or
any other contract, agreement, document or other instrument relating to the
Trust Estate to which Assignor is a party or by which it is bound) pursuant to
the Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement
or any other
PARTICIPATION AGREEMENT [N602SW]
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contract, agreement, document or other instrument relating to the Trust Estate
to which Assignor is a party or by which it is bound, and hereby confirms that
it shall be deemed a party to the Participation Agreement, the Trust Agreement,
the Tax Indemnity Agreement and each other contract, agreement, document or
other instrument relating to the Trust Estate to which Assignor is a party or
by which it is bound as if therein named as Owner Participant.
4. Release of Assignor. Except for liabilities not assumed as
provided in Section 3 hereof and except to the extent applicable as a condition
to the continued enforcement of any rights thereunder retained by Assignor,
upon the execution of this Assignment and Assumption Agreement, Assignor shall
have no further duty or obligation under the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement or under any other contract, agreement,
document or other instrument relating to the Trust Estate to which Assignor is
a party or by which it is bound; provided, however, that Assignor shall in no
event be released from any liability on account of any breach by it of any
representations or warranties, covenants or obligations set forth in the
Participation Agreement or for any fraudulent or willful misconduct engaged in
by it on or prior to the date hereof; provided further, that Assignor shall
remain liable for, and shall indemnify and hold harmless the Original Loan
Participant from and against any reduction in the amount payable out of the
Trust Estate to the Original Loan Participant, and any other losses, costs or
expenses incurred by the Original Loan Participant to the extent that any such
reduction, loss, cost or expense shall result from the imposition or
enforcement of any Lien or any claim against the Trust Estate by a taxing
authority because of the nonpayment by Assignor of taxes imposed on or measured
by its income or gross receipts by such taxing authority arising from the
assignment hereunder.
5. Appointment as Attorney-in-Fact. In furtherance of the within
assignment, Assignor hereby constitutes and appoints Assignee, and its
successors and assigns, the true and lawful attorneys of Assignor, with full
power of substitution, in the name of Assignee or in the name of Assignor but
on behalf of and for the benefit of and at the expense of Assignee, to collect
for the account of Assignee all items sold, transferred or assigned to Assignee
pursuant hereto; to institute and prosecute, in the name of Assignor or
otherwise, but at the expense of Assignee, all proceedings that Assignee may
deem proper in order to collect, assert or enforce any claim, right or title of
any kind in or to the items sold, transferred or assigned; to defend and
compromise at the expense of Assignee any and all actions, suits or proceedings
as to title to or interest in any of the property acquired by Assignee; and to
do all such acts and things in relation thereto at the expense of Assignee as
Assignee shall reasonably deem advisable. Assignor hereby acknowledges that
this appointment is coupled with an interest and is irrevocable by Assignor in
any manner or for any reason.
6. Payments. Assignor hereby covenants and agrees to pay over to
Assignee, if and when received following the date hereof, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of Assignor that, under Section 2 hereof, belong to Assignee, and
Assignee hereby covenants and agrees to pay over to Assignor, if and when
received following the date hereof, any amounts (including any sums payable as
interest in respect thereof) paid to or for the benefit of Assignee that, under
Section 2 hereof, belong to Assignor.
7. Representations and Warranties. Assignee represents and warrants
that:
PARTICIPATION AGREEMENT [N602SW]
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(a) it is a [corporation] duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority to carry on its business as now conducted, to own
or hold under lease its properties and to enter into and perform its
obligations under this Agreement and the Owner Participant Agreements;
(b) this Agreement has been duly authorized by all necessary corporate
action on the part of the Assignee, does not require any approval not already
obtained of stockholders of the Assignee or any approval or consent not already
obtained of any trustee or holders of any indebtedness or obligations of the
Assignee, and has been duly executed and delivered by the Assignee;
(c) assuming that this Agreement and each of the Owner Participant
Agreements is the legal, valid and binding obligation of each other party
thereto, this Agreement and each such Owner Participant Agreement constitute
the legal, valid and binding obligations of the Assignee enforceable in
accordance with their respective terms;
(d) subject to and in reliance upon the representations made by the Original
Loan Participant and Lessee in Sections 8(o) and 7(a)(xv) of the Participation
Agreement, respectively, and compliance with the covenants of Section 8(d) and
8(bb) of the Participation Agreement, neither the execution and delivery by the
Assignee of this Agreement, nor the consummation of the transactions
contemplated hereby or by the Owner Participant Agreements, nor compliance by
the Assignee with any of the terms and provisions hereof or of the Owner
Participant Agreements will contravene any United States federal or state law,
judgment, governmental rule, regulation or order applicable to or binding on
the Assignee (it being understood that no representation or warranty is made
with respect to laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws, rules
or regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a) of the
definition thereof) upon the Trust Estate under any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, corporate charter, by-law or other agreement or instrument to
which the Assignee is a party or by which it or its properties may be bound or
affected;
(e) there are no pending or, to the knowledge of the Assignee, threatened
actions or proceedings against the Assignee before any court or administrative
agency which, if determined adversely to the Assignee, would materially
adversely affect the financial condition of the Assignee or the ability of the
Assignee to perform its obligations under this Agreement or the Owner
Participant Agreements;
(f) on the Delivery Date, there will be no Lessor Liens attributable to the
Assignee;
(g) the Assignee's net worth (as defined in Section 8(l) of the
Participation Agreement) is at least $75,000,000;
(h) there has not occurred any event which constitutes (or to the best of
its knowledge would, with the passage of time or giving of notice or both,
constitute) an Indenture Event of Default which has been caused by or relates
to the Assignee and which is presently continuing;
(i) it is a permitted Transferee under Section 8(l)(A) of the Participation
Agreement;
<PAGE> 76
(j) it is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) [or it has, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), entered
into a voting trust or similar arrangement which permits the registration of
the Aircraft under the Act in the name of the Owner Trustee without any
restriction on the operation of the Aircraft]; and
(k) it has the full power and authority to enter into the transactions
contemplated by the Owner Participant Agreements.
8. GOVERNING LAW. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO ANY
CONFLICT OF LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION.
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Assumption Agreement as of the day and year first above written.
[ASSIGNOR]
By ________________________________
Title:_____________________________
[ASSIGNEE]
By _______________________________
Title:_____________________________
<PAGE> 1
Exhibit 4.23
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO.,
as Lessee
NATIONSBANK, N.A.,
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
and in its capacity as Pass Through Trustee under
each of the four Pass Through Trust Agreements
and as Holder
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N602SW)
<PAGE> 2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT dated as of October 1,
1995 (this "Amendment") by and among (i) Southwest Airlines Co., a Texas
corporation ("Lessee"), (ii) NationsBank, N.A., a national banking association
("Owner Participant"), (iii) Shawmut Bank Connecticut, National Association, a
national banking association, not in its individual capacity, except as
expressly provided herein, but solely as Owner Trustee under the Trust
Agreement ("Owner Trustee"), and (iv) Wilmington Trust Company, a Delaware
banking corporation, in its individual capacity and as Indenture Trustee under
the Trust Indenture (the "Indenture Trustee") and in its capacity as Pass
Through Trustee under each of the four separate Pass Through Trust Agreements
("Pass Through Trustee") and as Holder, amends that certain Participation
Agreement respecting the aircraft having U.S. registration number N602SW and
dated as of July 1, 1995 (the "Participation Agreement"), by and among Lessee,
Owner Participant, Bank of America Illinois (the "Original Loan Participant"),
Owner Trustee and Indenture Trustee,
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, the Delivery Date occurred on July 13, 1995; and
WHEREAS, concurrently with the execution of this Amendment, the Series
SWA 1995 Trust N602SW-I Certificate held by the Original Loan Participant is
being refinanced by the issuance of one or more new Certificates issued to Pass
Through Trustee as Holder; and
WHEREAS, as contemplated by Section 18 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
Section 1. Amendment to Schedule I. Schedule I to the
Participation Agreement is hereby deleted in its entirety and replaced with
Schedule I to this Agreement.
Section 2. Amendments to Section 7(b). Section 7(b) of the
Participation Agreement is hereby amended in the following manner:
(i) Section 7(b) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase is
hereby amended to be and read in its entirety as follows:
"Operative Agreement or each Pass Through Trust Agreement" and
"Operative Agreements or each Pass Through Trust Agreement"
PARTICIPATION AMENDMENT [N602SW]
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<PAGE> 3
except in the case of Section 7(b)(iii) where the phrase "Operative
Agreements" is hereby amended to be and read, in its entirety, "Operative
Agreements and the Pass Through Trust Agreements."
(ii) Section 7(b)(i) is hereby amended as follows:
(a) the following language is added immediately after the
words "combined or unitary return with such Indemnified
Party)" and before the words "harmless from, any and all":
"except that for purposes of this Section 7(b)(i) an
Indemnified Party shall not include any Holder other than
Original Loan Participant";
(b) unless as otherwise provided in (c) below, wherever the
term "Certificates" is used, such term is hereby amended to be
and read in its entirety as follows:
"Certificates and each Pass Through Certificate"; and
(c) the language immediately after the phrase "or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture" is
hereby amended to be and read in its entirety as follows:
"and each Pass Through Trust Agreement, or the beneficial
interests in the Trust Estate and each Pass Through Trust
Estate or the creation thereof, or any payments made pursuant
to any such agreement or instrument or upon or with respect to
the property held by Owner Participant or by the Trust Estate
or by Indenture Trustee under the Trust Indenture or the
property held by Pass Through Trustee under the respective
Pass Through Trust Estate, amounts payable with respect to the
Certificates and each Pass Through Certificate, including
withholding Taxes imposed on payments of principal, interest,
Premium or Break Amount on the Certificates or payments of
principal of, interest on or any other amounts payable with
respect to each Pass Through Certificate that are asserted
against the Owner Participant, Owner Trustee or Pass Through
Trustee, as withholding agent, or otherwise with respect to or
in connection with the transactions contemplated by the
Operative Agreements."
Section 3. Amendments to Section 7(c). Section 7(c) of the
Participation Agreement shall be amended in the following manner:
(i) Section 7(c) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase
includes each Pass Through Trust Agreement.
(ii) Clause (d) of Section 7(c)(i) is hereby amended to be
and read in its entirety as follows:
PARTICIPATION AMENDMENT [N602SW]
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<PAGE> 4
"(d) the offer, sale or delivery of the Certificates or the
Pass Through Certificates, whether before or after the
Delivery Date (the indemnity in this clause (d) to extend also
to any Person who controls an Indemnified Party, its
successors, assigns, employees, servants and agents within the
meaning of Section 15 of the Securities Act)."
(iii) The final paragraph of Section 7(c) is hereby amended
to be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of Indenture Trustee (including the reasonable fees
and expenses of its counsel and any agent appointed in
accordance with Section 9.02(c) of the Trust Indenture) and
Pass Through Trustee and, as provided in Section 6.07 of the
Trust Agreement, Owner Trustee (including, but not limited to,
the reasonable fees and expenses of its counsel), without
cost, on a net after-tax basis, to Owner Participant, for
acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay
the reasonable fees and expenses of any separate owner trustee
or co-trustee appointed pursuant to Section 9.02 of the Trust
Agreement as a result of any requirement of law or if
otherwise required by any Operative Agreement or if requested,
or consented to, by the Lessee."
Section 4. Amendments to Section 8. Section 8 of the
Participation Agreement is hereby amended in the following respects:
(i) Section 8(e) is hereby amended to be and read in its
entirety as follows:
"(e) (i) Pass Through Trustee hereby agrees that, except
as otherwise required by applicable law including, without
limitation, any law which requires Pass Through Trustee to act
within its own discretion, it shall not, without the prior
written consent of Owner Trustee, direct Indenture Trustee to
take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization,
direction or consent of, or notice from, the Holders holding a
specified percentage in principal amount of Outstanding (as
defined in the Trust Indenture) Certificates unless Pass
Through Trustee receives a Direction (as defined in the
relevant Pass Through Trust Agreement) to so direct the
Indenture Trustee from Certificateholders (as defined in the
relevant Pass Through Trust Agreement) holding the same
percentage of Certificates (as defined in the relevant Pass
Through Trust Agreement) evidencing Fractional Undivided
Interests (as defined in the relevant Pass Through Trust
Agreement) in the Trust (as defined in the relevant Pass
Through Trust Agreement) holding the Certificates.
(ii) Lessee and Pass Through Trustee hereby agree
that Article X of each Pass Through Trust Agreement (to the
extent relating to the Certificates) shall not be amended
without the prior written consent of Owner Participant.
PARTICIPATION AMENDMENT [N602SW]
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<PAGE> 5
(iii) Pass Through Trustee hereby agrees that,
except as otherwise required by applicable law including,
without limitation, any law which requires Pass Through
Trustee to act within its own discretion, if requested to do
so by Owner Trustee or Owner Participant, Pass Through Trustee
shall request a Direction from the relevant Certificateholders
to establish whether Pass Through Trustee, in its capacity as
a Holder, may direct the Indenture Trustee to take or refrain
from taking any action under the Operative Agreements."
(ii) Section 8(l) is hereby amended by deleting the
references therein to the Original Loan Participant.
(iii) Section 8(bb) is hereby amended to be and read in its
entirety as follows:
"(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or
Section 8.03(e)(ii) of the Indenture, each Holder covenants
that it will not transfer its Certificate to any Person unless
such Person represents and warrants in writing to such Holder,
the Owner Participant and Lessee either that (a) no part of
the funds used by it to acquire its Certificate constitutes
`plan assets' of any `employee benefit plan' within the
meaning of ERISA or any `plan' within the meaning of Section
4975(e)(1) of the Code or (b) its purchase or acquisition of
such Certificate will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of
ERISA. Any such Person shall require any transferee of its
interest to make the representations and warranties in the
preceding sentence."
(iv) Section 8(dd) is hereby amended to be and read in its
entirety as follows:
"(dd) Deferred Equity. Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and
not with any other party to this Agreement or the Holders of
any Certificates), that, so long as no Lease Event of Default
or Lease Default (of the type described in Section 14.1 or
14.5 of the Lease) shall have occurred and be continuing, it
will pay or cause to be paid to Indenture Trustee on the
Deferred Equity Date sufficient funds to effect the payment of
an amount (the "Deferred Equity Amount") equal to the amount
due on such date in respect of accrued interest on the
Certificates from the Section 18 Refinancing Date (as defined
in Section 18 hereof) to and including the Deferred Equity
Date. Owner Participant and Owner Trustee hereby direct the
Indenture Trustee, and Indenture Trustee hereby agrees, to
apply the Deferred Equity Amount to the payment of interest on
the Certificates which may be due and payable pursuant to the
provisions of the Trust Indenture on the Deferred Equity Date.
Owner Participant agrees to make payment of the Deferred
Equity Amount in immediately available funds on or before
11:00 a.m., New York City time, on the Deferred Equity Date
provided, that the Owner Participant agrees to give Lessee
notice by 11:00 a.m., New York City time, on the second
Business Day prior to the Deferred Equity Date if it shall not
make such payment. Indenture Trustee agrees to give Lessee
prompt notice if it shall not have received such
PARTICIPATION AMENDMENT [N602SW]
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<PAGE> 6
payment by noon, New York City time, on the Deferred Equity
Date. In the event Owner Participant fails to make such
payment, and Lessee shall make an Advance as required by
Section 3.8 of the Lease, Lessee may obtain reimbursement in
the manner and to the extent provided in Section 3.8 of the
Lease for the Advance, together with interest on such amount
at the rate described below from (and including) the date of
the making of such Advance to (but excluding) the date of
reimbursement by the Owner Participant or the date Lessee
deducts such Advance from other payments to the extent and as
provided in Section 3.8 of the Lease and, without duplication
of the foregoing, shall have such remedies as may be available
to it against the Owner Participant at law or in equity in
respect of the recovery of any such Advance. Interest shall
accrue on the amount of the Advance at an annual rate equal to
5% in excess of the Base Rate, unless the Advance is made when
any Lease Event of Default or Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) shall have
occurred and be continuing, in which event interest shall
accrue on the amount of such Advance at the Base Rate, but in
each case not to exceed the maximum rate permitted by
applicable law. All amounts paid to Lessee by the Owner
Participant in respect of any Advance or deducted by Lessee
pursuant to Section 3.8 of the Lease shall be applied first to
payment to Lessee of interest and then to payment to Lessee of
amounts equal to such Advance."
Section 5. Amendments to Section 11(f). Section 11(f) of the
Participation Agreement is hereby amended such that wherever the phrase
"Operative Agreement" or "Operative Agreements" is used, such phrase is hereby
amended to be and read in its entirety as follows:
"Operative Agreement and each Pass Through Trust Agreement"
and "Operative Agreements and each Pass Through Trust
Agreement."
Section 6. Amendments to Section 15. Section 15(b) of the
Participation Agreement is hereby amended to be and read in its entirety as
follows:
"(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, Owner Trustee, Indenture
Trustee, Owner Participant, Pass Through Trustee and any
Holder provided for in this Agreement, and Lessee's, Owner
Trustee's, Indenture Trustee's, Owner Participant's, Pass
Through Trustee's and any Holder's obligations under any and
all thereof, shall survive the making available of the Owner
Participant's Commitment, the delivery or return of the
Aircraft, the transfer of any interest of Owner Participant in
the Trust Estate or the Aircraft or any Engine or the transfer
of any interest by any Holder in any Certificate or the Trust
Indenture Estate and the expiration or other termination of
this Agreement, any other Operative Agreement or the Pass
Through Trust Agreements, except as otherwise expressly
provided herein or therein."
PARTICIPATION AMENDMENT [N602SW]
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<PAGE> 7
Section 7. Amendment to Section 16. Section 16(b) of the
Participation Agreement is hereby amended by changing "0.365%" in clause (i)
thereof to read "0.361787" and by changing "0.625%" in clause (ii) thereof to
read "0.623295."
Section 8. Amendment to Section 17. Section 17(a)(3) of the
Participation Agreement is hereby amended by deleting the second parenthetical
contained in clause (i) thereof.
Section 9. Ratification. Except as amended hereby, the
Participation Agreement continues and shall remain in full force and effect in
all respects.
Section 10. Authorization to Execute Amendments. By execution of
this Amendment, Owner Participant hereby authorizes, directs and instructs
Owner Trustee to execute and deliver this Amendment and any and all other
amendments, agreements and certificates as may be necessary as a result of the
refinancing contemplated hereby and by Section 18 of the Participation
Agreement.
Section 11. Pass Through Trustee a Party. Effective as of the
date hereof, Pass Through Trustee shall be a party to the Participation
Agreement and shall have the rights and obligations of the Holders as set forth
in the Participation Agreement, as amended hereby.
Section 12. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 13. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
PARTICIPATION AMENDMENT [N602SW]
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Participation Agreement to be duly delivered in the State of New
York and executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By: /s/ John D. Owen
Treasurer
NATIONSBANK, N.A.,
Owner Participant
By: /s/ George L. Robinson, Jr.
Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By: /s/ Philip G. Kane, Jr.
Vice President
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as otherwise expressly
provided herein, but solely as
Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Senior Financial Services Officer
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By: /s/ David A. Vanaskey, Jr.
Senior Financial Services Officer
PARTICIPATION AMENDMENT [N602SW]
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<PAGE> 9
SCHEDULE I
Names and Addresses
Lessee: Indenture Trustee and Pass Through
Southwest Airlines Co. Trustee and Holder:
2702 Love Field Drive Wilmington Trust Company
P.O. Box 36611 Rodney Square North
Dallas, Texas 75235-1611 1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Treasurer
Telecopy: (214) 904-4022 Attn: Corporate Trust
Administration
Owner Participant: Telecopy: (302) 651-8882
NationsBank, N.A.
c/o NationsBanc Lease Investments, Inc. Payment Instructions:
NationsBanc Corp. Center, 12th floor Wilmington Trust Company
101 North Tryon Street Wilmington, Delaware
NC-1007-12-01 ABA No. 031100092
Charlotte, NC 28255 For the account of Southwest
Airlines 1995-1
Attn: Alison Dubbs Account No. 30875-0
Telecopy: (704)386-3271 Reference: N602SW
Attn: David A. Vanaskey
Payment Instructions: Corporate Trust Administration
NationsBanc of North Carolina
ABA No. 053000196
For the account of NationsBanc
Lease Investments, Inc.
Account No. 001608249
Reference: Southwest Airlines
Owner Trustee:
Shawmut Bank Connecticut,
National Association
777 Main Street
Hartford, Connecticut 06115
Attn: Corporate Trust
Administration
Telecopy: (203) 240-7920
PARTICIPATION AGREEMENT [N602SW]
I-1
<PAGE> 1
EXHIBIT 4.24
________________________________________________________________________________
SALE AND LEASE AGREEMENT
dated as of July 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N602SW
________________________________________________________________________________
All right, title and interest of Lessor in and to this Sale and Lease
Agreement and the Aircraft (including the Engines) has been assigned to and is
subject to a security interest in favor of WILMINGTON TRUST COMPANY, as
Indenture Trustee. This Sale and Lease Agreement has been executed in several
counterparts. No security interest in Lessor's right, title and interest in
and to this Sale and Lease Agreement may be created through the transfer or
possession of any counterpart other than the counterpart identified, for
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart. [This is not the original
counterpart.]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Sale, Lease and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Interim and Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Variable Amounts on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Adjustment to Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value . . . . . . . . 16
3.7.1 Adjustments upon Payment by Lessor of Transaction Costs, Etc . . . . . . . . . . . . . . 16
3.7.2 Recalculation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.8 Certain Advances; Reimbursement Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain Agreements of Lessee . . . . . . . . . 18
4.1 Lessor's Representations and Warranties; DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 General Condition upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.1 Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.2 Free of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.3 Operating Configuration and Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.4 Cleanliness and Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.5 Parts and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Return of Other Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Return at End of Base Lease Term or Renewal Lease Term . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Manuals; Service Bulletins, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Failure to Return Aircraft or Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 Aid in Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.7 Storage upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7. Registration, Operation, Possession, Subleasing and Records . . . . . . . . . . . . . . . . . . . . 23
7.1 Registration and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
SALE AND LEASE AGREEMENT [N602SW]
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<PAGE> 3
<TABLE>
<S> <C> <C>
7.1.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.2 Nameplate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.4 Insurance Requirements; Government Requisition; Indemnity . . . . . . . . . . . . . . . . 24
7.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.1 Interchange and Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.2 Testing and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.3 Civil Reserve Air Fleet Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.4 Installation of Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.5 Installation of Engines on Other Airframes . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.6 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.7 Wet Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.8 Sublease to Permitted Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.2 Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations; Modifications and Additions . . . . . . 29
8.1 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.1 Maintenance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.2 Compliance with Government Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.3 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.4 Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4.1 Mandatory Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4.2 Voluntary Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Right of Termination upon Obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Sale of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Retention by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4 Termination As to Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10. Loss, Destruction, Requisition, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1 Event of Loss with Respect to Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.1 Lessee's Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.2 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.3 Payment of Stipulated Loss Value and Rent . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.4 Stipulated Loss Value Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.5 Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.6 Conditions to Replacement of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.6.1 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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10.1.6.2 Tax Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.6.3 Lessee's Obligations with Respect to Replacement Aircraft . . . . . . . . . . . 36
10.1.7 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1.8 Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2 Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2.2 Conditions; Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.3 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.4 Conveyance; Replacement Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.5 No Reduction of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Application of Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3.1 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.2 Replacement of Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.3 Nonreplacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.4 Requisition of Aircraft for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 41
10.5 Requisition of an Engine for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 41
10.6 Application of Payments During Existence of Default . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1 Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1.2 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1.3 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2 Insurance Against Loss of or Damage to Aircraft and Engines . . . . . . . . . . . . . . . . . . . . 42
11.2.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.2 War-Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3 Certain Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3.1 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3.2 Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.4 Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.5 Government Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3 General Policy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.1 Primary Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.2 Coverage for Each Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.3 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.5 Notice of Termination or Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.6 Nonliability for Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.7 Identity of Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.8 Fifty-fifty Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Application of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.5 Certificates; Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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11.6 Lessor's Right to Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.7 Insurance for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.8 Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.2 Security for Lessor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.1 Failure to Pay Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.2 Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.3 General Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.4 Misrepresentation and Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.5 Bankruptcy, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1 Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1.1 Return; Repossession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1.2 Sale; Use Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.3 Certain Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.3.1 Liquidated Damages--Fair Market Rental Value . . . . . . . . . . . . . . . . . 50
15.1.3.2 Liquidated Damages--Fair Market Sales Value . . . . . . . . . . . . . . . . . . 50
15.1.4 Liquidated Damages upon Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.5 Rescission and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.2 Determination of Fair Market Rental Value and Fair Market Sales Value . . . . . . . . . . . . . . . 52
15.3 No Waiver, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17. Net Lease; Lessee's Obligations; No Setoff, Counterclaim, Etc . . . . . . . . . . . . . . . . . . . 53
Section 18. Renewal and Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
18.1 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
18.2 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 19. Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 20. Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 21. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 22. Investment of Security Funds; Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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22.1 Investment of Security Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
22.2 Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 23. Permitted Foreign Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
EXHIBIT A Form of Sale and Lease Agreement Supplement
EXHIBIT B-1 Stipulated Loss Value Schedule
EXHIBIT B-2 Termination Value Schedule
EXHIBIT C Rent Payment Schedule, EBO Installment Payment Schedule and Special Purchase Price
EXHIBIT D Permitted Foreign Air Carriers
EXHIBIT E Assumed Interest Amounts
APPENDIX A Certain Return Conditions
</TABLE>
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THIS SALE AND LEASE AGREEMENT, dated as of July 1, 1995, is between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity except as expressly stated herein, and otherwise
as Owner Trustee under the Trust Agreement hereinafter referred to (together
with any successor in such capacity and its permitted assigns, "Lessor"), and
SOUTHWEST AIRLINES CO., a Texas corporation (together with its successors and
permitted assigns, "Lessee").
RECITALS
1. On May 31, 1995, an AC Form 8050-2 Bill of Sale dated April
19, 1995, from Manufacturer (as defined below) in favor of Lessee covering the
Aircraft (as defined below) was recorded by the FAA (as defined below) as
Conveyance Number UU011889.
2. The parties hereto desire that Lessor purchase the Aircraft
from and lease it back to Lessee as hereinbelow provided.
In consideration of the premises and the mutual agreements herein
contained, Lessor and Lessee agree as follows:
Section 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease and shall be equally applicable to both the singular and the plural forms
of the terms herein defined. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified (including as the same may be
amended and restated) from time to time, to the extent permitted by, and in
accordance with, the terms thereof. For all purposes of this Lease the
capitalized terms used but not defined herein are used as defined in the Trust
Indenture or, if not defined therein, as defined in the Participation
Agreement.
"Act" means Subtitle VII of Title 49 of the United States Code, as
amended from time to time.
"Advance" is defined in Section 3.8.
"Affiliate" means, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aircraft" means the Airframe, together with the two Engines, whether
or not any of such Engines may from time to time be installed on the Airframe
or may be installed on any other airframe or on any other aircraft.
SALE AND LEASE AGREEMENT [N602SW]
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"Airframe" means (i) the Boeing Model 737-3H4 aircraft (excluding
Engines or engines from time to time installed thereon) specified in the
initial Lease Supplement, manufactured by Manufacturer and sold by Manufacturer
to Lessee pursuant to the Purchase Agreement, sold hereunder by Lessee to
Lessor, and leased back by Lessor to Lessee, all hereunder and under the
initial Lease Supplement, (ii) any Replacement Airframe, (iii) any and all
Parts so long as the same shall be incorporated in such aircraft and title
thereto shall have vested in Lessor pursuant to the terms of Section 8, and any
and all Parts removed from such aircraft so long as title thereto shall remain
vested in Lessor in accordance with the terms of Section 8, and (iv) all
Records at any time maintained with respect to the foregoing property;
provided, however, that at such time as a Replacement Airframe shall be
substituted hereunder and the replaced Airframe shall be released from the Lien
of the Trust Indenture, such replaced Airframe shall cease to be the Airframe
hereunder.
"Assumed Interest Rate" means 6.40% per annum, compounded
semi-annually and computed on the basis of a 360-day year of twelve 30-day
months.
"Assumed Interest Amount" means, with respect to the Deferred Equity
Date and each Rent Payment Date, the amount set forth on Exhibit E opposite
such date.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time, or any successor statute.
"Base Lease Term" means the period commencing on the Base Lease Term
Commencement Date and expiring at the end of the day on May 13, 2019.
"Base Lease Term Commencement Date" means July 1, 1996.
"Base Rate" means the interest rate publicly announced in New York
City from time to time by The Chase Manhattan Bank (National Association) as
its prime or base lending rate.
"Basic Rent" means the rent identified as Basic Rent in and payable
pursuant to Section 3.3.
"Bills of Sale" means the FAA Bill of Sale, the Warranty Bill of Sale,
the Lessee FAA Bill of Sale and the Lessee Warranty Bill of Sale.
"Break Amount" is defined in Section 15.05(b) of the Trust Indenture.
"Business Day" shall have the meaning attributed thereto in the Trust
Indenture, so long as the Trust Indenture shall remain in effect, and otherwise
means a day on which banks are not required or authorized to close in any of
the City of New York, New York, Dallas, Texas, and
SALE AND LEASE AGREEMENT [N602SW]
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Hartford, Connecticut, or such other city as shall be the situs of the
principal office of Lessee or Lessor at the time in question.
"Certificate Holder" is defined in Section 1.01(b) of the Trust
Indenture.
"Certificate Rate" means, as of any date of determination thereof, (i)
in respect of amounts owing or distributable pursuant to the Trust Indenture to
the Holders of Certificates issued prior to the Section 18 Refinancing Date,
the applicable Assumed Interest Rate, (ii) in respect of amounts owing to the
Holders of Certificates issued on or after the Section 18 Refinancing Date, the
interest rate or, if such Certificates shall have been issued with more than
one Maturity Date, the weighted average of the interest rates (which weighting
is to be based on the Outstanding principal amounts of the Certificates of each
Maturity Date), then in effect with respect to the then Outstanding principal
amounts of the Certificates, (iii) in respect of any portion of Stipulated Loss
Value expected to be distributed to the Owner Participant, an interest rate
equal to the yield utilized in calculating the Owner Participant's Net Economic
Return, and (iv) in respect of any other amount owing to the Owner Participant
(and which is not distributed to the Holders pursuant to the Trust Indenture),
1% in excess of the Base Rate, but in no event to exceed the maximum rate
permitted by applicable law.
"Certificates" means the Certificates (as defined in the Trust
Indenture) issued under the Trust Indenture.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Debt Payments" is defined in Section 18.2(e)(1)(b).
"Deferred Equity Amount" is defined in Section 8(dd) of the
Participation Agreement.
"Deferred Equity Date" means January 1, 1996.
"Delivery Date" means the date of the initial Lease Supplement, which
date shall be the date on which the Aircraft is delivered by Lessee to, and
accepted by, Lessor hereunder and in turn leased back by Lessor to Lessee
hereunder, which date shall be a Business Day.
"Dollars" and "$" mean the lawful currency of the United States of
America.
"DOT" means the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"EBO Installment Payment Date" means a date set forth in Part II of
Exhibit C hereto.
"Engine" means (i) each of the CFM International Model CFM56-3-B1
engines identified by manufacturer's serial number in the initial Lease
Supplement subjecting the Aircraft to this Lease and originally installed on
the Airframe covered by such Lease Supplement, whether or not from time to time
thereafter installed on such Airframe or installed on any other airframe or on
any other
SALE AND LEASE AGREEMENT [N602SW]
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aircraft, and (ii) any Replacement Engine, whether or not from time to time
thereafter installed on the Airframe or any other airframe or on any other
aircraft, together in each case with any and all Parts incorporated in such
Engine and any and all Parts removed from such Engine, in each case so long as
title thereto shall have been and shall remain vested in Lessor in accordance
with the terms of Section 8, and all Records at any time maintained with
respect to the foregoing property. Except as otherwise set forth herein, at
such time as a Replacement Engine shall be substituted hereunder and the Engine
for which the substitution is made shall be released from the Lien of the Trust
Indenture, such replaced Engine shall cease to be an Engine hereunder. The
term "Engines" means, as of any date of determination, all Engines then leased
hereunder.
"Engine Manufacturer" means CFM International, Inc., a Delaware
corporation, in its capacity as manufacturer of the Engines.
"Equity Payments" is defined in Section 18.2(e)(1)(b).
"Estate" means the Trust Estate as that term is defined in the Trust
Agreement.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such property: (i)
disappearance or theft of such property or the loss of the use thereof for any
reason not covered by any other clause of this definition, including hijacking,
for a period of three consecutive months or for a period continuing through the
last day of the Term, whichever first occurs, or destruction, damage beyond
economic repair or rendition of such property permanently unfit for normal use
for any reason whatsoever; (ii) any damage to such property which results in an
insurance settlement with respect to such property on the basis of a total loss
or a constructive or compromised total loss; (iii) the confiscation,
condemnation or requisition of use of such property by the Government or any
other government or any instrumentality or agency thereof for a period in
excess of six consecutive months or for a period continuing beyond the Term,
whichever first occurs; (iv) as a result of any rule, regulation, order or
other action by the FAA, DOT or other governmental body (including any court)
having jurisdiction, the use of such property in the normal course of
interstate air transportation of persons shall have been prohibited for a
period of more than six consecutive months, unless Lessee, prior to the
expiration of such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit normal use by Lessee, but in any event (a) in any case in which such
prohibition shall apply generally to all similar Boeing Model 737-300 series
aircraft, if such prohibition is continuing on the last day of the Term, or (b)
in all other cases, if such prohibition is continuing on the earlier of the
first anniversary of such prohibition and the last day of the Term; provided,
however, that if such prohibition is continuing on the last day of the Term, no
Event of Loss pursuant to this clause (iv) shall exist if Lessor shall have
delivered to Lessee a written notice not less than two days prior to the end of
the Term that such prohibition on the last day of the Term shall not be deemed
an Event of Loss; (v) the confiscation, condemnation or requisition of title to
such property by the Government or any other government or any instrumentality
or agency thereof; or (vi) respecting any Engine, any divestiture of title
treated as an Event of Loss pursuant to Section 7.2.1 or any other provision of
this Lease. An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if an Event of Loss occurs with respect to the Airframe. An
Event of Loss shall be deemed to occur as of the date of the disappearance,
theft, loss of use, insurance
SALE AND LEASE AGREEMENT [N602SW]
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settlement, prohibition, confiscation, condemnation or requisition of title or
of use, as applicable, except that no Event of Loss shall be deemed to have
occurred pursuant to clause (i), (iii) or (iv) above until the expiration of
the applicable period referred to therein.
"FAA" or "Federal Aviation Administration" means the Federal Aviation
Administration or any governmental person, agency or other authority succeeding
to the functions of the Federal Aviation Administration.
"FAA Bill of Sale" means a bill of sale for the Aircraft on AC Form
8050-2 delivered to Lessee on the date of delivery of the Aircraft to Lessee by
Manufacturer under the Purchase Agreement.
"FAA Regulations" means the Federal Aviation Regulations issued
pursuant to the Act from time to time, or any successor regulations thereto.
"Fixed Rate Renewal Term" means a six-month period following the end
of the Base Lease Term and with respect to which Lessee shall have exercised
its option pursuant to Section 18.1 hereof.
"Floating Rate Renewal Term" means any of three successive periods of
six months or one, two or three years each, not to exceed three years and six
months in the aggregate, which follow the Fixed Rate Renewal Term and with
respect to which Lessee shall have exercised its option pursuant to Section
18.1 hereof.
"Government" means the federal government of the United States of
America or any instrumentality or agency thereof having the full faith and
credit of the United States of America.
"Holder" is defined in Section 1.01(b) of the Trust Indenture.
The term "incorporated in" means incorporated or installed in or
attached to or otherwise made a part of.
"Indemnified Parties" means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N602SW-I
Certificate (including without limitation the Original Loan Participant), (v)
the Estate and the Trust Indenture Estate, (vi) the respective Affiliates,
successors and assigns of the foregoing, and (vii) the respective directors,
officers, employees, agents, partners and servants of the foregoing.
"Indenture and Trust Supplement" means a supplement to the Trust
Agreement and the Trust Indenture, substantially in the form of Exhibit C to
the Trust Indenture.
"Indenture Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Indenture Trustee under the Trust Indenture
and any successor, separate or additional Indenture Trustee thereunder.
SALE AND LEASE AGREEMENT [N602SW]
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"Indenture Trustee Agreements" means the Participation Agreement and
the Trust Indenture.
"Interim Lease Term" means the period commencing on January 6, 1996
and expiring at the end of the day on the day before the Base Lease Term
Commencement Date.
"Interim Rent" means the rent identified as Interim Rent in and
payable pursuant to Section 3.3.
"Investment Grade" is defined in Section 11.8.
"Lease", "this Lease", "this Agreement", "hereby", "herein", "hereof",
"hereunder" or other words mean this Sale and Lease Agreement, including
without limitation supplementation hereof by one or more Lease Supplements.
"Lease Default" means any event or condition which, with notice or
lapse of time or both, would constitute a Lease Event of Default.
"Lease Event of Default" is defined in Section 14.
"Lease Period" means each of the Preliminary Lease Term, the Interim
Lease Term, and each six-month period commencing on a January 1 or July 1, as
the case may be, thereafter during the Term.
"Lease Supplement" means a supplement to this Lease, in the case of
the initial such supplement substantially in the form attached as Exhibit A
hereto, subjecting the Aircraft or other property to this Lease.
"Lessee FAA Bill of Sale" means a bill of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the FAA and delivered to
Lessor on the Delivery Date by Lessee.
"Lessee Warranty Bill of Sale" means a full warranty bill of sale
covering the Aircraft delivered to Lessor on the Delivery Date by Lessee.
"Lessor's Cost" for the Aircraft means the amount identified as such
in the initial Lease Supplement subjecting the Aircraft to this Lease.
"Lessor Liens" means Liens of any Person claiming by, through or under
Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant which arise as a result of (i) claims against Lessor, the
Person serving as Owner Trustee, in its individual capacity, or Owner
Participant, as the case may be, not related to the transactions contemplated
by the Operative Agreements, (ii) any act or omission of Lessor, the Person
serving as Owner Trustee, in its individual capacity, or Owner Participant, as
the case may be, which is not related to the transactions contemplated by the
Operative Agreements, or is in violation of any of the express terms of any of
the Operative Agreements, (iii) Taxes or Losses imposed against or incurred by
Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant, as the case may be, for
SALE AND LEASE AGREEMENT [N602SW]
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which Lessee is not obligated to indemnify pursuant to the Participation
Agreement or the Tax Indemnity Agreement, other than Liens for Taxes not yet
due or for Taxes or Losses being contested in good faith (and for the payment
of which adequate reserves have been provided in accordance with generally
accepted accounting principles) by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture, loss or
loss of use of the Aircraft, the Airframe or any Engine or any interest
therein, or (iv) claims against Lessor, the Person serving as Owner Trustee, in
its individual capacity, or Owner Participant, as the case may be, arising out
of any transfer by any of such Persons in violation of the express terms of the
Operative Agreements.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest, or any claim or exercise of rights, affecting the title to
or any interest in property.
"Losses" is defined in Section 7(c)(i) of the Participation Agreement.
"Maintenance Program" is defined in Section 8.1.1.
"Manufacturer" means The Boeing Company, a Delaware corporation, or
any Affiliate thereof whose obligations are guaranteed by The Boeing Company,
and their respective successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
Manufacturer to be attached to the Purchase Agreement Assignment and, if
applicable, the Agreement of Subsidiary by Boeing Domestic Sales Corporation of
even date therewith.
"Net Economic Return" means after-tax economic yield, total aggregate
after-tax cash flow and general pattern of book earnings expected by the
initial Owner Participant with respect to the Aircraft for the Base Lease Term,
utilizing the same assumptions (including tax assumptions and constraints) as
were utilized by Owner Participant in determining Interim Rent, Basic Rent,
Stipulated Loss Value and Termination Value percentages as of the Delivery
Date, as such assumptions may be adjusted from time to time to take into
account the impact of any change of the type specified in Section 3.7 which
theretofore has resulted in an adjustment of the percentages of Interim Rent,
Basic Rent, Stipulated Loss Value or Termination Value.
"Net Present Value of Rents" means, as of any date of determination,
the net present value, as of the Delivery Date, of each of (i) all unpaid
Interim Rent and Basic Rent through the end of the Term and (ii) for any date
of determination prior to the Special Purchase Option Date, all unpaid Interim
Rent and Basic Rent through the Special Purchase Option Date plus the Special
Purchase Price, in each case utilizing a semi-annual discount rate that, on an
annual basis, is equal to 8.60%.
"Officer's Certificate" means a certificate signed by the Chairman,
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Assistant Secretary of the Person providing
such certificate.
"Operative Agreements" means this Agreement, each Lease Supplement,
the Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment,
SALE AND LEASE AGREEMENT [N602SW]
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the Trust Indenture, the Certificates, each Indenture and Trust Supplement, the
Bills of Sale, the Tax Indemnity Agreement and the Manufacturer's Consent,
including any consents included in or attached to any thereof.
"Original Loan Participant" means Bank of America Illinois, and its
successors and permitted assigns as holder of the Series SWA 1995 Trust
N602SW-I Certificates.
"Overdue Rate" means (i) in respect of that portion of Interim Rent,
Basic Rent, Stipulated Loss Value, Termination Value or Special Purchase Price
(or any installment thereof) expected to be applied to principal of or interest
on the Certificates, the Past Due Rate, or if Certificates shall have been
issued after the Section 18 Refinancing Date with more than one Maturity Date,
the weighted average of the Past Due Rates in respect of the then- outstanding
Certificates of each Maturity Date (which weighting is to be based on the
Outstanding principal amounts of the Certificates of each Maturity Date) and
(ii) in respect of any other portion of Interim Rent, Basic Rent, Stipulated
Loss Value, Termination Value or Special Purchase Price (or any installment
thereof), any Renewal Rent, any Supplemental Rent owing to any Person, or any
amount payable to Lessee (except as otherwise provided), 2% in excess of the
Base Rate, but in no event to exceed the maximum rate permitted by applicable
law. Any interest payable at the Overdue Rate that is determined with
reference to clause (i) of this definition shall be computed on the same basis
as the Past Due Rate, and any interest payable at the Overdue Rate that is
determined with reference to clause (ii) of this definition shall be computed
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed.
"Owner Participant" means NationsBank, N.A., a national banking
association, and its successors and permitted assigns.
"Owner Participant Agreements" means the Participation Agreement, the
Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means Shawmut Bank Connecticut, National Association,
not in its individual capacity but solely as trustee under the Trust Agreement,
and any successor, separate or additional Owner Trustee thereunder.
"Owner Trustee Documents" means the Participation Agreement, this
Lease, the Trust Agreement, the Trust Indenture, the Certificates and the
Purchase Agreement Assignment.
"Participant" means Owner Participant and Original Loan Participant
and their respective successors and permitted assigns.
"Participation Agreement" means the Participation Agreement, dated as
of July 1, 1995, among Lessee, Participants, Lessor and Indenture Trustee,
relating to the Aircraft.
"Parts" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(other than (a) complete Engines or engines and
SALE AND LEASE AGREEMENT [N602SW]
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(b) any items leased by Lessee from a third party (other than Lessor)) which
may from time to time be incorporated in the Airframe or any Engine and title
to which shall vest in Lessor (and "Part" means any of the foregoing) or, so
long as title thereto shall remain vested in Lessor in accordance with Section
8.2 hereof, after removal therefrom.
"Permitted Foreign Air Carrier" means a "foreign air carrier" (as
defined in the Act) named in Exhibit D hereto (as the same may be modified from
time to time in accordance with Section 23) and any successor of any such
carrier.
"Permitted Lien" means any Lien referred to in clauses (a) through (g)
of Section 6.
"Permitted Sublease" means a sublease permitted under Section 7.2.8.
"Permitted Sublessee" means the sublessee under a Permitted Sublease.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Preliminary Lease Term" means the period commencing on the Delivery
Date and expiring at the end of the day on January 5, 1996.
"Purchase Agreement" means the Purchase Agreement between Manufacturer
and Lessee specified in the Purchase Agreement Assignment providing, among
other things, for the manufacture and sale by Manufacturer to Lessee of certain
Boeing Model 737-300 series aircraft (including the Aircraft), as the same has
been or may hereafter (to the extent permitted by the terms of the Purchase
Agreement Assignment) be amended, modified or supplemented and including,
without limitation, as part thereof, the detail specifications referred to
therein and any and all change orders from time to time entered into with
respect thereto (to the extent permitted by the terms of the Purchase Agreement
Assignment), as such Purchase Agreement relates to the Aircraft and has been
assigned pursuant to the Purchase Agreement Assignment.
"Purchase Agreement Assignment" means the Purchase Agreement
Assignment to be entered into, between Lessee and Lessor, assigning to Lessor
certain of Lessee's rights and interests under the Purchase Agreement with
respect to the Aircraft, which Purchase Agreement Assignment will have annexed
thereto the Manufacturer's Consent, executed by Manufacturer.
"Records" is defined in Section 5.4.
"Refinancing Date" is defined in Section 17(a) of the Participation
Agreement.
"Renewal Rent" means the rent payable in respect of a Renewal Term
determined pursuant to Section 18.1.
"Renewal Term" means the Fixed Rate Renewal Term or any Floating Rate
Renewal Term.
SALE AND LEASE AGREEMENT [N602SW]
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"Rent" means Interim Rent, Basic Rent, Renewal Rent and Supplemental
Rent.
"Rent Differential Amount" is defined in Section 3.3.
"Rent Payment Date" means each January 1 and July 1 during the Base
Lease Term and any Renewal Term, commencing with July 1, 1996.
"Replacement Aircraft" means any Aircraft of which a Replacement
Airframe is a part.
"Replacement Airframe" means a Boeing Model 737-300 (or an improved
model) aircraft (except Engines or engines from time to time installed thereon)
which shall be leased hereunder pursuant to Section 10.1.2.
"Replacement Engine" means a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer or an engine
of another manufacturer of at least equivalent utility, remaining useful life
and value, in each case suitable for installation and use on the Airframe and
fully compatible with the other Engine or engine installed thereon) which shall
have been substituted for an Engine leased hereunder pursuant to Section 5.2,
9.4, 10.1 or 10.2.
"Section 18 Refinancing Date" is defined in Section 18(a) of the
Participation Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"SLV Determination Date" means any date set forth in Exhibit B-1
hereto.
"Special Purchase Option Date" is defined in Section 18.2(b).
"Special Purchase Price" is defined in Section 18.2(b).
"Special Purchase Price After-Tax Yield" means the after-tax economic
yield, total aggregate after-tax cash flow and general pattern of book earnings
expected by the Owner Participant with respect to the Aircraft through the
Special Purchase Option Date if the Special Purchase Option were exercised and
the Special Purchase Option Price paid in installments, utilizing the multiple
investment sinking fund method of analysis and the same assumptions as used by
such Owner Participant (including the Tax Assumptions set forth in Section 2 of
the Tax Indemnity Agreement and the assumption that the amount of interest
payable on the Certificates on each Rent Payment Date occurring prior to or
concurrent with the Special Purchase Option Date will be the Assumed Interest
Amount set forth on Exhibit E in respect of such Rent Payment Date) in its
economic analysis of the transaction as of the Delivery Date.
"Stipulated Loss Value" means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
SALE AND LEASE AGREEMENT [N602SW]
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Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment (and, to the
extent that the actual amount of interest paid and to be paid on the
Certificates during the Lease Period in which such SLV Determination Date
occurs up to and including such date is greater or less than the amount
included in calculating the percentage set forth in Exhibit B-1 with respect to
such SLV Determination Date on account of such interest, such percentage shall
be adjusted appropriately to compensate for such differential). Stipulated
Loss Value may be subject to adjustment in accordance with Section 3.7 and
Section 18.2(d) of this Agreement.
"Supplemental Rent" means, without duplication, all amounts,
liabilities and obligations (other than Interim Rent, Basic Rent or Renewal
Rent) which Lessee assumes or agrees to pay to Lessor or any other Person
hereunder, under the Participation Agreement or any of the other Operative
Agreements, including, without limitation (i) Stipulated Loss Value and
Termination Value payments and Special Purchase Price payments, (ii) all
amounts required to be paid by Lessee under the agreements, covenants and
indemnities contained in the Participation Agreement and the Tax Indemnity
Agreement, and (iii) all amounts required to be paid pursuant to Sections 3.4,
3.5 and 3.8 hereof.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement, dated as
of July 1, 1995, between Owner Participant and Lessee, relating to the
Aircraft.
"Taxes" is defined in Section 7(b)(i) of the Participation Agreement.
"Term" means the term for which the Aircraft is leased pursuant to
Section 3 hereof and, unless earlier terminated, shall include the Preliminary
Lease Term, the Interim Lease Term, the Base Lease Term and any Renewal Term
then in force or committed to in accordance with Section 18.1.
"Termination Date" is defined in Section 9.1.
"Termination Value" means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined (and, to the extent that the actual amount of interest paid and to
be paid on the Certificates during the Lease Period in which such TV
Determination Date occurs up to and including such date is greater or less than
the amount included in calculating the percentage set forth in Exhibit B-2 with
respect to such TV Determination Date on account of such interest, such
percentage shall be adjusted appropriately to compensate for such
differential). Termination Value may be subject to adjustment in accordance
with Section 3.7 of this Agreement.
"Transfer" means, with respect to any Person, to transfer, by bill of
sale or otherwise, all such Person's right, title and interest in and to the
Aircraft, Airframe or any Engine, as the case may be, to another Person on an
"as is, where is" basis, free and clear of any Lessor Lien but otherwise
without recourse, representation or warranty, express or implied, and including
an express disclaimer of warranties, representations and guarantees in a manner
comparable to that set forth in Section 4.1.
SALE AND LEASE AGREEMENT [N602SW]
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"Trust Agreement" means the Trust Agreement, dated as of July 1, 1995,
between Owner Participant and Shawmut Bank Connecticut, National Association,
in its individual capacity, relating to the Aircraft.
"Trust Indenture" means the Trust Indenture and Security Agreement,
dated as of July 1, 1995, between Owner Trustee and Indenture Trustee, relating
to the Aircraft.
"Trust Indenture Estate" has the meaning attributed to the term
"Indenture Estate" in the Trust Indenture.
"TV Determination Date" means any date set forth in Exhibit B-2 hereto.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to 49 U.S.C. Section 41102 and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
"Warranty Bill of Sale" means the full warranty bill of sale for the
Aircraft delivered to Lessee on the date of delivery of the Aircraft to Lessee
by the Manufacturer under the Purchase Agreement.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which the Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under the Act for the performance by such employees of
similar functions within the United States of America (it being understood that
cabin attendants need not be regular employees of Lessee), (ii) shall be
maintained by Lessee in accordance with its Maintenance Program, and (iii)
shall be and remain, in the hands of such third party, subject to all other
terms and conditions of this Lease.
Section 2. Sale, Lease and Acceptance.
(a) Lessor, subject to satisfaction or waiver of the conditions
set forth in Section 4 of the Participation Agreement and the concurrent
acceptance hereunder by Lessee of the Aircraft, hereby agrees, to the extent
that the funds received by it pursuant to Section 2 of the Participation
Agreement are adequate for the purpose, to purchase at a purchase price equal
to Lessor's Cost and to accept delivery on the Delivery Date from Lessee
hereunder and to lease back (immediately after extension of the Lien of the
Trust Indenture to the Aircraft) to Lessee hereunder, and Lessee hereby agrees
to sell to Lessor and to lease back (immediately after extension of the Lien of
the Trust Indenture to the Aircraft) from Lessor hereunder on the Delivery
Date, the Aircraft, which shall have been accepted by Lessor and Lessee
hereunder as evidenced by the execution by Lessor and Lessee of the Lease
Supplement conveying to Lessor and leasing to Lessee the Aircraft hereunder;
provided,
SALE AND LEASE AGREEMENT [N602SW]
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however, that Lessor and Lessee shall have no further obligation hereunder with
respect to the Aircraft if the Delivery Date shall not have occurred on or
before September 30, 1995. The purchase price of the Aircraft shall be paid by
Lessor to Lessee on the Delivery Date in the manner specified in Section 2 of
the Participation Agreement.
(b) Lessor hereby authorizes each of Gary C. Kelly, John D. Owen
and Laura Wright, all of whom are employees of Lessee, as the authorized
representative or representatives of Lessor to accept delivery of the Aircraft
from Lessee pursuant hereto. Lessee hereby agrees that in the event delivery
of the Aircraft shall be accepted by an employee or employees of Lessee
pursuant to such authorization by Lessor, such acceptance of delivery by such
employee or employees on behalf of Lessor shall, without further act, also
irrevocably constitute (i) acceptance by such employee of such appointment and
(ii) acceptance by Lessee of the Aircraft for all purposes of this Agreement.
Section 3. Term and Rent.
3.1 General. Except as otherwise provided herein, the Term for
the Aircraft shall commence on the Delivery Date specified in the initial Lease
Supplement and shall terminate as herein provided.
3.2 Lease Term. Except as provided herein, the Aircraft shall be
leased hereunder for the Preliminary Lease Term, the Interim Lease Term, the
Base Lease Term and each Renewal Term, if any.
3.3 Interim and Basic Rent. No Interim Rent or Basic Rent shall
be paid during the Preliminary Lease Term. Lessee hereby agrees to pay to
Lessor (i) Interim Rent for the Interim Lease Term with respect to the Aircraft
on the first Rent Payment Date set forth on Exhibit C, and (ii) Basic Rent for
the Base Lease Term with respect to the Aircraft on each subsequent Rent
Payment Date set forth in Exhibit C, in each case in an amount equal to the
percentage of Lessor's Cost of the Aircraft set forth in Exhibit C opposite
such Rent Payment Date, subject to the terms of the next succeeding paragraphs
of this Section 3.3 and Section 3.7. Each installment (or portion of an
installment) of Interim Rent or Basic Rent under the heading "Advance" in
Exhibit C payable on a Rent Payment Date shall relate to the respective Lease
Period immediately following such Rent Payment Date, and each installment (or
portion of an installment) of Interim Rent or Basic Rent under the heading
"Arrears" in Exhibit C payable on a Rent Payment Date shall relate to the
respective Lease Period immediately preceding such Rent Payment Date.
Although the Interim Rent and Basic Rent amounts set forth in Exhibit
C hereto have been computed on the assumption that the amount of interest
payable on the Certificates on the Rent Payment Dates throughout the Base Lease
Term will be the Assumed Interest Amounts, Lessor and Lessee recognize that the
actual amount of interest payable on the Certificates may, from time to time
during Interim Lease Term and the Base Lease Term, be different from the
Assumed Interest Amounts. Accordingly, Interim Rent and Basic Rent shall be
increased or decreased (but not below zero), as the case may be, by the Rent
Differential Amount (as defined herein). Any increase in Interim Rent or Basic
Rent shall constitute additional arrears Rent on the date in question, and any
decrease in Interim Rent or Basic Rent shall first decrease arrears Rent before
affecting advance Rent
SALE AND LEASE AGREEMENT [N602SW]
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on the date in question. For purposes hereof, "Rent Differential Amount" shall
mean, as of any Rent Payment Date, the absolute value of the difference between
(i) the aggregate amount of interest due and payable on such Rent Payment Date
on the Certificates (or due and payable on the next following or next preceding
Business Day, as the case may be, if such date shall not constitute a Business
Day) and (ii) the Assumed Interest Amount with respect to such Rent Payment
Date. If, as of such Rent Payment Date, the amount determined in accordance
with clause (i) of the immediately preceding sentence shall be greater than the
amount determined in accordance with clause (ii) of such sentence, the amount
of Interim Rent or Basic Rent payable on such Rent Payment Date shall be
increased by the Rent Differential Amount. If, as of such Rent Payment Date,
the amount determined in accordance with such clause (ii) shall exceed the
amount determined in accordance with such clause (i), the amount of Interim
Rent or Basic Rent due on such Rent Payment Date shall be decreased (but not
below zero) by the Rent Differential Amount.
Anything contained in the Participation Agreement or this Lease or any
other Operative Agreement to the contrary notwithstanding, (a) each installment
of Basic Rent payable under this Lease, whether or not adjusted in accordance
with the immediately preceding paragraph or the provisions of Section 3.7,
shall be, under any circumstances and in any event, in an amount at least
sufficient to pay in full, on the Rent Payment Date on which such installment
is due and payable, any scheduled payments then required to be made on account
of the principal of and interest on the Certificates, and (b) Stipulated Loss
Value, Termination Value and, unless Lessee shall have assumed the Certificates
pursuant to Section 18.2(c) hereof, the Special Purchase Price and the initial
installment of the Special Purchase Price if paid in installments, in each case
whether or not adjusted in accordance with the provisions of Section 3.7, as of
any date of determination thereof, together with any amount of Basic Rent
required to be paid on such date and all other amounts payable on such date,
shall equal, under any circumstances and in any event, an amount at least
sufficient to pay in full any payments then required to be made on account of
the principal of and interest (including, without limitation, any interest on
overdue principal and, to the extent permitted by applicable law, interest),
Premium, if any, and Break Amount, if any, on the Certificates and all amounts
which would be payable prior thereto or on a parity therewith if Section 3.03
of the Trust Indenture were applicable at the time of such payment.
3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Break Amount (if any) or the Premium (if any) payable on the Certificates,
amounts due pursuant to Section 15.05 of the Trust Indenture and each other
amount required to be paid (other than principal and interest on the
Certificates) by Lessor as Owner Trustee under the Trust Indenture, on the same
date that such amounts are due under the Trust Indenture, and as provided in
Section 3.6.
3.5 Supplemental Rent. In addition to the amounts payable as
Supplemental Rent pursuant to Section 3.4, Lessee also agrees to pay (or cause
to be paid) to Lessor, or to whomsoever shall be entitled thereto, all
Supplemental Rent with respect to Stipulated Loss Value or Termination Value
when and as the same shall become due and owing and all other amounts of
Supplemental Rent (other than as covered by Section 3.4) within five days after
demand or such other relevant period as may be provided in any Operative
Agreement. Lessee will also pay to Lessor, or to whomsoever shall be entitled
thereto, as Supplemental Rent, to the extent permitted by applicable law,
interest at
SALE AND LEASE AGREEMENT [N602SW]
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the Overdue Rate on any part of any installment of Interim Rent, Basic Rent or
Renewal Rent not paid when due for any period from and including the date on
which the same was due to but excluding the date of payment in full and (to the
extent permitted by applicable law) on any payment of Supplemental Rent not
paid when due to Lessor, or to whomsoever shall be entitled thereto, as the
case may be, for the period from the date on which the same was due to but
excluding the date of payment in full. The expiration or other termination of
Lessee's obligation to pay Interim Rent, Basic Rent or Renewal Rent hereunder
shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent.
3.6 Payments. Payments of Rent and any and all other payments
payable to Lessor hereunder shall be paid in funds of the United States of
America which shall be immediately available not later than 11:00 A.M., New
York City time, on the date due at the office of Lessor at 777 Main Street,
Hartford, Connecticut 06115, Attention: Corporate Trust Administration, Re:
Southwest Airlines 1995 Trust N602SW, or as otherwise directed by Lessor in
writing at least five Business Days prior to the date such payment is due;
provided, that so long as the Trust Indenture shall not have been terminated
pursuant to Section 10.01 of the Trust Indenture, Lessor hereby directs and
Lessee agrees, that, unless the Indenture Trustee shall otherwise direct, all
Rent (other than Excluded Payments) shall be paid prior to 11:00 A.M., New York
City time, on the due date thereof directly to Indenture Trustee to its account
set forth in Schedule I to the Participation Agreement. All payments of
Supplemental Rent owing to Indenture Trustee or to any Holder pursuant to the
Participation Agreement shall be made in immediately available funds prior to
11:00 A.M. New York City time, on the due date thereof at the office of
Indenture Trustee or at such other office of such other financial institution
located in the continental United States as the party entitled thereto may so
direct at least five Business Days prior to the due date thereof. All payments
of Supplemental Rent payable to Owner Participant, to the extent that such
amounts constitute Excluded Payments (as defined in the Trust Indenture), shall
be made by wire transfer prior to 11:00 A.M., New York City time, on the due
date thereof, to its account set forth in Schedule I to the Participation
Agreement, with sufficient information to identify the source and application
of the funds. Except as otherwise expressly provided herein, whenever any
payment of Rent or other payment to be made hereunder shall be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
day which is a Business Day and (provided such payment is made on such next
succeeding Business Day) no interest shall accrue on the amount of such payment
from and after such scheduled date.
3.7 Adjustment to Interim Rent, Basic Rent, Stipulated Loss Value
and Termination Value.
3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a)
of the Participation Agreement paid by Owner Participant in connection
with the closing of this transaction on the Delivery Date are equal to
an amount which is other than .365% of Lessor's Cost, (b) the
Transaction Costs referred to in Section 16(a) of the Participation
Agreement paid by Owner Participant in connection with the initial
refinancing or refunding of the Certificates pursuant to Section 17 or
18 of the Participation Agreement are equal to an amount which is
other than .625% of Lessor's Cost, (c) the Delivery Date is not July
6, 1995, (d) a refinancing or refunding of the
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Certificates pursuant to Section 17 or 18 of the Participation
Agreement occurs, (e) any recalculation of Interim Rent, Basic Rent,
Stipulated Loss Value and Termination Value is required by the terms
of the Tax Indemnity Agreement (including at Lessee's election
pursuant to Section 16 thereof), or (f) the Deferred Equity Amount is
not equal to the Assumed Interest Amount with respect to the Deferred
Equity Date, and there shall not have occurred a refunding or
refinancing pursuant to Section 17 or 18 of the Participation
Agreement prior to the first Rent Payment Date, then in each case, the
Interim Rent and Basic Rent percentages set forth in Exhibit C, the
Stipulated Loss Value percentages set forth in Exhibit B-1 and the
Termination Value percentages set forth in Exhibit B-2 shall be
recalculated by Owner Participant (i) in the case of a recalculation
pursuant to clause (a) or (c), prior to July 6, 1996, (ii) in the case
of a recalculation pursuant to clause (b) or (d), prior to the
relevant Refinancing Date or Section 18 Refinancing Date, as the case
may be, (iii) in the case of a recalculation pursuant to clause (e),
prior to the Rent Payment Date next following the event described in
clause (e), or (iv) in the case of a recalculation pursuant to clause
(f), prior to the first Rent Payment Date, in each case in order to:
(A) maintain Net Economic Return and (B) minimize the Net Present
Value of Rents to the extent possible consistent with clause (A). In
addition, in the event of an adjustment pursuant to this Section 3.7,
the Special Purchase Price (including any installments thereof) shall
be recalculated in accordance with the terms of Section 18.2(b).
3.7.2 Recalculation Procedures. Any recalculation of
Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value
percentages and the Special Purchase Price pursuant to this Section
3.7 shall be determined by Owner Participant, and shall be subject to
the verification of Lessee and its advisors. Such recalculated
Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value
percentages and Special Purchase Price (including installments
thereof) shall be set forth in a Lease Supplement and, in the case of
Interim Rent or Basic Rent, shall become effective as of the next
succeeding Rent Payment Date and, in the case of Interim Rent or
Stipulated Loss Value, Termination Value and the Special Purchase
Price, shall be retroactive to the inception of this Lease. Such
recalculated Interim Rent or Basic Rent and, if applicable, the
Special Purchase Price shall be determined so as to conform, in the
opinion of Owner Participant's tax counsel, to all applicable tax
constraints and requirements, including the requirements of Section
467 of the Code and Sections 4.(1)(B), 4.(6) and 5. of Revenue
Procedure 75-21, 75-1 Cum. Bull. 715; provided, however, that
notwithstanding the foregoing, all adjustments provided for herein
shall be based on the same calculation methods and assumptions
(including tax assumptions set forth in Section 2 of the Tax Indemnity
Agreement) as were used initially by the Owner Participant in
determining Interim Rent, Basic Rent, Stipulated Loss Values,
Termination Values and the Special Purchase Price for the Aircraft
(except and only to the extent such assumptions are required to be
changed by virtue of the event giving rise to the adjustment or any
event giving rise to any prior adjustments pursuant to the terms of
this Lease) and shall take into account the amount and timing of any
contribution made by the Owner Participant to the Estate subsequent to
the Delivery Date. If, upon verification of the percentages
determined by Owner Participant pursuant to this Section 3.7, Lessee
does not agree with the determination of Owner Participant, then an
independent accounting firm, to be selected by Owner Participant and
reasonably acceptable to Lessee, shall verify the computations. Such
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accounting firm shall be requested to make its determination within 30
days. Owner Participant shall provide to such accounting firm such
information as it may reasonably require, including a description of
the methodology of the calculations used in computing such adjustments
and such other information as is necessary to determine whether the
computations are mathematically accurate. The accounting firm shall
hold in strict confidence such methodology and other information. The
computations of Owner Participant or the accounting firm selected as
provided above, whichever is applicable, shall be final, binding and
conclusive upon Lessee and Lessor, and Lessee shall have no right to
inspect the books, records, tax returns or other documents of or
relating to Owner Participant to verify such computations or for any
other purpose in connection with such adjustments. All fees and
expenses payable to the accounting firm selected above under this
Section 3.7.2 shall be borne by Lessee, except that such fees and
expenses shall be payable by Owner Participant if the computations
provided by Owner Participant are higher than those provided by the
accounting firm and the computations of such accounting firm causes
the present value of the Interim Rent and Basic Rent (utilizing a
semi-annual discount rate that, on an annual basis, is equal to 8.60%)
as computed by Owner Participant to decrease by ten basis points or
more.
Section 3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received (i) the Deferred
Equity Amount on the Deferred Equity Date, or (ii) the payment to be made by
the Owner Trustee pursuant to clause (5) of Section 18(a) of the Participation
Agreement on the Section 18 Refinancing Date, then Lessee shall pay to the
Indenture Trustee on behalf of the Owner Participant or the Owner Trustee, as
the case may be, on the Deferred Equity Date, or the Section 18 Refinancing
Date, as the case may be, an amount equal to the amount not so paid by the
Owner Participant or the Owner Trustee, as the case may be (such amount herein
referred to as an "Advance"). In the event Lessee makes any Advance pursuant
to this Section 3.8, then, notwithstanding any provision to the contrary herein
or in any other Operative Agreement, Lessee shall be entitled to demand
immediate repayment of such Advance from the Owner Participant and, in
addition, shall be entitled to offset and deduct (without duplication) against
each succeeding payment (other than as limited by the provisos to this
sentence) due from Lessee to Persons other than the Holders, the Indenture
Trustee and Lessor in its individual capacity (including, without limitation,
Interim Rent, Basic Rent, payments due under Sections 5, 9, 10, 15 and 18
hereof, and payments due to Persons other than the Holders, the Indenture
Trustee and Lessor in its individual capacity under Section 7 of the
Participation Agreement) the amounts (including interest at the rates provided
therein) due and owing by the Owner Participant to Lessee under Section 8(dd)
of the Participation Agreement until Lessee has been fully reimbursed for such
amounts; provided, that in the case of any payment due from Lessee which is
distributable under the terms of the Trust Indenture, Lessee's right of offset
and deduction shall be limited to amounts distributable to Lessor or the Owner
Participant thereunder (and shall not include any amounts distributable to the
Indenture Trustee or the Holders); and provided, further, that in no event
shall any such offset or aggregate combined effect of separate offsets reduce
the amount of (i) any installment of Basic Rent to an amount that is
insufficient to pay in full the scheduled payments then required to be made on
account of the Certificates then Outstanding or (ii) any payment of Stipulated
Loss Value, Termination Value or Special Purchase Price (or installment
thereof) to an amount that, together with any other amounts then required to be
paid by Lessee hereunder in connection
SALE AND LEASE AGREEMENT [N602SW]
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therewith, is insufficient to pay in full as of the date of payment thereof,
the aggregate unpaid principal of the Outstanding Certificates, together with
all unpaid interest, Premium (if any) and Break Amount (if any) thereon.
Notwithstanding any provision of this Section 3.8 to the contrary, Lessee's
obligation to make any Advance shall terminate at such time as its obligation
to pay Basic Rent terminates under this Lease.
Section 4. Lessor's Representations and Warranties; DISCLAIMER;
Certain Agreements of Lessee.
4.1 Lessor's Representations and Warranties; DISCLAIMER. LESSEE
EXPRESSLY AGREES TO TAKE THE AIRCRAFT "AS IS", AND LESSEE HAS SELECTED THE
AIRCRAFT AND THE MANUFACTURER THEREOF (AND EACH PORTION THEREOF) AND ALL
MAINTENANCE FACILITIES REQUIRED FOR THE AIRCRAFT OR HEREUNDER. NEITHER LESSOR
(INDIVIDUALLY OR AS OWNER TRUSTEE) NOR THE INDENTURE TRUSTEE (INDIVIDUALLY OR
AS INDENTURE TRUSTEE) NOR ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO
HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Shawmut Bank
Connecticut, National Association, in its individual capacity (i) represents
and warrants that on the Delivery Date Lessor shall have received whatever
title thereto as was conveyed to it by the Lessee, (ii) represents and warrants
that on the Delivery Date the Aircraft shall be free of Lessor Liens
attributable to it, (iii) agrees that it will not directly or indirectly
create, incur, assume or suffer to exist any Lessor Lien attributable to it on
or with respect to the Airframe or any Engine or any other portion of the
Estate, and (iv) represents and warrants that it is a "citizen of the United
States" as defined in the Act. Lessor covenants that during the Term (so long
as no Lease Event of Default shall have occurred and be continuing) it will
not, through its own actions or breaches of any of its obligations under the
Operative Agreements, interfere in the quiet enjoyment of the Aircraft by
Lessee or any Permitted Sublessee.
Nothing in this Section 4.1 shall be deemed to modify or otherwise
affect the respective rights and obligations of Lessee and of Manufacturer
under the Purchase Agreement.
4.2 Certain Agreements of Lessee. All obligations of Lessee in
this Lease shall be done, performed or complied with at Lessee's cost and
expense, whether or not so expressed, unless otherwise expressly stated.
Lessee hereby agrees with Lessor for the benefit of the Participants that it
shall perform the agreements, covenants and indemnities set forth in the
Participation Agreement (including, without limitation, Sections 7(b) and 7(c)
of the Participation Agreement) which are incorporated herein, and hereby
restates Lessee's representations and warranties set forth in the
SALE AND LEASE AGREEMENT [N602SW]
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Participation Agreement and the Tax Indemnity Agreement, as fully and to the
same extent and with the same force and effect as if set forth in full in this
Section 4.2.
Section 5. Return of Aircraft.
5.1 General Condition upon Return. Unless purchased by Lessee
pursuant to Section 18.2, and subject to Section 10, upon the expiration or
termination of this Lease, Lessee will return the Aircraft to Lessor by
delivering the same at any location in the continental United States at which
Lessee has maintenance facilities (and Section 5.7 shall apply). Lessee shall
give Lessor not less than 15 days prior notice of the return location. All
costs associated with the return flight shall be for the account of Lessee. At
the time of such return, the Airframe and Engines or engines installed thereon:
5.1.1 Airworthiness. Subject to the exception described
in clause (iii) of Section 8.1.1, shall be duly certificated as an
airworthy aircraft by the FAA under Part 121 of the Federal Aviation
Regulations or any successor provision; provided, that Lessee's
ability to satisfy such return condition shall not preclude the
occurrence of an Event of Loss pursuant to clause (iv) of the
definition thereof;
5.1.2 Free of Liens. Shall be free and clear of all Liens
(except Lessor Liens);
5.1.3 Operating Configuration and Condition. Shall be in a
configuration suitable for operation in regularly scheduled commercial
airline passenger service in the United States and shall be in as good
operating condition as when delivered new to Lessee by Manufacturer,
ordinary wear and tear excepted or, in the case of any such engines
owned by Lessee, shall have a value, utility, airworthiness and
remaining useful life at least equal to, and shall be in as good
operating condition as required by the terms hereof with respect to,
Engines constituting part of the Aircraft but not then installed on
the Airframe. All Lessee or Permitted Sublessee exterior markings, as
the case may be, shall have been painted over in matching exterior
colors. In addition, any appliance, part, instrument, appurtenance,
accessory, furnishing or other equipment leased by Lessee from a third
party (other than Lessor) and incorporated in the Aircraft shall be
removed prior to the date of such return without any damage to the
Aircraft and without diminishing or impairing the value, utility,
remaining useful life or condition which the Aircraft would have had
at such time had such equipment not been installed, and Lessee shall
make all repairs which are required as a result of such removal;
5.1.4 Cleanliness and Operability. Shall be clean by
United States commercial airline operating standards with all systems
and components operable; and
5.1.5 Parts and Equipment. Shall have installed thereon
all Engines and Parts installed thereon at the commencement of the
Term therefor or replacements therefor made in accordance with the
terms of this Lease.
SALE AND LEASE AGREEMENT [N602SW]
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<PAGE> 26
5.2 Return of Other Engines. In the event that any engine not
owned by Lessor shall be installed on the Airframe returned in accordance with
Section 5.1, such engine shall be a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer, or an engine
of another manufacturer of at least equivalent utility, value, airworthiness
and remaining useful life in each case suitable for installation and use on the
Airframe and fully compatible with the other Engine or engine installed on the
Airframe). At the time of such replacement, such engine shall have performance
and durability characteristics and a value, condition, utility, airworthiness
and remaining useful life at least equal to the Engine it replaced hereunder,
assuming such Engine was maintained in accordance with the requirements of this
Lease, and at the time the Airframe is returned shall fully comply with all the
requirements of this Lease, including this Section 5, which are applicable to
Engines. Upon return of the Aircraft, Lessee shall duly convey to Lessor good
title to any such replacement engine, free and clear of (i) all rights of third
parties under any arrangement, including pooling, interchange, overhaul, repair
or other similar agreements or arrangements and (ii) Liens other than Lessor
Liens; and, upon such conveyance and as a condition thereto, Lessee will (a)
furnish Lessor with a full warranty (as to title) bill of sale, in form and
substance reasonably satisfactory to Lessor, with respect to each such
replacement engine, together with an opinion of counsel to the effect that such
bill of sale has been duly authorized and delivered and is enforceable in
accordance with its terms and that each such replacement engine is free and
clear of all Liens other than Lessor Liens, and (b) take such other action as
Lessor may reasonably request in order that title to such replacement engine
may be duly and properly vested in Lessor to the same extent as the Engine
replaced thereby. Upon compliance by Lessee with the foregoing, Lessor will,
so long as no Lease Event of Default has occurred and is continuing, comply
with the applicable provisions of the Trust Indenture and, upon Indenture
Trustee's release of the Engine from the Lien of the Trust Indenture Estate,
Transfer to Lessee any Engine not installed on the Airframe at the time of
return.
5.3 Return at End of Base Lease Term or Renewal Lease Term. Upon
return of the Aircraft at the expiration or termination of this Lease, Lessee
shall have caused all FAA Airworthiness Directives applicable to the Aircraft
and all mandatory service bulletins from Manufacturer, Engine Manufacturer or
other manufacturer of an engine then installed on the Airframe (in compliance
with Section 5.2) applicable to the Aircraft to have been complied with (except
for any such FAA Airworthiness Directives and bulletins that permit compliance
after the return date and would not, in the normal course of the Maintenance
Program, be complied with on or prior to the return date). Lessee shall have
treated the Aircraft, including without limitation with respect to maintenance,
additions and modifications (including compliance with FAA Airworthiness
Directives), during the Term similarly to all other Boeing 737-300 aircraft in
its fleet, without in any way discriminating against the Aircraft, whether by
reason of its leased status or otherwise.
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of such return, the Airframe shall have remaining until the
next scheduled "C" check (which term, as used in this paragraph, shall include
a "C" check and any other check equivalent thereto) at least 50% of the
allowable hours between "C" checks permitted under the Maintenance Program then
used by Lessee (or such Permitted Sublessee, as the case may be), and the
condition set forth in Appendix A shall have been satisfied. In the event that
Lessee (or any
SALE AND LEASE AGREEMENT [N602SW]
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Permitted Sublessee then in possession of the Aircraft) shall then be using a
continuous or "progressive" maintenance program with respect to the Airframe,
then the Airframe shall be current on such program. If the conditions set
forth in the first sentence of this paragraph shall be applicable to the
Airframe but shall not have been met at the time of such return, Lessee shall
perform (or cause to be performed) all maintenance work necessary to meet such
conditions or, if Lessee shall so elect, Lessee shall pay or cause to be paid
to Lessor an amount computed by multiplying (i) the current market cost of a
"C" check by (ii) a fraction of which (x) the numerator shall be the excess of
50% of hours of operation allowable between such "C" checks over the actual
number of hours of operation remaining on the Airframe to the next such "C"
check, and (y) the denominator shall be the number of hours of operation
allowable between such "C" check in accordance with such Maintenance Program.
Lessee further agrees that, whether or not the then-current engine
maintenance program is on-condition, the number of hours or cycles of operation
(whichever shall be applicable under the Maintenance Program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 3,000 allowable hours
or cycles (whichever shall be applicable), in the aggregate for both Engines or
engines; provided, that each life-limited Part within each Engine or engine
shall have a minimum of 1,200 allowable hours or cycles (whichever shall be
applicable) remaining until its next required replacement. If, at the time of
such return, the Engines or engines do not meet the aggregate 3,000 hour
condition specified in the previous sentence, Lessee shall perform (or cause to
be performed) all maintenance work necessary to meet such conditions or, if
Lessee shall so elect, Lessee shall pay or cause to be paid to Lessor an amount
computed by multiplying (i) the current market cost of performing for an engine
of the same model as such Engines or engines the scheduled engine refurbishment
under the Maintenance Program then used by Lessee (or such Permitted Sublessee,
as the case may be) for engines of such model by (ii) a fraction of which (x)
the numerator shall be the excess of 3,000 hours or cycles (whichever is
applicable) over the aggregate number of hours or cycles of operation on such
Engines or engines remaining until the next scheduled engine refurbishment, and
(y) the denominator shall be the number of hours or cycles allowable between
such scheduled engine refurbishments. If, at the time of such return, any
life-limited Part within such Engine or engine does not meet the 1,200 hour
condition specified in the first sentence of this paragraph, Lessee shall
perform (or cause to be performed) all maintenance work necessary to meet such
conditions or, if Lessee shall so elect, Lessee shall pay or cause to be paid
to Lessor an amount computed by multiplying (i) the current market cost of
replacing such life-limited Part by (ii) a fraction of which (x) the numerator
shall be the excess of 1,200 hours or cycles (whichever is applicable) over the
number of remaining hours or cycles (whichever is applicable) of operation of
such life-limited Part, and (y) the denominator shall be the total number of
hours or cycles allowable on such life-limited Part.
5.4 Manuals; Service Bulletins, Etc. Upon return of the Aircraft
at the expiration or termination of this Lease, Lessee shall deliver or cause
to be delivered to Lessor all logs, manuals, drawings and data and inspection,
modification and overhaul records in respect of the Aircraft required to be
maintained under applicable rules and regulations of the FAA, updated through
the date of return (collectively, "Records"). All "no-charge" service bulletin
kits received by or on behalf of Lessee from Manufacturer, Engine Manufacturer
or vendors for the Aircraft and Engines
SALE AND LEASE AGREEMENT [N602SW]
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or engines and not incorporated therein shall be returned at no charge to
Lessor as cargo on board the Aircraft at the time of its return. At the time
the Aircraft is returned, Lessor shall have the option to purchase from Lessee,
at Lessee's cost therefor, any "charge" service bulletin kits purchased by
Lessee which have not been incorporated in the Aircraft. All such items shall
thereupon become the property of Lessor.
5.5 Failure to Return Aircraft or Engines. If Lessee shall, for
any reason whatsoever, fail to return the Aircraft or any Engine at the time
specified herein, the obligations of Lessee as provided in this Lease
(including the obligation to pay Rent on the same basis as that applicable
immediately prior to such failure) shall continue in effect with respect to the
Aircraft or such Engine until the Aircraft or such Engine is returned to
Lessor; but this Section 5.5 shall not be construed as permitting Lessee to
fail to meet its obligation to return the Aircraft or such Engine in accordance
with the requirements of this Lease or constitute a waiver of a Lease Event of
Default.
5.6 Aid in Disposition. Lessee agrees that, unless Lessee shall
have elected to purchase the Aircraft pursuant to Section 18.2, during the last
six months of the Term it will cooperate in all reasonable respects with any
efforts of Lessor to lease or sell the Aircraft, including without limitation
(subject to the provisions of Section 12) permitting potential lessees or
purchasers to inspect the Aircraft and the records relating thereto.
5.7 Storage upon Return. Upon written request of Lessor or Owner
Participant received by Lessee at least 10 days prior to its return of the
Aircraft at the expiration or termination of this Lease, Lessee will attempt to
arrange for parking facilities for the Aircraft for a period not exceeding 60
days following return thereof by Lessee at the location of return pursuant to
Section 5.1; and Lessor shall bear or reimburse Lessee for Lessee's
out-of-pocket expenses of such storage (including maintenance and insurance
expenses).
Section 6. Liens. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, the Airframe or any Engine, title thereto or any interest therein or
in this Lease except: (a) the respective rights of the parties to the
Operative Agreements; (b) the rights of others under agreements or arrangements
to the extent expressly permitted by the terms of Sections 7.2 and 8.3; (c)
Lessor Liens; (d) Liens for taxes, assessments or other governmental charges
either not yet due or being contested in good faith (and for the payment of
which adequate reserves have been provided in accordance with generally
accepted accounting principles) by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture, loss or
loss of use of the Aircraft, the Airframe or any Engine or any interest
therein; (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 due or not overdue for a period of more than
60 days or is being contested in good faith (and for the payment of which
adequate reserves have been provided in accordance with generally accepted
accounting principles) by appropriate proceedings so long as such Liens do not
involve any material danger of the sale, forfeiture, loss or loss of use of the
Aircraft, the Airframe or any Engine or any interest therein; (f) Liens arising
out of any judgment or award against Lessee, unless the judgment secured shall
not, within 45 days after entry thereof, have been discharged or vacated or
execution thereof stayed pending appeal or shall not have been discharged,
vacated or reversed within 45 days
SALE AND LEASE AGREEMENT [N602SW]
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after the expiration of such stay; and (g) any other Lien with respect to which
Lessee shall have provided a bond or other security adequate in the reasonable
judgment of Lessor. Lessee will promptly take (or cause to be taken) such
action at its own expense as may be necessary duly to discharge any such Lien
not excepted above if the same shall arise at any time.
Section 7. Registration, Operation, Possession, Subleasing and
Records.
7.1 Registration and Operation.
7.1.1 Registration. Lessee shall forthwith upon the
delivery of the Aircraft hereunder cause the Aircraft to be duly
registered and at all times thereafter to remain duly registered in
the name of Lessor with the FAA pursuant to and as permitted by the
Act (it being understood that Lessee shall not be required to comply
with this covenant to the extent that Shawmut Bank Connecticut,
National Association's or Owner Participant's failure to comply with
its covenant set forth in Section 8(b) of the Participation Agreement
with regard to its citizenship makes such compliance by Lessee
impossible).
7.1.2 Nameplate. Lessee agrees to affix within 10 days of
the Delivery Date and thereafter to maintain in the cockpit of the
Airframe adjacent to the airworthiness certificate and on each Engine
a nameplate bearing the inscription "OWNED BY AND LEASED FROM SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND
LESSOR" and, so long as the Trust Indenture shall be in effect,
"SUBJECT TO A SECURITY INTEREST IN FAVOR OF WILMINGTON TRUST COMPANY,
AS INDENTURE TRUSTEE" (such nameplate to be replaced, if necessary,
with a nameplate reflecting the name of any successor Lessor or
successor Indenture Trustee). Except as above provided, Lessee will
not allow the name of any person, association or corporation to be
placed on the Airframe or on any Engine as a designation that might be
interpreted as a claim of ownership; provided, that nothing herein
contained shall prohibit Lessee (or any Permitted Sublessee) from
placing its customary colors and insignia on the Airframe or any
Engine or displaying information concerning the registration or
manufacture of the Aircraft, the Airframe, any Engine or Part.
7.1.3 Compliance with Laws. Lessee agrees that it will
not use or operate the Aircraft, the Airframe or any Engine in
violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign) or in violation of any airworthiness certificate, license or
registration relating to the Aircraft, the Airframe or any Engine
issued by any such authority, except to the extent Lessee is
contesting in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor's interest in the Aircraft.
7.1.4 Insurance Requirements; Government Requisition;
Indemnity. Lessee agrees not to operate, use or locate the Aircraft,
the Airframe or any Engine, or permit any Permitted Sublessee to
operate, use or locate the Aircraft, the Airframe or any Engine, (i)
in any area excluded from coverage by any insurance required by the
terms of Section 11,
SALE AND LEASE AGREEMENT [N602SW]
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except in the case of a requisition by the Government where Lessee
obtains indemnity (backed by the full faith and credit of the United
States of America) in lieu of such insurance from the Government
against the risks and in the amounts required by Section 11 covering
such area, or (ii) in any area where maintenance of war-risk insurance
is required by Section 11 unless fully covered by war-risk insurance
satisfying the terms of Section 11, or unless the Aircraft, the
Airframe or such Engine is operated or used under contract with the
Government under which contract the Government assumes liability
(backed by the full faith and credit of the United States of America)
in an amount not less than the amount of insurance otherwise required
by Section 11 for any damage, loss, destruction or failure to return
possession of the Aircraft, the Airframe or such Engine at the end of
the term of such contract or for injury to persons or damage to
property of others, or (iii) in any area referred to in subclause
3(iv) immediately following Section 7.2.8.
7.2 Possession. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine or install
any Engine, or permit any Engine to be installed, on any airframe other than
the Airframe; provided, however, that so long as no Lease Default (of the type
described in Section 14.1 or 14.5) or Lease Event of Default shall have
occurred and be continuing, and so long as Lessee shall comply with the
provisions of Section 11, and all FAA approvals required for such purposes have
been obtained, Lessee may, without such prior written consent:
7.2.1 Interchange and Pooling. Subject or permit any
Permitted Sublessee to subject (i) the Aircraft, Airframe or any
Engine to normal interchange agreements customary in the airline
industry and entered into by Lessee or such Permitted Sublessee in the
ordinary course of its business with, in the case of the Airframe, a
U.S. Air Carrier or a Permitted Foreign Air Carrier, in either case
that is not then subject to bankruptcy or similar proceedings, and
(ii) any Engine to pooling agreements or arrangements customary in the
United States domestic commercial airline industry and entered into by
Lessee or such Permitted Sublessee in the ordinary course of its
business; but in either case (A) no transfer of the registration of
the Airframe or any Engine shall be effected in connection therewith
and the terms of this Lease and the Participation Agreement shall be
observed and (B) no such agreement or arrangement shall contemplate or
require the transfer of title to the Aircraft, Airframe or any Engine
and if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect thereto and Lessee shall comply with
Section 10.2 hereof;
7.2.2 Testing and Service. Deliver or permit any
Permitted Sublessee to deliver possession of the Aircraft, Airframe or
any Engine or Part, to the manufacturer thereof for testing or other
similar purposes, or to any organization for service, repair,
maintenance or overhaul work on the Aircraft, Airframe or any Engine
or Part, or for alterations or modifications in or additions to the
Aircraft, Airframe or any Engine to the extent required or permitted
by the terms of Section 8.4;
7.2.3 Civil Reserve Air Fleet Program. Transfer or permit
any Permitted Sublessee, if required by law to do so, to transfer
possession of the Aircraft, Airframe or any
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Engine to the Government pursuant to the Civil Reserve Air Fleet
Program or any similar or substitute programs, so long as such
transfer of possession does not continue beyond the end of the Term
and so long as Lessee shall (A) promptly notify Lessor upon subjecting
the Airframe or any Engine to such program and provide Lessor with the
name and address of the appropriate party to whom notice must be given
in connection with any repossession of the Aircraft under Section
15.1.1, and (B) promptly notify Lessor upon transferring possession of
the Airframe or any Engine to the Government pursuant to such program;
7.2.4 Installation of Engines. Install or permit any
Permitted Sublessee to install an Engine on an airframe owned by
Lessee or such Permitted Sublessee, as the case may be, free and clear
of all Liens, except (A) Permitted Liens and those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of air carriers under normal interchange
agreements which are customary in the airline industry and do not
contemplate, permit or require the transfer of title to the airframe
or engines installed thereon, and (C) mortgage liens or other security
interests, provided, that (as regards this clause (C)) such mortgage
liens or other security interests effectively provide that such Engine
shall not become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such airframe,
unless and until Lessee shall become the owner of such Engine;
7.2.5 Installation of Engines on Other Airframes. Install
or permit any Permitted Sublessee to install an Engine on an airframe
leased to, or purchased by, Lessee or any Permitted Sublessee subject
to a lease, conditional sale, trust indenture or other security
agreement, but only if (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease, conditional
sale, trust indenture or other security agreement covering such
airframe, or their successors or assigns, and except Liens of the type
permitted by clauses (A) and (B) of Section 7.2.4, and (B) the lease,
conditional sale, trust indenture or other security agreement covering
such airframe effectively provides that such Engine will not become
subject to the Lien thereof at any time while such Engine is subject
to this Lease, notwithstanding the installation thereof on such
airframe;
7.2.6 Pooling of Parts. To the extent permitted by
Section 8.3, subject any Parts owned by Lessor and removed from the
Airframe or any Engine to any pooling arrangement referred to in
Section 8.3;
7.2.7 Wet Lease. Enter into a Wet Lease for the Airframe
and Engines or engines then installed thereon with any third party for
a term not to continue beyond the Term;
7.2.8 Sublease to Permitted Air Carriers. So long as the
proposed sublessee is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the date
the sublease is entered into, enter into a sublease of the Aircraft,
or the Airframe and Engines or engines then installed on the Airframe,
or any Engine, for use on the sublessee's regularly scheduled or
charter routes, with any U.S. Air
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Carrier or Permitted Foreign Air Carrier, in any such case for a term
not to continue beyond the remaining Term.
Provided, further, with respect to this Section 7.2, that:
(1) the rights of any transferee who receives
possession by reason of a transfer permitted by this Section
7.2 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be effectively subject and subordinate
to, and any sublease permitted by this Section 7.2 shall be
made expressly subject and subordinate to, all the terms of
this Lease and the Lien of the Trust Indenture, and to
Lessor's rights, powers and remedies under this Lease,
including the rights to repossession pursuant to Section 15
and to terminate and avoid such sublease upon such
repossession and to require such sublessee to forthwith
deliver the Aircraft, Airframe and Engines subject to such
sublease upon such repossession;
(2) Lessee shall remain primarily liable
hereunder for the performance of all the terms of this Lease
(including, without limitation, the payment of Supplemental
Rent representing any indemnities payable as a result of acts
or circumstances respecting a sublease or a sublessee's
operation of the Aircraft) to the same extent as if such
sublease, transfer or relinquishment of possession had not
occurred (it being understood that, without limitation of the
foregoing, any standards established under this Lease with
reference to Lessee's practices respecting other aircraft
owned or operated by it shall continue to refer to such
practices of Lessee rather than of any transferee); provided,
that performance of any such terms by any Permitted Sublessee
shall be as effective, for purposes of this Lease, as
performance thereof directly by Lessee;
(3) any such sublease shall (i) be consistent
with the requirements of this Lease and the applicable
requirements of the Participation Agreement, (ii) include
appropriate provisions for the continued maintenance in
accordance with applicable maintenance standards in the
appropriate jurisdiction, operation, insurance (appropriate
certificates as to which shall be furnished to Lessor and
Indenture Trustee prior to Lessee's entry into any such
sublease with any Permitted Foreign Air Carrier or within 10
days thereafter) and return of the subleased property as
required hereunder, (iii) provide that the sublessee may not
assign or further sublease the Aircraft, (iv) provide that the
Aircraft may not be operated into a country with which the
United States does not maintain diplomatic relations or in
which there is open warfare, whether or not declared, (v) not
provide for sublease rentals to be prepaid or assigned to a
third party; provided, however, that (x) up to six months'
rentals may be prepaid to Lessee and (y) this clause (v) shall
not preclude Lessee's establishing and holding appropriate
reserves for any obligations arising under such sublease, and
(vi) not require the sublessee to purchase the Aircraft or
grant the sublessee any purchase options, or any options for
the renewal of such sublease for a term beyond the Base Lease
Term, in each case on dates other than, or at amounts less
than, corresponding options granted to Lessee hereunder;
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(4) no interchange agreement, transfer,
sublease or other relinquishment of possession permitted
hereunder shall affect the registration of the Aircraft or
shall permit any action not permitted to Lessee in this Lease;
and
(5) no such interchange agreement, sublease,
transfer or other relinquishment of possession of the
Aircraft, Airframe or any Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or
under any other Operative Agreement or constitute a waiver of
Lessor's rights or remedies hereunder or under any other
Operative Agreement.
Lessee shall notify Lessor within 10 days after the commencement of
any sublease permitted hereunder and shall deliver to Lessor within such period
a duly executed copy of any sublease or interchange or pooling agreement
permitted hereunder. Upon request of Lessor, Lessee shall promptly duly
execute and deliver to Lessor an assignment of any such sublease having a term
in excess of 12 months in favor of Lessor in form and substance reasonably
satisfactory to Lessor. Lessor hereby agrees, for the benefit of Lessee (and
any Permitted Sublessee) and for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any airframe or engine leased to
or purchased by Lessee (or any Permitted Sublessee) subject to a lease,
conditional sale, trust indenture or other security agreement, that Lessor will
not acquire or claim, as against such lessor, conditional seller, indenture
trustee or secured party, or any successor or assign thereof, any right, title
or interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
conditional seller or subject to a trust indenture or security interest in
favor of such indenture trustee or secured party; provided, however, that such
agreement of Lessor shall not be for the benefit of any lessor or secured party
of any airframe (other than the Airframe) leased to Lessee (or any Permitted
Sublessee) or purchased by Lessee (or any Permitted Sublessee) subject to a
conditional sale or other security agreement or for the benefit of any
mortgagee of or any other holder of a security interest in an airframe owned by
Lessee (or any Permitted Sublessee), unless such lessor, conditional vendor,
other secured party or mortgagee has expressly agreed (which agreement may be
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as
against Lessor, any right, title or interest in an Engine as a result of such
Engine being installed on such airframe.
A consolidation, merger, conveyance, transfer, or lease permitted by
Section 11(f) of the Participation Agreement shall not be deemed to be a
transaction to which this Section 7.2 shall apply.
7.3 Records and Reports. Lessee shall:
7.3.1 Records. Maintain or cause to be maintained all
records, logs and other materials required by the FAA or any other
governmental authority having jurisdiction to be maintained in respect
of the Aircraft, the Airframe and each Engine;
7.3.2 Information and Reports. Upon request, promptly
furnish or cause to be furnished to Lessor (in sufficient number) such
information as may be required to enable Lessor or any Participant to
file any reports, including tax returns, required to be filed by
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Lessor or such Participant with any governmental authority because of
Lessor's ownership of the Aircraft, Airframe or any Engine or because
of receipt of Rent or because of the interest of any Participant in
the Estate or Trust Indenture Estate; provided, however, that with
respect to any such information (other than with respect to income
taxes) which Lessee deems commercially sensitive or confidential, if
reasonably feasible, Lessor shall afford Lessee a reasonable
opportunity to seek from any such governmental authority a waiver of
Lessor's or such Participant's obligation to file any such information
or consent to the filing of such information directly by Lessee in
lieu of filing by Lessor or such Participant and if any such waiver or
consent is evidenced to the reasonable satisfaction of Lessor, then
Lessee shall not be required to furnish such information to Lessor;
and
7.3.3 Financial Information. Promptly provide Lessor, the
Owner Participant, the Original Loan Participant and Indenture Trustee
with (i) such financial information concerning Lessee as is provided
from time to time to the public shareholders of Lessee, (ii) within 60
days after the end of each of the first three quarterly periods of
each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of such
period, together with the related consolidated statements of income
for such period, (iii) within 120 days after the close of each fiscal
year of Lessee, a consolidated balance sheet of Lessee and its
consolidated subsidiaries as of the close of such fiscal year,
together with the related consolidated statements of income for such
fiscal year, as certified by independent public accountants, (iv)
promptly upon the sending, making available or filing of the same, all
such reports (other than reports on Form 11-K or similar forms) as
Lessee shall file with the Securities and Exchange Commission, and (v)
from time to time such other information as to its financial condition
as Lessor, Indenture Trustee or any Participant may reasonably
request. In addition, Lessee shall promptly notify Lessor, Indenture
Trustee, the Original Loan Participant and the Owner Participant after
a Responsible Company Officer of Lessee shall acquire knowledge of a
Lease Default or Lease Event of Default.
Section 8. Maintenance; Replacement and Pooling of Parts;
Alterations; Modifications and Additions.
8.1 Maintenance.
8.1.1 Maintenance Program. Lessee shall maintain,
service, repair, overhaul, alter, modify, add to and test (or cause to
be maintained, serviced, repaired, overhauled, altered, modified,
added to and tested) the Aircraft, the Airframe and each Engine, and
each other engine installed from time to time on the Airframe, in
accordance with Lessee's FAA-approved maintenance program for the
Aircraft, Airframe and Engines (the "Maintenance Program"), (i) so as
to keep the Aircraft, the Airframe and each Engine in as good
operating condition as when delivered new to Lessee by the
Manufacturer, ordinary wear and tear excepted, (ii) in the same manner
and with the same care as used by Lessee with similar aircraft owned
or operated by Lessee, without in any way discriminating against the
Aircraft, whether by reason of its leased status or otherwise, and
(iii) so as to keep the Aircraft, the Airframe and each Engine in such
condition as required to enable the FAA
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certificate of airworthiness for the Aircraft to be maintained in good
standing at all times under the Act, except when all comparable Boeing
Model 737-300 series aircraft registered in the United States of
America have been grounded by the FAA other than as a result of
actions taken or omitted to be taken by Lessee (or, if a sublease is
then in effect, any Permitted Sublessee).
8.1.2 Compliance with Government Requirements. Lessee will
comply with all service, inspection, maintenance, repair and overhaul
regulations, directives and instructions which are made mandatory by
the FAA or other applicable government authority upon operators of
Boeing Model 737-300 series aircraft and CFM International Model
CFM56-3-B1 engines and which require compliance during the Term and
prior to return of the Aircraft under this Lease.
8.2 Replacement of Parts. Lessee, at its own cost and expense,
will promptly replace (or cause to be replaced) all Parts which may from time
to time be incorporated in the Aircraft, Airframe or any Engine and which may
from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever, except as otherwise provided in Section 8.4. In
addition, Lessee may, at its own cost and expense, remove in the ordinary
course of maintenance, service, repair, overhaul or testing any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, however, Lessee, except
as otherwise provided in Section 8.4, at its own cost and expense, will replace
such Parts as promptly as possible. All replacement parts shall be free and
clear of all Liens (except for Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof. All Parts at any
time removed from the Aircraft, Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by parts which have been incorporated in the Aircraft,
Airframe or such Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement part becoming incorporated
in the Aircraft, Airframe or such Engine as above provided, without further
act, (i) unless the replacement property is temporarily installed on an
emergency basis, title to the replaced Part shall thereupon vest in Lessee free
and clear of all rights of Lessor, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement part shall thereupon
vest in Lessor (subject only to Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis), and (iii)
such replacement part shall become a Part subject to this Lease and be deemed
part of the Aircraft, Airframe or such Engine for all purposes hereof to the
same extent as the Parts originally incorporated in such Aircraft, Airframe or
Engine.
8.3 Pooling of Parts. Any Part removed from the Aircraft,
Airframe or any Engine as provided in Section 8.2 may be subjected by Lessee
(or a Permitted Sublessee) to a normal pooling arrangement customary in the
airline industry entered into in the ordinary course of business of Lessee or
such Permitted Sublessee, so long as a part replacing such removed Part shall
be incorporated in the Aircraft, Airframe or such Engine in accordance with
Section 8.2 as promptly as practicable after the removal of such removed Part.
In addition, any replacement part when
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incorporated in the Aircraft, Airframe or any Engine in accordance with Section
8.2 may be owned by any third party subject to such a normal pooling
arrangement, so long as Lessee (or any Permitted Sublessee), at its own cost
and expense, as promptly thereafter as practicable either (i) causes title to
such replacement part to vest in Lessor in accordance with Section 8.2 by
Lessee (or any Permitted Sublessee) acquiring title thereto for the benefit of,
and transferring such title to, Lessor free and clear of all Liens (except
Permitted Liens), or (ii) replaces such replacement part by incorporating in
the Aircraft, Airframe or such Engine a further replacement part owned by
Lessee (or any Permitted Sublessee) free and clear of all Liens (except
Permitted Liens) and by causing title to such further replacement part to vest
in Lessor in accordance with Section 8.2.
8.4 Alterations, Modifications and Additions.
8.4.1 Mandatory Alterations, Etc. Lessee shall make (or
cause to be made) such alterations and modifications in and additions
to the Aircraft, Airframe and each Engine as may be required from time
to time to meet the standards of the FAA or other governmental
authority having jurisdiction and to maintain the FAA certificate of
airworthiness for the Aircraft; provided, however, that Lessee may
contest in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor's interest in the Aircraft. All
alterations and modifications made pursuant to this Section 8.4.1
shall be made at the cost and expense of Lessee.
8.4.2 Voluntary Alterations, Etc. Lessee, at its own cost
and expense, may, from time to time make (or cause to be made),
subject to the standards set forth in Section 8.1.1, such alterations
and modifications in and additions to the Aircraft, Airframe or any
Engine as Lessee may deem desirable in the proper conduct of its
business, including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine; provided, however, that no such
alteration, modification, addition or removal shall diminish the
value, remaining useful life, or utility of the Aircraft, Airframe or
such Engine, or impair the condition or airworthiness thereof, below
the value, remaining useful life, utility, condition and airworthiness
thereof immediately prior to such alteration, modification or addition
assuming the Aircraft, Airframe or such Engine was then of the value
and utility and in the condition and airworthiness required to be
maintained by the terms of this Lease. Title to all parts
incorporated in the Aircraft, Airframe or such Engine as the result of
such alteration, modification or addition shall remain vested in
Lessee and Lessee may, at any time during the Term, remove any such
part if (i) such part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated in the Aircraft,
Airframe or such Engine at the time of delivery thereof hereunder or
any Part in replacement of or substitution for any such Part, (ii)
such part is not required to be incorporated in the Aircraft, Airframe
or such Engine pursuant to the terms of this Section 8, (iii) such
part can be removed from the Aircraft, Airframe or such Engine without
diminishing or impairing the value, remaining useful life, utility,
condition or airworthiness required to be maintained by the terms of
this Lease which the Aircraft, Airframe or such Engine would have had
at such time had such alteration, modification or addition not
occurred, and (iv) no Lease Event of Default or Lease Default shall
have occurred and be continuing. Title to all other such parts shall,
without further act,
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vest in Lessor and shall constitute "Parts" for all purposes
hereunder. Upon the removal of any part title to which is retained by
Lessee, Lessee shall promptly repair any damage to the Airframe or
Engine from which it was removed which resulted from such removal and
such part shall no longer be deemed part of the Airframe or such
Engine from which it was removed. Any part not removed by Lessee as
above provided prior to the return of the Aircraft, Airframe or such
Engine to Lessor hereunder shall, without further act, vest in Lessor
and shall constitute a "Part" for all purposes hereunder.
Section 9. Voluntary Termination.
9.1 Right of Termination upon Obsolescence. So long as no Lease
Event of Default or Lease Default shall have occurred and be continuing, Lessee
shall have the right at its option to terminate this Lease with respect to the
Aircraft during the Base Lease Term on the first day of any month (a
"Termination Date") occurring on or after the seventh anniversary of the
Delivery Date on at least three months' prior written notice to Lessor, each
Participant and Indenture Trustee specifying a proposed Termination Date;
provided, that such notice shall also include copies of resolutions of Lessee's
board of directors stating that such board of directors has determined, in good
faith, that the Aircraft either has become economically obsolete or is surplus
to Lessee's requirements. Lessee may revoke any notice of termination referred
to in this Section 9.1 by notice to Lessor, each Participant and the Indenture
Trustee not less than 30 days prior to the proposed Termination Date, if Lessor
shall not have received a bid to purchase the Aircraft for at least the
Termination Value thereof pursuant to Section 9.2 and if Lessor shall not have
furnished to Lessee the notice referred to in Section 9.3, and upon doing so,
shall reimburse Lessor and Owner Participant on an after-tax basis for all
reasonable out-of-pocket expenses incurred by them in contemplation of such
termination; provided, however, that Lessee may so revoke a notice of
termination no more than three times during the Term.
9.2 Sale of Aircraft. Lessee, as agent for Lessor, shall, from
the date of such notice of termination until no more than 30 days' prior to the
proposed Termination Date specified by Lessee, use its reasonable best efforts
to obtain bids (in the worldwide market) for the cash purchase of the Aircraft
and Lessor may, if it desires to do so, seek to obtain such bids and may itself
bid to retain the Aircraft. In the event Lessee receives any bid, Lessee shall
at least 30 days prior to the proposed Termination Date, certify to Lessor in
writing the amount and terms of such bid, and the name and address of the
Person submitting such bid (who shall not be Lessee, an Affiliate of Lessee or
a Person who shall be a party to any arrangement for the further use of the
Aircraft by Lessee or any of its Affiliates). In the event Lessor receives any
bid, Lessor shall, at least five Business Days prior to the proposed
Termination Date, certify to Lessee in writing the amount and terms of such bid
and the name and address of the Person submitting such bid. Subject to Section
9.3, on the Termination Date, (a) Lessee shall deliver the Airframe and Engines
or engines constituting part of the Aircraft to the bidder, if any, which shall
have submitted the highest cash bid (net of any brokerage commissions) prior to
such date, in the same manner as if delivery were made to Lessor pursuant to
Section 5 and in full compliance with the terms thereof, and shall duly
transfer to Lessor under a full warranty (as to title) bill of sale title to
any such engines not owned by Lessor, all in accordance with the terms of
Section 5, and (b) unless Lessor is the successful bidder, Lessor shall
simultaneously therewith Transfer the Airframe and Engines or engines to such
bidder for cash paid
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to Lessor in the manner and in funds of the type specified in Section 3.6. The
total sales price realized at such sale shall be paid to and retained by
Indenture Trustee, so long as the Trust Indenture remains in effect, and
otherwise shall be paid to and retained by Lessor and, in addition, on such
Termination Date, and as a condition precedent to such sale and the delivery of
the Aircraft and Engines or engines to such bidder, Lessee shall pay to
Indenture Trustee, so long as the Trust Indenture remains in effect, and
otherwise to Lessor the sum of (i) the excess, if any, of (A) the Termination
Value for the Aircraft, computed as of such Termination Date, over (B) the
sales price of the Airframe and Engines or engines sold (or if the winning
bidder is Lessor, the amount of such bid) after deducting the reasonable fees
and expenses incurred by Lessor, Indenture Trustee and the Participants, if
any, in connection with such termination and sale, (ii) all unpaid Interim Rent
or Basic Rent due on or prior to the TV Determination Date with reference to
which the Termination Value is computed (it being understood and agreed that
Lessee shall not be required to pay the portion, if any, of such Interim Rent
or Basic Rent designated in Exhibit C hereto as payable in advance on such TV
Determination Date), and (iii) (without duplication) all other amounts
(including, without limitation, Break Amount, if any, or Premium, if any) owing
by Lessee under this Lease or under any other Operative Agreement. Upon such
payment, Lessor will comply with Section 10.01 of the Trust Indenture and, upon
Indenture Trustee's release of such Engines from the Lien of the Trust
Indenture Estate, Transfer to Lessee any Engines constituting part of the
Aircraft but which were not then installed on the Airframe and sold therewith.
If no sale shall have occurred on or as of the Termination Date specified in
such notice of termination, this Lease shall continue in full force and effect,
Lessee shall pay the reasonable expenses incurred by Lessee, Lessor, each
Participant and Indenture Trustee in connection with the proposed sale, and
Lessee shall have the right at any time to submit another notice of termination
pursuant to, and subject to the terms of, Section 9.1. In the event of any
such sale and receipt by Lessor or Indenture Trustee, as appropriate, of such
sale price and other amounts as provided herein, and upon compliance by Lessee
with the provisions of this Section 9.2, the obligation of Lessee to pay
Interim Rent or Basic Rent due after the TV Determination Date with reference
to which the Termination Value is computed shall cease and the Base Lease Term
shall end effective as of the date of such sale. Lessor shall be under no duty
to solicit bids, to inquire into the efforts of Lessee to obtain bids or
otherwise to take any action in connection with any such sale other than to
Transfer to the purchaser named in the highest bid as referred to above the
Airframe and Engines or engines against receipt of the payments provided for
herein.
9.3 Retention by Lessor. Notwithstanding anything in this Section
9 to the contrary, Lessor may, by irrevocable notice to Lessee at least 45 days
prior to the proposed date of sale referred to in Section 9.1, reject all bids
and retain title to the Aircraft (and take possession thereof); provided, that
Lessor shall pay (and, by delivering such notice, Lessor shall be obligated to
pay) to Indenture Trustee on the proposed Termination Date an amount equal to
the unpaid principal amount of the Certificates, together with all interest due
thereon. Upon receipt of notice of such an election by Lessor, Lessee shall
cease any efforts to obtain bids as provided in Section 9.1 and shall reject
all bids theretofore or thereafter received for the Aircraft. In the event
Lessor elects to retain the Aircraft as provided in this Section 9.3, and upon
its payment to Indenture Trustee of such amount, Lessee shall deliver the
Aircraft and Engines to Lessor on the proposed Termination Date pursuant to
Section 5 and in full compliance with the terms thereof and upon such delivery
and payment in full of the amounts specified in the first sentence hereof and
the next following sentence and shall
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have no obligation to make any payment of Termination Value. The foregoing
shall in no way affect the obligation of Lessee to make payment of any Interim
Rent or Basic Rent accrued and unpaid on or before the proposed Termination
Date and all other amounts of Rent and other amounts payable hereunder or under
the other Operative Agreements and due on or prior to such date, including,
without limitation, all other sums due and payable to the Holders under the
Certificates (including, without limitation, Break Amount or Premium, if any,
as of such TV Determination Date). If the amounts required to be paid pursuant
to this Section 9.3 shall not be received by the respective payees thereof on
the proposed Termination Date, this Lease shall continue in full force and
effect.
9.4 Termination As to Engines. So long as no Lease Event of
Default or Lease Default shall have occurred and be continuing, Lessee shall
have the right, at its option at any time during the Term, on at least 30 days'
prior written notice to Lessor, Indenture Trustee, the Original Loan
Participant and the Owner Participant, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe. In such event,
and prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10.2 to the same extent as if
an Event of Loss had occurred with respect to such Engine, and, upon Indenture
Trustee's release of the replaced Engine from the Lien of the Trust Indenture
Estate, Lessor shall Transfer to Lessee the replaced Engine as provided in
Section 5.2.
Section 10. Loss, Destruction, Requisition, Etc.
10.1 Event of Loss with Respect to Airframe.
10.1.1 Lessee's Election. Upon the occurrence of an Event
of Loss with respect to the Aircraft, Lessee shall forthwith (and in
any event within 15 days after such occurrence) give Lessor, Indenture
Trustee and each Participant written notice of such Event of Loss and,
within 60 days after such occurrence, give Lessor, Indenture Trustee
and each Participant written notice of its election to comply either
with Section 10.1.2 or Section 10.1.3, and if Lessee shall not have
given notice of such election within 60 days after such occurrence
Lessee shall be deemed to have elected to comply with Section 10.1.3.
10.1.2 Replacement of Airframe and Engines. As promptly as
practicable, and in any event on or before the Business Day next
preceding the 180th day following the date of occurrence of such Event
of Loss, Lessee shall, in compliance with Section 10.1.6, convey or
cause to be conveyed to Lessor, to be leased by Lessee hereunder in
replacement thereof, a Replacement Airframe (which need not be a new
Replacement Airframe but shall have been placed in service not earlier
than October 22, 1994) together with the same number of Replacement
Engines as the Engines, if any, subject to such Event of Loss, such
Replacement Airframe and Replacement Engines to be free and clear of
all Liens (except Permitted Liens), to have a value, remaining useful
life and utility at least equal to, and to be in as good operating
condition as, the Airframe and Engines, if any, so replaced (for such
purpose, it shall be assumed that the Airframe and such Engines were
in the condition and repair required by the terms of this Lease). If
Lessee shall not effect such replacement hereunder on or before the
Business Day next preceding the 150th day following the date of the
occurrence of such Event of Loss, then Lessee shall immediately
deposit with Lessor, in
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the manner and in funds of the type specified in Section 3.6, an
amount equal to the excess of the Stipulated Loss Value for the
Aircraft over any funds then being held by Lessor or the Indenture
Trustee with respect to such Event of Loss. If Lessee shall not
perform its obligation to effect such replacement hereunder on or
before the Business Day next preceding the 180th day following the
date of the occurrence of such Event of Loss, then Lessee shall
immediately pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, the aggregate amount specified in clauses
(A), (B) and (C) of Section 10.1.3, net of any amount deposited with
Lessor pursuant to the next preceding sentence of this Section 10.1.2.
10.1.3 Payment of Stipulated Loss Value and Rent. On or
before the Business Day next preceding the earlier of (i) the 180th
day following the date of the occurrence of such Event of Loss, or
(ii) the later of 15 days following the receipt of insurance proceeds
with respect to such occurrence or the date Lessee shall have made or
shall be deemed to have made its election under Section 10.1.1 to
comply with Section 10.1.3, Lessee shall pay to Lessor, in the manner
and in funds of the type specified in Section 3.6, (A) the Stipulated
Loss Value for the Aircraft, determined as of the date of payment (as
described in the definition of Stipulated Loss Value), (B) all unpaid
Basic Rent due on or prior to the SLV Determination Date with
reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated in
Exhibit C hereto as payable in advance on such SLV Determination
Date), and (C) (without duplication) any other Rent which is due and
payable through and including the date of payment.
10.1.4 Stipulated Loss Value Payment. In the event of
payment in full of the Stipulated Loss Value for the Aircraft pursuant
to Section 10.1.2 or 10.1.3 and, in either case, the amounts referred
to in clauses (B) and (C) of Section 10.1.3, (A) the obligation of
Lessee to pay Interim Rent and Basic Rent due after the SLV
Determination Date with reference to which such Stipulated Loss Value
is computed shall terminate (but Lessee shall remain liable for all
payments of Supplemental Rent due through and including the date of
such payment of Stipulated Loss Value), (B) the Term for the Aircraft
shall end, and (C) Lessor will comply with the applicable provisions
of Section 10.01 of the Trust Indenture and, upon Indenture Trustee's
release of the Aircraft from the Lien of the Trust Indenture Estate,
will Transfer to Lessee the Aircraft.
10.1.5 Payment of Rent. In the event of an Event of Loss,
during the period between the occurrence of the Event of Loss and the
date of payment pursuant to Section 10.1.3 or replacement, the
obligation of Lessee to pay Interim Rent, Basic Rent or Renewal Rent
shall continue unchanged, except that upon such replacement, it shall
become an obligation to pay such Rent in respect of the Replacement
Aircraft.
10.1.6 Conditions to Replacement of Aircraft. Lessee's
right to exercise the replacement options contemplated by Section
10.1.1 with respect to the Aircraft shall be subject to the
fulfillment prior to or at the time of any such replacement, in
addition to the requirements contained in Section 10.1.2, of the
conditions precedent set forth below:
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10.1.6.1 No Default. No Lease Event of Default or
Lease Default shall have occurred and be continuing.
10.1.6.2 Tax Loss. Owner Participant and Lessor
shall have received, at Lessee's expense, a tax opinion of tax
counsel selected by Lessee, to the effect that the Event of
Loss or the Replacement of the Airframe or Aircraft in
connection therewith will not cause any adverse tax
consequences to Lessor or Owner Participant or its Affiliates
(or, in lieu thereof, Lessee shall have agreed to indemnify
for such tax risk), or if Owner Participant and Lessee shall
have agreed upon the amount, if any, payable and upon the
manner of payment thereof with respect to such replacement by
Lessee pursuant to the Tax Indemnity Agreement or Section 7(b)
of the Participation Agreement, then any such amount shall be
paid.
10.1.6.3 Lessee's Obligations with Respect to
Replacement Aircraft. Lessee will promptly (all writings
referred to below to be reasonably satisfactory in form and
substance to Lessor):
(a) furnish Lessor with (i) a full
warranty bill of sale and FAA bill of sale duly
conveying to Lessor the Replacement Airframe and
Replacement Engines, if any, and (ii) an assignment
of the purchase agreement with respect to the
Replacement Airframe and Replacement Engines, if any
(if Lessee shall have any rights thereunder)
substantially in the form of the Purchase Agreement
Assignment and a consent and agreement of the
manufacturer thereof substantially in the form of
the Manufacturer's Consent;
(b) cause a Lease Supplement
subjecting such Replacement Airframe and Replacement
Engines, if any, to this Lease, duly executed by
Lessee, to be delivered to Lessor for execution, and
an Indenture and Trust Supplement to be delivered to
Lessor for execution and, in each case upon such
execution, to be filed for recordation with the FAA
pursuant to the Act;
(c) furnish Lessor with such evidence
of compliance with (i) Section 5.01(b) of the Trust
Indenture (if the Trust Indenture shall be in effect
at such time) and (ii) the insurance provisions of
Section 11 hereof with respect to the Replacement
Airframe and Replacement Engines, if any, and the
payment of all premiums then due with respect to all
such insurance, as Lessor may reasonably request;
(d) furnish Lessor with an opinion or
opinions of counsel reasonably satisfactory to
Lessor to the effect that, upon such conveyance,
Lessor will acquire good title to the Replacement
Airframe and Replacement Engines, if any, free and
clear of all Liens other than Permitted Liens, the
Replacement Airframe and Replacement Engines, if
any, will be leased
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hereunder and subject to the Lien of the Trust
Indenture (if then in effect) to the same extent as
the Airframe and Engines replaced thereby, Lessor and
(assuming the Trust Indenture is still in effect) the
Indenture Trustee shall be entitled to the benefit of
Section 1110 of the Bankruptcy Code with respect to
the Replacement Aircraft to the same extent as the
Aircraft, and to such further effect as Lessor may
reasonably request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Airframe
which shall be identified by manufacturer,
model, FAA registration number and
manufacturer's serial number;
(ii) a description of the Replacement
Airframe to be received (including the
manufacturer, model, FAA registration
number and manufacturer's serial number)
as consideration for the Airframe to be
released;
(iii) that on the date of the Indenture
and Trust Supplement and the Lease
Supplement relating to the Replacement
Airframe, Lessor will be the legal owner
of such Replacement Airframe free and
clear of all Liens (other than Permitted
Liens), that such Replacement Airframe
will on such date be in good working order
and condition, and that such Replacement
Airframe has been or, substantially
concurrently with such replacement, will
be duly registered in the name of Lessor
under the Act and that an airworthiness
certificate has been duly issued under the
Act with respect to such Replacement
Airframe, and that such registration and
certificate are in full force and effect,
and that Lessee will have the full right
and authority to use such Replacement
Airframe;
(iv) that the insurance required by
Section 11 is in full force and effect
with respect to such Replacement Airframe
and all premiums then due thereon have
been paid in full;
(v) that the Replacement Airframe is
of the same or an improved model as the
Airframe requested to be released from the
Lien of the Trust Indenture;
(vi) that no Lease Default or Lease
Event of Default has occurred and is
continuing or would result from the making
and granting of the request for release
and the addition of a Replacement
Airframe; and
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(vii) if the Trust Indenture has not
theretofore been discharged, the release
of the Airframe so to be released will not
impair the security of the Trust Indenture
or be in contravention of any of the
provisions of the Trust Indenture;
(f) furnish Lessor with a certificate
or certification of qualified independent aircraft
appraisers reasonably satisfactory to Lessor
certifying that the Replacement Airframe and
Replacement Engines, if any, have a value, remaining
useful life and utility at least equal to, and are
in at least as good operating condition as, the
Airframe and Engines, if any, so replaced (assuming
the Airframe and Engines were in the condition and
repair required by the terms hereof immediately
prior to the occurrence of such Event of Loss); and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to
the financing statements filed on or before the
Delivery Date) as Lessor or any Participant may
reasonably request to effect such replacement.
10.1.7 Recordation and Opinions. In the case of any
Replacement Airframe and/or Replacement Engines conveyed to Lessor
under this Section 10.l, promptly upon the registration of the
Replacement Aircraft and the recordation of the Lease Supplement and
Indenture and Trust Supplement covering the Replacement Airframe and
Replacement Engines, if any, pursuant to the Act, Lessee will cause to
be delivered to Lessor an opinion of Daugherty, Fowler & Peregrin or
other FAA counsel satisfactory to Lessor as to the due registration of
the Replacement Aircraft and the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.1.8 Conveyance. Upon compliance by Lessee with all of
the terms of this Section 10.1, (i) Lessor will comply with the
applicable provisions of Section 10.01 of the Trust Indenture and,
upon Indenture Trustee's release of the Aircraft and Engines (if
applicable) from the Lien of the Trust Indenture Estate, Transfer to
Lessee the replaced Airframe and Engines (if any), and (ii) Lessee
will be subrogated to all claims of Lessor, if any, against third
parties for damage to or loss of such Airframe and Engines to the
extent of the then insured value thereof.
10.2 Event of Loss with Respect to an Engine.
10.2.1 Event of Loss. Upon the occurrence of an Event of
Loss with respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe, Lessee
shall forthwith (and in any event within 15 days after such
occurrence) give Lessor, Indenture Trustee and each Participant
written notice thereof and shall, as promptly as possible and in any
event within 60 days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement for the
Engine with respect to which such Event of Loss occurred, title to a
Replacement Engine free and clear
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of all Liens, other than Permitted Liens, and having a value,
remaining useful life and utility at least equal to, and being in as
good operating condition as, the Engine with respect to which such
Event of Loss occurred, assuming such Engine was of the value,
remaining useful life and utility and in the condition and repair
required by the terms hereof immediately prior to the occurrence of
such Event of Loss.
10.2.2 Conditions; Lessee's Obligations. Prior to or at
the time of any such conveyance, Lessee will promptly:
(a) furnish Lessor with a full warranty (as to
title) bill of sale duly conveying to Lessor such Replacement
Engine;
(b) cause a Lease Supplement subjecting such
Replacement Engine to this Lease, duly executed by Lessee, to
be delivered to Lessor for execution, and an Indenture and
Trust Supplement to be delivered to Lessor for execution and,
in each case upon execution, to be filed for recordation with
the FAA pursuant to the Act;
(c) furnish Lessor with such evidence of
compliance with (i) Section 5.01(b) of the Trust Indenture (if
the Trust Indenture shall be in effect at such time) and (ii)
the insurance provisions of Section 11 hereof with respect to
such Replacement Engine and the payment of all premiums then
due with respect to such insurance, as Lessor may reasonably
request;
(d) furnish Lessor with an opinion or opinions
of Lessee's counsel, in form, substance and scope reasonably
satisfactory to Lessor, to the effect that, upon such
conveyance, Lessor will acquire good title to such Replacement
Engine free and clear of all Liens other than Permitted Liens,
and that such Replacement Engine will be leased hereunder and
subject to the Lien of the Trust Indenture (if then in effect)
to the same extent as the Engine replaced thereby and to such
further effect as Lessor or Indenture Trustee may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Engine which
shall be identified by manufacturer's serial number;
(ii) a description of the Replacement
Engine (including the manufacturer's name, model and
serial number) as consideration for the Engine to be
released;
(iii) that on the date of the Lease
Supplement and the Indenture and Trust Supplement
relating to the Replacement Engine, Lessor will be
the legal owner of such Replacement Engine free and
clear of all Liens except Permitted Liens, that such
Replacement Engine will on such date be in good
working order and condition, and that such
Replacement Engine is
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the same or an improved or equivalent model as the
Engine to be released; and
(iv) if the Trust Indenture has not
theretofore been discharged, that the release of the
Engine so to be released will not impair the
security of the Trust Indenture or be in
contravention of any of the provisions of the Trust
Indenture;
(f) furnish Lessor with a certificate of a
qualified aircraft engineer (who may be an employee of Lessee)
certifying that such Replacement Engine has a value, remaining
useful life and utility at least equal to, and is in at least
as good operating condition as, the Engine so replaced
assuming such Engine was in the condition and repair required
by the terms hereof immediately prior to the occurrence of
such Event of Loss; and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to the
financing statements filed on or before the Delivery Date) as
Lessor or any Participant may reasonably request to effect
such replacement.
10.2.3 Recordation and Opinions. In the case of any
Replacement Engine conveyed to Lessor under this Section 10.2,
promptly upon the recordation of the Lease Supplement and the
Indenture and Trust Supplement covering such Replacement Engine
pursuant to the Act, Lessee will cause to be delivered to Lessor an
opinion of Daugherty, Fowler & Peregrin or other FAA counsel
satisfactory to Lessor as to the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.2.4 Conveyance; Replacement Engine. Upon compliance by
Lessee with the terms of this Section 10.2, Lessor will comply with
the provisions of the Trust Indenture applicable thereto and, upon
Indenture Trustee's release of the Engine with respect to which such
Event of Loss occurred from the Lien of the Trust Indenture Estate,
Transfer such Engine to Lessee, and Lessee will be subrogated to all
claims of Lessor, if any, against third parties for damage to or loss
of such Engine to the extent of the insured value thereof.
10.2.5 No Reduction of Rent. No Event of Loss with respect
to an Engine under the circumstances contemplated by the terms of this
Section 10.2 shall result in any reduction of Basic Rent or Renewal
Rent.
10.3 Application of Certain Payments. Any payments (other than
insurance proceeds, the application of which is provided for in Section 11)
received at any time by Lessor, Lessee or any Permitted Sublessee from any
governmental authority or other Person with respect to any Event of Loss, will
be applied as follows:
10.3.1 Replacement of Airframe and Engines. If such
payments are received with respect to the Airframe and the Engines (or
engines) installed on the Airframe that have been or are being
replaced by Lessee pursuant to Section 10.1 (other than Section
10.1.3), such
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payments shall be paid over to, or retained by, Indenture Trustee or,
if the Trust Indenture is no longer in effect, Lessor, and upon
completion of such replacement be paid over to Lessee, provided Lessee
shall have fully performed or, concurrently therewith will fully
perform, the terms of Section 10.1 with respect to the Event of Loss
for which such payments are made.
10.3.2 Replacement of Engine. If such payments are
received with respect to an Engine that has been or is being replaced
by Lessee pursuant to Section 10.2, such payments shall be paid over
to, or retained by, Indenture Trustee or, if the Trust Indenture is no
longer in effect, Lessor, and upon completion of such replacement be
paid over to Lessee, provided Lessee shall have fully performed or,
concurrently therewith will fully perform, the terms of Section 10.2
with respect to the Event of Loss for which such payments are made.
10.3.3 Nonreplacement. If such payments are received with
respect to the Airframe or the Airframe and the Engines or engines
installed on the Airframe that has not or have not been and will not
be replaced pursuant to Section 10.1 or 10.2, so much of such payments
remaining after reimbursement of Lessor, Indenture Trustee and each
Participant for costs and expenses as shall not exceed the Stipulated
Loss Value and other amounts required to be paid by Lessee hereunder
shall be applied in reduction of Lessee's obligation to pay such
Stipulated Loss Value and other amounts required to be paid by Lessee
hereunder, if not already paid by Lessee, or, if already paid by
Lessee, shall be applied to reimburse Lessee for its payment of such
Stipulated Loss Value and other amounts. The balance, if any, of such
payment remaining thereafter shall be divided between Lessor and
Lessee in proportion to their relative interests in the Aircraft.
10.4 Requisition of Aircraft for Use by Governmental Authorities.
In the event of the requisition for use of the Airframe and the Engines or
engines installed on such Airframe during the Term by any governmental
authority, Lessee shall notify Lessor promptly of such requisition, and all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred. All
payments received by Lessor or Lessee from such governmental authority for the
use of such Airframe and Engines or engines prior to the time such requisition
becomes an Event of Loss shall be paid over to, or retained by, Lessee (or, if
directed by Lessee, any Permitted Sublessee); and all payments received by
Lessor or Lessee from such governmental authority for the use of such Airframe
and Engines or engines after such time shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect, Lessor,
and upon the performance by Lessee of the terms of Section 10.1 with respect to
such Event of Loss, shall be paid over to Lessee.
10.5 Requisition of an Engine for Use by Governmental Authorities.
In the event of the requisition for use by any governmental authority (other
than in circumstances contemplated by Section 10.4) of any Engine but not the
Airframe, Lessee will replace such Engine hereunder by complying with the terms
of Section 10.2 to the same extent as if an Event of Loss had occurred with
respect to such Engine, and any payments received from such governmental
authority with respect to such requisition shall be paid over to, or retained
by, Indenture Trustee, or if the Trust Indenture is no longer in effect,
Lessor, and upon the performance by Lessee of the terms of
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Section 10.2 to the same extent as if an Event of Loss had occurred with
respect to such requisitioned Engine, shall be paid over to Lessee.
10.6 Application of Payments During Existence of Default. Any
amount referred to in this Section 10 which is payable or creditable to or
retainable by Lessee shall not be paid or credited to or retained by Lessee if,
at the time of such payment, credit or retention, a Lease Event of Default or
Lease Default shall have occurred and be continuing hereunder but shall be paid
to and held by Indenture Trustee and applied by it as provided in the Trust
Indenture, or, if the Trust Indenture is no longer in effect, held by Lessor as
security for the obligations of Lessee under this Lease and applied against
Lessee's obligations hereunder as and when due; at such time as there shall not
be continuing any such Lease Event of Default or Lease Default, or at such
earlier time as Lessee shall have paid in full all Rent and other amounts due
and payable hereunder and under the other Operative Agreements by Lessee, any
remaining balance of such amount shall be paid to Lessee to the extent not
previously applied in accordance with the preceding clause of this sentence.
Section 11. Insurance.
11.1 Public Liability and Property Damage Insurance. Lessee shall
at all times maintain, or cause to be maintained, at its or any Permitted
Sublessee's expense, public liability (including without limitation contractual
liability, passenger legal liability and property damage, but excluding
manufacturer's product liability coverage) insurance which shall:
11.1.1 Type, Form and Amount. Be of a type and form
carried by similarly situated United States commercial air carriers
generally, and carried in amounts not less than that carried by Lessee
on similar equipment owned or leased by Lessee and not less than the
minimum amount of $350,000,000 (per occurrence) combined single limit
(or such greater amount as Lessee may carry from time to time on other
737-300 series aircraft in its fleet);
11.1.2 Coverage. Include, but not be limited to, public
liability insurance, contractual liability insurance, passenger
liability insurance and property damage liability insurance (including
cargo and baggage liability insurance); and
11.1.3 Additional Insureds. Name as additional insureds
Lessor (in its individual and trust capacities), Indenture Trustee,
each Participant and each other Indemnified Party, as their interests
may appear.
11.2 Insurance Against Loss of or Damage to Aircraft and Engines.
Lessee shall at all times maintain, or cause to be maintained, at its or any
Permitted Sublessee's expense, insurance against loss of or damage to the
Aircraft, Airframe and Engines as follows:
11.2.1 Type, Form and Amount. "All-risk" ground and flight
aircraft hull insurance on the Aircraft and "all-risk" coverage on
each Engine and on Parts while removed from the Aircraft or Engines,
which is of the type and form, and in an amount not less than that,
carried by Lessee on similar equipment owned or leased by Lessee and
in an amount not less than that usually carried by similarly situated
United States commercial air carriers
SALE AND LEASE AGREEMENT [N602SW]
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generally; and, to the extent so usually carried, at all times that
the Aircraft or any Engine is not covered by the insurance described
in Section 11.2.2, coverage against the perils of (i) strikes, riots,
civil commotions or labor disturbances, (ii) any malicious act or act
of sabotage, and (iii) hijacking, or any unlawful seizure or wrongful
exercise of control of the Aircraft or crew in flight (including any
attempt at such seizure or control) made by any person or persons on
board the Aircraft acting without the consent of the insured other
than hijacking committed by persons engaged in a program of irregular
warfare for terrorist purposes. Such insurance shall at all times be
for an amount not less than the Stipulated Loss Value of the Aircraft.
11.2.2 War-Risk Insurance. If at any time (a) war-risk
insurance is maintained by Lessee or any Permitted Sublessee
subleasing the Aircraft or any Engine with respect to other aircraft
operated by Lessee or such Permitted Sublessee on the same or similar
routes, (b) the Aircraft is operated on routes where the custom in the
United States commercial airline industry is to carry war-risk
insurance, (c) the Aircraft is operated by a Permitted Foreign Air
Carrier as a Permitted Sublessee in any recognized or threatened area
of hostilities, or (d) the Aircraft is operated on any route where no
other aircraft is regularly operated by a United States commercial
airline and such route is within any such area of hostilities, then
war-risk and allied perils insurance of the type carried by similarly
situated United States commercial air carriers operating the same or
comparable models of aircraft on the same or similar routes shall be
maintained on the Aircraft in an amount not less than that specified
in Section 11.2.l.
11.2.3 Certain Requirements. The insurance policies
required by this Section 11.2 shall:
11.2.3.1 Additional Insureds. Be endorsed to name
Lessor (in its individual and trust capacities), each
Participant, the Indenture Trustee and each other Indemnified
Party as additional insureds, as their interests may appear.
11.2.3.2 Payment of Proceeds. Provide that
proceeds thereunder shall be paid directly to Indenture
Trustee, so long as the Trust Indenture shall be in effect,
and thereafter to Lessor, in either case, as exclusive loss
payee; provided, however, that any proceeds payable as a
result of any property damage to the Airframe or any Engine,
which property damage does not exceed $4,000,000 and does not
constitute an Event of Loss with respect to the Aircraft or
such Engine, shall be paid to Lessee unless Lessor or
Indenture Trustee, prior to such payment, shall have notified
the insurer making such payment that a Lease Default (of the
type described in Section 14.1 or 14.5) or Lease Event of
Default has occurred and is continuing.
11.2.3.3 Waiver of Subrogation. Provide that the
insurers shall waive any rights of subrogation against Lessor,
Indenture Trustee, each Participant and each other Indemnified
Party except for claims arising out of gross negligence or
willful misconduct of such Person; provided, that the exercise
by insurers of rights of subro-
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gation, if any, permitted by this Section 11.2 shall not, in
any way, delay payment of any claim that would otherwise be
payable by such insurers but for the existence of such rights
of subrogation or entitle such insurers to exercise or to
assert any setoff, recoupment, counterclaim or any other
deduction in respect of any amounts payable under such
policies.
11.2.4 Deductibles. The insurance required by this Section
11.2 may, subject to Section 11.8, provide for standard deductibles
which are from time to time in effect in the aviation insurance
industry generally and which are customarily maintained by similarly
situated United States commercial air carriers generally; provided,
however, such deductibles shall not be more than the deductibles
generally maintained by Lessee (and which Lessee is under no
compulsion to maintain pursuant to any indenture, mortgage, lease or
other agreement) with respect to its fleet of Boeing Model 737-300
series aircraft and CFM International Model CFM56-3 engines generally.
11.2.5 Government Indemnity. In the case of a contract
with the Government in respect of the Aircraft or Engines, a valid
agreement by the Government to indemnify Lessee, Lessor, each
Participant, Indenture Trustee and each other Indemnified Party
against the same risks which are required hereunder to be insured
against in amounts at least equal to the amounts required hereunder
from time to time (such indemnity to be backed by the full faith and
credit of the United States of America), shall be considered adequate
insurance with respect to the Aircraft, Airframe and any Engine
subject to such contract to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
11.3 General Policy Provisions. Each insurance policy to be
procured and maintained hereunder shall:
11.3.1 Primary Insurance. Be primary and without right of
contribution from other insurance which may provide coverage to
Lessor, Indenture Trustee, or any Participant or any other Indemnified
Party with respect to its interest in the Aircraft, Airframe or any
Engine or its liabilities with respect to or arising out of the
transactions contemplated by the Operative Agreements;
11.3.2 Coverage for Each Insured. Expressly provide that
all the provisions thereof, except the agreed values and the limits of
the liability of the insurer under such policy, shall operate in the
same manner as if there were a separate policy covering each insured;
11.3.3 Waiver of Certain Rights. Waive any right of the
insurers to any setoff, recoupment, counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
liability of Lessee, Lessor, Indenture Trustee, any Participant or any
other Indemnified Party;
11.3.4 Breach of Warranty. Provide that, in respect of
Lessor, Indenture Trustee, each Participant and each other Indemnified
Party, such insurance shall not be invalidated
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by any action or inaction by Lessee, any Indemnified Party or other
Person and shall insure the interests of Lessor, Indenture Trustee,
each Participant and each other Indemnified Party regardless of any
breach or violation by Lessee, any Indemnified Party or other Person
of any representation, warranty, declaration or condition contained in
such policy;
11.3.5 Notice of Termination or Changes. Provide for not
less than 30 days' prior written notice to be received by Lessor,
Indenture Trustee and each Participant before any lapse, alteration,
termination or cancellation of the insurance evidenced thereby shall
be effective as to Lessor, Indenture Trustee, each Participant and
each other Indemnified Party, except that war-risk and allied perils
policies may provide for not less than seven days' prior written
notice or such lesser or greater notice as shall at the time be
customary in the aviation insurance industry generally, and which are
customarily in effect with respect to major United States commercial
air carriers generally from time to time;
11.3.6 Nonliability for Premiums. Provide that neither
Lessor, Indenture Trustee, any Participant nor any other Indemnified
Party shall be liable for any insurance premium;
11.3.7 Identity of Insurers. Be with insurance companies,
underwriters or funds of recognized responsibility; and
11.3.8 Fifty-fifty Clause. Contain a fifty-fifty clause
per AVS 103 or its equivalent, but only in the event that such clause
is customarily included in such policies maintained by similarly
situated United States commercial air carriers generally.
11.4 Application of Insurance Proceeds. As between Lessor and
Lessee, all insurance proceeds received under policies required to be
maintained (or to be caused to be maintained) by Lessee pursuant to Section
11.2 as a result of the occurrence of an Event of Loss with respect to the
Aircraft, Airframe or any Engine will be applied in accordance with Section
10.3.1, 10.3.2 or 10.3.3, as the case may be (except that the balance referred
to in Section 10.3.3 shall be paid over to, or retained by, Lessee). All
insurance proceeds received under such policies in respect of any property
damage loss not constituting an Event of Loss with respect to the Airframe or
an Engine will be applied in payment for repairs or for replacement property in
accordance with the terms of Section 8, if not already paid for by Lessee, and
any balance remaining after compliance with such Section with respect to such
loss shall be paid to Lessee. In the case of a loss with respect to an engine
(other than an Engine) installed on the Airframe, Lessor shall hold any payment
to it of any insurance proceeds in respect of such loss for the account of
Lessee or any other third party that is entitled to receive such proceeds. The
provisions of Section 10.6 shall apply to amounts referred to in this Section
11.4.
11.5 Certificates; Reports, Etc. With respect to any policy
required hereunder, Lessee shall cause to be furnished to Lessor, Indenture
Trustee and each Participant on or prior to the Delivery Date of the Aircraft
and on or prior to expiration of such policy, certificates of the insurer or
insurers (or their authorized representatives) providing insurance pursuant to
the requirements of this Section 11. On or before the Delivery Date of the
Aircraft, and annually thereafter on or before the renewal date of such policy,
Lessee shall cause to be furnished to Lessor, Indenture Trustee, the
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Original Loan Participant and Owner Participant a report signed by Willis
Corroon Aerospace (or any other firm of independent aircraft insurance brokers,
appointed by Lessee, reasonably satisfactory to the Original Loan Participant
and Owner Participant) describing in reasonable detail the insurance then
carried and maintained with respect to the Aircraft and stating the opinion of
such firm that the insurance then carried and maintained on the Aircraft
complies with the terms hereof. Lessee agrees that it will cause such firm to
advise Lessor, Indenture Trustee, the Original Loan Participant and Owner
Participant in writing promptly of any default in the payment of any premium or
any other act or omission on the part of Lessee or any Permitted Sublessee of
which they have knowledge and which might invalidate or render unenforceable,
in whole or in part, the insurance on the Aircraft. To the extent such
agreement is reasonably obtainable, Lessee further agrees to cause such firm to
advise Lessor, Indenture Trustee and each Participant in writing at least 30
days (seven days in the case of war-risk and allied perils coverage or such
lesser or greater notice as is customary in the aviation industry generally)
prior to any expiration, lapse, alteration, cancellation or termination date of
any insurance carried and maintained on the Aircraft pursuant to this Section
11.
11.6 Lessor's Right to Maintain Insurance. In the event that
Lessee shall fail to maintain or cause to be maintained insurance as herein
provided, Lessor, Indenture Trustee or any Participant may at its option (but
shall not be obligated to) provide such insurance and in such event, Lessee
shall, upon demand, reimburse such Person, as Supplemental Rent, for the cost
thereof. No such payment, performance or compliance shall be deemed to cure
any Lease Default hereunder or otherwise relieve Lessee of its obligations with
respect thereto.
11.7 Insurance for Own Account. Nothing in Section 11 shall limit
or prohibit Owner Participant (directly or through Lessor) from obtaining
insurance for its own account, and any proceeds payable thereunder shall be
payable as provided in the insurance policy relating thereto; provided,
however, that no such insurance may be obtained which would limit or otherwise
adversely affect the availability or coverage or cost of any insurance required
to be obtained or maintained pursuant to this Section 11. Nothing in this
Section 11 shall limit or prohibit Lessor, Indenture Trustee or any Holder from
obtaining insurance for its own account, and any proceeds payable thereunder
shall be payable as provided in the insurance policy relating thereto;
provided, however, that no such insurance may be obtained which would limit or
otherwise adversely affect the availability or coverage or cost of any
insurance required to be obtained or maintained pursuant to this Section 11 or
obtained by Owner Participant pursuant to the preceding sentence.
11.8 Self-Insurance. Notwithstanding the foregoing provisions of
this Section 11, Lessee may, from time to time so long as no Lease Event of
Default has occurred and is continuing, self-insure with respect to the
Aircraft to the same extent as it does with respect to, or maintain policies
with deductibles or premium adjustment provisions consistent with similar
provisions applicable to, other comparable aircraft operated by Lessee;
provided, however, that in the case of public liability insurance, such
self-insurance shall in no event exceed $50,000,000; and provided, further,
that if at any time Lessee's unsecured senior long-term debt securities are not
rated Investment Grade, such self-insurance (inclusive of any such public
liability insurance and without derogation from the preceding proviso) shall in
no case be in amounts greater than 4% of Lessee's tangible net worth. As used
in this Agreement, the term "Investment Grade" means a rating of
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"Baa3" or higher from Moody's Investors Service or a rating from any other
nationally recognized bond rating service equivalent to or better than such a
rating.
Section 12. Inspection. At all reasonable times, and upon
reasonable notice, Lessor, Indenture Trustee or any Participant or its
authorized representatives may inspect the Aircraft and inspect and copy
(subject to any confidentiality agreements, copyright restrictions and the
like) the books and records of Lessee relative thereto. Any such inspection of
the Aircraft shall be without out-of-pocket expense or risk to Lessee and shall
be a visual, walk-around inspection and may not include opening any panels,
bays or the like; provided, that no exercise of such inspection right shall
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee (or any Permitted Sublessee). Subject to the proviso in
the preceding sentence, upon receipt by Lessee of a written request from the
Owner Participant or the Indenture Trustee specifying that the Owner
Participant or the Indenture Trustee desires to have an authorized
representative observe the major overhaul to be performed on the Aircraft next
following receipt of any such request, Lessee shall permit such authorized
representative to observe such overhaul. Neither Lessor, Indenture Trustee nor
any Participant shall have any duty to make any such inspection or shall incur
any liability or obligation by reason of not making any such inspection.
Section 13. Assignment.
13.1 In General. Except as otherwise expressly permitted in
Section 7.2 or Section 11(f) of the Participation Agreement, or as required in
the case of any requisition by the Government referred to in Section 7.1,
Lessee will not, without the prior or written consent of Lessor, assign or
transfer any of its rights or obligations under this Lease or any other
Operative Agreement. Lessor may assign or convey any of its right, title and
interest in and to this Lease, any of the other Operative Agreements or the
Aircraft in accordance with the Participation Agreement, the Trust Agreement or
the express provisions of this Lease. The terms and provisions of the Lease
shall be binding upon and inure to the benefit of Lessor and Lessee and their
respective permitted successors and assigns.
13.2 Security for Lessor's Obligations. In order to secure the
indebtedness evidenced by the Certificates, the Trust Indenture provides, among
other things, for the assignment by Lessor to Indenture Trustee of its right,
title and interest in, to and under this Lease and any Permitted Sublease, to
the extent set forth in the Trust Indenture, and for the creation of a first
mortgage lien on and perfected security interest in the Aircraft in favor of
Indenture Trustee. Lessee hereby consents to such assignment and to the
creation of such mortgage and security interest and acknowledges receipt of
copies of the Trust Agreement and the Trust Indenture, it being understood that
such consent shall not affect any requirement or the absence of any requirement
for any consent under any other circumstances. So long as the Trust Indenture
shall be in effect, Lessee will furnish to Indenture Trustee counterparts of
all writings of any kind required to be delivered hereunder by Lessee to
Lessor. Until the Lien of the Trust Indenture has been released, (a) Lessee
shall make all payments of Basic Rent, Stipulated Loss Value and Termination
Value and all other amounts payable hereunder (other than Excluded Payments as
defined in the Trust Indenture) to Indenture Trustee at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, and the right of Indenture Trustee to receive
such payments shall
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not be subject to any defense, counterclaim, setoff or other right or claim of
any kind which Lessee may be able to assert against Lessor (in its individual
or trust capacity), Indenture Trustee (in its individual or trust capacity),
any Participant or any other Person in an action brought by any thereof on this
Lease and (b) as provided in the Trust Indenture, certain rights of Lessor with
respect to this Lease, the Aircraft, the Airframe or any Engine (or any Part
thereof) or any other part of the Trust Indenture Estate are exercisable by
Indenture Trustee.
Section 14. Events of Default. The following events shall
constitute Lease Events of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body), and each such
Lease Event of Default shall continue so long as, but only so long as, it shall
not have been remedied or waived:
14.1 Failure to Pay Rent. Lessee shall fail to make any payment of
Interim Rent or Basic Rent within seven Business Days from the due date
thereof; or Lessee shall fail to make any other payments required to be made by
it under the Operative Agreements within ten Business Days after the receipt of
written demand therefor delivered to Lessee by Lessor after such payments were
required to have been made (provided, that any failure to pay any amount owed
by Lessee under the Tax Indemnity Agreement or any failure of Lessee to pay to
Lessor or the Owner Participant when due any Excluded Payments shall not
constitute a Lease Event of Default unless written notice is given by the Owner
Participant to Lessee and the Indenture Trustee that such failure shall
constitute a Lease Event of Default); or
14.2 Specific Defaults. Lessee shall fail to carry and maintain
(or cause to be carried and maintained) insurance on or with respect to the
Aircraft in accordance with the provisions of Section 11; provided, that any
such failure shall not constitute a Lease Event of Default so long as such
failure is for a period of not more than 30 days, Lessee shall not operate the
Aircraft at a time when such insurance is not in effect and the Aircraft
continues to be covered by such insurance as is required when the Aircraft is
on the ground, or Lessee shall fail to comply with Section 7.1.1; or
14.3 General Default. Lessee shall fail to perform or observe any
other covenant, condition or agreement to be performed or observed by it
hereunder or under any other Operative Agreement (except the Tax Indemnity
Agreement), and such failure shall continue unremedied for a period of 30 days
after written notice thereof to Lessee, unless Lessee shall be diligently
proceeding to correct such failure and such failure is cured within 180 days
after such notice or by the end of the Term, whichever first occurs; or
14.4 Misrepresentation and Breach of Warranty. Any representation
or warranty made by Lessee herein or in the Participation Agreement or in any
other Operative Agreement (other than the Tax Indemnity Agreement) or in any
document or certificate furnished by Lessee in connection with any thereof,
shall prove to have been incorrect in any material respect at the time made,
shall remain material at the time of discovery and shall, if curable, remain
incorrect in any material respect after 30 days after written notice thereof to
Lessee;
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14.5 Bankruptcy, Etc. Lessee shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official or agency in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to authorize
any of the foregoing; or an involuntary case or other proceeding shall be
commenced against Lessee seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official or agency of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 90 days.
Section 15. Remedies.
15.1 Default; Remedies. Upon the occurrence of a Lease Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, so long as any such Lease Event of Default shall be
continuing, exercise one or more of the following remedies as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect
which have not been effectively waived by Lessee:
15.1.1 Return; Repossession. Lessor may cause Lessee, upon
written demand by Lessor and at Lessee's expense, to return promptly,
and Lessee shall return promptly, all or any part of the Aircraft,
Airframe or Engines as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with
all the provisions of, Section 5 as if the Aircraft, Airframe or
Engines were being returned at the end of the Term; or Lessor, at its
option, may enter upon the premises where the Aircraft, Airframe or
any Engine, or part thereof is located and take immediate possession
of and remove the same by summary proceedings or otherwise, all
subject to receipt of notice delivered pursuant to Section 7.2.3 (if
applicable) and without liability accruing to Lessor for or by reason
of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise, and Lessee
expressly waives any right it may have under applicable law to a
hearing prior to repossession of the Aircraft, Airframe or any Engine
or part thereof; or
15.1.2 Sale; Use Etc. Lessor may sell all or any part of
the Aircraft, Airframe or any Engine, at public or private sale, at
such times and places, to such Persons (including Lessor, Indenture
Trustee or any Participant) as Lessor may determine, or otherwise
dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, Airframe or any Engine or part thereof, as Lessor, in its
sole discretion, may determine, all free and clear of any rights of
Lessee except as hereinafter set forth in this Section 15 and without
any duty to account to Lessee with respect to such action or inaction
or for any proceeds with respect thereto; or
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15.1.3 Certain Liquidated Damages.
15.1.3.1 Liquidated Damages--Fair Market Rental
Value. Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under
Section 15.1.1 or 15.1.2 with respect to the Aircraft,
Airframe or any Engine or part thereof, Lessor, by written
notice to Lessee specifying a payment date (which shall be an
SLV Determination Date) not earlier than ten days from the
date of such notice, may cause Lessee to pay to Lessor, and
Lessee shall pay to Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Interim Rent, Basic Rent or
Renewal Rent, as the case may be, due after the date specified
for payment in such notice), any unpaid Interim Rent, Basic
Rent or Renewal Rent, as the case may be, due on or prior to
such SLV Determination Date (it being understood and agreed
that Lessee shall not be required to pay the portion, if any,
of such Interim Rent or Basic Rent designated in Exhibit C
hereto as payable in advance on such SLV Determination Date)
plus an amount equal to the excess, if any, of the Stipulated
Loss Value for the Aircraft, computed as of such SLV
Determination Date, over the fair market rental value
(determined as hereafter provided in this Section 15) of the
Aircraft for the remainder of the Term, after discounting such
fair market rental value semiannually (effective on each Rent
Payment Date) by a rate equal to the higher of the Certificate
Rate or the rate specified in clause (ii) of the definition of
Overdue Rate to present worth as of the date specified for
payment in such notice, together with interest, if any, on
such amount and unpaid Interim Rent, Basic Rent or Renewal
Rent, as the case may be, at the Overdue Rate from the date
specified for payment in such notice to the date of payment in
full; or
15.1.3.2 Liquidated Damages--Fair Market Sales
Value. If Lessor shall not have sold the Aircraft, Lessor, by
written notice to Lessee specifying a payment date (which
shall be an SLV Determination Date) not earlier than ten days
from the date of such notice, may cause Lessee to pay to
Lessor, and Lessee shall pay to Lessor, on the payment date
specified in such notice, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Interim Rent,
Basic Rent or Renewal Rent, as the case may be, due after the
date specified for payment in such notice), any unpaid Interim
Rent, Basic Rent or Renewal Rent, as the case may be, due on
or prior to such SLV Determination Date (it being understood
and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated
in Exhibit C hereto as payable in advance on such SLV
Determination Date) plus an amount equal to the excess, if
any, of the Stipulated Loss Value for the Aircraft, computed
as of such SLV Determination Date, over the fair market sales
value of the Aircraft (determined as hereafter provided in
this Section 15 as of the date specified for payment in such
notice), together with interest, if any, on such amount and
unpaid Interim Rent, Basic Rent or Renewal Rent, as the case
may be, at the Overdue Rate from the date specified for
payment in such notice to the date of payment in full; or
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15.1.4 Liquidated Damages upon Sale. If Lessor,
pursuant to Section 15.1.2 or applicable law, shall have sold
the Aircraft, Lessor, in lieu of exercising its rights under
Section 15.1.3 with respect to the Aircraft, may, if Lessor
shall so elect, upon giving written notice to Lessee, cause
Lessee to pay Lessor, and Lessee shall pay to Lessor, on the
date of such sale, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Interim Rent, Basic Rent
or Renewal Rent, as the case may be, due after the date of
such sale), any unpaid Basic Rent or Renewal Rent, as the case
may be, due on or prior to the SLV Determination Date (it
being understood and agreed that Lessee shall not be required
to pay the portion, if any, of such Interim Rent or Basic Rent
designated in Exhibit C hereto as payable in advance on such
SLV Determination Date) on or immediately preceding such date
of sale plus the amount of any deficiency between the net
proceeds of such sale or (if such sale is a private sale and
is made to Lessor, Indenture Trustee, a Participant or any
Affiliate thereof) between the fair market sales value of the
Aircraft, determined as of the date of such sale as
hereinafter provided in this Section 15, and the Stipulated
Loss Value of the Aircraft, computed as of the date of such
sale, together with interest, if any, on such amount and such
unpaid Interim Rent, Basic Rent or Renewal Rent at the Overdue
Rate from the date of such sale, to the date of payment in
full; or
15.1.5 Rescission and Other Remedies. Lessor may
rescind and terminate this Lease, or may exercise any other
right or remedy which may be available to it under applicable
law or proceed by appropriate court action to enforce the
terms hereof or to recover damages for the breach hereof,
including without limitation Lessee's agreement to lease the
Aircraft for the Term and to pay Rent.
In addition to the foregoing remedies, Lessee shall be liable (except
as otherwise provided above and without duplication of amounts otherwise
payable hereunder) for any and all unpaid Rent due hereunder before, during or
after the exercise of any of the foregoing remedies and for all legal fees and
other costs and expenses (including the fees and expenses of all appraisers
required by this Section 15) of Lessor, Indenture Trustee and Participants,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all insurance and
storage costs and all costs and expenses incurred in connection with the return
of the Aircraft, Airframe or any Engine or part thereof, in accordance with the
terms of Section 5 or in placing the Aircraft, Airframe or any Engine or part
thereof, in the condition and airworthiness required by Section 5.
Lessor agrees to give Lessee at least 15 days' prior written notice of
the date fixed for any public sale of the Aircraft, the Airframe or any Engine
or part thereof, and of the date on or after which will occur the execution of
any contract providing for any private sale.
15.2 Determination of Fair Market Rental Value and Fair Market
Sales Value. For the purpose of this Section 15, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be,
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under no compulsion to lease or purchase, as the case may be, and an informed
and willing lessor or seller in possession, as the case may be, and in each
case shall be determined on an "as is, where is" basis pursuant to an appraisal
by a recognized independent aircraft appraiser chosen by Lessor and approved by
Lessee, which approval shall not be unreasonably withheld or delayed and shall
be deemed granted if such choice is not rejected within 10 days after Lessee's
receipt of notice of Lessor's choice.
15.3 No Waiver, Etc. No remedy referred to in this Section 15 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. No express or implied waiver by
Lessor of any Lease Event of Default shall in any way be, or be construed to
be, a waiver of any earlier or subsequent Lease Event of Default. To the
extent permitted by applicable law, Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use the Aircraft, Airframe or any Engine, or part thereof,
in mitigation of Lessor's damages as set forth in this Section 15 or which may
otherwise limit or modify any of Lessor's rights or remedies under this Section
15.
Section 16. Notices. All notices required under the terms and
provisions hereof shall be in writing and shall be given by certified mail,
telecopy or any other customary means of written communication, addressed:
If to Lessee, at 2702 Love Field Drive, P.O. Box 36611, Dallas, Texas
75235-1611 (telecopy no. 214/904-4022), Attention: Treasurer, or at such other
address as Lessee shall from time to time designate in writing;
If to Lessor, at 777 Main Street, Hartford, Connecticut 06115
(telecopy no. 203/240-7920), Attention: Corporate Trust Administration, or at
such other address as Lessor shall from time to time designate in writing;
If to any Participant or Indenture Trustee, at the applicable address
set forth in the signature pages of the Participation Agreement or Schedule I
thereto, or at such other address as any such Participant or Indenture Trustee,
as the case may be, shall from time to time designate in writing.
The effective date of any such notice shall be, if sent by mail, five
days (ten days, if international) after mailing or, if sent by telex or
telecopy, the date when such notice is sent or dispatched, and otherwise the
date on which it is received by the addressee. Lessee shall furnish to Lessor
for transmission to Indenture Trustee and Participants a sufficient number of
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished hereunder, except in any case where
Lessee shall have transmitted the same directly to any such person.
Section 17. Net Lease; Lessee's Obligations; No Setoff,
Counterclaim, Etc. This is a net lease and it is hereby recognized that Lessor
is the owner of the Aircraft (except that Owner
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Participant will be the owner for income tax purposes) and Lessee is the lessee
thereof. It is the intent of the parties hereto that this Lease be a "true
lease". Lessee's obligation to pay all Rent payable hereunder as and when due
and to the Person entitled thereto shall, subject to Section 3.8, be absolute
and unconditional and shall not be affected by any circumstance, including
without limitation: (a) any setoff, counterclaim, recoupment, defense or other
right which Lessee may have against Lessor (in its individual or trust
capacity), Indenture Trustee (in its individual or trust capacity), any
Participant, Manufacturer, any Indemnified Party or any other Person for any
reason whatsoever; (b) any defect in the title, airworthiness, condition,
design, operation or fitness for use of, or any damage to or loss, theft,
taking, requisition, condemnation, confiscation or destruction of, the
Aircraft, Airframe or any Engine, or any interruption or cessation in the use
or possession thereof by Lessee, any sublessee or any other Person for any
reason whatsoever; (c) any insolvency, bankruptcy, reorganization or similar
proceedings by or against Lessee or any other Person; (d) any restriction,
prevention or curtailment of or interference with any use of the Aircraft or
part thereof; (e) any invalidity or unenforceability or disaffirmance of this
Lease or any provision hereof or any of the other Operative Agreements or any
provision thereof, in each case whether against or by Lessee or otherwise; or
(f) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided, that nothing in this sentence shall
be construed to modify or limit in any way Lessee's rights under Section 3.8.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees, subject to Section 3.8, to pay an amount
equal to each Interim Rent, Basic Rent, Renewal Rent and Supplemental Rent
payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part. All Rent payable by Lessee shall be paid without notice or demand
(except as otherwise expressly provided) and, subject to Section 3.8, without
abatement, suspension, deferment, deduction, diminution or proration by reason
of any circumstance or occurrence whatsoever. Lessee hereby waives, to the
extent permitted by applicable law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease or any part hereof, or to
any abatement, suppression, deferment, diminution, reduction or proration of
Rent except in accordance with the express terms hereof. Each payment of Rent
made by Lessee shall, subject to Section 3.8, be final as to Lessor and Lessee.
Lessee will not, subject to Section 3.8, seek to recover all or any part of any
such payment of Rent for any reason whatsoever. Lessee covenants that it will
remain obligated under this Lease in accordance with its terms and will take no
action to terminate, rescind or avoid this Lease solely as a result of the
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding-up or other similar proceeding affecting Lessor or Owner
Participant or any other action with respect to this Lease which may be taken
in any such proceeding by any trustee or receiver of Lessor or Owner
Participant or by any court (it being understood that nothing in this sentence
shall prevent Lessee from taking any action to which it would have been
entitled had such bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding- up or other similar proceeding
not occurred).
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Section 18. Renewal and Purchase Options.
18.1 Renewal Options. At the end of the Base Lease Term and any
Renewal Term (other than the third Floating Rate Renewal Term or any prior
Floating Rate Renewal Term ending four years after the end of the Base Lease
Term), so long as no Lease Event of Default or Lease Default (of the type
described in Section 14.1 or 14.5) has occurred and is continuing, Lessee shall
have the option to renew this Lease for a Renewal Term. In order to exercise
the option to renew, Lessee shall notify Lessor thereof in writing not more
than nine months nor less than six months prior to the commencement of the
applicable Renewal Term (which notice shall be irrevocable and shall specify
the length of such Renewal Term). Renewal Rent shall be payable in arrears for
each Lease Period occurring during any Renewal Term. The Renewal Rent payable
for the Fixed Rate Renewal Term hereunder shall be the lesser of (i) 50% of the
average Basic Rent and (ii) the fair market rental value of the Aircraft (as
defined below) calculated as of the commencement of such Renewal Term; the
Renewal Rent payable for any Floating Rate Renewal Term hereunder shall be the
fair market rental value of the Aircraft (as defined below) calculated as of
the commencement of such Renewal Term. Such fair market rental value shall be
determined not later than three months prior to the commencement of such
Renewal Term by mutual consent of Owner Participant and Lessee or, if they
shall be unable so to agree, by three recognized independent aircraft
appraisers, one chosen and paid for by Owner Participant, one chosen and paid
for by Lessee and the third appraiser chosen by the mutual consent of the first
two appraisers and paid for equally by Owner Participant and Lessee, the
appraisals of which three appraisers shall be averaged and such average shall
be deemed to be the fair market rental value of the Aircraft for all purposes
hereof; provided, however, that if the appraisal of one appraiser is more
disparate from the average of all three appraisals than each of the other two
appraisals, then the appraisal of such appraiser shall be excluded, the
remaining appraisals shall be averaged and such average shall be deemed to be
the fair market rental value of the Aircraft for all purposes hereof. If
either Owner Participant or Lessee shall fail to appoint an appraiser by the
date which is two months prior to the commencement of such Renewal Term or if
such two appraisers cannot agree on the amount of such appraisal and fail to
appoint a third appraiser by the date which is one month before the
commencement of such Renewal Term, then either Owner Participant or Lessee may
apply to any court having jurisdiction (including, without limitation, the
courts referred to in Section 13(b) of the Participation Agreement) to make
such appointment. For purposes of this Section 18.1, fair market rental value
shall be the cash rental obtainable in an arm's-length lease between an
informed and willing lessee (under no compulsion to lease) and an informed and
willing lessor (under no compulsion to lease) and shall be determined on the
assumptions that the Aircraft is in the United States of America, available for
use by Lessee, unencumbered by any renewal or purchase option contained in this
Lease, in the return condition required by Section 5 of this Lease and
otherwise in compliance with and subject to the terms and requirements of this
Lease. Stipulated Loss Value amounts that are payable during any such Renewal
Term shall be calculated as of the date of commencement of such Renewal Term
and shall be determined in the same manner referred to above based on the fair
market sales value of the Aircraft on such date determined in accordance with
Section 18.2(a); provided, that the Stipulated Loss Value payable during any
Fixed Rate Renewal Term shall not be less than 20% of Lessor's Cost.
SALE AND LEASE AGREEMENT [N602SW]
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<PAGE> 60
18.2 Purchase Options. (a) Lessee shall have the option to
purchase the Aircraft at the end of the Base Lease Term and each Renewal Term,
so long as no Lease Default (of the type described in Section 14.1 or 14.5) or
Lease Event of Default shall have occurred and be continuing on the date of
notice of exercise of such option. In order to exercise such option, Lessee
shall notify Lessor thereof in writing not more than nine months nor less than
six months prior to the end of the Base Lease Term or such Renewal Term, as
applicable (which notice shall be irrevocable). In such case, Lessee shall
purchase the Aircraft on the last Business Day of the Base Lease Term or such
Renewal Term, as applicable, at a purchase price equal to the fair market sales
value thereof as of such last Business Day. Such fair market sales value shall
be determined not later than three months prior to such last Business Day by
mutual consent of Owner Participant and Lessee or, if they shall be unable so
to agree, by three recognized independent aircraft appraisers, one chosen and
paid for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market sales value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two appraisals, then the appraisal
of such appraiser shall be excluded, the remaining appraisals shall be averaged
and such average shall be deemed to be the fair market sales value of the
Aircraft for all purposes hereof. If either Owner Participant or Lessee shall
fail to appoint an appraiser by the date which is two months prior to such last
Business Day or if such two appraisers cannot agree on the amount of such
appraisal and fail to appoint a third appraiser by the date which is one month
before such last Business Day, then either Owner Participant or Lessee may
apply to any court having jurisdiction to make such appointment. For purposes
of this Section 18.2, fair market sales value shall be the cash price
obtainable in an arm's-length sale between an informed and willing buyer (under
no compulsion to buy) and an informed and willing seller (under no compulsion
to sell) and shall be determined on the assumptions that the Aircraft is in the
United States of America, available for use by the buyer, unencumbered by any
renewal or purchase option contained in this Lease, in the return condition
required by Section 5 of this Lease and otherwise in compliance with the
requirements of this Lease. At the time of payment to Lessor, in funds of the
type specified in Section 3.6, of the full amount of the purchase price
pursuant to this Section 18.2(a), Lessee shall also pay to Lessor all unpaid
Interim Rent and Basic Rent due on or prior to the last day of the Term and
(without duplication) any other Rent which is due and payable through and
including the date of payment.
(b) So long as no Lease Default (of the type described in Section
14.1 or 14.5) or Lease Event of Default shall have occurred and be continuing
on the date of notice of exercise of such option, Lessee shall have the option
to purchase the Aircraft on January 1, 2015 or, if such date is not a Business
Day, on the next succeeding Business Day (the "Special Purchase Option Date")
at a purchase price equal to the percentage of Lessor's Cost indicated in Part
III of Schedule C (the "Special Purchase Price"); provided, that if there has
been an adjustment prior to the Special Purchase Option Date pursuant to
Section 3.7, the Special Purchase Price (including any installments thereof)
shall be at all times calculated to preserve the Owner Participant's Special
Purchase Price After-Tax Yield, but in any event subject to Section 3.7.2.
Such option to purchase the Aircraft shall be exercised upon written notice
from Lessee to Lessor given not more than nine months nor less than six months
prior to the Special Purchase Option Date. Such notice shall be irrevocable
and
SALE AND LEASE AGREEMENT [N602SW]
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shall contain the statement that this Lease will terminate upon the
consummation of such purchase. On the Special Purchase Option Date, Lessee
shall pay to Lessor, in funds of the type specified in Section 3.6, the full
amount of the Special Purchase Price pursuant to this Section 18.2(b), together
with all unpaid Interim Rent and Basic Rent due on or prior to the Special
Purchase Option Date (it being understood and agreed that Lessee shall not be
required to pay the portion, if any, of such Basic Rent designated in Exhibit C
hereto as payable in advance on such Special Purchase Option Date) and (without
duplication) any other Rent (including Premium, if any, and Break Amount, if
any, payable in respect of the Certificates) which is due and payable through
and including the date of payment; provided, that Lessee may elect on ten days'
prior notice to Lessor to pay the Special Purchase Price in installments as
Supplemental Rent, secured as provided herein, in which case Lessee shall pay
to Lessor, on each EBO Installment Payment Date, the amount determined by
multiplying Lessor's Cost by the percentage set forth opposite such EBO
Installment Payment Date in Part II of Exhibit C.
(c) In connection with any purchase pursuant to Section 18.2(b),
Lessee may, at its option, as part or all, as the case may be, of the
applicable purchase price, assume all of the rights and obligations of Lessor
under the Trust Indenture in respect of the Certificates (including, without
limitation, any scheduled payment of principal of or accrued interest on the
Certificates due and payable on such date of purchase but only to the extent
that any Basic Rent installment payable by Lessee on any such date of purchase
does not cover such scheduled payment of principal or accrued interest on the
Certificates and excluding any obligations or liabilities of Lessor in its
individual capacity incurred on or prior to such date of purchase, which
obligations and liabilities shall remain the sole responsibility of Lessor in
its individual capacity) in accordance with Section 7.03 of the Trust Indenture
and simultaneously shall pay to Lessor, in funds of the type specified in
Section 3.6, an amount equal to (i) the excess, if any, of the applicable
purchase price over an amount equal to the sum of the principal of, and accrued
and unpaid interest on, the Outstanding Certificates on such date of purchase,
after taking into account any payments of principal and interest made in
respect of the Outstanding Certificates on or before such date of purchase,
plus (ii) all unpaid Interim Rent and Basic Rent due and owing by Lessee
hereunder on or prior to such date of purchase and (without duplication) any
other Rent which is due and payable through and including the date of payment
(it being understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Basic Rent designated in Exhibit C hereto as payable
in advance on such date of purchase); provided, that Lessee may elect, by
notice to Lessor concurrently with notice of its election to assume such
obligations of Lessor, to pay the amount of the excess calculated pursuant to
clause (i) above in installments as Supplemental Rent, in which case (I) Lessee
shall pay to Lessor on the first EBO Installment Payment Date, the excess, if
any, of (x) the amount determined by multiplying Lessor's Cost by the
percentage set forth opposite such EBO Installment Payment Date in Part II of
Exhibit C hereto, over (y) the principal amount of the Certificates outstanding
on such date, and shall pay to Lessor on each subsequent EBO Installment
Payment Date the amount determined by multiplying Lessor's Cost by the
percentage set forth opposite such EBO Installment Payment Date in Part II of
Exhibit C hereto, and (II) Section 8(aa) of the Participation Agreement shall
apply.
(d) Upon payment of the applicable purchase price for the Aircraft
as set forth in this Section 18.2, together with the other amounts specified
above to be paid by Lessee concurrently with such purchase, Lessor will
Transfer to Lessee all of the Lessor's right, title and interest in and to
SALE AND LEASE AGREEMENT [N602SW]
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<PAGE> 62
the Aircraft, this Lease will terminate and, if Lessee shall not have assumed
the rights and obligations of the Owner Trustee under the Trust Indenture in
respect of the Certificates as provided for above, Lessor will request the
Indenture Trustee to execute and deliver to Lessee an appropriate instrument
releasing the Airframe and Engines with respect to which title is transferred
from the lien of the Trust Indenture and releasing the Purchase Agreement, the
Purchase Agreement Assignment, the Engine Purchase Agreement and the Engine
Purchase Agreement Assignment from the assignment and pledge, if any,
thereunder; provided, that if Lessee elects to pay the Special Purchase Price
in installments as provided for above (and shall have paid in full the
installment thereof due on the Special Purchase Option Date), the following
provisions shall also be applicable: (a) this Lease shall continue in full
force and effect (except as hereinafter provided) but shall constitute then and
thereafter a lease intended for security securing the payment of such
installments (and any appropriate UCC financing statements or amendments to UCC
financing statements shall be filed in order to indicate that this Lease is
intended for security purposes), (b) Lessor shall permit re- registration of
the Aircraft in the name of Lessee or a Sublessee on the Special Purchase
Option Date (it being understood that in all other respects the registration
provisions of the Operative Agreements shall remain fully applicable), (c) no
Basic Rent shall be payable after the Special Purchase Option Date, (d) the
Stipulated Loss Value of the Aircraft determined at any time after the Special
Purchase Option Date shall be equal to the aggregate amount of the installments
of the Special Purchase Price which have not been paid at the time of such
determination, (e) the reference to Basic Rent in Section 14.1 shall be deemed
to refer to installments of the Special Purchase Price and (f) in the event of
the occurrence and continuance of a Lease Event of Default after the Special
Purchase Option Date, Lessor shall be entitled to accelerate the unpaid
installments and exercise all the remedies available under applicable law to a
secured creditor with respect thereto.
(e) If Lessee shall have elected both (i) to assume all of the
rights and obligations of Lessor under the Trust Indenture in accordance with
Section 7.03 of the Trust Indenture and (ii) to pay to Lessor the installments
specified in the proviso to Section 18.2(c) of this Lease, then, as further
conditions precedent to those specified in paragraphs (c) and (d) of this
Section 18.2 to such assumption:
(1) the Indenture Trustee shall have received evidence reasonably
satisfactory to it that the Trust Indenture, after giving effect to the
transactions contemplated by Section 18.2(d) of this Lease, constitutes a first
priority and perfected security interest in the Aircraft, which evidence shall
include an opinion of the tenor contemplated by Section 7.03(h) of the Trust
Indenture; and (2) the Indenture Trustee and the Owner Trustee shall execute
and deliver an intercreditor agreement that covers the following matters:
(a) the Owner Trustee shall not, notwithstanding any
Lease Event of Default, exercise any remedy accorded to it pursuant to
Section 15 of this Lease until the Trust Indenture shall have been
discharged pursuant to Section 10.01 of the Trust Indenture;
(b) payment of Supplemental Rent in respect of the
installments specified in Section 18.2(c), and all other amounts owing
to the Owner Trustee (other than Excluded Payments) (collectively,
"Equity Payments"), shall be fully and unconditionally subordinated to
the payment in full in cash of principal, interest, Break Amount or
Premium, if any, and
SALE AND LEASE AGREEMENT [N602SW]
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<PAGE> 63
all other amounts owing to the Holders or the Indenture Trustee under
or in respect of the Certificates or the Trust Indenture
(collectively, "Debt Payments"), all pursuant to such terms of
subordination as shall be effectively and substantively equivalent to
the manner in which Debt Payments are paid or payable in priority to
the Equity Payments, and such other customary terms of subordination
as shall be reasonably required by the Indenture Trustee; and
(c) the Owner Trustee shall have the substantive
equivalent of the cure and buy-out rights specified in clauses (e)(i)
and (e)(ii) of Section 8.03 of the Trust Indenture.
Section 19. Successor Owner Trustee. Lessee agrees that in the
case of the appointment of any successor Owner Trustee pursuant to the terms of
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft for all purposes hereof without the necessity of any consent or
approval by Lessee (but such successor Owner Trustee shall qualify under the
terms of Section 8(b) of the Participation Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Trust Agreement, and such right may be exercised repeatedly as
long as this Lease shall be in effect.
Section 20. Right to Perform for Lessee. If Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor (subject
to the terms of the Trust Indenture) or Indenture Trustee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or
Indenture Trustee incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
Section 21. Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred, and be continuing, during the Term, Lessor will
not, through its own actions or inactions, interfere in the quiet enjoyment of
the Aircraft by Lessee or any Permitted Sublessee.
Section 22. Investment of Security Funds; Miscellaneous;
Amendment.
22.1 Investment of Security Funds. Subject always to the terms of
the Trust Indenture for so long as the Trust Indenture shall remain in effect,
any moneys required to be paid to or retained by Lessor which are not required
to be paid to Lessee pursuant to Section 10.6 or 11.4 solely because a Lease
Event of Default or Lease Default shall have occurred and be continuing, or
which are held by Lessor pending payment to Lessee pursuant to Section 11.4 or
which are required to be paid to Lessee pursuant to Section 10.3 or 11.4 after
completion of a replacement to be made pursuant to Section 10.1 or 10.2, shall,
until paid to Lessee as provided in Section 10 or 11 or applied as provided
herein or in the Trust Indenture or Trust Agreement, be invested by Lessor from
time to time as directed in writing by Lessee and at the expense and risk of
Lessee in the following
SALE AND LEASE AGREEMENT [N602SW]
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<PAGE> 64
securities (which shall mature within 91 days of the date of purchase thereof):
(a) direct obligations of the Government; (b) obligations fully guaranteed by
the Government; (c) open market commercial paper of any corporation
incorporated under the laws of the United States of America or any State
thereof rated P-1 or its equivalent by Moody's Investors Service and A-l or its
equivalent by Standard & Poor's Rating Group, a division of McGraw-Hill, Inc.;
or (d) certificates of deposit issued by, or bankers' acceptances of, or time
deposits or a deposit account with (i) the Owner Trustee or Indenture Trustee
(in their individual capacities) or (ii) any bank, trust company or national
banking association incorporated or doing business under the laws of the United
States of America or any state thereof having a combined capital and surplus of
at least $100,000,000. There shall be promptly remitted to Lessee or its order
any gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred
in connection with such investment) unless a Lease Event of Default or a Lease
Default (of the type described in Section 14.1 or 14.5) shall have occurred and
be continuing. Lessee will promptly pay to Lessor, on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other expenses, including Taxes, if any, incurred in connection
with such investment), such amount to be disposed of in accordance with the
terms of the Trust Indenture or the Trust Agreement.
22.2 Miscellaneous; Amendment. Lessee shall do, execute,
acknowledge and deliver, or shall cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances and assurances as Owner Trustee,
Indenture Trustee or any Participant shall reasonably require for accomplishing
the purposes of this Agreement and the other Operative Agreements. Any
provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. This Lease shall constitute an
agreement of lease, and nothing herein shall be construed as conveying to
Lessee any right, title or interest in or to the Aircraft, Airframe or Engines
except as a lessee only. The section and paragraph headings in this Lease and
the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN, AND EACH LEASE SUPPLEMENT AND
AMENDMENT HERETO IS INTENDED TO BE, DELIVERED IN THE STATE OF NEW YORK AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY
RESIDENTS THEREOF AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease and each Lease
Supplement and amendment hereto may be executed in several counterparts, each
of which shall be deemed an original, and all such counterparts shall
constitute one and the same instrument; provided, that no security interest in
Lessor's right, title and interest in and to this Agreement may be created
through the transfer or
SALE AND LEASE AGREEMENT [N602SW]
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<PAGE> 65
possession of any counterpart other than the counterpart identified, for
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart on the cover hereof.
Section 23. Permitted Foreign Air Carriers. Lessor may, in the
exercise of its reasonable business judgment, by written notice to Lessee,
remove any foreign air carrier from Exhibit D and Lessee may, by written notice
to Lessor, request that any foreign air carrier be added to Exhibit D, subject
to Lessor's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no deletion of an airline from the
list of Permitted Foreign Air Carriers pursuant hereto shall (i) affect any
existing sublease or other agreement providing for transfer of possession of
the Aircraft, Airframe, any Engine or Part which was permitted hereunder at the
time entered into, or (ii) preclude any subsequent renewal or extension of such
sublease or other agreement to which the Permitted Foreign Air Carrier under a
sublease is entitled by the terms thereof as originally in effect.
SALE AND LEASE AGREEMENT [N602SW]
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<PAGE> 66
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed and delivered as of the day and year first above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity except as expressly
stated herein, and otherwise solely as
Owner Trustee under the Trust Agreement
By: /s/ Pablo de la Canal
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By: /s/ John D. Owen
Treasurer
SALE AND LEASE AGREEMENT [N602SW]
<PAGE> 67
EXHIBIT A TO
LEASE AGREEMENT
SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____
THIS SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____, dated
______________, _____ between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner Trustee under that certain
Trust Agreement, dated as of July 1, 1995 (the "Trust Agreement"), between the
Owner Participant named therein and such Bank ("Lessor"), and SOUTHWEST
AIRLINES CO., a Texas corporation ("Lessee"),
RECITALS.
A. On ________________ an AC Form 8050-2 Bill of Sale from
Manufacturer (as defined in the Sale and Lease Agreement hereinbelow referred
to) in favor of Lessee covering the Aircraft hereinbelow described was recorded
by the Federal Aviation Administration as Conveyance Number ________;
B. Lessor and Lessee have heretofore entered into that certain
Sale and Lease Agreement dated as of July 1, 1995, as supplemented and amended
from time to time (herein called the "Lease Agreement" and the defined terms
therein being herein used with the same meaning), which Lease Agreement
provides in Section 2 for the execution of a Lease Supplement substantially in
the form hereof for the purpose of Lessee's selling to Lessor, and Lessor's
leasing back to Lessee, the Aircraft under the Lease Agreement as and when
delivered by Lessor to Lessee in accordance with the terms thereof; and
C. The Lease Agreement relates to the airframe and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation with the FAA on the date hereof as
one document.
______________________
All of the right, title and interest of Lessor in and to this Sale and
Lease Agreement Supplement has been assigned to and is subject to a security
interest in favor of Wilmington Trust Company, as Indenture Trustee. This Sale
and Lease Agreement Supplement has been executed in several counterparts. No
security interest in Lessor's right, title and interest in and to this Sale and
Lease Agreement Supplement may be created through the transfer or possession of
any counterpart other than the counterpart identified, for purposes of
perfection of a security interest in chattel paper (as such term is defined in
the UCC), as the original counterpart. [This is not the original counterpart.]
A-1
<PAGE> 68
In consideration of the premises and other good and sufficient
consideration, and pursuant to Section 2 of the Lease Agreement, Lessor and
Lessee hereby agree as follows:
1. Lessee hereby delivers and sells to Lessor and Lessor hereby
accepts and purchases from Lessee and in turn delivers and leases back to
Lessee, and Lessee hereby accepts and leases back from Lessor, under the Lease
Agreement, as herein supplemented, the following-described Boeing Model 737-3H4
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date
hereof consists of the following:
Airframe: U.S Registration Number N602SW and Manufacturer's Serial
No. 27953; and
Engines: Two CFM International Model CFM56-3-B1 Engines installed
thereon bearing Engine Manufacturer's Serial Numbers as follows: 858183 and
858184.
Each of the Engines described above has 750 or more rated takeoff
horsepower or the equivalent of such horsepower.
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms to Lessor that the Delivered Aircraft
has been or will be duly marked in accordance with the terms of Section 7.l.2
of the Lease and that Lessee has accepted the Delivered Aircraft for all
purposes hereof and of the Lease Agreement, including its being airworthy, in
accordance with specifications, in good working order and repair and without
defect or inherent vice in title, condition, design, operation or fitness for
use, whether or not discoverable by Lessee as of the date hereof, and free and
clear of all Liens except Permitted Liens; provided, however, that this Section
3 is without prejudice to the rights of Lessee or Lessor against Manufacturer
or any supplier of the Aircraft, Engines or any Part.
4. Lessor's Cost for the Delivered Aircraft is $32,000,000.
5. All the provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement, on and as of the date of
this Lease Supplement, to the same extent as if fully set forth herein.
6. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW
YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
A-2
<PAGE> 69
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered as of the date and year first
above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By ____________________________________
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By ___________________________________
Treasurer
A-3
<PAGE> 70
EXHIBIT B-1 TO
LEASE AGREEMENT
STIPULATED LOSS VALUE SCHEDULE
<TABLE>
<CAPTION>
SLV
Determination Stipulated Loss Value
Date (% of Lessor's Cost)
------------------ ---------------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
_________________________
* NOTE: If the event giving rise to an obligation to pay any Stipulated
Loss Value occurs and the actual date of the loss of tax benefits
resulting from such event shall be earlier or later than the date
assumed in calculating the Federal income tax consequences reflected
in the applicable Stipulated Loss Value, such Stipulated Loss Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-1-1
<PAGE> 71
EXHIBIT B-2 TO
LEASE AGREEMENT
TERMINATION VALUE SCHEDULE
<TABLE>
<CAPTION>
TV
Determination Termination Value
Date (% of Lessor's Cost)
-------------- --------------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
_________________________
* NOTE: If the event giving rise to an obligation to pay any
Termination Value occurs and the actual date of the loss of tax
benefits resulting from such event shall be earlier or later than the
date assumed in calculating the Federal income tax consequences
reflected in the applicable Termination Value, such Termination Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-2-1
<PAGE> 72
EXHIBIT C TO
LEASE AGREEMENT
PART I
RENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Percentage of
Lessor's Cost
-------------------------------------
Rent Payment
Date Total Advance Arrears
-------------- ----- ------- -------
<S> <C> <C> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
C-1
<PAGE> 73
EXHIBIT C TO
LEASE AGREEMENT
PART II
EBO INSTALLMENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
EBO Installment Percentage of
Payment Date Lessor's Cost
---------------- -------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
C-2
<PAGE> 74
EXHIBIT C TO
LEASE AGREEMENT
PART III
SPECIAL PURCHASE PRICE
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
C-3
<PAGE> 75
EXHIBIT D TO
LEASE AGREEMENT
PERMITTED FOREIGN AIR CARRIERS
<TABLE>
<S> <C>
Aer Lingus Icelandair
Aerolineas Argentinas Interflug
Air Afrique Japan Air Lines
Aeromexico Japan Air Lines System
Air Canada Japan TransOcean Air
Air Europa JAT
Air France KLM
Air Inter Korean Air
Air Jamaica LAN Chile
Air New Zealand Lauda Air
Air UK Lufthansa
Alitalia Luxair
All Nippon Airways Maersk
ALM Malaysian Airline System
Ansett Airlines of Australia Martinair
Australian Airlines Mexicana
Austrian Airlines Monarch Airlines
AVENSA Nordair
Bahamasair Olympic Airlines
Braathens S.A.F.E. Philippine Airlines
Britannia QANTAS Airways
British Airways Quebecair
British Midland Ryanair
BWIA Sabena
CAAC SAS
Canadian Airlines International Saudi Arabian Airlines
Cathay Pacific Airways Singapore Airlines
Cayman Airways Swissair
China Airlines TAP
Condor Flugdienst Thai Airways
DanAir Trans Australia Airlines
Egyptair Transavia Holland
El Al Transbrasil
Finnair VARIG
Garuda VIASA
Hopag Lloyd VIVA Air
Iberia
</TABLE>
D-1
<PAGE> 76
EXHIBIT E TO
LEASE AGREEMENT
ASSUMED INTEREST AMOUNTS
<TABLE>
<CAPTION>
Rent Payment Assumed Interest
Date Amount
-------------- ----------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
E-1
<PAGE> 77
APPENDIX A TO
LEASE AGREEMENT
CERTAIN RETURN CONDITIONS
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of its return of the Aircraft pursuant to Section 5.3, the
Airframe shall have at least one year remaining until the next scheduled "D"
check (which term, as used in this paragraph, shall refer to a "full D" check
accomplished at ten year intervals, rather than to any "quarter D" or "half D"
check which may be scheduled under the Maintenance Program then used by Lessee
or any Permitted Sublessee, as the case may be).
* * *
APP-1
<PAGE> 1
EXHIBIT 4.25
FIRST AMENDMENT TO
SALE AND LEASE AGREEMENT
dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
_______________________
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N602SW)
All right, title and interest of Lessor in and to the Sale and Lease
Agreement, as amended, and the Aircraft (including the Engines), has been
assigned to and is subject to a security interest in favor of WILMINGTON TRUST
COMPANY, as Indenture Trustee. This First Amendment to Sale and Lease
Agreement has been executed in several counterparts. No security interest in
Lessor's right, title and interest in and to this First Amendment to Sale and
Lease Agreement may be created through the transfer or possession of any
counterpart other than the counterpart identified, for purposes of perfection
of a security interest in chattel paper (as such term is defined in the UCC),
as the original counterpart. This is not the original counterpart.
<PAGE> 2
THIS FIRST AMENDMENT TO SALE AND LEASE AGREEMENT, dated as of October
1, 1995 (this "Amendment"), between SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee under that certain Trust Agreement establishing
Southwest Airlines 1995 Trust N602SW and dated as of July 1, 1995 ("Lessor"),
and SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), amends that certain
related Sale and Lease Agreement dated as of July 1, 1995 (the "Original
Lease") between Lessee and Lessor (the Original Lease, as supplemented by Sale
and Lease Agreement Supplement No. One thereto relating to the Aircraft
referred to below dated July 13, 1995 ("Lease Supplement No. 1") between Lessor
and Lessee, being referred to herein as the "Lease"),
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor, the
Aircraft, which consists of the following components: (i) Airframe: One (1)
Boeing 737-3H4, FAA Registration No. N602SW, Manufacturer's serial no. 27953;
and (ii) Engines: Two (2) CFM International Model CFM56-3-B1 Engines bearing,
respectively, Manufacturer's serial numbers 858183 and 858184; and
WHEREAS, a counterpart of the Original Lease, to which was attached
and made a part thereof a counterpart of Lease Supplement No. 1, was recorded
by the Federal Aviation Administration on August 21, 1995 and assigned
Conveyance No. EE010087; and
WHEREAS, in connection with the refinancing of the Certificates
pursuant to Section 18 of the Participation Agreement, the parties wish to
recalculate Interim Rent, Basic Rent, Stipulated Loss Value percentages and
Termination Value percentages and Special Purchase Price; and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to Exhibits B-1, B-2, C and E. Exhibits
B-1, B-2 and C to the Lease are hereby deleted in their entirety and replaced
with Exhibits B-1, B-2 and C, respectively, to this Amendment. Exhibit E to
the Lease is hereby deleted in its entirety.
Section 2. Amendments to Section 1. Section 1 of the Lease is
hereby amended in the following manner:
(a) The following defined terms are hereby added to
Section 1 in alphabetical order:
SALE AND LEASE AMENDMENT [N602SW]
-1-
<PAGE> 3
"`First Amendment to Sale and Lease Agreement' means that certain
First Amendment to Sale and Lease Agreement dated as of October 1, 1995 by and
between Lessee and Lessor relating to the Aircraft."
"`First Amendment to Participation Agreement' means that certain First
Amendment to Participation Agreement dated as of October 1, 1995 by and among
Lessee, Owner Participant, Owner Trustee, Indenture Trustee and Pass Through
Trustee relating to the Aircraft."
"`First Amendment to Trust Indenture' means that certain First
Amendment to Trust Indenture and Security Agreement, dated as of October 1,
1995 between Owner Trustee and Indenture Trustee relating to the Aircraft."
"`Pass Through Certificates' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trust Agreements' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trustee' is defined in Section 1.01(b) of the Trust
Indenture."
"`Pass Through Trust Supplement' means each of the four separate Trust
Supplements Nos. 1995-A1, 1995-A2, 1995- A3 and 1995-A4 dated as of October 1,
1995 between Lessee and Pass Through Trustee."
"`Refinancing Agreement' means that certain Refinancing Agreement
relating to the Aircraft dated as of October 1, 1995 by and among Lessee, Owner
Participant, Original Loan Participant, Owner Trustee, Indenture Trustee and
Pass Through Trustee."
(b) The definition of "Indemnified Parties" is hereby
amended to be and read in its entirety as follows:
"`Indemnified Parties' means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N602SW
Certificate (including without limitation the Pass Through Trustee), (v) the
Estate and the Trust Indenture Estate, (vi) the Original Loan Participant,
(vii) the respective Affiliates, successors and assigns of the foregoing and
(viii) the respective directors, officers, employees, agents, partners and
servants of the foregoing."
(c) The definition of "Lease", "this Lease", "this
Agreement", "hereby", "herein", "hereof", and "hereunder" is hereby amended to
be and read in its entirety as follows:
"`Lease', `this Lease', `this Agreement', `hereby', `herein',
`hereof', `hereunder' or other words mean this Sale and Lease Agreement as
amended by the First Amendment to Sale and Lease Agreement, and as supplemented
by one or more Lease Supplements and as may be further amended from time to
time."
SALE AND LEASE AMENDMENT [N602SW]
-2-
<PAGE> 4
(d) The definition of "Operative Agreements" is hereby
amended to be and read in its entirety as follows:
"`Operative Agreements' means this Lease, each Lease Supplement, the
Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement,
the Manufacturer's Consent and the Refinancing Agreement, including any
consents included in or attached to any thereof."
(e) The definition of "Participant" is hereby amended to
be and read in its entirety as follows:
"`Participant' means Owner Participant and its successors and
permitted assigns."
(f) The definition of "Participation Agreement" is hereby
amended to be and read in its entirety as follows:
"`Participation Agreement' means the Participation Agreement relating
to the Aircraft, dated as of July 1, 1995, among Lessee, Owner Participant,
Original Loan Participant, Lessor and Indenture Trustee as amended by the First
Amendment to Participation Agreement and as may be further amended from time to
time."
(g) The definition of "Special Purchase Price After-Tax
Yield" means the after-tax economic yield, total aggregate after-tax cash flow
and general pattern of book earnings expected by the Owner Participant with
respect to the Aircraft through the Special Purchase Option Date if the Special
Purchase Option were exercised and the Special Purchase Option Price paid in
installments, utilizing the multiple investment sinking fund method of analysis
and the same assumptions as used by Owner Participant (including the Tax
Assumptions set forth in Section 2 of the Tax Indemnity Agreement) in its
economic analysis of the transaction as of the Delivery Date.
(h) The definition of "Stipulated Loss Value" is hereby
amended to be and read in its entirety as follows:
"`Stipulated Loss Value' means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment. Stipulated Loss
Value may be subject to adjustment in accordance with Section 3.7 and Section
18.2(d) of this Agreement."
(i) The definition of "Termination Value" is hereby
amended to be and read in its entirety as follows:
SALE AND LEASE AMENDMENT [N602SW]
-3-
<PAGE> 5
"`Termination Value' means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined. Termination Value may be subject to adjustment in accordance with
Section 3.7 of this Agreement."
(j) The definition of "Trust Indenture" is hereby amended
to be and read in its entirety as follows:
"`Trust Indenture' means the Trust Indenture and Security Agreement,
dated as of July 1, 1995, between Owner Trustee and Indenture Trustee, relating
to the Aircraft, as supplemented by the Trust Agreement and Trust Indenture and
Security Agreement Supplement, dated July 13, 1995, and as amended by the First
Amendment to Trust Indenture and as may be further amended or supplemented from
time to time."
(k) The definitions of "Assumed Interest Rate," "Assumed
Interest Amount" and "Rent Differential Amount" are hereby deleted in their
entirety.
Section 3. Amendments to Section 3. Section 3 of the Lease is
hereby amended in the following manner:
(a) Section 3.3 is hereby amended to be and read in its
entirety as follows:
"3.3 Interim and Basic Rent. No Interim Rent or Basic
Rent shall be paid during the Preliminary Lease Term. Lessee hereby agrees to
pay to Lessor (i) Interim Rent for the Interim Lease Term with respect to the
Aircraft on the first Rent Payment Date set forth in Part I of Exhibit C, and
(ii) Basic Rent for the Base Lease Term with respect to the Aircraft on each
subsequent Rent Payment Date set forth in Part I of Exhibit C, in each case in
an amount equal to the percentage of Lessor's Cost of the Aircraft set forth in
Part I of Exhibit C opposite such Rent Payment Date, subject to the terms of
the next succeeding paragraph of this Section 3.3 and Section 3.7. Each
installment (or portion of an installment) of Interim Rent or Basic Rent under
the heading `Advance' in Part I of Exhibit C payable on a Rent Payment Date
shall relate to the respective Lease Period immediately following such Rent
Payment Date, and each installment (or portion of an installment) of Interim
Rent or Basic Rent under the heading `Arrears' in Part I of Exhibit C payable
on a Rent Payment Date shall relate to the respective Lease Period immediately
preceding such Rent Payment Date.
"Anything contained in the Participation Agreement or this
Lease or any other Operative Agreement to the contrary notwithstanding, (a)
each installment of Basic Rent payable under this Lease, whether or not
adjusted in accordance with the provisions of Section 3.7 hereof, shall be,
under any circumstances and in any event, in an amount at least sufficient to
pay in full, on such Rent Payment Date, any scheduled payments then required to
be made on account of the principal of and interest on the Certificates, and
(b) Stipulated Loss Value, Termination Value and, unless Lessee shall have
assumed the Certificates pursuant to Section 18.2(c) hereof, the Special
Purchase Price and the initial installment of the Special Purchase Price if
paid in installments, in each case whether or not adjusted in accordance with
the provisions of Section 3.7, as of any date of determination thereof,
together with any amount of
SALE AND LEASE AMENDMENT [N602SW]
-4-
<PAGE> 6
Basic Rent required to be paid on such date and all other amounts payable on
such date, shall equal under any circumstances and in any event, an amount at
least sufficient to pay in full any payments then required to be made on
account of the principal of and interest (including, without limitation any
interest on overdue principal and, to the extent permitted by applicable law,
interest), and Premium, if any, on the Certificates and all amounts which would
be payable prior thereto or on a parity therewith if Section 3.03 of the Trust
Indenture were applicable at the time of such payment."
(b) Section 3.4 of the Lease is hereby amended to be and
read in its entirety as follows:
"3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Premium (if any) payable on the Certificates, amounts due pursuant to
Section 15.05 of the Trust Indenture and each other amount required to be paid
(other than principal and interest on the Certificates) by Lessor as Owner
Trustee under the Trust Indenture, on the same date that such amounts are due
under the Trust Indenture and as provided in Section 3.6."
(c) Section 3.7.1 of the Lease is hereby amended to be
and read in its entirety as follows:
"3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a) of the
Participation Agreement paid by Owner Participant in connection with the
closing of this transaction on the Delivery Date are equal to an amount which
is other than 0.361787% of Lessor's Cost, (b) the Transaction Costs referred to
in Section 16(a) of the Participation Agreement paid by Owner Participant in
connection with the initial refinancing or refunding of the Certificates
pursuant to Section 18 of the Participation Agreement are equal to an amount
which is other than 0.623295% of Lessor's Cost, (c) a refinancing or refunding
of the Certificates pursuant to Section 17 of the Participation Agreement
occurs, or (d) any recalculation of Interim Rent, Basic Rent, Stipulated Loss
Value, Termination Value and the Special Purchase Price is required by the
terms of the Tax Indemnity Agreement, then in each case, the Interim Rent and
Basic Rent percentages set forth in Exhibit C, the Stipulated Loss Value
percentages set forth in Exhibit B-1 and the Termination Value percentages set
forth in Exhibit B-2 shall be recalculated by Owner Participant (i) in the case
of a recalculation pursuant to clause (a) or (b), on or prior to July 13, 1996,
(ii) in the case of a recalculation pursuant to clause (c), prior to the
relevant Refinancing Date or (iii) in the case of a recalculation pursuant to
clause (d), prior to the Rent Payment Date next following the event described
in clause (d), in each case in order to: (A) maintain Net Economic Return and
(B) minimize the Net Present Value of Rents to the extent possible consistent
with clause (A). In addition, in the event of an adjustment pursuant to this
Section 3.7, the Special Purchase Price (including any installments thereof)
shall be recalculated in accordance with the terms of Section 18.2(b)."
(d) The first sentence of Section 3.8 is hereby amended to be
and read in its entirety as follows:
SALE AND LEASE AMENDMENT [N602SW]
-5-
<PAGE> 7
"3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received the
Deferred Equity Amount on the Deferred Equity Date, then Lessee shall
pay to the Indenture Trustee on behalf of the Owner Participant on the
Deferred Equity Date an amount equal to the amount not so paid by the
Owner Participant (such amount herein referred to as an "Advance")."
Section 4. Amendment to Section 7. Section 7.3.3 of the Lease
is hereby amended to delete all references therein to the Original Loan
Participant.
Section 5. Amendment to Section 10. Section 10.1.3 of the Lease
is hereby amended to be and read in its entirety as follows:
"10.1.3 Payment of Stipulated Loss Value and Rent. On any Business
Day designated by Lessee upon 30 days' irrevocable notice to Lessor and the
Indenture Trustee, but in no event later than the earlier of (i) the 180th day
following the date of the occurrence of such Event of Loss or (ii) the later of
15 days following receipt of insurance proceeds with respect to such occurrence
or the date Lessee shall have made or shall have deemed to have made its
election under Section 10.1.1 to comply with Section 10.1.3, Lessee shall pay
to Lessor in the manner and in funds of the type specified in Section 3.6, (A)
the Stipulated Loss Value for the Aircraft, determined as of the date of
payment (as described in the definition of Stipulated Loss Value), (B) all
unpaid Interim Rent and Basic Rent due on or prior to the SLV Determination
Date with reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the portion, if
any, of such Interim Rent or Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date), and (C) (without
duplication) any other Rent which is due and payable through and including the
date of payment."
Section 6. Amendments to Section 11.
(a) Section 11.5 of the Lease is hereby amended to delete
all references therein to the Original Loan Participant.
(b) Section 11.6 of the Lease is hereby amended to be and
read in its entirety as follows:
"11.6 Lessor's Right to Maintain Insurance. In the event that Lessee
shall fail to maintain or cause to be maintained insurance as herein provided,
Lessor, Indenture Trustee, Owner Participant or, so long as Pass Through
Trustee is a Holder, Pass Through Trustee, may at its option (but shall not be
obligated to) provide such insurance and in such event, Lessee shall, upon
demand, reimburse such Person, as Supplemental Rent, for the cost thereof. No
such payment, performance or compliance shall be deemed to cure any Lease
Default hereunder or otherwise relieve Lessee of its obligations with respect
thereto."
Section 7. Amendment to Section 15. Section 15.1.4 of the Lease
is hereby amended to be and read in its entirety as follows:
SALE AND LEASE AMENDMENT [N602SW]
-6-
<PAGE> 8
"15.1.4 Liquidated Damages upon Sale. If Lessor, pursuant to Section
15.1.2 or applicable law, shall have sold the Aircraft, Lessor, in lieu of
exercising its rights under Section 15.1.3 with respect to the Aircraft, may,
if Lessor shall so elect, upon giving written notice to Lessee, cause Lessee to
pay Lessor, and Lessee shall pay to Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Interim Rent, Basic Rent or Renewal Rent, as the case may be, due after the
date of such sale), any unpaid Interim Rent, Basic Rent or Renewal Rent, as the
case may be, due on or prior to the SLV Determination Date (it being understood
and agreed that Lessee shall not be required to pay the portion, if any, of
such Interim Rent or Basic Rent designated in Exhibit C hereto as payable in
advance on such SLV Determination Date) on or immediately preceding such date
of sale plus the amount of any deficiency between the net proceeds of such sale
or (if such sale is a private sale and is made to Lessor, Indenture Trustee, a
Participant or any Affiliate thereof) between the fair market sales value of
the Aircraft, determined as of the date of such sale as hereinafter provided in
this Section 15, and the Stipulated Loss Value of the Aircraft, computed as of
the date of such sale, together with interest, if any, on such amount and such
unpaid Interim Rent, Basic Rent or Renewal Rent at the Overdue Rate from the
date of such sale, to the date of payment in full; or"
Section 8. Ratification. Except as amended hereby, the Lease
continues and shall remain in full force and effect in all respects.
Section 9. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same instrument.
SALE AND LEASE AMENDMENT [N602SW]
-7-
<PAGE> 9
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Sale and Lease Agreement to be duly delivered in the State of New
York and executed as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By: /s/ Philip G. Kane, Jr.
Corporate Trust Officer
SOUTHWEST AIRLINES CO., Lessee
By: /s/ John D. Owen
Treasurer
Approved and Consented to:
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Senior Financial Services Officer
SALE AND LEASE AMENDMENT [N602SW]
-8-
<PAGE> 10
EXHIBIT B-1 TO
SALE AND LEASE AGREEMENT
Stipulated Loss Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N602SW]
B-1
<PAGE> 11
EXHIBIT B-2 TO
SALE AND LEASE AGREEMENT
Termination Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N602SW]
B-2
<PAGE> 12
EXHIBIT C TO
SALE AND LEASE AGREEMENT
Part I
Rent Payment Schedule
Part II
EBO Installment Payment Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
Part III
Special Purchase Price
51.94115386% of Lessor's Cost
SALE AND LEASE AMENDMENT [N602SW]
C-1
<PAGE> 1
EXHIBIT 4.26
________________________________________________________________________________
TRUST AGREEMENT
dated as of July 1, 1995
between
NATIONSBANK, N.A.
Owner Participant
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N602SW
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01 Authority to Execute Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.01 Purchase of Certain Rights in the Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.02 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.01 Distribution of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Payments to the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Payments to Owner Trustee; Other Parties . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Certain Distributions to the Owner Participant . . . . . . . . . . . . . . . . . . . . . 5
(d) Excluded Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Legal Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.02 Method of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V
DUTIES OF THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.01 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.02 Action Upon Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.03 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.04 No Duties Except as Specified in Trust Agreement or Instructions . . . . . . . . . . . . . . . 7
SECTION 5.05 No Action Except Under Specified Documents or Instructions . . . . . . . . . . . . . . . . . . 7
SECTION 5.06 No Power to Reinvest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI
THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.01 Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.02 Absence of Certain Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.03 No Representations or Warranties as to Certain Matters . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.04 No Segregation of Monies; Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.05 Reliance Upon Certificates, Counsel and Agents . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.06 Not Acting in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.07 Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.08 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII
INDEMNIFICATION OF SBC
BY OWNER PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7.01 Owner Participant to Indemnify SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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<TABLE>
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ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST . . . . . . . . . . . . . . . . . 12
SECTION 8.01 Transfer of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES . . . . . . . . . . . . . . . . . . 12
SECTION 9.01 Resignation of Owner Trustee: Appointment of Successor . . . . . . . . . . . . . . . . . . . . 12
(a) Resignation or Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Execution and Delivery of Documents, Etc. . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 9.02 Co-Trustees and Separate Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . 15
SECTION 10.01 Supplements and Amendments and Delivery Thereof . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Delivery of Amendments and Supplements to Certain Parties . . . . . . . . . . . . . . . 15
SECTION 10.02 Discretion as to Execution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.03 Distribution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.04 Absence of Requirement as to Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.01 Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.02 Owner Participant Has No Legal Title in Trust Estate . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.03 Assignment, Sale, Etc. of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.04 Trust Agreement for Benefit of Certain Parties Only . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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SECTION 11.05 [Intentionally reserved for potential future use] . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.08 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.10 Binding Effect, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.11 Headings; References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.13 Performance by the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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TRUST AGREEMENT
This TRUST AGREEMENT, dated as of July 1, 1995, is between
NATIONSBANK, N.A., a national banking association, and SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its
individual capacity, together with its successors and permitted assigns, "SBC",
and otherwise not in its individual capacity but solely as trustee hereunder
with its permitted successors and assigns, the "Owner Trustee").
W I T N E S S E T H:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01 Certain Definitions. Unless the context
shall otherwise require and except as contained in this Section 1.01, the
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings assigned thereto in the Lease (as hereinafter defined) or,
if not defined in the Lease, in the Trust Indenture (as defined in the Lease),
for all purposes hereof. All definitions contained in this Section 1.01 shall
be equally applicable to both the singular and plural forms of the terms
defined. For all purposes of this Trust Agreement the following terms shall
have the following meanings:
"Commitment" has the meaning ascribed to such term in Section
1 of the Participation Agreement.
"Excluded Payments" has the meaning ascribed to such term in
the Trust Indenture.
"Indenture Event of Default" has the meaning ascribed to such
term in the Trust Indenture.
"Lease" means that certain Sale and Lease Agreement, dated as
of the date hereof, relating to that certain Boeing 737-3H4 aircraft bearing
U.S. Registration No. N602SW and Manufacturer's serial number 27953, to be
entered into by the Owner Trustee and Lessee concurrently with the execution
and delivery of this Trust Agreement, as said Sale and Lease Agreement may from
time to time be supplemented or amended, or the terms thereof waived or
modified, to the extent permitted by, and in accordance with, the terms of this
Trust Agreement. The term "Lease" shall also include said Sale and Lease
Agreement as supplemented by each Lease Supplement from time to time entered
into pursuant to the terms of the Lease.
"Lease Event of Default" has the meaning ascribed to such term
in the Lease.
"Lessee" means Southwest Airlines Co., a Texas corporation,
and its permitted successors and assigns under the Lease and the Participation
Agreement.
TRUST AGREEMENT [N602SW]
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"Owner Participant" means and includes (i) Nationsbank, N.A.,
a national banking association, as the original Owner Participant, and (ii) the
successors and permitted assigns of Nationsbank, N.A.
"Trust Estate" means all estate, right, title and interest of
the Owner Trustee in and to the Aircraft, the Participation Agreement, the
Lease, any Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Bills of Sale and the other Operative Agreements including,
without limitation, all amounts of Basic Rent and Supplemental Rent including,
without limitation, insurance proceeds (other than insurance proceeds payable
to or for the benefit of the Owner Trustee, for its own account or in its
individual capacity, the Owner Participant, the Holders or the Indenture
Trustee), all payments and proceeds as a result of the sale, lease or other
disposition of the Aircraft, the Airframe, any Engine or any Part thereof, and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (except amounts owing to the Owner Participant, to the Indenture
Trustee, to the Owner Trustee, in its individual capacity, or to a Holder, or
to any of their respective directors, officers, employees, servants and agents,
pursuant to Section 7 of the Participation Agreement) including, without
limitation, any and all payments and proceeds received by the Owner Trustee
after the termination of the Lease with respect to the Aircraft resulting from
the sale, lease or other disposition thereof, subject, however to the
provisions of and the Lien created by the Trust Indenture. Notwithstanding the
foregoing, "Trust Estate" shall (i) not include any Excluded Payment and (ii)
include all property and rights purported to be included in the Trust Indenture
Estate.
"Trust Indenture Estate" has the meaning ascribed to the term
"Indenture Estate" in the Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the
Trust Indenture.
"Trust Supplement" means a supplement to this Trust Agreement
and to the Trust Indenture in substantially the form of Exhibit C to the Trust
Indenture.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST
SECTION 2.01 Authority to Execute Documents. The Owner
Participant hereby authorizes and directs the Owner Trustee to, and the Owner
Trustee agrees for the benefit of the Owner Participant that it will, on or
before the Delivery Date, execute and deliver the Operative Agreements to which
it is a party and any other agreements, instruments or documents to which the
Owner Trustee is a party in the respective forms thereof which are delivered
from time to time by the Owner Participant to the Owner Trustee for execution
and delivery and, subject to the terms hereof, to exercise its rights (upon
instructions received from the Owner Participant) and perform its duties under
said Operative Agreements in accordance with the terms thereof.
TRUST AGREEMENT [N602SW]
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SECTION 2.02 Declaration of Trust. SBC hereby declares
that it will hold as Owner Trustee the Trust Estate upon the trusts hereinafter
set forth for the use and benefit of the Owner Participant, subject, however,
to the Lien created by the Trust Indenture.
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES
SECTION 3.01 Purchase of Certain Rights in the Aircraft.
The Owner Participant hereby authorizes and directs the Owner Trustee to, and
the Owner Trustee agrees for the benefit of the Owner Participant that it will,
on the Delivery Date, subject to due compliance with the terms of Section 3.02
hereof:
(a) purchase the Aircraft pursuant to the Lease;
(b) accept from Lessee the Lessee Warranty Bill of Sale
and the Lessee FAA Bill of Sale and the invoice furnished pursuant to
the Participation Agreement;
(c) execute and deliver a Lease Supplement covering the
Aircraft;
(d) execute and deliver each of the other Operative
Agreements to which the Owner Trustee is to be a party including,
without limitation, a Trust Supplement covering the Aircraft;
(e) execute, issue and deliver to the Original Loan
Participant one or more authenticated Certificates in the amounts and
otherwise as provided in Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred
to in Section 4(a)(vi) of the Participation Agreement, together with
all other agreements, documents and instruments referred to in Section
4 of the Participation Agreement to which the Owner Trustee is to be a
party;
(g) effect the registration of the Aircraft in the name
of the Owner Trustee by filing or causing to be filed with the FAA:
(i) the Lessee FAA Bill of Sale; (ii) an application for registration
of the Aircraft in the name of the Owner Trustee (including, without
limitation, an affidavit from the Owner Trustee in compliance with the
provisions of 14 C.F.R. Section 47.7(c)(2)(ii)); and (iii) this Trust
Agreement;
(h) authorize a representative or representatives of the
Owner Trustee (who shall be an employee or employees of Lessee) to
accept delivery of the Aircraft pursuant to the Participation
Agreement; and
(i) execute and deliver all such other instruments,
documents or certificates and take all such other actions in
accordance with the directions of the Owner Participant, as the
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Owner Participant may deem necessary or advisable in connection with
the transactions contemplated hereby.
SECTION 3.02 Conditions Precedent. The rights and
obligations of the Owner Trustee to take the actions required by Section 3.01
hereof with respect to the Aircraft shall be subject to the following
conditions precedent: (a) the Owner Participant shall have made the full
amount of its Commitment with respect to the Aircraft available to the Owner
Trustee, in immediately available funds, in accordance with Sections 1 and 2 of
the Participation Agreement; and (b) the Owner Participant shall have notified
the Owner Trustee that the terms and conditions of Section 4 of the
Participation Agreement, insofar as they relate to conditions precedent to
performance by the Owner Participant of its obligations thereunder, shall have
been either fulfilled to the satisfaction of or waived by the Owner
Participant. The Owner Participant shall, by instructing the Owner Trustee to
release the funds then held by the Owner Trustee as provided in Section 2 of
the Participation Agreement, be deemed to have found satisfactory to it, or
waived, all such conditions precedent.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.01 Distribution of Payments.
(a) Payments to the Indenture Trustee. Until the Trust
Indenture shall have been discharged pursuant to Section 10.01 thereof or
defeased pursuant to Section 10.05 thereof, all Rent, insurance proceeds and
requisition or other payments of any kind included in the Trust Estate (other
than Excluded Payments and other than payments received from the Indenture
Trustee under the Trust Indenture) payable to the Owner Trustee shall be
payable directly to the Indenture Trustee (and any of the same which are
received by the Owner Trustee shall upon receipt be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind) for distribution
in accordance with the provisions of Article III of the Trust Indenture;
provided, however, that any payments received by the Owner Trustee from (i) the
Lessee with respect to the Owner Trustee's fees and disbursements, or (ii) the
Owner Participant pursuant to Article VII hereof shall not be paid over to the
Indenture Trustee but shall be retained by the Owner Trustee and applied toward
the purpose for which such payments were made.
(b) Payments to Owner Trustee; Other Parties. After the
Trust Indenture shall have been discharged pursuant to Section 10.01 thereof or
defeased pursuant to Section 10.05 thereof, any payment of the type referred to
in Section 4.01(a) hereof (other than Excluded Payments) received by the Owner
Trustee, any payments received from the Indenture Trustee other than as
specified in Section 4.01(c) or (d) hereof and any other amount received as
part of the Trust Estate and for the application or distribution of which no
provision is made herein, shall be distributed forthwith upon receipt by the
Owner Trustee in the following order of priority: first, so much of such
payment as shall be required to reimburse the Owner Trustee for any expenses
not otherwise reimbursed as to which the Owner Trustee is entitled to be so
reimbursed by the Owner Participant pursuant to the provisions hereof shall be
retained by the Owner Trustee; second, so
TRUST AGREEMENT [N602SW]
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much of the remainder for which provision as to the application thereof is
contained in the Lease or any of the other Operative Agreements shall be
applied and distributed in accordance with the terms of the Lease or such other
Operative Agreement; and third, the balance, if any, shall be paid to the Owner
Participant.
(c) Certain Distributions to the Owner Participant. All
amounts from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the Trust Indenture shall, if paid to the Owner
Trustee, be distributed by the Owner Trustee to the Owner Participant in
accordance with the provisions of Article III of the Trust Indenture.
(d) Excluded Payments. Any Excluded Payments received by
the Owner Trustee shall be paid by the Owner Trustee to the Person to whom such
Excluded Payments are payable under the provisions of the Participation
Agreement, the Tax Indemnity Agreement or the Lease.
(e) Legal Title. The Owner Participant shall have no
legal title to the Aircraft or any other portion of the Trust Estate.
SECTION 4.02 Method of Payments. The Owner Trustee shall
make distributions or cause distributions to be made to (i) the Owner
Participant pursuant to this Article IV by transferring by wire transfer in
immediately available funds on the day received (or on the next succeeding
Business Day if the funds to be so distributed shall not have been received by
the Owner Trustee by 3:00 p.m., New York City time), the amount to be
distributed as provided in Schedule I to the Participation Agreement or to such
account or accounts of the Owner Participant as the Owner Participant may
designate from time to time in writing to the Owner Trustee and (ii) the
Indenture Trustee pursuant to this Article IV by transferring the amount to be
distributed to the Indenture Trustee in the manner specified in the Trust
Indenture.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01 Notice of Event of Default. If the Owner
Trustee shall have knowledge of a Lease Event of Default or Indenture Event of
Default (or an event which with the passage of time or the giving of notice or
both would constitute a Lease Event of Default or an Indenture Event of
Default), the Owner Trustee shall give to the Owner Participant and Lessee
prompt telephonic or facsimile notice thereof followed by prompt written
confirmation thereof by certified mail, postage prepaid, provided, that (i) in
the case of an event which with the passage of time would constitute an
Indenture Event of Default referred to in paragraph (b) of Section 8.01 of the
Trust Indenture, such notice shall in no event be furnished later than ten (10)
days after the Owner Trustee shall first have knowledge of such event and (ii)
in the case of a misrepresentation by the Owner Trustee which with the passage
of time would constitute an Indenture Event of Default referred to in paragraph
(c) of Section 8.01 of the Trust Indenture, such notice shall in no event be
furnished later than ten (10) days after the Owner Trustee shall first have
knowledge of such event. The notice shall set forth in reasonable detail the
facts or circumstances known to it with respect to such Lease Event of Default
or Indenture Event of Default. Subject to the terms of Section 5.03 hereof,
the Owner Trustee shall take such action or shall refrain from taking such
action, not
TRUST AGREEMENT [N602SW]
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inconsistent with the provisions of the Trust Indenture or the other Operative
Agreements, with respect to such Lease Event of Default, Indenture Event of
Default or other event as the Owner Trustee shall be directed in writing by the
Owner Participant. For all purposes of this Trust Agreement, the Lease and the
other Operative Agreements, in the absence of actual knowledge by a responsible
officer of the Trust Office of the Owner Trustee in his or her capacity as
such, the Owner Trustee shall not be deemed to have knowledge of a Lease Event
of Default, Indenture Event of Default or other event referred to in this
Section 5.01 unless notified in writing thereof by the Indenture Trustee, the
Owner Participant or Lessee.
SECTION 5.02 Action Upon Instructions. Subject to the
terms of Sections 5.01 and 5.03 hereof and to the terms of the other Operative
Agreements, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following
actions, not inconsistent with the provisions of the Lease and the Trust
Indenture, as may be specified in such instructions: (i) give such notice or
direction or exercise such right, remedy or power hereunder or take such other
actions under any of the Operative Agreements to which the Owner Trustee is a
party or in respect of all or any part of the Trust Estate as shall be
specified in such instructions; (ii) take such action to preserve or protect
the Trust Estate (including the discharge of Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Agreements to be satisfactory to the
Owner Trustee, it being understood that without written instructions of the
Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it; (iv) subject to the rights of Lessee under the Operative
Agreements, after the expiration or earlier termination of the Lease, convey
all of the Owner Trustee's right, title and interest in and to the Aircraft for
such amount, on such terms and to such purchaser or purchasers as shall be
designated in such instructions, or net lease the Aircraft to such lessee or
lessees and on such terms as shall be designated in such instructions or
deliver the Aircraft to the Owner Participant in accordance with such
instructions; and (v) take such other action as is requested by the Owner
Participant, which action is not inconsistent with the terms of the Operative
Agreements.
SECTION 5.03 Indemnification. The Owner Trustee shall not
be required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof unless the Owner Trustee shall have
been indemnified by the Owner Participant, in manner and form satisfactory to
the Owner Trustee, against any liability, cost or expense (including reasonable
counsel fees and disbursements) which may be incurred in connection therewith
other than that which results from the willful misconduct or gross negligence
of the Owner Trustee; and, if the Owner Participant shall have directed the
Owner Trustee to take any such action or refrain from taking any action, the
Owner Participant agrees to furnish such indemnity as shall be required and, in
addition to the extent not otherwise paid pursuant to the provisions of the
Lease or of the Participation Agreement, to pay the reasonable fees and charges
of the Owner Trustee for the services performed or to be performed by it
pursuant to such direction. The Owner Trustee shall not be required to take
any action under Section 5.01 (other than the giving of the notices referred to
therein) or 5.02 hereof if the Owner Trustee shall reasonably determine, or
shall have been advised by counsel, that such action is contrary to the terms
of any of the Operative Agreements to which the Owner Trustee is a party, or is
otherwise contrary to law and the Owner Trustee shall have delivered to the
Owner Participant written notice of the basis of its refusal to act.
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SECTION 5.04 No Duties Except as Specified in Trust
Agreement or Instructions. The Owner Trustee shall not have any duty or
obligation to manage, control, use, sell, dispose of or otherwise deal with the
Aircraft or any other part of the Trust Estate, or to otherwise take or refrain
from taking any action under, or in connection with any of the Operative
Agreements to which the Owner Trustee is a party, except (i) as expressly
required by the terms of any of the Operative Agreements to which the Owner
Trustee is a party, or (ii) (to the extent not inconsistent with the provisions
of the Trust Indenture, as expressly provided by the terms hereof) as expressly
provided in a written instruction from the Owner Participant received pursuant
to the terms of Section 5.01 or 5.02 hereof, and no implied duties or
obligations shall be read into this Trust Agreement against the Owner Trustee.
SBC agrees that it will, in its individual capacity and at its own cost or
expense (but without any right of indemnity in respect of any such cost or
expense under Section 5.03 or 7.01 hereof), promptly take such action as may be
necessary to duly discharge and satisfy in full all Lessor Liens attributable
to it in its individual capacity which it is required to discharge pursuant to
Section 8(g) of the Participation Agreement and otherwise comply with the terms
of said Section binding upon it.
SECTION 5.05 No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall have no power, right or authority to,
and the Owner Trustee agrees that it will not, manage, control, use, sell,
dispose of or otherwise deal with the Aircraft or any other part of the Trust
Estate except (i) as expressly required by the terms of any of the Operative
Agreements to which the Owner Trustee is a party, (ii) as expressly provided by
the terms hereof, or (iii) as expressly provided in written instructions from
the Owner Participant pursuant to Section 5.01 or 5.02 hereof, but subject
always to the provisions of and Lien created by the Trust Indenture.
SECTION 5.06 No Power to Reinvest. Notwithstanding
anything contained in Section 5.01, 5.02, 5.04 or 5.05 to the contrary, the
Owner Trustee shall not be authorized and shall have no power to reinvest the
proceeds of the Trust Estate or to otherwise "vary the investment" of the Owner
Participant within the meaning of Treasury Regulations Section
301.7701-4(c)(1); provided, however, that nothing contained in this Section
5.06 shall limit the indemnity provided in Section 5.03 hereof or any
requirement pertaining to the investment of funds in the Operative Agreements.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01 Acceptance of Trusts and Duties. SBC accepts
the trusts hereby created and agrees to perform the same but only upon the
terms hereof applicable to it. The Owner Trustee also agrees to receive and
disburse all monies received by it constituting part of the Trust Estate upon
the terms hereof. SBC shall not be answerable or accountable under any
circumstances, except for (a) its or the Owner Trustee's own willful misconduct
or gross negligence, (b) its failure to perform its obligations under the last
sentence of Section 5.04 hereof and the first sentence of Section 5.01 hereof,
(c) its or the Owner Trustee's failure to use ordinary care in handling and
disbursing funds, (d) any Tax based on or measured by any fees, commissions or
compensation received by it for acting as trustee in connection with any of the
transactions contemplated by the
TRUST AGREEMENT [N602SW]
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Operative Agreements, and (e) liabilities that may result from the inaccuracy
of any representation or warranty of it (or from the failure by it to perform
any covenant) in Section 6.03 hereof or in any of the other Operative
Agreements (including, without limitation, covenants of SBC contained in the
Participation Agreement and the Trust Indenture).
SECTION 6.02 Absence of Certain Duties. Except in
accordance with written instructions furnished pursuant to Section 5.01 or 5.02
hereof and except as provided in, and without limiting the generality of,
Sections 3.01, 5.04 and 5.05 hereof and the last sentence of Section 9.01(b)
hereof, neither the Owner Trustee nor SBC shall have any duty (i) to see to any
recording or filing of any Operative Agreement or of any supplement to any
thereof or to see to the maintenance of any such recording or filing or any
other filing of reports with the Federal Aviation Administration or other
governmental agencies, except that SBC in its individual capacity agrees to
comply with the Federal Aviation Administration reporting requirements set
forth in 14 CFR Section 47.45 and 14 CFR Section 47.51, and the Owner Trustee
shall, to the extent that information for that purpose is timely supplied by
Lessee and approved by the Owner Participant pursuant to any of the Operative
Agreements, complete and timely submit (and furnish the Owner Participant with
a copy of) any and all reports relating to the Aircraft which may from time to
time be required by the Federal Aviation Administration or any government or
governmental authority having jurisdiction, (ii) to see to any insurance on the
Aircraft or to effect or maintain any such insurance, whether or not Lessee
shall be in default with respect thereto, other than to forward to the Owner
Participant copies of all reports and other written information which the Owner
Trustee receives from Lessee pursuant to Section 11 of the Lease, (iii) to see
to the payment or discharge of any tax, assessment or other governmental charge
or any lien or encumbrance of any kind owing with respect to, assessed or
levied against any part of the Trust Indenture Estate or the Trust Estate,
except as provided in Section 5.04 hereof, Section 4.01(ii) or 4.02 of the
Trust Indenture or Section 8(g) of the Participation Agreement, or (iv) to
inspect Lessee's books and records with respect to the Aircraft at any time
permitted pursuant to the Lease. Notwithstanding the foregoing, the Owner
Trustee will furnish to the Indenture Trustee and the Owner Participant,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to the Owner Trustee under the Lease or any other Operative Agreement
to the extent that any of the same shall not state on its face or otherwise
that it has been so distributed.
SECTION 6.03 No Representations or Warranties as to
Certain Matters. NEITHER THE OWNER TRUSTEE NOR SBC MAKES OR SHALL BE DEEMED TO
HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF,
AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR
ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
AIRCRAFT OR ANY PART THEREOF WHATSOEVER, except that SBC in its individual
capacity warrants that (i) on the Delivery Date, the Owner Trustee shall have
received whatever title was conveyed to it by Lessee, (ii) on the Delivery
Date, the Owner Trustee shall be in compliance with the last sentence of
Section 5.04 hereof, and (iii) the Aircraft shall during the Term of the Lease
be free of Lessor Liens attributable to SBC, or (b) any representation or
warranty as to the validity, legality or enforceability of this Trust Agreement
or any other Operative Agreement to which the Owner Trustee is a party,
TRUST AGREEMENT [N602SW]
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or any other document or instrument, or as to the correctness of any statement
contained in any thereof except to the extent that any such statement is
expressly made herein or therein by such party as a representation by SBC or by
the Owner Trustee, as the case may be, and except that SBC hereby represents
and warrants that this Trust Agreement has been, and (assuming due
authorization, execution and delivery by the Owner Participant of this Trust
Agreement) the other Operative Agreements to which it or the Owner Trustee is a
party have been (or at the time of execution and delivery of any such
instrument by it or the Owner Trustee hereunder or pursuant to the terms of the
Participation Agreement that such an instrument will be) duly executed and
delivered by one of its officers who is or will be, as the case may be, duly
authorized to execute and deliver such instruments on behalf of SBC or the
Owner Trustee, as the case may be, and that this Trust Agreement constitutes
the legal, valid and binding obligation of SBC or the Owner Trustee, as the
case may be, enforceable against SBC or the Owner Trustee, as the case may be,
in accordance with its terms.
SECTION 6.04 No Segregation of Monies; Interest. Monies
received by the Owner Trustee hereunder need not be segregated in any manner
except to the extent required by law and the Owner Trustee shall not be liable
for any interest thereon.
SECTION 6.05 Reliance Upon Certificates, Counsel and
Agents. The Owner Trustee shall incur no liability to anyone in acting in
reliance upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper reasonably
believed by it in good faith to be genuine and reasonably believed by it in
good faith to be signed by the proper party or parties. Unless other evidence
in respect thereof is specifically prescribed herein, any request, direction,
order or demand of the Owner Participant or Lessee mentioned herein or in any
of the other Operative Agreements to which the Owner Trustee is a party shall
be sufficiently evidenced by written instruments signed by the Chairman of the
Board, the President, any Vice President, the Treasurer or any other duly
authorized officer or representative and in the name of any such Owner
Participant or Lessee, as the case may be. The Owner Trustee may accept a copy
of a resolution of the Board of Directors or Executive Committee of Lessee or
the Owner Participant, as the case may be, certified by the Secretary or an
Assistant Secretary of Lessee or the Owner Participant, as the case may be, as
duly adopted and in full force and effect, as conclusive evidence that such
resolution has been duly adopted by said Board or Committee and that the same
is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically described herein, the Owner Trustee
may for all purposes hereof rely on a certificate signed by the Chairman of the
Board, the President, any Vice President, the Treasurer or any other duly
authorized officer or representative of Lessee or the Owner Participant, as the
case may be, as to such fact or matter, and such certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be
taken by it in good faith in reliance thereon. In the administration of trusts
hereunder, the Owner Trustee may execute any of the trusts or powers hereof and
perform its powers and duties hereunder directly or through agents or attorneys
and may, at the expense of the Trust Estate, consult with counsel, accountants
and other skilled persons to be selected and employed by it. The Owner Trustee
shall not be liable for anything done, suffered or omitted in good faith by it
in accordance with the advice or opinion, within the scope of such person's
competence, of any such counsel, accountants or other skilled persons and the
Owner Trustee shall not be liable for the negligence of any such counsel,
accountant or other skilled person appointed by it with due care hereunder.
TRUST AGREEMENT [N602SW]
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SECTION 6.06 Not Acting in Individual Capacity. In
executing the trusts accepted by SBC hereunder, the Owner Trustee acts solely
as trustee and not in its individual capacity except as otherwise expressly
provided herein; and, except as may be otherwise expressly provided in this
Trust Agreement, the Lease, the Participation Agreement and the Trust
Indenture, all persons, other than the Owner Participant, as provided herein,
having any claim against the Owner Trustee by reason of the transactions
contemplated hereby shall look only to the Trust Estate for payment or
satisfaction thereof except to the extent the Owner Trustee shall expressly
agree otherwise in writing.
SECTION 6.07 Fees and Compensation. The Owner Trustee
shall be entitled to receive compensation, reasonable as regards its
responsibilities hereunder, together with reimbursement within three (3) months
of its request for all reasonable expenses incurred or made by it in accordance
with any of the provisions of this Trust Agreement or any other Operative
Agreement (including the reasonable compensation of the expenses of its
counsel, accountants or other skilled persons and of all other persons not
regularly in its employ). If a Lease Event of Default or Indenture Event of
Default shall occur and be continuing, the Owner Trustee shall be entitled to
receive compensation, reasonable as regards its additional responsibilities
hereunder, and payment or reimbursement for its expenses as provided above.
Pursuant to Section 7(c) of the Participation Agreement and subject to Section
16 thereof, Lessee shall be required to pay the reasonable fees and expenses of
the Owner Trustee comprising the compensation and reimbursement of expenses to
which the Owner Trustee is entitled under this Section 6.07. Except as
otherwise expressly provided in Section 5.03 or Section 7.01 of this Trust
Agreement, neither the Owner Participant nor the Trust Estate shall have any
liability for any such fees and expenses; provided, however, the Owner
Participant shall be liable for such additional compensation of the Owner
Trustee if the same is attributable to an Indenture Event of Default which is
caused solely by the actions or inactions of the Owner Participant.
SECTION 6.08 Tax Returns. The Owner Trustee shall be
responsible for the keeping of all appropriate books and records relating to
the receipt and disbursement of all monies received by it under this Trust
Agreement or any other Operative Agreement. The Owner Participant shall be
responsible for causing to be prepared and filed all income tax returns
required to be filed by the Owner Participant. The Owner Trustee shall be
responsible for causing to be prepared, at the request of the Owner
Participant, all income tax returns required to be filed with respect to the
trust created hereby and shall execute and, with the approval of the Owner
Participant, file such returns. The Owner Trustee and the Owner Participant,
upon request, will furnish each other with all such information as may be
reasonably required in connection with the preparation of such income tax
returns. The Owner Trustee will give to the Owner Participant, upon request,
such periodic information concerning receipts and disbursements by it with
respect to the Trust Estate as would be helpful to the Owner Participant in
preparing its tax returns.
TRUST AGREEMENT [N602SW]
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ARTICLE VII
INDEMNIFICATION OF SBC
BY OWNER PARTICIPANT
SECTION 7.01 Owner Participant to Indemnify SBC. The
Owner Participant hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and hereby
indemnifies, protects, saves and keeps harmless SBC in its individual capacity
and its successors, assigns, legal representatives and agents, from and against
any and all Losses indemnified against by Lessee pursuant to Section 7(b) or
7(c) of the Participation Agreement, disregarding those exclusions contained in
clause (3) of Section 7(b)(ii) and in clauses (A) and (B) of Section 7(c)(ii),
and, to the extent that SBC acts in its capacity as Owner Trustee and in
accordance with instructions received from the Owner Participant, clause (E) of
Section 7(c)(ii), and except (a) in the case of willful misconduct or gross
negligence on the part of the Owner Trustee or SBC in the performance or
nonperformance of its duties hereunder or under any of the other Operative
Agreements to which the Owner Trustee is a party, (b) those claims resulting
from the inaccuracy of any representation or warranty of SBC (or from the
failure of SBC to perform any of its covenants) in Section 6.03 hereof or in
any of the other Operative Agreements, (c) as may result from a breach by SBC
of its covenant in the last sentence of Section 5.04 hereof or a breach by SBC
of any other of its covenants contained herein or (d) in the case of the
failure to use ordinary care on the part of the Owner Trustee or SBC in the
receipt or disbursement of funds; provided, however, that the exception set
forth in clause (a) of this Section 7.01 shall not apply to any action taken or
omission made by the Owner Trustee pursuant to and in accordance with written
directions given to the Owner Trustee by the Owner Participant. The
indemnities contained in this Section 7.01 extend to SBC only in its individual
capacity and shall not be construed as indemnities of the Trust Indenture
Estate or the Trust Estate (except to the extent, if any, that SBC has been
reimbursed by the Trust Indenture Estate or the Trust Estate for amounts
covered by the indemnities contained in this Section 7.01). The indemnities
contained in this Section 7.01 shall survive the termination of this Trust
Agreement. In addition, if necessary, SBC shall be entitled to indemnification
from the Trust Estate, subject to the provisions of Section 4.01 hereof and the
Lien of the Trust Indenture, for any liability, obligation, loss, damage,
penalty, tax, claim, action, suit, cost, expense or disbursement indemnified
against pursuant to this Section 7.01 to the extent not reimbursed by Lessee,
the Owner Participant or others, but without releasing any of them from their
respective agreements of reimbursement; and, to secure the same, SBC shall have
a lien on the Trust Estate, subject to the provisions of Section 4.01 hereof
and the Lien of the Trust Indenture, which shall be prior to any interest
therein of the Owner Participant. The payor of any indemnity under this
Article VII shall be subrogated to any right of the person indemnified in
respect of the matter as to which such indemnity was paid. Notwithstanding the
foregoing, SBC shall not make any claim under this Section 7.01 for any claim,
loss, tax or other liability indemnified against by the Lessee under the
Participation Agreement without first making demand on the Lessee for payment
of such claim, loss, tax or other liability, and pursuing such demand on a
reasonable basis for a reasonable length of time.
TRUST AGREEMENT [N602SW]
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ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01 Transfer of Interest. All provisions of
Section 8(l) of the Participation Agreement shall (with the same force and
effect as if set forth, mutatis mutandis, in full in this Section 8.01) be
applicable to any assignment, conveyance or other transfer by the Owner
Participant of its right, title or interest in and to the Participation
Agreement, the Trust Estate or this Trust Agreement.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01 Resignation of Owner Trustee: Appointment of
Successor.
(a) Resignation or Removal. The Owner Trustee or any
successor Owner Trustee (i) shall resign if required to do so pursuant to
Section 8(b) of the Participation Agreement and (ii) may resign at any time
without cause by giving at least 60 days' prior written notice to the Owner
Participant, the Indenture Trustee and Lessee, such resignation to be effective
upon the acceptance of appointment by the successor Owner Trustee under Section
9.01(b) hereof. In addition, the Owner Participant may at any time remove the
Owner Trustee with or without cause by a notice in writing delivered to the
Owner Trustee, the Holders, the Indenture Trustee and Lessee, such removal to
be effective upon the acceptance of appointment by the successor Owner Trustee
under Section 9.01(b) hereof. In the case of the removal or resignation of the
Owner Trustee, the Owner Participant may, after consultation in good faith with
Lessee, appoint a successor Owner Trustee by an instrument signed by the Owner
Participant. If a successor Owner Trustee shall not have been appointed within
30 days after such notice of resignation or removal, the Owner Trustee, the
Owner Participant, Lessee or the Indenture Trustee may apply to any court of
competent jurisdiction to appoint a successor Owner Trustee to act until such
time, if any, as a successor shall have been appointed as above provided. Any
successor Owner Trustee so appointed by such court shall immediately and
without further act be superseded by any successor Owner Trustee appointed as
above provided.
(b) Execution and Delivery of Documents, Etc. Any
successor Owner Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee an instrument accepting such appointment, and
thereupon such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor Owner Trustee in the trusts hereunder with like effect as if
originally named the Owner Trustee herein; but nevertheless, upon the written
request of such successor Owner Trustee, such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner Trustee,
upon the trusts herein expressed, all the estates, properties, rights, powers
and trusts of such predecessor Owner Trustee, and such predecessor Owner
Trustee shall duly assign, transfer, deliver and pay over to such successor
Owner Trustee all monies or other property then held by such predecessor Owner
Trustee upon the trusts herein expressed. Upon the appointment of any
successor Owner Trustee hereunder, the predecessor Owner Trustee will complete,
execute and deliver such
TRUST AGREEMENT [N602SW]
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documents as are provided to it by such successor Owner Trustee and will take
such further actions as are requested of it by such successor Owner Trustee as
are reasonably required to cause registration of the Aircraft included in the
Trust Estate to be transferred upon the records of the Federal Aviation
Administration, or other governmental authority having jurisdiction, into the
name of the successor Owner Trustee.
(c) Qualifications. Any successor Owner Trustee, however
appointed, shall be a "citizen of the United States" within the meaning of the
Act and shall also be a bank or trust company organized under the laws of the
United States or any state thereof having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
or customary terms.
(d) Merger, Etc. Any corporation into which SBC may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which SBC shall be a
party, or any corporation to which substantially all the corporate trust
business of SBC may be transferred, shall, subject to the terms of Section
9.01(c) hereof, be the Owner Trustee hereunder without further act.
SECTION 9.02 Co-Trustees and Separate Trustees. If at any
time it shall be necessary or prudent in order to conform to any law of any
jurisdiction in which all or any part of the Trust Estate is located, or make
any claim or bring any suit with respect to the Trust Estate or the Lease, or
in the event that the Owner Trustee shall have been requested to do so by the
Owner Participant or the Owner Trustee being advised by counsel shall determine
that it is so necessary or prudent in the interest of the Owner Participant or
the Owner Trustee, or the Owner Trustee shall have been directed to do so by
the Owner Participant, the Owner Trustee and Owner Participant shall execute
and deliver an agreement supplemental hereto and all other instruments and
agreements necessary or proper to constitute another bank or trust company or
one or more persons (any and all of which shall be a "citizen of the United
States" as defined in 49 U.S.C. Section 40102(a)(15)(C)) approved by the Owner
Trustee and the Owner Participant, either to act as co-trustee, jointly with
the Owner Trustee, or to act as separate trustee hereunder (any such co-trustee
or separate trustee being herein sometimes referred to as an "additional
trustee").
Every additional trustee hereunder shall, to the extent
permitted by law, be appointed and act, and the Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
(A) all powers, duties, obligations and rights conferred
upon the Owner Trustee in respect of the custody, control and
management of monies, the Aircraft or documents authorized to be
delivered hereunder or under the Participation Agreement shall be
exercised solely by the Owner Trustee;
(B) all other rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee and any limitations
thereon shall be conferred or imposed upon and exercised or performed
by the Owner Trustee and such additional trustee jointly, except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed
TRUST AGREEMENT [N602SW]
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(including the holding of title to the Trust Estate) the Owner Trustee
shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations shall be
exercised and performed by such additional trustee;
(C) notwithstanding anything to the contrary contained
herein, no power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised hereunder
by such additional trustee, except jointly with, or with the consent
in writing of, the Owner Trustee;
(D) no trustee hereunder shall be personally liable by
reason of any action or omission of any other trustee hereunder;
(E) the Owner Participant, at any time, by an instrument
in writing may remove any such additional trustee; and
(F) no appointment of, or action by, any additional
trustee will relieve the Owner Trustee of any of its obligations
under, or otherwise affect any of the terms of, the Trust Indenture or
affect the interests of the Indenture Trustee or the Holders in the
Trust Indenture Estate.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS
SECTION 10.01 Supplements and Amendments and Delivery
Thereof.
(a) Supplements and Amendments. This Trust Agreement may
not be amended, supplemented or otherwise modified except by an instrument in
writing signed by the Owner Trustee and (except in the case of a Trust
Supplement) the Owner Participant. Subject to Section 10.02 hereof, Section 10
of the Participation Agreement and, until the Trust Indenture shall have been
satisfied and discharged pursuant to Section 10.01 thereof, Section 11.06 of
the Trust Indenture, the Owner Trustee will execute any amendment, supplement
or other modification of this Trust Agreement or of any other Operative
Agreement to which the Owner Trustee is a party which it is requested to
execute by the Owner Participant except that the Owner Trustee shall not
execute any such amendment, supplement or other modification which, by the
express provisions of any of the above documents, requires the consent of any
other party unless such consent shall have been obtained.
(b) Delivery of Amendments and Supplements to Certain
Parties. A signed copy of each amendment or supplement referred to in Section
10.01(a) hereof shall be delivered promptly by the Owner Trustee to Lessee and,
until the Trust Indenture shall have been satisfied and discharged pursuant to
Section 10.01 thereof, the Indenture Trustee.
TRUST AGREEMENT [N602SW]
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SECTION 10.02 Discretion as to Execution of Documents.
Prior to executing any document required to be executed by it pursuant to the
terms of Section 10.01 hereof, the Owner Trustee shall be entitled to receive
an opinion of its counsel to the effect that the execution of such document is
authorized hereunder. If in the opinion of the Owner Trustee any document
required to be executed by the Owner Trustee pursuant to the terms of Section
10.01 hereof adversely affects any right, duty, immunity or indemnity in favor
of the Owner Trustee hereunder or under any other Operative Agreement to which
the Owner Trustee is a party, the Owner Trustee may in its discretion decline
to execute such document.
SECTION 10.03 Distribution of Documents. Promptly after
the execution by the Owner Trustee of any document entered into pursuant to
Section 10.01 hereof, the Owner Trustee shall mail, by certified mail, postage
prepaid, a conformed copy thereof to the Owner Participant, but the failure of
the Owner Trustee to mail such conformed copy shall not impair or affect the
validity of such document.
SECTION 10.04 Absence of Requirement as to Form. It shall
not be necessary for any written request furnished pursuant to Section 10.01 to
specify the particular form of the proposed documents to be executed pursuant
to such Section, but it shall be sufficient if such request shall indicate the
substance thereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Termination of Trust Agreement. This Trust
Agreement and the trusts created hereby shall terminate and this Trust
Agreement shall be of no further force or effect upon the earlier of (a) the
later of (x) the final satisfaction and discharge of the Trust Indenture
pursuant to Section 10.01 thereof and the sale or other final disposition by
the Owner Trustee of all property constituting part of the Trust Estate and the
final distribution by the Owner Trustee of all monies or other property or
proceeds constituting part of the Trust Estate in accordance with Article IV
hereof, provided, that at such time Lessee shall have fully complied with all
of the terms of the Lease and the Participation Agreement and (y) the
expiration or termination of the Lease in accordance with its terms, (b)
twenty-one years less one day after the death of the last survivor of all of
the descendants of Robert E. Lee, late General in Chief of the Armies of the
Confederate States, living on the date of the earliest execution of this Trust
Agreement by any party hereto or (c) the date of revocation of such trusts by
the Owner Participant (in which case the Trust Estate, subject to the Trust
Indenture, shall be distributed in accordance with the terms hereof); otherwise
this Trust Agreement and the trusts created hereby shall continue in full force
and effect in accordance with the term hereof.
SECTION 11.02 Owner Participant Has No Legal Title in Trust
Estate. The Owner Participant shall not have legal title to any part of the
Trust Estate. No transfer, by operation of law or otherwise, of any right,
title and interest of the Owner Participant in and to the Trust Estate
hereunder shall operate to terminate this Trust Agreement or the trusts
hereunder or entitle any successors or transferees of the Owner Participant to
an accounting or to the transfer of legal title to any part of the Trust
Estate.
TRUST AGREEMENT [N602SW]
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<PAGE> 21
SECTION 11.03 Assignment, Sale, Etc. of Aircraft. Any
assignment, sale, transfer or other conveyance of the Aircraft, any Engine or
any interest therein by the Owner Trustee made in accordance with the express
terms hereof or of the Lease or the Participation Agreement shall bind the
Owner Participant and shall be effective to transfer or convey all right, title
and interest of the Owner Trustee and the Owner Participant in and to the
Aircraft, such Engine or interest therein. No purchaser or other grantee shall
be required to inquire as to the authorization, necessity, expediency or
regularity of such assignment, sale, transfer or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.
SECTION 11.04 Trust Agreement for Benefit of Certain
Parties Only. Except for the terms of Section 8(l) of the Participation
Agreement incorporated in Article VIII hereof and except as otherwise provided
in Articles V and IX and Sections 2.02, 3.01, 4.01, 6.07, 10.01, 10.02 and
11.01 hereof, nothing herein, whether expressed or implied, shall be construed
to give any person other than the Owner Trustee and the Owner Participant any
legal or equitable right, remedy or claim under or in respect of this Trust
Agreement; but this Trust Agreement shall be held to be for the sole and
exclusive benefit of the Owner Trustee and the Owner Participant.
SECTION 11.05 [Intentionally reserved for potential future
use].
SECTION 11.06 Notices. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by telecopier, or by prepaid
courier service, and shall be deemed to be given for purposes of this Trust
Agreement on the day that such writing is delivered or, if sent by registered
or certified mail, three Business Days after being deposited in the mails
addressed to the intended recipient thereof in accordance with the provisions
of this Section 11.06. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section 11.06,
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telecopier numbers) as follows: (A) if to
Lessee, the Owner Trustee, the Indenture Trustee or the Owner Participant, to
the respective addresses set forth on Schedule I to the Participation Agreement
or (B) if to any Holder, addressed to such Holder at its address as set forth
in the Register maintained pursuant to the Trust Indenture.
SECTION 11.07 Severability. Subject to Section 11.12
hereof, any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.08 Waivers, Etc. No term or provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing entered into in compliance with the terms of Article X
hereof; and any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.
TRUST AGREEMENT [N602SW]
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<PAGE> 22
SECTION 11.09 Counterparts. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10 Binding Effect, Etc. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Owner Trustee and its successors and assigns, and the Owner Participant,
its successors and, to the extent permitted by Article VIII hereof, its
assigns. Any request, notice, direction, consent, waiver or other instrument
or action by an Owner Participant shall bind its successors and permitted
assigns.
SECTION 11.11 Headings; References. The headings of the
various Articles and Sections herein are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof. The trust
created hereby, together with the trust created by the Trust Indenture, may for
convenience of reference be referred to, collectively, as "Southwest Airlines
1995 Trust N602SW."
SECTION 11.12 Governing Law. THIS TRUST AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE. THIS TRUST AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW
YORK.
SECTION 11.13 Performance by the Owner Participant. Any
obligation of SBC in its individual capacity or as Owner Trustee hereunder or
under any other Operative Agreement or other document contemplated herein, may
be performed by the Owner Participant and any such performance shall not be
construed as a revocation of the trust created hereby.
SECTION 11.14 Authorization to Owner Trustee for Trust
Indenture. Notwithstanding any contrary provision in this Trust Agreement, the
Owner Trustee is hereby authorized and instructed to enter into and perform
fully the Trust Indenture. This provision is for the benefit of the Owner
Trustee and the Indenture Trustee and the Holders from time to time of the
Certificates and shall not be changed prior to the termination of the Trust
Indenture pursuant to Section 10.01 thereof.
* * *
TRUST AGREEMENT [N602SW]
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
NATIONSBANK, N.A.
By: /s/ George L. Robinson, Jr.
Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By: /s/ Pablo de la Canal
Corporate Trust Officer
TRUST AGREMEENT [N602SW]
<PAGE> 1
EXHIBIT 4.27
________________________________________________________________________________
TRUST INDENTURE
AND SECURITY AGREEMENT
dated as of July 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly
set forth herein and otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N603SW
________________________________________________________________________________
Southwest Airlines Co.
Series SWA 1995 Trust N603SW-I and N603SW Certificates
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2
THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.01. Certificates; Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05. Holder Lists; Ownership of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 16
Section 2.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.08. Payment on Certificates; Defaulted Principal and Interest . . . . . . . . . . . . . . . . 16
Section 2.09. Payment from Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.10. Execution, Delivery and Dating of Certificates upon Issuance . . . . . . . . . . . . . . 19
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE . . . . . . . . . . . . . . . . . . . . 19
Section 3.01. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.02. Payment in Case of Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.03. Application of Rent When No Indenture Event of Default Is Continuing . . . . . . . . . . 20
Section 3.04. Application of Certain Payments in Case of Requisition or Event of Loss . . . . . . . . . 20
Section 3.05. Payments During Continuance of Indenture Event of Default . . . . . . . . . . . . . . . . 21
Section 3.06. Payments for Which Application Is Provided in Other Documents . . . . . . . . . . . . . . 22
Section 3.07. Payments for Which No Application Is Otherwise Provided . . . . . . . . . . . . . . . . . 22
Section 3.08. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4
COVENANTS OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 23
Section 4.01. Covenants of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.02. Covenants of Shawmut Bank Connecticut, National Association . . . . . . . . . . . . . . . 24
</TABLE>
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ARTICLE 5
<TABLE>
<S> <C> <C>
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.01. Disposition, Substitution and Release of Property Included in the Indenture Estate
During Continuation of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.02. Certificates in Respect of Replacement Aircraft and Engines . . . . . . . . . . . . . . . 26
ARTICLE 6
REDEMPTION OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . 26
Section 6.01. Redemption of Certificates upon Certain Events . . . . . . . . . . . . . . . . . . . . . 26
Section 6.02. Redemption or Purchase of Certificates Upon Certain Indenture Events of Default . . . . . 27
Section 6.03. Notice of Redemption to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.04. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.05. Certificates Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7
MATTERS CONCERNING THE COMPANY . . . . . . . . . . . . . . . . . . . . 29
Section 7.01. Repayment of Monies for Certificate Payments Held by the Indenture Trustee . . . . . . . . 29
Section 7.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.03. Assumption of Obligations of Owner Trustee by the Company . . . . . . . . . . . . . . . . 29
ARTICLE 8
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.01. Indenture Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.02. Acceleration; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.03. Other Remedies Available to Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.04. Waiver of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.05. Waiver of Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.06. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.07. Limitation on Suits by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.08. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.09. Indenture Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 9
INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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<TABLE>
<S> <C> <C>
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent; Investments . . . . . . . . . . . 42
Section 9.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.06. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.07. Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.08. Successor Indenture Trustee, Agents by Merger, Etc. . . . . . . . . . . . . . . . . . . . 45
Section 9.09. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.10. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.11. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.12. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.13. Certain Rights of Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . . . 46
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 47
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance; Termination of Obligations . . . . . 47
Section 10.02. Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.03. Monies to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.04. Monies to Be Returned to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.05. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 11
AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.01. Amendments to this Agreement Without Consent of Holders . . . . . . . . . . . . . . . . . 50
Section 11.02. Amendments to this Agreement with Consent of Holders . . . . . . . . . . . . . . . . . . 51
Section 11.03. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.04. Notation on or Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.05. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.06. Amendments, Waivers, Etc. of Other Operative Agreements . . . . . . . . . . . . . . . . . 52
Section 11.07. Trust Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.03. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.04. Rules by Indenture Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.05. Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.06. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.07. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.09. Applicability Only to Original Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
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<TABLE>
<S> <C> <C>
Section 12.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE . . . . . . . . . . . . . . . . 57
Section 13.01. Actions to Be Taken upon Termination of Lease . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE] . . . . . . . . . . . . . . . . . . . 58
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N603SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N603SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N603SW-I
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 15.01. Conditions Precedent to Issuance of Series SWA 1995 Trust N603SW Certificates . . . . . . 58
Section 15.02. Payment upon Issuance of Series SWA 1995 Trust N603SW Certificates . . . . . . . . . . . . 59
Section 15.03. Special Provision Governing Refinancing of the Series SWA 1995 Trust N603SW-I
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 15.04. Special Provision for Payments in Respect of the Series SWA 1995 Trust N603SW-I
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 15.05. Increased Costs, Break Amount, Additional Interest, Taxes, Etc . . . . . . . . . . . . . 60
</TABLE>
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EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A - Form of Series SWA 1995 Trust N603SW-I Certificate
Exhibit A-1 - Form of Series SWA 1995 Trust N603SW Installment Certificates
Exhibit A-2 - Form of Series SWA 1995 Trust N603SW Serial Certificates
Exhibit B - Maturity Dates, Principal Amounts and Interest Rates on Series SWA 1995 Trust N603SW
Certificates
Exhibit B-1 - Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 - Issuance of Series SWA 1995 Trust N603SW Certificates
Exhibit C - [FORM OF] Trust Agreement and Trust Indenture and Security Agreement Supplement
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
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TRUST INDENTURE AND SECURITY AGREEMENT
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of July
1, 1995, is between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national
banking association organized under the laws of the United States, in its
individual capacity only as expressly provided herein and otherwise solely as
Owner Trustee under the Trust Agreement (capitalized terms used herein having
the respective meanings specified therefor in Article 1), and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as Indenture Trustee hereunder.
W I T N E S S E T H:
WHEREAS, the Owner Participant and the Owner Trustee in its
individual capacity have entered into the Trust Agreement whereby, among other
things, (i) the Owner Trustee has established a certain trust for the use and
benefit of the Owner Participant, subject, however, to the Indenture Estate
created pursuant hereto for the use and benefit of, and with the priority of
payment to, the holders of the Certificates issued hereunder, and (ii) the
Owner Trustee has been authorized and directed to execute and deliver this
Agreement;
WHEREAS, the parties desire by this Agreement, among other
things, (i) to provide for the issuance by the Owner Trustee of the Series SWA
1995 Trust N603SW-I Certificates and for the potential issuance by the Owner
Trustee of the Series SWA 1995 Trust N603SW Certificates in respect of the
refinancing and redemption of the Series SWA 1995 Trust N603SW-I Certificates
and (ii) to provide for the assignment, mortgage and pledge by the Owner
Trustee to the Indenture Trustee, as part of the Indenture Estate hereunder,
among other things, of certain of the Owner Trustee's right, title and interest
in and to the Aircraft and the Operative Agreements and certain payments and
other amounts received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's obligations to
the Indenture Trustee, for the ratable benefit and security of the Holders; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner Trustee and the Indenture
Trustee, for the uses and purposes herein set forth, in accordance with its
terms, have been done and performed and have happened;
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
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<PAGE> 8
GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND SECURITY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal of, Premium, if
any, and interest on, Break Amount, if any, and all other amounts due with
respect to, all Certificates from time to time Outstanding and all other
amounts due to the Holders hereunder and under the Participation Agreement and
the performance and observance by each of the Company and the Owner Trustee of
all the agreements, covenants and provisions contained herein and in the
Operative Agreements to which it is a party, for the benefit of Indenture
Trustee and the Holders, and for the uses and purposes hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of the sum of $1 paid to the
Owner Trustee by the Indenture Trustee at or before the delivery hereof, the
receipt whereof is hereby acknowledged, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time, a
security interest in and mortgage lien on all estate, right, title and interest
of the Owner Trustee in, to and under the following described property, rights,
interests and privileges, other than Excluded Payments (which collectively,
including all property hereafter specifically subjected to the lien of this
Agreement by any instrument supplemental hereto, but excluding the Excluded
Payments, are herein called the "Indenture Estate"):
(1) the Aircraft (including the Airframe and the
Engines originally installed thereon on the Delivery Date), and all
replacements thereof and substitutions therefor in which the Owner
Trustee shall from time to time acquire an interest in accordance with
the Lease, as more particularly described in the Trust Supplement and
the Lease Supplement executed and delivered with respect to the
Aircraft or any such replacements or substitutions therefor, as
provided in this Agreement, and all Records maintained with respect to
the foregoing property;
(2) the Lease and all Rent thereunder, including,
without limitation, all amounts of Basic Rent, Supplemental Rent,
payments of any kind required to be made by the Company thereunder
(including the purchase price for the Aircraft pursuant to Section
18.2 of the Lease) and any sales proceeds of the Aircraft sold
pursuant to Section 9 of the Lease or otherwise; the Purchase
Agreement (to the extent assigned by the Purchase Agreement
Assignment); the Purchase Agreement Assignment; all subleases of the
Airframe and the Engines and all rent thereunder to the extent
assigned to the Owner Trustee by Lessee; the Bills of Sale; the
Participation Agreement; and the Manufacturer's Consent; including,
without limitation, in respect of each of the foregoing documents and
instruments, all rights of the Owner Trustee to receive any payments
or other amounts or to exercise any election or option or to make any
decision or determination or to give or receive any notice, consent,
waiver or approval or to take any other action under or in respect of
any such document or to accept surrender or redelivery of the Aircraft
or any part thereof, as well as all the rights, powers and remedies on
the part of the Owner Trustee, whether acting under any such document
or by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default;
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
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<PAGE> 9
(3) all rents, issues, profits, revenues and
other income of the property subjected or required to be subjected to
the Lien of this Agreement;
(4) all requisition proceeds with respect to the
Aircraft or any part thereof and all insurance proceeds with respect
to the Aircraft or any part thereof;
(5) all moneys and securities now or hereafter
paid or deposited or required to be paid or deposited to or with the
Indenture Trustee by or for the account of the Owner Trustee pursuant
to any term of any Operative Agreement and held or required to be held
by the Indenture Trustee hereunder; and
(6) all proceeds of the foregoing.
On the Delivery Date the Owner Trustee shall deliver to the
Indenture Trustee an executed chattel paper original counterpart of each of the
Lease and the Lease Supplement covering the Aircraft, together with executed
copies of the Trust Agreement and each of the other Indenture Documents (other
than the Purchase Agreement, the Participation Agreement and the FAA bills of
sale). All property referred to in this Granting Clause, whenever acquired by
the Owner Trustee, shall secure all obligations under and with respect to the
Certificates at any time Outstanding. Any and all properties referred to in
this Granting Clause which are hereafter acquired by the Owner Trustee, shall,
without further conveyance, assignment or act by the Owner Trustee or the
Indenture Trustee thereby become and be subject to the security interest hereby
granted as fully and completely as though specifically described herein.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Indenture Trustee and the Holders from time to
time, without any priority of any one Certificate over any other, and for the
uses and purposes and subject to the terms and provisions set forth in this
Agreement.
The Owner Trustee agrees that this Agreement is intended to
and shall create and grant a security interest in the Aircraft to the Indenture
Trustee, which security interest shall attach on the Delivery Date. The
security interest created by this Agreement and granted to the Indenture
Trustee hereunder in the Indenture Estate other than in the Aircraft shall
attach in the case of each other item of property included in the Indenture
Estate upon the delivery thereof or upon the Owner Trustee's acquiring rights
in such property.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Agreements to which it is a party, to perform all of the
obligations assumed by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Indenture Trustee and the Holders
shall have no obligation or liability under any of the Operative Agreements to
which the Owner Trustee is a party by reason of or arising out of the
assignment hereunder, nor shall the Indenture Trustee or the Holders be
required or obligated in any manner to perform or fulfill any obligations of
the Owner Trustee under any of
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
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<PAGE> 10
the Operative Agreements to which the Owner Trustee is a party, or, except as
herein expressly provided, to make any payment, or to make any inquiry as to
the nature or sufficiency of any payment received by it, or present or file any
claim, or take any action to collect or enforce the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
The Owner Trustee does hereby constitute the Indenture Trustee
the true and lawful attorney of the Owner Trustee, irrevocably, with full power
(in the name of the Owner Trustee or otherwise) to ask, require, demand,
receive and, to the extent permitted by Article 8 hereof (if an Event of
Default shall have occurred and be continuing), give acquittance for any and
all moneys and claims for moneys due and to become due to the Owner Trustee
(other than Excluded Payments) under or arising out of any Indenture Document
and all other property which now or hereafter constitutes part of the Indenture
Estate, to endorse any checks or other instruments or orders in connection
therewith and, to file any claims or take any action or institute any
proceedings which the Indenture Trustee may deem to be necessary or advisable
in the premises. The Owner Trustee has directed the Company to make all
payments of Rent (other than Excluded Payments) payable to the Owner Trustee by
the Company and all other amounts which are required to be paid to or deposited
with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee
at such address as the Indenture Trustee shall specify, for application as
provided in this Agreement. The Owner Trustee agrees that promptly on receipt
thereof, it will transfer to the Indenture Trustee any and all moneys from time
to time received by it constituting part of the Indenture Estate, for
distribution by the Indenture Trustee pursuant to this Agreement, except that
the Owner Trustee shall accept for distribution pursuant to the Trust Agreement
any amounts distributed to it by the Indenture Trustee as expressly provided in
this Agreement and any Excluded Payments.
The Owner Trustee agrees that at any time and from time to
time, upon the written request of the Indenture Trustee, the Owner Trustee will
promptly and duly execute and deliver or cause to be duly executed and
delivered any and all such further instruments and documents as the Indenture
Trustee may reasonably deem desirable in obtaining the full benefits of the
assignment hereunder and of the rights and powers herein granted.
The Owner Trustee does hereby warrant and represent that it
has not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of its
right, title or interest hereby assigned, to anyone other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement
amending or supplementing any of the Operative Agreements, execute any waiver
or modification of, or consent under the terms of any of the Operative
Agreements, settle or compromise any claim (other than claims in respect of
Excluded Payments) against the Company arising under any of the Operative
Agreements, or submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Operative Agreements,
to arbitration thereunder.
The Owner Trustee does hereby ratify and confirm the Indenture
Documents and does hereby agree that (except as permitted herein) it will not
take or omit to take any action, the taking or omission of which would result
in an alteration or impairment of any of the Indenture Documents or of any of
the rights created by any thereof or the assignment hereunder.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
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<PAGE> 11
Notwithstanding the Granting Clause, any of the preceding
paragraphs or any other provision of this Indenture, there are hereby expressly
excluded from the foregoing grant, bargain, sale, assignment, transfer,
conveyance, mortgage, pledge and security interest all Excluded Payments.
Further, nothing in the Granting Clause or any of the preceding paragraphs
shall impair in any respect the rights of the Owner Trustee or the Owner
Participant under Section 9.13 or 11.06.
IT IS HEREBY COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article 1 have the
meanings assigned to them in this Article 1, and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(3) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision; and
(4) unless otherwise specified, all references in
this Agreement to Articles, Sections and Exhibits refer to Articles,
Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Bankruptcy Code" means the United States Bankruptcy Code of
1978, as amended, or any successor statute.
"Basis Point" shall have the meaning specified therefor in
Exhibit A.
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"Break Amount" shall have the meaning specified therefor in
Section 15.05(b).
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in the
City of Dallas, Texas; New York, New York; the city and state in which (i) so
long as any Certificates shall be Outstanding, the Indenture Trustee and (ii)
thereafter, the Owner Trustee, has its principal place of business; and the
city and state in which the Indenture Trustee or the Owner Trustee, as the case
may be, receives and disburses funds; provided, however, that so long as the
Series SWA 1995 Trust N603SW-I Certificates are Outstanding, such day must also
be a day on which dealings are carried on in the applicable offshore dollar
interbank market.
"Certificate" or "Certificates" means any certificate or other
debt instrument issued under this Agreement, including the Series SWA 1995
Trust N603SW-I Certificates and the Series SWA 1995 Trust N603SW Certificates,
if any, issued hereunder.
"Company" means Southwest Airlines Co., a Texas corporation,
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company
executed on its behalf by a Responsible Company Officer of the Company.
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Debt" means any liability for borrowed money, or any
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
"Debt Rate" shall have the meaning specified therefor in
Exhibit A.
"Defaulted Installment" shall have the meaning specified
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
in Section 2.08.
"Defeasance Trustee" shall have the meaning specified therefor
in Section 10.05.
"Deferred Equity Amount" shall have the meaning specified in
Section 8(dd) of the Participation Agreement.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System or
any governmental authority which is the successor thereto, as in effect from
time to time.
"Eurocurrency Reserve Percentage" for any day means the
reserve percentage applicable in respect of such day under Regulation D of the
Board of Governors of the Federal Reserve System (or any governmental authority
which is the successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
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marginal reserve requirement) for the Original Holder with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities.
"Excluded Payments" means (i) any right, title or interest of
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective, successors, permitted assigns,
directors, officers, employees, servants and agents to any indemnity payment,
including, but not limited to, any payment which by the terms of Section 7(b),
7(c), 7(f), 16, 17 or 18 of the Participation Agreement, Section 5.03 or 7.01
of the Trust Agreement or any section of the Tax Indemnity Agreement or any
corresponding payment under Section 3.5 of the Lease shall be payable to the
Owner Trustee in its individual capacity or to the Owner Participant, as the
case may be, pursuant to the terms of the Operative Agreements, (ii) any
insurance proceeds payable under insurance maintained by the Owner Trustee in
its individual or trust capacity or the Owner Participant (whether directly or
through the Owner Trustee), or to their respective Affiliates, successors,
permitted assigns, directors, officers, employees, servants and agents, (iii)
any insurance proceeds (or proceeds of governmental indemnities in lieu
thereof) payable to the Owner Trustee in its individual capacity or to the
Owner Participant or to their respective Affiliates, successors, permitted
assigns, directors, officers, employees, servants and agents, under any
liability insurance maintained by the Company pursuant to Section 11 of the
Lease or by any other Person (or proceeds of governmental indemnities in lieu
thereof), (iv) payments to the Owner Participant by the Owner Trustee pursuant
to Section 2 of the Participation Agreement and any funds held by the Owner
Trustee or payable to the Owner Participant pursuant to any funding letter
entered into in lieu of the provisions of Section 2 of the Participation
Agreement, (v) amounts paid or payable to the Owner Trustee from Lessee
pursuant to Section 18.2(c) of the Lease, (vi) Transaction Costs or other
amounts or expenses paid or payable to, or for the benefit of, the Owner
Participant pursuant to the Participation Agreement, (vii) the respective
rights of the Owner Trustee in its individual or trust capacity or the Owner
Participant to the proceeds of the foregoing, (viii) any payment of Rent
attributable to an indemnity payment under the Tax Indemnity Agreement, and
(ix) any right to demand, collect, sue or otherwise receive and enforce the
payment of any amount described in clauses (i) through (viii) above.
"Federal Aviation Act" means Subtitle VII of Title 49, U.S.C.,
as amended.
"Fixed Period" means the period after the Floating Period.
"Floating Period" means the period any Series SWA 1995 Trust
N603SW-I Certificate is Outstanding.
"Government Obligations" shall have the meaning specified
therefor in Section 10.05.
"Holder" or "Certificate Holder" means a Person in whose name
a Certificate is registered on the Register including, so long as it holds a
Series SWA 1995 Trust N603SW-I Certificate, the Original Holder.
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Documents" means each and every document or
instrument referred to in the Granting Clause hereof.
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"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Section 8.01.
"Indenture Trustee" means Wilmington Trust Company, and each
other Person which may from time to time be acting as Indenture Trustee in
accordance with the provisions of this Agreement.
"Independent" when used with respect to an engineer, appraiser
or other expert, means an engineer, appraiser or other expert who (i) is in
fact independent, (ii) does not have any direct financial interest or any
material indirect financial interest in the Company or any Affiliate of the
Company and (iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"Independent Investment Banker" means an Independent
investment banking institution of national standing appointed by the Company on
behalf of the Owner Trustee (and reasonably acceptable to the Owner
Participant, which acceptance shall not be unreasonably withheld after notice
to the Owner Participant); provided, that if the Indenture Trustee shall not
have received written notice of such an appointment at least 10 days prior to
the relevant Redemption Date or if a Lease Event of Default shall have occurred
and be continuing, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
"Installment Certificate" means a Certificate, other than a
Series SWA 1995 Trust N603SW-I Certificate, should any such Certificate be
issued hereunder which shall provide for the payments of principal in
installments.
"Installment Payment Amount" means, with respect to each
Installment Certificate, the amount of the installment payment of principal due
and payable on each Installment Payment Date, which amount shall be equal to
the product of the original principal amount of such Certificate and the
Installment Payment Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an
installment payment of principal is due and payable on the Certificates, as set
forth in Exhibit B-l as completed in accordance with Article 15.
"Installment Payment Percentage" means, with respect to each
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-l as completed in accordance with Article 15.
The term "interest" payable, or to be payable, on any date
during the Floating Period in respect of the Series SWA 1995 Trust N603SW-I
Certificates shall include, without limitation, any and all accrued and unpaid
compounded interest thereon.
"Interest Payment Date" means each July 1 and January 1
commencing on January 1, 1996.
"Interest Period" shall have the meaning specified therefor in
Exhibit A.
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"Lease" means the Sale and Lease Agreement, dated as of the
date hereof, between the Owner Trustee, as lessor, and the Company, as lessee,
relating to the Aircraft as such Sale and Lease Agreement may from time to time
be supplemented, amended or modified in accordance with the terms thereof and
this Agreement. The term "Lease" shall also include each Lease Supplement
entered into pursuant to the terms of the Lease.
"Lease Loss Payment Date" means the date on which Stipulated
Loss Value is payable pursuant to Section 10.1.4 of the Lease in connection
with an Event of Loss in respect of the Aircraft.
"Lease Termination Date" means the date the Lease terminates
pursuant to Section 9 of the Lease.
"Lending Office" of any Holder of a Series SWA 1995 Trust
N603SW-I Certificate means the office through which such Holder makes and/or
books and maintains the loan evidenced by its Certificate, which, in the case
of the Original Holder, is Concord, California, as of the date hereof.
"Maturity Date" means, with respect to the Series SWA 1995
Trust N603SW Certificates, each of the dates specified in Exhibit B as a
maturity date of such Certificates and shall have, in respect of the Series SWA
1995 Trust N603SW-I Certificates, the meaning specified therefor in Exhibit A.
"Officers' Certificate" means a certificate signed in the case
of the Company, by (i) the Chairman of the Board of Directors, the President,
or any Executive or Senior Vice President of the Company, signing alone, or
(ii) any Vice President signing together with the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer or the Controller of the
Company or, in the case of the Owner Trustee, a Responsible Officer of the
Owner Trustee.
"Offshore Rate" shall have the meaning specified therefor in
Exhibit A.
"Opinion of Counsel" means a written opinion of legal counsel,
who in the case of counsel for the Company may be (i) the senior corporate
attorney employed by the Company, (ii) Vinson & Elkins L.L.P. or (iii) other
counsel designated by the Company and who shall be reasonably satisfactory to
the Indenture Trustee or, in the case of legal counsel for the Owner Trustee,
may be (x) Shipman & Goodwin or (y) other counsel designated by the Owner
Trustee and who shall be reasonably satisfactory to the Indenture Trustee.
"Original Holder" means Bank of America Illinois, as the
original holder of the loan evidenced by the Series SWA 1995 Trust N603SW-I
Certificate and any branch or agency thereof in the United States to which the
Series SWA 1995 Trust N603SW-I Certificate held by it may be transferred.
"Outstanding", when used with respect to Certificates, means,
as of the date of determination, all Certificates theretofore executed and
delivered under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation
pursuant to Section 2.07 or otherwise;
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(ii) Certificates for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates; provided, that
if such Certificates are to be redeemed, notice of such redemption has
been duly given pursuant to this Agreement or provision therefor
satisfactory to the Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant to this
Agreement;
provided, however, that in determining whether the Holders of the requisite
aggregate principal amount of Certificates Outstanding have given any request,
demand, authorization, declaration, direction, notice, consent or waiver
hereunder, Certificates owned by or pledged to the Company or any Affiliate of
the Company or the Owner Trustee or the Owner Participant or any Affiliate
thereof, shall (unless all Certificates are then owned thereby) be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, declaration, direction, notice, consent or waiver, only
Certificates which the Indenture Trustee knows to be so owned or so pledged
shall be disregarded. Certificates owned by the Company, or the Owner Trustee
or the Owner Participant, which have been pledged in good faith may be regarded
as Outstanding if the Company, or the Owner Trustee or the Owner Participant,
as the case may be, establishes to the satisfaction of the Indenture Trustee
the pledgee's right to act with respect to such Certificates and that the
pledgee is not the Company, or the Owner Trustee or the Owner Participant or
any Affiliate thereof.
"Owner Trustee" means Shawmut Bank Connecticut, National
Association, not in its individual capacity, except as expressly provided
herein, but solely as trustee under the Trust Agreement, and each other Person
which may from time to time be acting as Owner Trustee in accordance with the
provisions of the Operative Agreements.
"Past Due Rate" means, in respect of any Certificate, the rate
of interest applicable pursuant to the provisions of such Certificate to any
amount of principal or interest payable thereunder not paid when due.
"Paying Agent" means any person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means any Installment Payment Date, Interest
Payment Date or Maturity Date.
"Permitted Investment" means any of the investments permitted
by Section 22.1 of the Lease.
"Premium" means, with respect to each Series SWA 1995 Trust
N603SW Certificate to be redeemed, purchased or otherwise prepaid pursuant to
Article 6, an amount determined as of the Business Day next preceding the
applicable Redemption Date which an Independent Investment Banker determines to
be equal to an excess, if any, of (i) the present values of all remaining
scheduled payments of such principal amount or portion thereof and interest
thereon (excluding interest accrued from the immediately preceding Interest
Payment Date to such Redemption Date) to the Maturity Date of such Certificate
in accordance with generally accepted financial practices
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assuming a 360-day year consisting of twelve 30-day months at a discount rate
equal to the Treasury Yield, all as determined by the Independent Investment
Banker over (ii) the unpaid principal amount of such Certificate. Premium
shall never be below zero.
"Premium Termination Date" means, with respect to each Series
SWA 1995 Trust N603SW Certificate, the date set forth as the "Premium
Termination Date" in Exhibit B hereto completed in accordance with Article 15
for Certificates of the Maturity Date of such Certificate.
"Principal Payment Date" shall have the meaning specified
therefor in Exhibit A.
"Record Date" for the interest or Installment Payment Amount
payable on any Interest Payment Date or Installment Payment Date (other than
the Maturity Date of the Certificates), as the case may be, means the calendar
day (whether or not a Business Day) which is 15 calendar days prior to the
related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are
to be redeemed or purchased pursuant to Section 6.01 or 6.02.
"Redemption Price" means the price at which any or all of the
Certificates (as the context may require) are to be redeemed or purchased,
determined as of the applicable Redemption Date, pursuant to Section 6.01, 6.02
or 15.03, as the case may be.
"Refinancing Date" means the date designated by the Company as
the date for a refinancing of the Certificates in accordance with Section 17 of
the Participation Agreement.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Remaining Weighted Average Life" means, for any Installment
Certificate, at the Redemption Date of such Certificate, the number of days
equal to the quotient obtained by dividing (a) the sum of the products obtained
by multiplying (i) the amount of each then remaining scheduled payment of
principal, including the payment due on the Maturity Date of such Certificate,
by (ii) the number of days from and including the Redemption Date to but
excluding the regularly scheduled date of such scheduled payment of principal;
by (b) the then unpaid principal amount of such Certificate.
"Responsible Company Officer" means, with respect to the
Company or Owner Participant, its Chairman of the Board, its President, the
Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (a) working under the direct supervision of such Chairman
of the Board, President, Chief Financial Officer, Vice President or Treasurer
and (b) whose responsibilities include the administration of the transactions
and agreements, including the Lease, contemplated by the Participation
Agreement.
"Responsible Officer", with respect to Shawmut Bank
Connecticut, National Association, the Owner Trustee or the Indenture Trustee,
means any officer in its Corporate Trust Administration Department or any
officer of the Owner Trustee or the Indenture Trustee, as the case may be,
customarily performing functions similar to those performed by the persons who
at the time
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shall be such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with a particular subject,
and in each case whose responsibilities include the administration of the
transactions and agreements, including the Lease, contemplated by the
Participation Agreement.
"SEC" means the Securities and Exchange Commission.
"Section 18 Refinancing Date" means the date specified by the
Company for the refinancing of the Series SWA 1995 Trust N603SW-I Certificates
in accordance with Section 18 of the Participation Agreement.
"Series SWA 1995 Trust N603SW Certificate" means any
certificate of such designation issued by the Owner Trustee under this
Agreement substantially in the form of Exhibit A-1 or A-2, should any of such
certificates be issued hereunder, and any such certificate issued in
replacement or exchange thereof in accordance with the provisions hereof.
"Series SWA 1995 Trust N603SW-I Certificate" means any
certificate issued by the Owner Trustee under this Agreement, substantially in
the form of Exhibit A, and any such certificate issued in replacement or
exchange thereof in accordance with the provisions hereof.
"Treasury Rate" shall have the meaning specified therefor in
Exhibit A.
"Treasury Yield" means (i) In the case of a Certificate having
a Maturity Date within one year after the Redemption Date the average yield to
maturity on a government bond equivalent basis of the applicable United States
Treasury Bill due the week of the Maturity of such Certificate and (ii) in the
case of a Certificate having a Maturity Date one year or more after the
Redemption Date, the average yield of the most actively traded United States
Treasury Notes (as reported by Cantor Fitzgerald Securities Corp. on page 5 of
Telerate Systems, Inc., a financial news service, or if such report is not
available, a source deemed comparable by the Independent Investment Banker
selected to determine the Premium and reasonably acceptable to the Company and
the Owner Participant) corresponding in maturity (x) for any Certificate issued
in serial form, the Maturity Date or (y) for any Certificate issued in
installment form, to the Average Life Date, in each case, of such Certificate
(or, if there is no corresponding maturity, an interpolation of maturities by
the Independent Investment Banker), in each case determined by the Independent
Investment Banker selected to determine the Premium based on the average of the
yields to stated maturity determined from the bid prices as of 10:00 A.M. and
2:00 P.M. New York time, on the second Business Day preceding the Redemption
Date. "Average Life Date" means, with respect to the redemption of an
Installment Certificate, the date which follows the Redemption Date by a period
equal to the Remaining Weighted Average Life of such Certificate.
"Trust Estate" shall have the meaning specified therefor in
the Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Security Agreement", "this Indenture" or
"this Agreement" means this Trust Indenture and Security Agreement, as the same
may from time to time be supplemented, amended or modified, including by any
Trust Supplement.
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"Trust Office" means the principal corporate trust office of
the Owner Trustee located at 777 Main Street, Hartford, Connecticut 06115,
Attention: Corporate Trust Administration, or at such other office at which the
Owner Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to the Company, the Indenture
Trustee and each Holder.
"Trust Supplement" means a supplement to the Trust Agreement
and this Agreement substantially in the form of Exhibit C.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
Section 1.02 Other Definitions. For all purposes of this
Agreement, terms defined in the heading and recitals of this Agreement are used
as so defined and capitalized terms used but not defined herein are used as
defined in the Lease.
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. One or more
Series SWA 1995 Trust N603SW-I Certificates in the aggregate face amount equal
to the Original Holder's Commitment under Section 1(b) of the Participation
Agreement shall be issued on the Delivery Date as provided in Section 3(e) of
the Participation Agreement in substantially the form set forth, and shall bear
interest as provided, in Exhibit A. In the event more than one such Certificate
is so issued, all references in this Indenture to a single Series SWA 1995
Trust N603SW-I Certificate shall be deemed to include each other such
Certificate. The Series SWA 1995 Trust N603SW-I Certificate shall be dated the
Delivery Date and shall be payable in installments on each Principal Payment
Date as set forth in Annex A to the Series SWA 1995 Trust N603SW-I Certificate.
In connection with a refinancing of the Series SWA 1995 Trust
N603SW-I Certificate in accordance with Section 18 of the Participation
Agreement and Section 15.01 hereof, an additional series of Certificates may be
issued hereunder. Such additional series of Certificates shall be designated as
Series SWA 1995 Trust N603SW Certificates. The Series SWA 1995 Trust N603SW
Certificates shall be substantially in the form set forth in Exhibit A-l or
A-2. The Series SWA 1995 Trust N603SW Certificates shall be dated the Delivery
Date, shall be issued in the maturities and principal amounts, and shall bear
the interest rates per annum (subject to Section 2.10 hereof), in each case as
specified in Exhibit B to be delivered in connection with such refinancing of
the Series SWA 1995 Trust N603SW-I Certificate in accordance with Section 15.01
of this Agreement. The principal of each Certificate, other than Installment
Certificates, shall be payable in full on the Maturity Date for such
Certificate. The principal of each Installment Certificate shall be payable in
installments, on each Installment Payment Date, in amounts equal to the
Installment Payment Amount for such Installment Payment Date.
The Series SWA 1995 Trust N603SW Certificates shall be issued
in denominations of $1,000 and integral multiples thereof, except that one of
such Certificates may be issued in any denomination. The Series SWA 1995 Trust
N603SW-I Certificates may be issued in any denomination.
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The Certificates shall be issued in registered form only. The
Certificates are not redeemable prior to maturity except as provided in this
Agreement. Interest accrued on the Certificates shall be calculated on the
basis set forth therein.
The principal of, Break Amount, if any, Premium, if any, and
interest on the Certificates shall be payable at the principal corporate trust
office of the Indenture Trustee or at any office or agency maintained for such
purpose pursuant to Section 2.03, provided, that subject to Section 15.04, all
such amounts (other than those payable on the Maturity Date of the Installment
Certificates) may be payable at the option of the Indenture Trustee or the
Paying Agent by check mailed on or before the due date by the Indenture Trustee
or the Paying Agent to the address of the Holder entitled thereto as such
address shall appear in the Register.
All payments in respect of the Certificates shall be made in
Dollars. Any payment due on any Certificate on a day that is not a Business
Day shall be made on the next succeeding day which is a Business Day and
(provided such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date.
Section 2.02. Execution and Authentication. (a)
Certificates shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its president, a senior vice president, a vice
president, an assistant vice president, its treasurer, its secretary, an
assistant secretary or an assistant treasurer.
(b) If any officer of the Owner Trustee executing the
Certificates by facsimile signature no longer holds that office at the time the
Certificate is executed on behalf of the Owner Trustee, the Certificate shall
be valid nevertheless.
(c) At any time and from time to time after the execution
of the Certificates, the Owner Trustee may deliver such Certificates to the
Indenture Trustee for authentication and, subject to the provisions of Section
2.10, the Indenture Trustee shall authenticate the Certificates by manual
signature upon written orders of the Owner Trustee. Certificates shall be
authenticated on behalf of the Indenture Trustee by any authorized officer or
signatory of the Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for
any purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner Trustee by the manual or facsimile signature of the officer
of the Owner Trustee specified in the first sentence of Section 2.02(a) and
until authenticated on behalf of the Indenture Trustee by the manual signature
of the officer or signatory of the Indenture Trustee specified in the second
sentence of Section 2.02(c). Such signatures shall be conclusive evidence that
such Certificate has been duly executed, authenticated and issued under this
Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
Trustee shall maintain an office or agency where the Certificates may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where (subject to Sections 2.04 and 2.08) the Certificates may
be presented for payment or for exchange (the "Paying Agent"). The Registrar
shall keep a register (the "Register") with respect to the Certificates and to
their transfer and exchange and the payments of Installment Payment Amounts
thereon, if any. The Indenture Trustee may appoint one or more co-registrars
(the "Co-Registrars") and one or more additional Paying Agents for the
Certificates and the Indenture Trustee may terminate the appointment of any
Co-Registrar or Paying
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Agent at any time upon written notice. The term "Registrar" includes any
Co-Registrar. The term "Paying Agent" includes any additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and
Paying Agent.
Section 2.04. Transfer and Exchange. At the option of the
Holder thereof, Series SWA 1995 Trust N603SW-I Certificates or Series SWA 1995
Trust N603SW Certificates may be exchanged for an equal aggregate initial
principal amount of other Series SWA 1995 Trust N603SW-I Certificates or Series
SWA 1995 Trust N603SW Certificates of the same maturity and type, dated the
Delivery Date, and of any authorized denominations or transferred upon
surrender of the Series SWA 1995 Trust N603SW-I Certificates or Series SWA 1995
Trust N603SW Certificates to be exchanged or transferred at the principal
corporate trust office of the Indenture Trustee, or at any office or agency
maintained for such purpose pursuant to Section 2.03. Whenever any Series SWA
1995 Trust N603SW-I Certificate or Series SWA 1995 Trust N603SW Certificate is
so surrendered for exchange, the Owner Trustee shall execute, and the Indenture
Trustee shall authenticate and deliver, the replacement Series SWA 1995 Trust
N603SW-I Certificate or Series SWA 1995 Trust N603SW Certificate which the
Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Owner Trustee,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Certificates surrendered upon such registration of
transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Holder or any transferee
for any registration of transfer or exchange of Certificates, but the Registrar
may, as a condition to any transfer or exchange hereunder require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of such transfer or exchange of
Certificates.
The Registrar shall not be required to register the transfer
of or to exchange any Certificate called for redemption or purchase pursuant to
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates. (a)
The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semiannually on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders.
(b) Ownership of the Certificates shall be proved by the
Register kept by the Registrar. Prior to due presentment for registration of
transfer of any Certificate, the Owner Trustee,
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the Owner Participant, the Company, the Indenture Trustee, the Paying Agent and
the Registrar shall deem and treat the Person in whose name any Certificate is
registered as the absolute owner of such Certificate for the purpose of
receiving payment of principal (including, subject to the provisions herein
regarding the applicable record dates, Installment Payment Amounts) of,
Premium, if any, and (subject to the provisions herein regarding the applicable
record dates), interest on such Certificate and for all other purposes
whatsoever, whether or not such Certificate is overdue, and none of the Owner
Trustee, the Owner Participant, the Company, the Indenture Trustee, the Paying
Agent or the Registrar shall be affected by notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen
Certificates. If any Certificate shall become mutilated, destroyed, lost or
stolen, the Owner Trustee shall, upon the written request of the Holder of such
Certificate, issue and execute, and the Indenture Trustee shall authenticate
and deliver, in replacement thereof, as applicable, a new Series SWA 1995 Trust
N603SW-I Certificate or a new Series SWA 1995 Trust N603SW Certificate of the
same type and having the same maturity, payable to the same Holder in the same
principal amount and dated the same date as the Certificate so mutilated,
destroyed, lost or stolen. If the Certificate being replaced has become
mutilated, such Certificate shall be surrendered to the Indenture Trustee. If
the Certificate being replaced has been destroyed, lost or stolen, the Holder
of such Certificate shall furnish to the Owner Trustee and the Indenture
Trustee such security or indemnity as may be required by it to save the Owner
Trustee and the Indenture Trustee harmless and evidence satisfactory to the
Owner Trustee and the Indenture Trustee of the destruction, loss or theft of
such Certificate and of the ownership thereof; provided, however, that if the
affected Holder is the Original Holder, the written notice of such destruction,
loss or theft and such ownership and the written undertaking of such Holder
delivered to the Owner Trustee and the Indenture Trustee to hold harmless the
Owner Trustee and the Indenture Trustee in respect of the execution,
authentication and delivery of such new Certificate shall be sufficient
evidence, security and indemnity.
Section 2.07. Cancellation. The Registrar and any Paying
Agent shall forward to the Indenture Trustee all Certificates surrendered to
them for replacement, redemption, registration of transfer, exchange or
payment. The Indenture Trustee shall cancel all Certificates surrendered for
replacement, redemption, registration of transfer, exchange, payment or
cancellation and shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal
and Interest. (a) The Indenture Trustee will arrange directly with any Paying
Agent for the payment, or the Indenture Trustee will make payment, all pursuant
to Section 2.09, of the principal of, the Break Amount, if any, Premium, if
any, and interest on, and any other amounts payable on or in respect of each
Certificate or to the Holder thereof hereunder. Interest, principal and other
amounts payable on or in respect of the Series SWA 1995 Trust N603SW-I
Certificate shall be paid as provided for therein and in Article 15. Payment on
Series SWA 1995 Trust N603SW Certificates in respect of interest and
Installment Payment Amounts, if any, payable on an Interest Payment Date or
Installment Payment Date, respectively (other than the Maturity Date of the
Series SWA 1995 Trust N603SW Certificates) shall be paid in Dollars on each
Interest Payment Date or Installment Payment Date (other than the Maturity Date
of such Series SWA 1995 Trust N603SW Certificates), as the case may be, to the
Holder thereof at the close of business on the relevant Record Date; provided,
however, that the Paying Agent will, at the request of the Indenture Trustee
and may, at its option, pay such interest and Installment Payment Amounts
(other than those payable on the Maturity Date of the Installment Certificate)
by check mailed on or before the due date to such Holder's address as it
appears on the
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Register. Otherwise, principal of Series SWA 1995 Trust N603SW Certificates
and Premium, if any, with respect thereto, shall be payable only against
presentation and surrender thereof at the principal corporate trust office of
the Indenture Trustee or at the office of the Paying Agent maintained for such
purpose pursuant to Section 2.03.
A Holder shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal amount of,
Premium, if any, Break Amount, if any, and interest on all Certificates held by
such Holder and all other sums payable to such Holder hereunder, under such
Certificates and under the Participation Agreement shall have been paid in
full.
(b) Any Installment Payment Amount payable on an
Installment Payment Date (other than the Maturity Date with respect to a
Certificate) or any interest payable on an Interest Payment Date on any Series
SWA 1995 Trust N603SW Certificate which is not punctually paid on such
Installment Payment Date or such Interest Payment Date, as the case may be
(herein called, respectively, a "Defaulted Installment" and "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Record Date by virtue of his having been such Holder; and such Defaulted
Installment or Defaulted Interest may be paid by the Indenture Trustee, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Indenture Trustee may elect to make
payment of any Defaulted Installment or Defaulted Interest, as the
case may be, to the Person in whose name any Series SWA 1995 Trust
N603SW Certificate is registered at the close of business on a special
record date for the payment of such Defaulted Installment or Defaulted
Interest, as the case may be, which shall be fixed in the following
manner. The Indenture Trustee shall notify the Paying Agent in writing
of the amount of Defaulted Installment or Defaulted Interest, as the
case may be, proposed to be paid on each such Certificate and the date
of the proposed payment, and at the same time the Indenture Trustee
shall make arrangements to set aside an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Installment or Defaulted Interest, as the case may be, prior to the
date of the proposed payment, to be held in trust for the benefit of
the Persons entitled to such Defaulted Installment or Defaulted
Interest, as the case may be, as this clause provides and shall fix a
special record date for the payment of such Defaulted Installment or
Defaulted Interest, as the case may be, which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment. The Indenture Trustee shall promptly notify the Owner
Trustee, the Company and the Registrar of such special record date and
shall cause notice of the proposed payment of such Defaulted
Installment or Defaulted Interest, as the case may be, and the special
record date therefor to be mailed, first class postage prepaid, to
each Holder of a Series SWA 1995 Trust N603SW Certificate at its
address as it appears in the Register, not less than 10 days prior to
such special record date. Notice of the proposed payment of such
Defaulted Installment or Defaulted Interest, as the case may be, and
the special record date therefor having been mailed, as aforesaid,
such Defaulted Installment or Defaulted Interest, as the case may be,
shall be paid to the Persons in whose names the applicable Series SWA
1995 Trust N603SW Certificates are registered on such special record
date and shall no longer be payable pursuant to the following clause
(2).
(2) The Indenture Trustee may make, or cause to
be made, payment of any Defaulted Installment or Defaulted Interest,
as the case may be, in any other lawful manner not inconsistent with
the requirements of any securities exchange on which Series SWA 1995
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Trust N603SW Certificates may be listed, and upon such notice as may
be required by such exchange, if such payment shall be deemed
practicable by the Indenture Trustee.
Any interest, principal or other amount payable on the Series
SWA 1995 Trust N603SW-I Certificates which is not punctually paid when due
shall be paid as provided in such Certificates.
(c) The Indenture Trustee shall require each Paying Agent
to agree in writing that such Paying Agent will hold in trust, for the benefit
of the Holders and the Indenture Trustee, all money held by such Paying Agent
for the payment of the principal of, Break Amount, if any, Premium, if any, or
interest or any other amounts payable to any Holder hereunder or under the
Participation Agreement and shall give to the Indenture Trustee notice of any
default in the making of any such payment upon the Certificates. The Indenture
Trustee at any time may require a Paying Agent to repay to the Indenture
Trustee all money held by it. Upon so doing the Paying Agent shall have no
further liability for the money so paid.
Section 2.09. Payment from Indenture Estate Only. All
amounts payable by the Indenture Trustee and the Owner Trustee under the
Certificates and this Agreement shall be made only from the income and proceeds
of the Indenture Estate and from the other amounts specified in Section 3.03.
Each Holder of a Certificate, by its acceptance of such Certificate, agrees
that (a) it will look solely to the income and proceeds of the Indenture Estate
and from the other amounts specified in Section 3.03 for the payment of such
amounts, to the extent available for distribution to it as herein provided, and
(b) none of the Owner Trustee, the Owner Participant or the Indenture Trustee
is or shall be personally liable to any Holder of any Certificate for any
amount payable under such Certificate or this Agreement or, except as expressly
provided in this Agreement in the case of the Owner Trustee and the Indenture
Trustee, for any liability thereunder.
Shawmut Bank Connecticut, National Association is entering
into this Agreement solely as Owner Trustee under the Trust Agreement and not
in its individual capacity, and in no case whatsoever shall Shawmut Bank
Connecticut, National Association (or any entity acting as successor trustee
under the Trust Agreement) be personally liable for, or for any loss in respect
of, any statements, representations, warranties, agreements or obligations
hereunder or thereunder; provided, that Shawmut Bank Connecticut, National
Association shall be liable hereunder in its individual capacity, (i) for the
performance of its agreements in its individual capacity hereunder and under
Section 8 of the Participation Agreement, and (ii) for its own willful
misconduct or gross negligence. If a successor Owner Trustee is appointed in
accordance with the terms of the Trust Agreement and the Participation
Agreement, such successor Owner Trustee shall, without any further act, succeed
to all of the rights, duties, immunities and obligations hereunder, and its
predecessor Owner Trustee and Shawmut Bank Connecticut, National Association
shall be released from all further duties and obligations hereunder, without
prejudice to any claims against Shawmut Bank Connecticut, National Association
or such predecessor Owner Trustee for any default by Shawmut Bank Connecticut,
National Association or such predecessor Owner Trustee, respectively, in the
performance of its obligations hereunder prior to such appointment.
Section 2.10. Execution, Delivery and Dating of
Certificates upon Issuance. The Owner Trustee shall issue and execute, and the
Indenture Trustee shall authenticate and deliver, the Certificates for original
issuance upon payment of an amount equal to the aggregate original principal
amount of the Series SWA 1995 Trust N603SW-I Certificates to be issued at such
time in the manner
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contemplated by Section 2 of the Participation Agreement. Each Certificate
issued hereunder shall be dated the Delivery Date, and the Indenture Trustee
shall note thereon, if issued after the Delivery Date, the date through which
has been paid interest thereon. Interest shall accrue on the Series SWA 1995
Trust N603SW Certificates only from the date of issuance of such Certificate
pursuant to Section 17 or 18.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption of
Certificates. (a) Except as otherwise provided in Section 3.05, in the event
the Certificates are redeemed in accordance with the provisions of Section
6.01(a) or (b), the Indenture Trustee will apply on the Redemption Date any
amounts then held by it in the Indenture Estate and received by it from or on
behalf of the Owner Trustee or, as assignee of the Owner Trustee, from the
Company, including, without limitation, pursuant to Section 9, 10, 11 or
(subject to Section 7.03) 18.2 of the Lease in the following order of priority:
first, so much thereof as was received by the Indenture
Trustee with respect to the amounts due to it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Outstanding
Certificates pursuant to Section 6.01(a) or (b), as the case may be,
on the Redemption Date shall be applied to the redemption of the
Certificates on the Redemption Date; and
third, the balance, if any, thereof remaining thereafter shall
be distributed to the Owner Trustee to be held or distributed to the
Owner Participant in accordance with the terms of the Trust Agreement.
(b) In the case of any refinancing or purchase of the
Certificates pursuant to Section 6.01(c) or 6.02, the Indenture Trustee will
apply on the Redemption Date the amounts received by it from or on behalf of
the Owner Trustee, or as assignee of the Owner Trustee, from the Company, to
the payment of the Redemption Price of the Outstanding Certificates pursuant to
Section 6.01(c) or 6.02, as the case may be, on the Redemption Date; it being
understood that any such payment shall be a refinancing or purchase of the
indebtedness represented by the Outstanding Certificates and is not, and shall
not be construed so as to be, a redemption thereof or payment or prepayment
thereon.
Section 3.03. Application of Rent When No Indenture Event
of Default Is Continuing. Except as otherwise provided in Section 3.02, 3.04,
3.05 or 3.06, each amount of Basic Rent or Advance (as defined in Section 3.8
of the Lease) received by the Indenture Trustee from the Owner Trustee or, as
assignee of the Owner Trustee, from the Company, any payment of interest
payable on any Interest Payment Date on overdue installments of Basic Rent, any
amount received
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from the Owner Participant pursuant to Section 8(dd) of the Participation
Agreement as the Deferred Equity Amount, together with any amount received by
the Indenture Trustee pursuant to Section 8.03(e)(i), shall be distributed by
the Indenture Trustee in the following order of priority:
first, so much of such aggregate amount as shall be required
to pay in full the interest, principal of, Premium, if any, Break
Amount, if any, and any other amounts then due on, all Outstanding
Certificates shall be distributed to the Persons entitled thereto; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Premium, if any, Break Amount, if any, such other
amounts payable to the Holders, and without any preference or priority
of one Certificate over another, ratably according to the aggregate
amount so due for interest, principal, Premium, if any, Break Amount,
if any, and such other amounts at the date fixed by the Indenture
Trustee for the distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall be
required to pay any amount due the Indenture Trustee pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such
amounts; and
third, the balance, if any, of such aggregate amount remaining
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement; provided, however,
that if an Indenture Default shall have occurred and be continuing,
then such balance shall not be distributed as provided in this clause
"third" but shall be held by the Indenture Trustee as part of the
Indenture Estate until whichever of the following shall first occur:
(i) all Indenture Events of Default shall have been cured, in which
event such balance shall, to the extent not theretofore distributed as
provided herein, be distributed as provided in this clause third", or
(ii) Section 3.04 or Section 3.05 shall be applicable, in which event
such balance shall be distributed in accordance with the provisions of
said Section 3.04 or Section 3.05, as the case may be, or (iii) such
installment or payment shall have been held for a period in excess of
183 days (during which no Indenture Event of Default which is not a
Lease Event of Default shall have occurred and be continuing and
during which period the Indenture Trustee and the Holders shall not
have been stayed or otherwise precluded by operation of law from
taking action to accelerate the Certificates or to exercise remedies
hereunder or under the Lease), in which event such balance shall, to
the extent not theretofore applied as provided herein, be distributed
as provided in this clause third".
Section 3.04. Application of Certain Payments in Case of
Requisition or Event of Loss. Except as otherwise provided in Section 3.05, any
amounts received directly or otherwise pursuant to the Lease from any
governmental authority or other Person pursuant to Section 10 of the Lease with
respect to the Airframe or the Airframe and the Engines or engines then
installed on the Airframe as the result of an Event of Loss, to the extent that
such amounts are not required to be paid to the Company pursuant to said
Section 10, and any amounts of insurance proceeds for damage to the Indenture
Estate received directly or otherwise pursuant to the Lease (and not
constituting Excluded Payments) from any insurer pursuant to Section 11 of the
Lease with respect thereto as the result of an Event of Loss, to the extent
such amounts are not required to be paid to the Company pursuant to said
Section 11, shall, except as otherwise provided in the next sentence, be
applied by the Indenture Trustee on behalf of, and as assignee of, the Owner
Trustee in reduction of the Company's obligations to pay Stipulated Loss Value
and the other amounts payable by the Company
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pursuant to Section 10 of the Lease and the remainder, if any, shall, except as
provided in the next sentence, be distributed to the Owner Trustee to be held
or distributed in accordance with the terms of the Lease and the Trust
Agreement. Any portion of any such amount referred to in the preceding
sentence which is not required to be so paid to the Company pursuant to the
Lease, solely because a Lease Default of the type referred to in Section 14.1
or 14.5 of the Lease or Lease Event of Default shall have occurred and be
continuing, shall, subject to Section 10.04 hereof, be held by the Indenture
Trustee on behalf of the Owner Trustee as security for the obligations of the
Company under the Lease and at such time as there shall not be continuing any
Lease Default of the type referred to in Section 14.1 or 14.5 of the Lease or
Lease Event of Default or such earlier time as shall be provided for in the
Lease, or upon satisfaction and discharge of this Indenture as provided herein,
such portion shall be paid to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease, unless the Indenture Trustee (as
assignee from the Owner Trustee of the Lease) shall have theretofore commenced
to exercise remedies pursuant to Section 15 thereof, in which event such
portion shall be distributed in accordance with the provisions of Section 3.05
hereof.
Section 3.05. Payments During Continuance of Indenture
Event of Default. All payments (except Excluded Payments) received and amounts
held or realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and so long as such an Indenture Event of Default shall be
continuing, and after the Indenture Trustee shall foreclose or enforce this
Indenture or after the Certificates shall have become due and payable as
provided in Section 8.02 (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as
all payments or amounts then held or thereafter received by the Indenture
Trustee as part of the Indenture Estate while such Indenture Event of Default
shall be continuing, shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such payments or amounts as shall be
required to pay the Indenture Trustee all amounts then due it pursuant
to Section 9.06 shall be applied to pay the Indenture Trustee such
amounts;
second, so much of such payments or amounts remaining as shall
be required to (i) pay the expenses incurred (including unbilled
expenses in respect of property delivered or contracted for or
services rendered or contracted for if the amount of such expenses is
liquidated) in using, operating, storing, leasing, controlling or
managing the Indenture Estate, and of all maintenance, insurance,
repairs, replacements, alterations, additions and improvements of and
to the Indenture Estate and to make all payments which the Indenture
Trustee may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the Indenture
Estate or any part thereof (including the employment of engineers and
accountants to examine and make reports upon the properties, books and
records of the Owner Trustee and, to the extent permitted under the
Lease, the Company), all in accordance with Section 8.03(c), shall be
applied for such purposes and (ii) reimburse the Holders in full for
payments made pursuant to Section 9.01(c) (to the extent not
previously reimbursed) shall be distributed to such Holders, and if
the aggregate amount remaining shall be insufficient to reimburse all
such payments in full, it shall be distributed ratably, without
priority of any Certificate over any other, in the proportion that the
aggregate amount of the unreimbursed payments made by each such Holder
pursuant to Section 9.01(c) bears to the aggregate amount of the
unreimbursed payments made by all Holders pursuant to Section 9.01(c);
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third, so much of such payments or amounts remaining as shall
be required to pay the principal of, Break Amount, if any, and accrued
interest on all Certificates Outstanding and all other amounts payable
to the Holders hereunder or under the Participation Agreement and then
due and payable, whether by declaration of acceleration pursuant to
Section 8.02 or otherwise, shall be applied to the payment of such
interest, principal, Break Amount, if any, and such other amounts; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Break Amount, if any, such other amounts and
interest, without any preference or priority of one Certificate over
another, ratably according to the aggregate amount so due for
interest, principal, Break Amount, if any, and such other amounts at
the date fixed by the Indenture Trustee for the distribution of such
payments or amounts; and
fourth, the balance, if any, of such payments or amounts
remaining thereafter shall be distributed to the Owner Trustee to be
held or distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement.
Section 3.06. Payments for Which Application Is Provided in
Other Documents. Except as otherwise provided in this Agreement, any payment
received by the Indenture Trustee for which provision as to the application
thereof is made in the Lease or the Participation Agreement shall be
distributed to the Person for whose benefit such payments were made in
accordance with, and subject to the terms, thereof and hereof. The Indenture
Trustee shall be obligated to distribute any Excluded Payments received by the
Indenture Trustee promptly upon receipt thereof by the Indenture Trustee to the
Person entitled thereto.
Section 3.07. Payments for Which No Application Is
Otherwise Provided. Except as otherwise provided in Section 3.05:
(a) any payment received by the Indenture Trustee for
which no provision as to the application thereof is made elsewhere in
this Agreement, and
(b) any payment received and amounts realized by the
Indenture Trustee with respect to the Aircraft to the extent received
or realized at any time after the conditions set forth in Article 10
for the satisfaction and discharge of this Agreement or for the
defeasance of the Certificates shall have been duly satisfied, as well
as any other amounts remaining as part of the Indenture Estate after
such satisfaction shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance, if any, of such aggregate amount
remaining thereafter shall be distributed to the Owner Trustee
to be held or distributed in accordance with the terms of the
Trust Agreement.
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Section 3.08. Application of Payments. Each payment of
principal and interest or other amounts due hereunder to the Indenture Trustee
or any Holder or in respect of each Certificate shall, except as otherwise
expressly provided herein, be applied, first, to the payment of any amount
(other than the principal of or Premium, Break Amount or interest on such
Certificate) due hereunder or in respect of such Certificate, second, to the
payment of Premium or Break Amount, if any, and interest on such Certificate
(as well as any interest on overdue principal and, to the extent permitted by
law, interest and other amounts payable hereunder and thereunder) due
thereunder, third, to the payment of the principal of such Certificate then due
and fourth, the balance, if any, remaining thereafter, to the payment of the
principal of such Certificate remaining unpaid (provided, that such Certificate
shall not be subject to prepayment or purchase without the consent of the
affected Holder except as expressly permitted hereby). The amounts paid
pursuant to clause fourth above shall be applied to the installments of
principal of such Certificate in inverse order of maturity.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner
Trustee hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually
perform its obligations under the Lease and will duly and punctually
pay the principal of, Premium, if any, Break Amount, if any, and
interest on and other amounts due hereunder and under the Certificates
and all other amounts payable by it to the Holders under the
Participation Agreement and the other Operative Agreements;
(ii) the Owner Trustee will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it with respect to any of the properties or assets of
the Indenture Estate and shall, at its own cost and expense, promptly
take such action as may be necessary to discharge duly any such Lessor
Lien, and the Owner Trustee will cause restitution to be made to the
Indenture Estate in the amount of any diminution of the value thereof
as the result of any Lessor Liens attributable to it;
(iii) in the event a Responsible Officer of the
Owner Trustee shall have actual knowledge of an Indenture Event of
Default or Indenture Default or an Event of Loss, the Owner Trustee
will give prompt written notice of such Indenture Event of Default or
Indenture Default or Event of Loss to the Indenture Trustee, the Owner
Participant, the Company and, so long as the Series SWA 1995 Trust
N603SW-I Certificate shall be Outstanding, the Original Holder;
(iv) except as contemplated by the Operative
Agreements, the Owner Trustee will not contract for, create, incur,
assume or permit to exist any Debt, and will not guarantee (directly
or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so
doing, or otherwise), endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the Debt of any
other Person;
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(v) the Owner Trustee will not enter into any
activity other than owning the Aircraft, the leasing thereof to the
Company and the carrying out of the transactions contemplated hereby
and by the Participation Agreement, the Trust Agreement and the other
Operative Agreements;
(vi) the Owner Trustee will furnish to the
Indenture Trustee, and the Indenture Trustee will furnish to each
Holder at the time outstanding, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to
the Owner Trustee under the Lease, including, without limitation, a
copy of each report or notice received pursuant to Section 11 of the
Lease, to the extent that the same shall not have been furnished
directly to such Holder or the Indenture Trustee pursuant to the
Lease; and
(vii) the Owner Trustee will not (except as
permitted herein) assign or pledge or otherwise dispose of, so long as
this Indenture shall remain in effect and shall not have been
terminated pursuant to Section 10.01, any of its right, title or
interest hereby assigned to anyone other than the Indenture Trustee,
and, with respect to such right, title and interest hereby assigned,
will not, except as provided in this Indenture, (1) accept any payment
that is subjected to the Lien of this Indenture from the Lessee or any
sublessee, enter into any agreement amending or supplementing any of
the Indenture Documents, execute any waiver or modification of, or
consent under, the terms of any of the Indenture Documents, (2)
exercise any rights with respect to the Indenture Estate, (3) settle
or compromise any claim arising under any of the Indenture Documents,
or (4) submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Indenture
Documents to arbitration thereunder.
Section 4.02. Covenants of Shawmut Bank Connecticut,
National Association. Shawmut Bank Connecticut, National Association, hereby
covenants and agrees that it will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Liens attributable to it with respect to
any of the properties or assets of the Indenture Estate and it shall, at its
own cost and expense, promptly take such action as may be necessary to
discharge duly any such Lessor Lien. Shawmut Bank Connecticut, National
Association, will cause restitution to be made to the Indenture Estate in the
amount of any diminution of the value thereof as the result of any Lessor Liens
thereon attributable to it.
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of
Property Included in the Indenture Estate During Continuation of Lease. So
long as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the lien of this
Agreement and be leased to the Company under the Lease; provided, that
to the extent permitted by and as provided in the Lease, the Company
shall have the right,
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at any time and from time to time, without any release from or consent
by the Owner Trustee or the Indenture Trustee, to remove, replace and
pool Parts and to make alterations, improvements and modifications in,
and additions to, the Aircraft. The Indenture Trustee agrees that, to
the extent permitted by and as provided in the Lease, title to any
such Part shall vest in the Company. The Indenture Trustee shall from
time to time execute an appropriate written instrument or instruments
to confirm the release of the security interest of the Indenture
Trustee in any Part as provided in this Section 5.01, in each case
upon receipt by the Indenture Trustee of a Company Request stating
that said action was duly taken by the Company in conformity with this
Section 5.01 and that the execution of such written instrument or
instruments is appropriate to evidence such release of a security
interest under this Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
Occurring to Airframe or Engines or upon Voluntary Termination of
Lease with Respect to Engines. Upon (i) the occurrence of an Event of
Loss occurring to the Airframe or an Engine, or (ii) a voluntary
termination of the Lease with respect to an Engine, the Company, in
accordance with the Lease, may, in the case of an Event of Loss which
has occurred to the Airframe, or shall, except as provided in Section
10.2 of the Lease, in the case of an Event of Loss which has occurred
to or termination of the Lease with respect to an Engine, substitute
an airframe or engine, as the case may be, in which case, upon due
satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of
its right, interest and lien in and to the Airframe or such Engine in
accordance with the provisions of the following sentence. The
Indenture Trustee shall execute and deliver to the Owner Trustee an
instrument releasing its lien in and to the Airframe or such Engine
and shall execute for recording in public offices, at the expense of
the Owner Trustee (if requested by the Owner Trustee) or the Company
(if requested by the Company), such instruments in writing as the
Owner Trustee or the Company shall reasonably request and as shall be
reasonably acceptable to the Indenture Trustee in order to make clear
upon public records that such lien has been released under the laws of
the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and
all rights existing or that may be acquired to any penalties, forfeit or
damages from or against the Indenture Trustee for failure to execute and
deliver any document in connection with the release of a lien or to file any
certificate in compliance with any law or statute requiring the filing of the
same in connection with the release of a lien, except for failure by the
Indenture Trustee to execute and deliver any document or to file any
certificate as may be specifically requested in writing by the Owner Trustee or
the Company and with respect to which the Owner Trustee or the Company shall be
duly entitled.
Section 5.02. Certificates in Respect of Replacement
Aircraft and Engines. Upon the execution and delivery of a Trust Supplement
covering a Replacement Airframe and/or Replacement Engine, as provided in
Section 5.01(b), each Certificate shall be deemed to have been issued in
connection with such Replacement Airframe and/or Replacement Engine and each
Certificate issued thereafter upon a transfer or exchange of, or as a
replacement for, a Certificate, shall be designated as having been issued in
connection with such Replacement Airframe and/or Replacement Engine, but
without any other change therein.
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ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain
Events. (a) If there shall be an Event of Loss to the Aircraft and the
Aircraft is not replaced pursuant to Section 10.1.2 of the Lease, each
Outstanding Certificate shall be redeemed in whole at a Redemption Price equal
to 100% of the outstanding principal amount of such Certificate plus accrued
and unpaid interest thereon to but excluding the applicable Redemption Date
plus, in the case of the Series SWA 1995 Trust N603SW-I Certificates, Break
Amount, if any, and all other amounts payable to the Holders hereunder or under
the Participation Agreement. The Redemption Date for Certificates to be
redeemed pursuant to this Section 6.01(a) shall be the Lease Loss Payment Date.
No Premium shall be paid in the case of a redemption pursuant to any provision
of this Section 6.01(a).
(b) The Certificates shall be redeemed on the Lease
Termination Date or upon the purchase of the Aircraft by the Company at its
option on the Special Purchase Option Date pursuant to Section 18.2(b) of the
Lease (unless the Company shall have elected to assume the rights and
obligations of the Owner Trustee hereunder to the extent and as provided for in
Section 7.03). In the case of any Series SWA 1995 Trust N603SW-I Certificate,
the Redemption Price therefor shall be equal to the unpaid principal amount of
such Certificate as at such date plus accrued and unpaid interest thereon to
but excluding the Redemption Date, the Break Amount, if any, and all other
amounts payable to the Holder thereof hereunder or under any other Operative
Agreement, but without any other premium or penalty. In the case of any Series
SWA 1995 Trust N603SW Certificate, such Redemption Price therefor shall be
equal to the unpaid principal amount of such Certificate as at such Redemption
Date together with an amount equal to the accrued but unpaid interest thereon
and, in the case of each Certificate redeemed prior to the Premium Termination
Date applicable to such Certificate, the Premium, if any. The Redemption Date
for Certificates to be redeemed shall be (A) in the case of a termination of
the Lease pursuant to Section 9 thereof, on the Lease Termination Date or (B)
in the case of purchase of the Aircraft by the Company pursuant to Section
18.2(b) of the Lease, on the Special Purchase Option Date.
(c) (i) The Series SWA 1995 Trust N603SW-I
Certificates may be refinanced in accordance with the provisions of Article 15
hereof and Sections 17 and 18 of the Participation Agreement and (ii) the
Series SWA 1995 Trust N603SW Certificates may be refinanced if all the
conditions to such refunding or refinancing set forth in Section 17 of the
Participation Agreement shall have been satisfied. In any such event, each
Outstanding Certificate may be so refinanced at a Redemption Price determined
in accordance with the procedures described above in Section 6.01(b); provided,
however, that the applicable Redemption Date for the Series SWA 1995 Trust
N603SW-I Certificates to be refinanced pursuant to clause (i) of this Section
6.01(c) shall be the applicable Refinancing Date under Section 17 of the
Participation Agreement or the Section 18 Refinancing Date under Section 18 of
the Participation Agreement, as the case may be, and the applicable Redemption
Date for Certificates to be redeemed pursuant to clause (ii) of this Section
6.01(c) shall be the applicable Refinancing Date under Section 17 of the
Participation Agreement.
Section 6.02. Redemption or Purchase of Certificates Upon
Certain Indenture Events of Default. If the Owner Trustee shall have given
notice of redemption or purchase to the Indenture Trustee pursuant to Section
8.03(e)(ii) at any time (x) after the Certificates shall have been accelerated
pursuant to Section 8.02 or (y) after one or more Lease Events of Default shall
have occurred and
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be continuing for a period of 180 days or more, each Outstanding Certificate
shall be redeemed or purchased in whole at a Redemption Price equal to 100% of
its principal amount plus accrued and unpaid interest thereon (including,
without limitation, interest on overdue interest) to but excluding the
applicable Redemption Date as determined below and all other amounts payable to
the Holders hereunder or under the Participation Agreement and, in the case of
the Series SWA 1995 Trust N603SW-I Certificate, the Break Amount, if any, and,
in the case of the Series SWA 1995 Trust N603SW Certificates, if to be
purchased or redeemed pursuant to clause (y) above prior to the one year
anniversary of the first occurrence of the relevant Lease Event of Default, the
Premium, if any. The Redemption Date for Certificates to be redeemed or
purchased pursuant to this Section 6.02 shall be the date specified in the
notice given by the Owner Trustee to the Indenture Trustee pursuant to Section
8.03(e)(ii) (provided, however, that in the case of the Series SWA 1995 Trust
N603SW-I Certificates, if such date is the last day of the then current
Interest Period therefor, no Break Amount shall be payable). If the Owner
Trustee elects to purchase the Certificates under Section 8.03(e)(ii), nothing
herein, including use of the terms "Redemption Date" and "Redemption Price",
shall be deemed to result in a redemption of the Certificates.
Section 6.03. Notice of Redemption to Holders. (a) Notice
of redemption or purchase with respect to the Series SWA 1995 Trust N603SW
Certificates shall be given by first-class mail, postage prepaid, mailed not
less than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of such Certificates to be redeemed or purchased, at such Holder's address
appearing in the Register; provided, that in the case of a redemption pursuant
to Section 6.01(b) related to Lessee's exercise of its option pursuant to
Section 9 of the Lease, such notice shall be revocable and shall be deemed
revoked in the event the Lease does not in fact terminate on the related Lease
Termination Date.
All notices of redemption or purchase shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption
Price,
(3) that on the Redemption Date, the Redemption Price
will become due and payable upon each such Certificate, and that
interest on Certificates shall cease to accrue on and after such
Redemption Date, and
(4) the place or places where such Certificates are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
(b) Notice of redemption of the Series SWA 1995 Trust
N603SW-I Certificate shall be given by the Owner Trustee (or by the Company on
behalf of the Owner Trustee) not less than three Business Days prior to the
Redemption Date, shall be irrevocable and shall be given by telephone, telex,
telecopy, cable or other customary means of communication by the Owner Trustee
or the Company, as the case may be, to the other and to the Indenture Trustee
and to the Original Holder at each such Person's address designated in Section
12.01(a). Notwithstanding any provision to the contrary contained in this
Article 6, the Series SWA 1995 Trust N603SW-I Certificate shall
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be redeemable as set forth in this Article 6 and in Article 15 without any
premium, prepayment penalty or other cost or expense except for the Break
Amount, if any, and the payment of all other amounts payable to the Holders
thereof hereunder and under the Participation Agreement.
Section 6.04. Deposit of Redemption Price. On or before
the Redemption Date, the Owner Trustee (or any Person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 Noon in immediately available
funds (i) the Redemption Price of the Certificates to be redeemed, refinanced
or purchased, as the case may be, on the Redemption Date and (ii) all other
amounts due and payable hereunder, including any amounts payable to the
Indenture Trustee pursuant to Section 9.06.
Section 6.05. Certificates Payable on Redemption Date.
Notice of redemption, refinancing or purchase having been given as aforesaid
(and not deemed revoked as contemplated in the proviso to Section 6.03(a)), the
Certificates (or the purchase or refinancing price therefor) shall, on the
applicable Redemption Date, become due and payable at the Redemption Price
therefor at the principal corporate trust office of the Indenture Trustee or at
any office or agency maintained for such purposes pursuant to Section 2.03, and
from and after such Redemption Date (unless there shall be a default in the
payment of the Redemption Price) any Certificates then Outstanding shall cease
to bear interest. Unless payment prior to surrender is expressly provided for
herein or in the Participation Agreement, upon surrender of any such
Certificate for redemption or purchase in accordance with said notice such
Certificate shall be paid at the Redemption Price. The Certificates shall not
be subject to prepayment, redemption, refunding or refinancing except as
provided in this Article 6 and in Section 8.02 hereof.
If any Certificate called for redemption or purchase shall not
be so paid upon surrender thereof for redemption or purchase, the principal
amount thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments
Held by the Indenture Trustee. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Premium, if any, or
interest on any Series SWA 1995 Trust N603SW Certificate, including without
limitation any money deposited pursuant to Article 10 and remaining unclaimed
for two years and eleven months after the due date for such payment, shall be
paid to the Owner Trustee; and the Holders of any Outstanding Certificates
shall thereafter, as unsecured general creditors, look only to the Owner
Participant (to the extent the Owner Trustee distributed any such trust money
to the Owner Participant) and to the Company on behalf of the Owner Trustee for
payment thereof, and all liability of the Indenture Trustee or any such Paying
Agent with respect to such trust money shall thereupon cease; provided, that
the Indenture Trustee or such Paying Agent, before being required to make any
such repayment, may at the expense of the Company cause to be mailed to each
such Holder notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
mailing, any unclaimed balance of such money then remaining will be repaid to
the Owner Trustee as provided herein.
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Section 7.02. [Reserved for Potential Future Use]
Section 7.03. Assumption of Obligations of Owner Trustee by
the Company. In the event that the Company shall have elected to assume all of
the rights and obligations of the Owner Trustee under this Agreement in respect
of the Certificates pursuant to Section 8(r) of the Participation Agreement in
connection with the purchase by the Company of the Aircraft, and if on or prior
to the Special Purchase Option Date (the "Assumption Date") the Indenture
Trustee shall have received:
(a) an instrument of assumption (the "Assumption
Agreement") pursuant to which the Company irrevocably and unconditionally
assumes and undertakes, with full recourse to the Company, the Owner Trustee's
obligations with respect to principal, interest, Break Amount, Premium and all
other amounts payable to the Holders or the Indenture Trustee under the
Certificates then Outstanding, this Agreement, and the Participation Agreement
and which incorporates therein events of default substantially similar in scope
and effect to those set forth in the Lease and covenants substantially similar
to the covenants of the Company under the Lease and the Participation
Agreement;
(b) a supplement to this Agreement and/or such other
instruments and documents (including, without limitation, Uniform Commercial
Code financing statement(s)) covering all of the security interests created by
or pursuant to this Indenture that are not covered by the recording system
established by the Federal Aviation Act as may be necessary (or reasonably
requested by the Indenture Trustee) for the security interest of the Indenture
Trustee in the Aircraft and in the other rights, property and interests
included in the Indenture Estate (other than those rights, property and
interests that depend on the existence of the Trust Estate and the
participation of the Owner Trustee and Owner Participant in the transactions
contemplated by the Participation Agreement and this Indenture) to continue to
be perfected and duly recorded with the Federal Aviation Administration and in
all other places necessary or, in the reasonable opinion of the Indenture
Trustee, advisable under the Uniform Commercial Code;
(c) an insurance report dated the Assumption Date of the
independent insurance broker referred to in Section 11.5 of the Lease and the
certificates of insurance, each in form and substance reasonably satisfactory
to the Indenture Trustee as to the due compliance as of the Assumption Date
with the terms of Section 11 of the Lease (as it relates to the Holders and the
Indenture Trustee) relating to the insurance with respect to the Aircraft;
(d) evidence that as of the Assumption Date, and after
giving effect to the transactions contemplated hereby, the Company has good
title to the Aircraft free and clear of all Liens other than the Lien of, and
the security interest created by, this Indenture and other Permitted Liens
(other than Lessor Liens);
(e) a copy of the application that was filed with the FAA
on the Assumption Date regarding the registration of the Aircraft in the name
of the Company;
(f) a certificate from a Responsible Company Officer of
the Company that no Lease Default of the type referred to in Section 14.1 or
14.5 of the Lease or Lease Event of Default shall have occurred and be
continuing as of the Assumption Date;
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(g) an opinion of the General Counsel of the Company (or
other counsel reasonably satisfactory to the Indenture Trustee) in form and
substance reasonably satisfactory to the Indenture Trustee, addressed to the
Indenture Trustee and dated the Assumption Date, to the effect that (i) the
execution, delivery and performance of the Assumption Agreement and the
supplement to this Indenture referred to in paragraph (b) of this Section 7.03
(and all other instruments and documents the execution of which are necessary
for and directly related to the assumption of the obligations contemplated by
this Section 7.03 or the continued perfection of the security interests
referred to in paragraph (b) of this Section 7.03) have been duly authorized by
the Company by all necessary action; (ii) the Assumption Agreement, such
supplement to this Indenture, all such other documents and instruments referred
to above and the security interests arising therefrom are legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, and except as limited by
applicable laws which may affect the remedies provided for in this Indenture,
which laws, however, do not in the opinion of such counsel make the remedies
provided for in this Indenture inadequate for the practical realization of the
rights and benefits purported to be provided thereby; (iii) the Assumption
Agreement, such supplement and all such other documents and instruments
referred to above do not and will not contravene any provision of the Company's
articles of incorporation or by-laws or any law or regulation applicable to the
Company or any agreement, mortgage or instrument to which the Company is a
party or by which the Company is bound; and (iv) the Indenture Trustee (on
behalf of the Certificate Holders) should continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft
upon and after the assumption of the obligations by the Company, provided, that
the opinion referred to in this clause (iv) need not be delivered to the extent
that the benefits of Section 1110 of the Bankruptcy Code were not, by reason of
a change of law or governmental interpretation thereof, available to the
Indenture Trustee with respect to the Aircraft immediately prior to such
assumption and provided, further, that such opinion may contain qualifications
of the tenor contained in the opinion of Vinson & Elkins L.L.P. relating to
said Section 1110 delivered pursuant to Section 4(a)(xi) of the Participation
Agreement on the Delivery Date;
(h) an opinion of Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City (or other counsel reasonably satisfactory to the
Indenture Trustee), in form and substance reasonably satisfactory to the
Indenture Trustee, addressed to the Indenture Trustee and dated the Assumption
Date, (i) to the effect that all documents executed in connection with the
assumption of the obligations contemplated by this Section 7.03 and required to
be filed with the Federal Aviation Administration are in proper form, and all
steps necessary have been taken, for the Aircraft to be duly registered in the
name of the Company and for the Lien of this Agreement with respect to the
Aircraft and Engines to continue to be duly perfected and of first priority;
and
(i) such other documentation reasonably requested by the
Indenture Trustee (in form and substance reasonably satisfactory to the
Indenture Trustee) to amend the Operative Agreements to give effect to the
foregoing;
then, automatically and without the requirement of further action by any
Person, effective as of the Assumption Date, the Owner Trustee shall be
released from all of its obligations under this Agreement in respect of the
Certificates or otherwise (other than any obligations or liabilities of the
Owner Trustee in its individual capacity incurred on or prior to the Assumption
Date or arising out of or based upon events occurring on or prior to the
Assumption Date, which obligations and
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liabilities shall remain the sole responsibility of the Owner Trustee in such
capacity). Promptly upon the filing and recording of the documents referred to
in the opinion of counsel specified in Section (h) above with the FAA, the
Company shall cause such counsel to deliver to the Indenture Trustee an opinion
addressed to the Indenture Trustee, in form and substance reasonably
satisfactory to the Indenture Trustee, as to due recording of said documents
with the FAA.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following
events shall constitute "Indenture Events of Default" under this Agreement
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Indenture Event of Default
shall be deemed to exist so long as, but only so long as, it shall not be
waived or remedied:
(a) the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any payment of principal
of or Premium or Break Amount, if any, or interest on any Certificate
and such failure shall have continued unremedied for seven Business
Days, or the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any other amount due and
payable hereunder, or under any Certificate, and such failure shall
have continued unremedied for 10 Business Days after notice thereof to
the Owner Trustee; or
(b) any Lessor Lien required to be discharged by Shawmut
Bank Connecticut, National Association, pursuant to Section 4.02 or
required to be discharged by the Owner Trustee pursuant to Section
4.01(ii) or required to be discharged or bonded (in a manner
reasonably satisfactory to the Indenture Trustee) by the Owner
Participant pursuant to Section 8(g) of the Participation Agreement
shall remain undischarged for a period of 30 calendar days after a
Responsible Officer or Responsible Company Officer, as the case may
be, of Shawmut Bank Connecticut, National Association, the Owner
Trustee or the Owner Participant, as the case may be, shall have
actual knowledge of such Lessor Lien; or
(c) any representation or warranty made by the Owner
Trustee or the Owner Participant or Shawmut Bank Connecticut, National
Association, herein or in the Participation Agreement, or made by any
Person guaranteeing or supporting the obligations of the Owner
Participant under the Operative Agreements in its guarantee or support
agreement, shall prove to have been false or incorrect when made in
any material respect to the Certificate Holders, is material at the
time of discovery and, if curable, is not cured within 30 days of
notice thereof to the Owner Participant and the Owner Trustee from the
Indenture Trustee; or
(d) any failure by the Owner Trustee to observe its
covenant in Section 4.01(iii), insofar as it relates to the Owner
Trustee's obligation to the Indenture Trustee only, or in Section
4.01(vi), and such failure shall have continued unremedied for ten
Business Days; or any failure by the Owner Trustee to observe any of
its other covenants in Section 4.01 or any failure by the Owner
Participant to observe any of its covenants in Section 8(b), 8(l),
8(v) or 10 of the Participation Agreement, or disaffirmance or
repudiation by any Person guaranteeing
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or supporting the obligations of the Owner Participant under the
Operative Agreements of its obligations under its guarantee or support
agreement; or
(e) any failure by the Owner Trustee or Shawmut Bank
Connecticut, National Association, to observe or perform any other
covenant or obligation of the Owner Trustee or Shawmut Bank
Connecticut, National Association, as the case may be, contained in
this Indenture or in the Participation Agreement or any failure by the
Owner Participant to observe or perform any other covenant or
obligation of the Owner Participant contained in the Participation
Agreement or any failure by any Person guaranteeing or supporting the
obligations of the Owner Participant under the Operative Agreements to
perform any covenant or obligation of such Person under its guarantee
or support agreement which, in any case, is not remedied within a
period of 30 calendar days after notice thereof has been given to the
Owner Trustee and the Owner Participant or such Person, as the case
may be; or
(f) there shall be a Lease Event of Default other than,
without the consent of the Owner Trustee in its sole discretion, a
Lease Event of Default arising by reason of nonpayment when due of any
Excluded Payments; or
(g) either the Trust Estate or the Owner Trustee with
respect thereto (and not in its individual capacity) or the Owner
Participant or any Person guaranteeing or supporting the obligations
of the Owner Participant under the Operative Agreements shall (i)
file, or consent by answer or otherwise to the filing against it of a
petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (ii) make an
assignment for the benefit of its creditors, or (iii) consent to the
appointment of a custodian, receiver, trustee or other officer with
similar powers of itself or any substantial part of its property;
provided, that an event referred to in this Section 8.01(g) with
respect to the Owner Participant shall not constitute an Indenture
Event of Default if (A) an order, judgment or decree shall be entered
in a proceeding by a court or a trustee, custodian, receiver or
liquidator which is either final and non-appealable or has not been
stayed pending any appeal, or (B) an opinion of counsel satisfactory
to the Indenture Trustee shall be provided by the Owner Participant,
in each case to the effect that no part of the Trust Estate created by
the Trust Agreement (except for the Owner Participant's beneficial
interest in such Trust Estate) and no right, title or interest under
the Indenture Estate shall be included in, or be subject to, any
declaration or adjudication of, or proceedings with respect to, the
bankruptcy, insolvency or liquidation of the Owner Participant
referred to in this Section 8.01(g); or
(h) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Trust Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant or any Person
guaranteeing or supporting the obligations of the Owner Participant
under the Operative Agreements, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Trust Estate or the
Owner Trustee with respect thereto (and not in its individual
capacity) or the Owner Participant or any Person guaranteeing or
supporting the obligations of the Owner Participant under the
Operative
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Agreements and any such order or petition is not dismissed or stayed
within 90 days after the earlier of the entering of any such order or
the approval of any such petition; provided, that an event referred to
in this Section 8.01(h) with respect to the Owner Participant shall
not constitute an Event of Default if (A) an order, judgment or decree
shall be entered in a proceeding by a court or a trustee, custodian,
receiver or liquidator which is either final and non-appealable or has
not been stayed pending any appeal, or (B) an opinion of counsel
satisfactory to the Indenture Trustee shall be provided by the Owner
Participant, in each case to the effect that no part of the Trust
Estate created by the Trust Agreement (except for the Owner
Participant's beneficial interest in such Trust Estate) and no right,
title or interest under the Indenture Estate shall be included in, or
be subject to, any declaration or adjudication of, or proceedings with
respect to, the bankruptcy, insolvency or liquidation of the Owner
Participant referred to in this Section 8.01(h).
Section 8.02. Acceleration; Rescission and Annulment. If an
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee and the Owner Trustee may declare the
principal of all the Certificates to be due and payable, whereupon the same
shall be accelerated and be and become due and payable; provided, that if an
Indenture Event of Default referred to in clause (g) or (h) of Section 8.01
shall have occurred or a Lease Event of Default of the type referred to in
clause (g) or (h) of said Section 8.01 shall have occurred with respect to the
Company, then and in every such case the unpaid principal of all Certificates
then Outstanding shall, unless the Indenture Trustee acting upon instructions
of at least 25% in aggregate principal amount of Outstanding Certificates shall
otherwise direct, immediately and without further act become due and payable,
without presentment, demand, protest or notice, all of which are hereby waived.
Upon such declaration (or automatic acceleration, as the case may be), the
principal of all Certificates together with accrued interest thereon from the
date in respect of which interest was last paid hereunder to the date payment
of such principal has been made or duly provided for, plus, in the case of the
Series SWA 1995 Trust N603SW-I Certificates, the Break Amount, if any, and all
other amounts payable to the Holders hereunder as at such date of payment shall
be immediately due and payable (but not including any Premium). At any time
after such declaration and prior to the sale or disposition of the Indenture
Estate, the Holders of a majority in aggregate principal amount of all of the
Outstanding Certificates, by notice to the Indenture Trustee, the Company and
the Owner Trustee, may rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal of, and, in the
case of the Series SWA 1995 Trust N603SW-I Certificates, the Break Amount, if
any, on any Certificates which have become due otherwise than by such
declaration and any interest thereon and interest due or past due, if any, and
all sums due and payable to the Indenture Trustee have been deposited with the
Indenture Trustee, (ii) the rescission would not conflict with any judgment or
decree and (iii) all existing Indenture Defaults and Indenture Events of
Default under this Agreement have been cured or waived except nonpayment of
principal of, or interest on, the Certificates that has become due solely
because of such acceleration.
Section 8.03. Other Remedies Available to Indenture
Trustee. (a) After an Indenture Event of Default shall have occurred and so
long as such Indenture Event of Default shall be continuing, then and in every
such case the Indenture Trustee, as trustee of an express trust and as assignee
hereunder of the Lease or as holder of a security interest in the Aircraft or
Engines or otherwise, may, and when required pursuant to the provisions of
Article 9 shall, exercise, subject to Sections 8.03(b) and 8.03(e), any or all
of the rights and powers and pursue any and all of the
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remedies accorded to the Owner Trustee pursuant to Section 15 of the Lease and
this Article 8, may recover judgment in its own name as Indenture Trustee
against the Indenture Estate and may take possession of all or any part of the
Indenture Estate and may exclude the Owner Trustee and the Owner Participant
and all Persons claiming under any of them wholly or partly therefrom. The
Indenture Trustee shall have and may exercise all of the rights and remedies of
a secured party under the Uniform Commercial Code as in effect in any
applicable jurisdiction.
(b) After an Indenture Event of Default, subject to
Section 8.03(e), the Indenture Trustee may, if at the time such action may be
lawful and always subject to compliance with any mandatory legal requirements,
either with or without taking possession, and either before or after taking
possession, and without instituting any legal proceedings whatsoever, and
having first given notice of such sale to the Owner Trustee, the Owner
Participant and the Company at least 10 days prior to the date of such sale,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public or private auction, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as the Indenture
Trustee may determine, and at any place (whether or not it be the location of
the Indenture Estate or any part thereof) and time designated in the notice
above referred to; provided, however, that notwithstanding any provision herein
to the contrary, the Indenture Trustee may not provide the notice provided for
above of its intention to sell any of the Indenture Estate or exercise other
remedies against the Indenture Estate seeking to deprive the Owner Trustee or
the Owner Participant of its rights therein unless a declaration of
acceleration has been made pursuant to Section 8.02 or the Certificates have
otherwise theretofore become due and payable through redemption or otherwise.
Any such sale or sales may be adjourned from time to time by announcement at
the time and place appointed for such sale or sales, or for any such adjourned
sale or sales, without further notice, and the Indenture Trustee and the Holder
or Holders of any Certificates, or any interest therein, may bid and become the
purchaser at any such sale, and each Holder shall be entitled, at any such
sale, to credit against the purchase price bid thereby all or any part of the
unpaid obligations owing to such Holder and secured by the Lien of this
Agreement. The Indenture Trustee may exercise such right without possession or
production of the Certificates or proof of ownership thereof, and as
representative of the Holders may exercise such right without notice to the
Holders or including the Holders as parties to any suit or proceeding relating
to foreclosure of any property in the Indenture Estate. The Owner Trustee
hereby irrevocably constitutes the Indenture Trustee the true and lawful
attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee or
otherwise) for the purpose of effectuating any sale, assignment, transfer or
delivery for enforcement of the Lien created under this Agreement, whether
pursuant to foreclosure or power of sale or otherwise, to execute and deliver
all such bills of sale, assignments and other instruments as the Indenture
Trustee may consider necessary or appropriate, with full power of substitution,
the Owner Trustee hereby ratifying and confirming all that such attorney or any
substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by
the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and
confirm any such sale, assignment, transfer or delivery, by executing and
delivering to the Indenture Trustee or such purchaser all bills of sale,
assignments, releases and other proper instruments to effect such ratification
and confirmation as may be designated in any such request.
(c) Subject to Sections 8.03(b) and 8.03(e), if an
Indenture Event of Default has occurred and is continuing, the Owner Trustee
shall, at the request of the Indenture Trustee, promptly execute and deliver to
the Indenture Trustee such instruments of title or other documents as the
Indenture Trustee may deem necessary or advisable to enable the Indenture
Trustee or an agent or representative designated by the Indenture Trustee, at
such time or times and place or places as the
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Indenture Trustee may specify, to obtain possession of all or any part of the
Indenture Estate. If the Owner Trustee shall for any reason fail to execute and
deliver such instruments and documents after such request by the Indenture
Trustee, the Indenture Trustee shall be entitled to a judgment for specific
performance of the covenants contained in the foregoing sentence, conferring
upon the Indenture Trustee the right to immediate possession and requiring the
Owner Trustee to execute and deliver such instruments and documents to the
Indenture Trustee. The Indenture Trustee shall also be entitled to pursue all
or any part of the Indenture Estate wherever it may be found and may enter any
of the premises of the Owner Trustee or any other Person wherever the Indenture
Estate may be or be supposed to be and search for the Indenture Estate and take
possession of any item of the Indenture Estate pursuant to this Section
8.03(c). The Indenture Trustee may, from time to time, at the expense of the
Indenture Estate, make all such expenditures for maintenance, insurance,
repairs, replacements, alterations, additions and improvements to and of the
Indenture Estate, as it may deem proper. In each such case, the Indenture
Trustee shall have the right to use, operate, store, lease, control or manage
the Indenture Estate, and to exercise all rights and powers of the Owner
Trustee relating to the Indenture Estate as the Indenture Trustee shall deem
appropriate, including the right to enter into any and all such agreements with
respect to the use, operation, storage, leasing, control or management of the
Indenture Estate or any part thereof; and the Indenture Trustee shall be
entitled to collect and receive directly all tolls, rents (including Rent),
issues, profits, products, revenues and other income of the Indenture Estate
and every part thereof, without prejudice, however, to the right of the
Indenture Trustee under any provision of this Agreement to collect and receive
all cash held by, or required to be deposited with, the Indenture Trustee
hereunder. In accordance with the terms of this Section 8.03(c), such tolls,
rents (including Rent), issues, profits, products, revenues and other income
shall be applied to pay the expenses of using, operating, storing, leasing,
controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect
to make, if any, for taxes, assessments, insurance or other proper charges upon
the Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine, inspect and make reports upon the properties and
books and records of the Owner Trustee and, to the extent permitted by the
Lease, the Company), and all other payments which the Indenture Trustee may be
required or authorized to make under any provision of this Agreement, including
this Section 8.03(c), as well as just and reasonable compensation for the
services of the Indenture Trustee, and of all persons properly engaged and
employed by the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and
the Indenture Trustee shall have obtained possession of or title to the
Aircraft, the Indenture Trustee shall not be obligated to use or operate the
Aircraft or cause the Aircraft to be used or operated directly or indirectly by
itself or through agents or other representatives or to lease, license or
otherwise permit or provide for the use or operation of the Aircraft by any
other Person unless (i) the Indenture Trustee shall have been able to obtain
insurance in kinds, at rates and in amounts satisfactory to it in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all liability for loss or damage to
the Aircraft and for public liability and property damage resulting from use or
operation of the Aircraft and (ii) funds are available in the Indenture Estate
to pay for all such insurance or, in lieu of such insurance, the Indenture
Trustee is furnished with indemnification from the Holders or any other Person
upon terms and in amounts satisfactory to the Indenture Trustee in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all such liabilities.
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(d) Subject to Sections 8.03(b) and 8.03(e), the
Indenture Trustee may proceed to protect and enforce this Agreement and the
Certificates by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Indenture Estate or any part thereof, or for the recovery of judgment
for the indebtedness secured by the Lien created under this Agreement or for
the enforcement of any other power, legal or equitable remedy available under
applicable law.
(e) (i) If the Company shall fail to make any payment
of Basic Rent under the Lease and such failure shall have become a Lease Event
of Default then as long as no other Indenture Event of Default shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the expiration of
a period of ten Business Days (the "10-Day Period") after such failure shall
have become a Lease Event of Default (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee) exercise any of the rights, powers or remedies pursuant to
Section 15 of the Lease or this Article 8), an amount equal to the full amount
of such payment of Basic Rent, together with any interest due thereon under the
Lease on account of the delayed payment thereof to the date of such payment,
and such payment by the Owner Participant or the Owner Trustee shall be deemed
to cure any Indenture Event of Default which arose from such failure of the
Company as of such date of payment (but such cure shall not relieve the Company
of any of its obligations). If the Company shall fail to perform or observe any
covenant, condition or agreement to be performed or observed by it under the
Lease (other than its obligation to pay Basic Rent), and if (but only if) the
performance or observance thereof can be effected by the payment of money alone
(it being understood that actions such as the obtaining of insurance and the
procurement of maintenance services can be so effected), then as long as no
other Indenture Event of Default (other than those arising from a Lease Event
of Default) shall have occurred and be continuing, the Owner Participant or the
Owner Trustee may (but need not) pay to the Indenture Trustee (or to such other
Person as may be entitled to receive the same), at any time prior to the
expiration of a period of ten Business Days after the expiration of the grace
period, if any, provided with respect to such failure on the part of the
Company in Section 14 of the Lease (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee) exercise any of the rights, powers or remedies pursuant to
Section 15 of the Lease or this Article 8), all sums necessary to effect the
performance or observance of such covenant or agreement of the Company,
together with any interest due thereon under the Lease on account of the
delayed payment thereof to the date of such payment, and such payment by the
Owner Participant or the Owner Trustee shall be deemed to cure any Indenture
Event of Default which arose from such failure of the Company as of such date
of payment (but such cure shall not relieve the Company of any of its
obligations). If, on the basis specified in the preceding sentences, any Lease
Events of Default shall have been remedied, then any declaration pursuant to
this Indenture that the Certificates are due and payable or that an Indenture
Event of Default exists hereunder, based solely upon such Lease Events of
Default, shall be deemed to be rescinded, and, in the case of the first and
second sentences of this Section 8.03(e)(i), the Owner Participant or the Owner
Trustee shall (to the extent of any such payments made by it) be subrogated to
the rights of the Holders of the Certificates under Section 3.03, to receive
from the Indenture Trustee such payment of overdue Basic Rent or other amount
(and the payment of interest on account of such Basic Rent or other amount
being overdue) and shall be entitled, so long as no other Indenture Event of
Default or Indenture Default shall have occurred and be continuing or would
result therefrom, to receive, subject to the provisions of this Indenture, such
payment upon receipt thereof by the Indenture Trustee; provided, that the Owner
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Participant shall not otherwise attempt to recover any such amount paid by it
on behalf of the Company pursuant to this Section 8.03(e)(i) except by
demanding of payment of such amount or by commencing an action at law against
the Company for the payment of such amount; and provided, further, that:
(x) this Section 8.03(e)(i) shall not apply with respect
to any default in the payment of Basic Rent due under the Lease if the
Lessee itself shall have theretofore failed to pay Basic Rent in the
manner required under the Lease (after giving effect to any applicable
grace period) (i) due on each of the two Rent Payment Dates
immediately preceding the date of such default, or (ii) due on a total
of four Rent Payment Dates; and
(y) neither the Owner Trustee nor the Owner Participant
shall have the right to cure any Lease Event of Default except as
specified in this Section 8.03(e)(i).
(ii) In the event that (A) at any time one or more
Lease Events of Default shall have occurred and be continuing for a period of
180 days during which the Holders or the Indenture Trustee shall not have been
stayed or otherwise precluded by operation of law from taking action to
accelerate the Certificates or to exercise remedies hereunder or under the
Lease or (B) the Certificates shall have been accelerated pursuant to Section
8.02, the Owner Trustee or the Owner Participant may, at its option, give at
least 30 days' prior irrevocable notice to the Indenture Trustee that the Owner
Trustee or the Owner Participant will redeem (except subsequent to the
establishment of the Redemption Date in respect of the Certificates) or
purchase all Certificates then Outstanding on a date determined consistently
with the applicable provisions of Article 6 and, concurrently with such notice,
the Owner Trustee or the Owner Participant will deposit with the Indenture
Trustee an amount sufficient to redeem (except subsequent to the establishment
of the Redemption Date in respect of the Certificates) or purchase at the
applicable Redemption Price determined in accordance with Article 6 all
Certificates then Outstanding (including, when applicable, an estimate of the
Premium to be paid on the Redemption Date computed using the Treasury Yield
determined as if the Redemption Date were the date of such notice) and to pay
the Indenture Trustee all amounts then due it hereunder, which funds shall be
held by the Indenture Trustee as provided in Section 9.04. Subject to the
subsequent satisfaction by the Owner Trustee of its obligations pursuant to the
next following sentence, upon the giving of such notice and the receipt by the
Indenture Trustee of such deposit, the Indenture Trustee shall deem all
instructions received from the Owner Trustee as having been given by the
Holders of 100% of the Outstanding principal amount of Certificates for all
purposes of this Indenture. If such notice is given, the Owner Trustee further
agrees that it will deposit or cause to be deposited with the Indenture
Trustee, on or prior to the applicable Redemption Date, whether or not an
Indenture Event of Default is then continuing, funds sufficient, when added to
the funds already held by the Indenture Trustee for such purpose, to redeem or
purchase at the applicable Redemption Price (including the Break Amount or
Premium (if the Redemption Price includes Premium) actually payable in respect
thereof, if any, and all other amounts payable to the Holders hereunder or
under any other Operative Agreement on such Redemption Date) all Certificates
then Outstanding and to pay the Indenture Trustee all amounts then due it
hereunder.
(iii) Anything in this Agreement to the contrary
notwithstanding, the Indenture Trustee shall not be entitled to exercise any
remedy hereunder as a result of an Indenture Event of Default which arises
solely by reason of one or more events or circumstances which constitute a
Lease Event of Default unless the Indenture Trustee as security assignee of the
Owner Trustee shall have exercised or concurrently be exercising one or more of
the remedies provided for
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in Section 15 of the Lease with respect to the Aircraft, provided, that the
requirement to exercise such remedies under the Lease shall not apply in
circumstances where the Indenture Trustee is involuntarily stayed or otherwise
prohibited by applicable law or court order from exercising such remedies under
the Lease after the Section 1110 Period. The "Section 1110 Period" shall mean
the period commencing on the date of such stay or prohibition and ending on the
earlier of (x) the 60th day thereafter (or such longer period (A) as may be
specified in Section 1110(a)(1) of the Bankruptcy Code, (B) equal to the period
of an extension with the consent of the Indenture Trustee of the 60-day period
specified therein pursuant to Section 1110(b) of the Bankruptcy Code, or (C)
resulting from the Indenture Trustee's own failure to give any requisite notice
to any Person) and (y) the date of repossession of the Aircraft. References in
this sentence to particular sections of the Bankruptcy Code as in effect on the
date hereof shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to
the contrary, including, without limitation, Sections 8.03(b), 8.03(c) and
8.03(d), as long as no Lease Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee shall take any
action in violation of the Company's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Company's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given
to the Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the
Indenture Trustee in the exercise of any right, remedy or power or in pursuing
any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of the Owner Trustee or the Company or to be
an acquiescence therein.
Section 8.04. Waiver of Owner Trustee. To the extent now
or at any time hereafter enforceable under applicable law, the Owner Trustee
covenants that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Indenture
Estate or any part thereof, prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or prior to any applicable decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute now or hereafter made
or enacted by any state or otherwise to redeem the property so sold or any part
thereof, and hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of the Owner Trustee acquiring any
interest in or title to the Indenture Estate or any part thereof subsequent to
the date of this Agreement, all benefit and advantage of any such law or laws,
and covenants that it will not invoke or utilize any such law or laws, but will
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Nothing in this Section 8.04 shall be deemed to
be a waiver by the Owner Trustee of its rights under Section 8.03(e).
The Indenture Trustee may maintain such a pleading, or in any
manner whatsoever claim or take any benefit or advantage of or from any law now
or hereafter in force even if it does
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not possess any of the Certificates or does not produce any of them in the
proceeding. A delay or omission by the Indenture Trustee or any Holder in
exercising any right or remedy accruing upon an Indenture Event of Default
under this Agreement shall not impair the right or remedy or constitute a
waiver of or acquiescence in such Indenture Event of Default.
Section 8.05. Waiver of Existing Defaults. The Holders of
a majority in aggregate principal amount of the Outstanding Certificates by
notice to the Indenture Trustee may waive on behalf of the Holders an existing
Indenture Default or Indenture Event of Default and its consequences except (i)
an Indenture Default or Indenture Event of Default in the payment of the
principal of or interest on any Certificate or (ii) in respect of a covenant or
provision hereof which pursuant to Section 11.02 cannot be amended or modified
without the consent of the Holder affected.
Section 8.06. Control by Majority. The Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee or exercising any trust or power conferred
on it by this Agreement. However, the Indenture Trustee may refuse to follow
any direction that conflicts with law or this Agreement, that is unduly
prejudicial to the rights of the Holders so affected, or that would, without
satisfactory indemnity from the Holders, subject the Indenture Trustee to
personal liability.
Section 8.07. Limitation on Suits by Holders. A Holder of
a Certificate may pursue a remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written
notice of a continuing Indenture Event of Default under this
Agreement;
(2) the Holders of at least 25% in aggregate principal
amount of the Outstanding Certificates make a written request to the
Indenture Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss,
liability or expense to be, or which may be, incurred by the Indenture
Trustee in pursuing the remedy;
(4) the Indenture Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a majority
in aggregate principal amount of the Outstanding Certificates do not
give the Indenture Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Agreement the right of any Holder
to receive payment of principal of, Premium or Break Amount, if any, and
interest on such Holder's Certificate on or after the respective due dates
expressed in such Certificate, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
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Section 8.09. Indenture Trustee May File Proofs of Claim.
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Holders allowed in any judicial proceedings
relating to any obligor on the Certificates, its creditors, or its property.
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee.
(a) The Indenture Trustee will furnish to each
Certificate Holder promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and
other instruments furnished to the Indenture Trustee under any Operative
Agreement or received from the Owner Trustee pursuant to Section 4.01(vi) to
the extent the same shall not have been otherwise directly distributed to the
Holders pursuant to the express provision of any other Operative Agreement.
(b) Subject to the terms of Sections 8.03(e), 8.05, 8.06,
9.01(c), 11.02 and 11.06, upon the written instructions at any time and from
time to time of Holders of a majority in aggregate principal amount of the
Outstanding Certificates, the Indenture Trustee shall take such of the
following actions as may be specified in such instructions: (i) exercise such
election or option, or make such decision or determination, or give such
notice, consent, waiver or approval or exercise such right, remedy or power or
take such other action hereunder or under any other Operative Agreement or in
respect of any part or all of the Indenture Estate as shall be specified in
such instructions; (ii) take such action with respect to, or to preserve or
protect, the Indenture Estate (including the discharge of Liens) as shall be
specified in such instructions and as are consistent with this Indenture; and
(iii) take such other action in respect of the subject matter of this Indenture
as is consistent with the terms hereof and the other Indenture Documents. The
Indenture Trustee will execute and the Owner Trustee will file or cause to be
filed such continuation statements with respect to financing statements
relating to the security interest created hereunder in the Indenture Estate as
may be specified from time to time in written instructions of Holders of a
majority in aggregate principal amount of the Outstanding Certificates (which
instructions may, by their terms, be operative only at a future date and which
shall be accompanied by the execution form of such continuation statement so to
be filed).
(c) The Indenture Trustee shall not be required to take
any action or refrain from taking any action under Section 8.06 or 9.01(b)
unless the Indenture Trustee shall have been indemnified by the Holders against
any liability, cost or expense (including counsel fees) which may be incurred
in connection therewith. The Indenture Trustee shall not be under any
obligation to take any action under this Agreement and nothing in this
Agreement contained shall require the Indenture Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. The Indenture Trustee shall not be required to take any action under
Section 8.06 or 9.01(b), nor shall any other provision of this Indenture be
deemed to impose a duty on the Indenture Trustee to take any action, if the
Indenture Trustee shall have been advised by counsel that such action is
contrary to the terms hereof or is otherwise contrary to law.
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(d) The Indenture Trustee shall not have any duty or
obligation to use, operate, store, lease, control, manage, sell, dispose of or
otherwise deal with the Aircraft or any other part of the Indenture Estate, or
to otherwise take or refrain from taking any action under, or in connection
with, this Indenture or any part of the Indenture Estate, except as expressly
provided by the terms of this Indenture or as expressly provided in written
instructions from Holders as provided in this Indenture; and no implied duties
or obligations shall be read into this Indenture against the Indenture Trustee.
(e) The Owner Trustee and the Indenture Trustee agree
that they will not use, operate, store, lease, control, manage, sell, dispose
of or otherwise deal with the Aircraft or any other part of the Indenture
Estate except (i) in accordance with the terms of the Lease or the
Participation Agreement, or (ii) in accordance with the powers granted or
reserved to, or the authority conferred upon, the Owner Trustee and the
Indenture Trustee pursuant to this Indenture and in accordance with the express
terms hereof.
(f) Subject to the provisions of Section 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Agreement. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to be
extent required by law.
Section 9.02. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may consult with counsel or require an Officer's Certificate or an
Opinion of Counsel from the Company or the Owner Trustee after which it will
take such action or refrain from acting as it deems appropriate. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith and in accordance herewith in reliance on a resolution of the Board of
Directors of the Company, the written advice of counsel acceptable to the Owner
Trustee, the Company and the Indenture Trustee, officer's certificates or
opinions of counsel provided by the Company or the Owner Trustee.
(c) The Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care; provided, that so long as no Indenture Event of
Default shall have occurred and be continuing no such agents shall be appointed
by the Indenture Trustee without the consent of the Company and the Owner
Trustee, which consent shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) If an Indenture Event of Default under this Agreement
has occurred and is continuing, the Indenture Trustee shall exercise its rights
and powers under this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
Section 9.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates and may otherwise
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deal with the Owner Trustee, the Company or an Affiliate of the Owner Trustee
or the Company or a subsidiary of the Owner Trustee or the Company with the
same rights it would have if it were not the Indenture Trustee. Any Agent may
do the same with like rights.
Section 9.04. Funds May Be Held by Indenture Trustee or
Paying Agent; Investments. Any monies (including without limitation for
purposes of this Section 9.04 Permitted Investments constituting the proceeds
of the maturity, sale or other disposition of any Permitted Investment) held by
the Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its account
with any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
States thereof having combined capital and surplus and retained earnings of at
least $100,000,000, and neither the Indenture Trustee nor the Paying Agent
shall have any liability for interest upon any such monies except as otherwise
agreed in writing or (ii) at any time and from time to time, so long as no
Lease Default (of the type described in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, at the request
(given directly by the Company to the Indenture Trustee) of the Company acting
as the agent of the Owner Trustee, shall be invested and reinvested in
Permitted Investments as specified in such request (if such investments are
reasonably available for purchase) and sold, in any case at such prices,
including accrued interest or its equivalent, as are set forth in such request,
and such Permitted Investments shall be held by the Indenture Trustee in trust
as part of the Indenture Estate until so sold; provided, that the Company, on
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity,
sale or other disposition of any such Permitted Investment and, so long as no
Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, be entitled to
receive from the Indenture Trustee, and the Indenture Trustee on behalf of the
Owner Trustee, shall promptly pay to the Company pursuant to Section 22.1 of
the Lease, any profit, income, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment. If any Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing, any net income, profit,
interest, dividend or gain realized upon maturity, sale or other disposition of
any Permitted Investment shall be held as part of the Indenture Estate and
shall be applied by the Indenture Trustee at the same time, on the same
conditions and in the same manner as the amounts in respect of which such
income, profit, interest, dividend or gain was realized are required to be
distributed in accordance with the provisions hereof or of the Lease pursuant
to which such amounts were required to be held. The Indenture Trustee shall not
be responsible for any losses on any investments or sales of Permitted
Investments made pursuant to the procedure specified in this Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event of
Default under this Agreement occurs and is continuing and the Indenture Trustee
has actual knowledge of same, the Indenture Trustee shall (i) promptly send
written notice thereof to the Company, the Owner Trustee and the Owner
Participant and, so long as the Series SWA 1995 Trust N603SW-I Certificates
shall be Outstanding, the Holders thereof and (ii) within 90 days after it
occurs, mail to each other Holder notice of all uncured Indenture Events of
Default under this Agreement. Except in the case of a default in the payment of
the principal of, Premium, if any, or interest on any Certificates or during
any period when the Series SWA 1995 Trust N603SW-I Certificate shall be
Outstanding, Break Amount, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii)
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above if and so long as the executive committee or trust committee of directors
of the Indenture Trustee and/or Responsible Officers thereof in good faith
determines that withholding such notice is in the interest of the Holders. In
addition, if an Indenture Default under this Agreement occurs and is continuing
and if the Indenture Trustee has actual knowledge of same, the Indenture
Trustee shall promptly send written notice thereof to the Company, the Owner
Trustee and the Owner Participant and, so long as the Series SWA 1995 Trust
N603SW-I Certificates shall be Outstanding, the Holders thereof.
Section 9.06. Compensation and Indemnity. (a) The Owner
Trustee shall pay to the Indenture Trustee from time to time (i) reasonable
compensation for its services, which compensation shall not be limited by any
law on compensation of a trustee of an express trust, (ii) reimbursement for
all reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the reasonable compensation and expenses of the Indenture Trustee's counsel and
any agent appointed in accordance with Section 9.02(c)), and (iii)
indemnification against any loss or liability incurred by it arising out of or
in connection with its acceptance or administration of the trust or trusts
hereunder except (A) as such expenses or loss or liability might result from
the gross negligence or willful misconduct of the Indenture Trustee or the
inaccuracy of any representation or warranty of the Indenture Trustee in its
individual capacity in Section 8 of the Participation Agreement or failure by
the Indenture Trustee to perform its payment and investment obligations
hereunder, (B) as otherwise provided in Section 9.10 and (C) as otherwise
excluded by the terms of Sections 7(b) and 7(c) of the Participation Agreement
from the Company's indemnities under said Sections; provided, that the
Indenture Trustee shall not make any claim under this Section 9.06(a) for any
claim or expense indemnified against by the Company under the Participation
Agreement without first making demand on, and pursuing such demand on a
reasonable basis for a reasonable length of time, the Company for payment of
such claim or expense. The Indenture Trustee shall notify the Owner Trustee and
the Company promptly of any claim for which it is entitled to be indemnified
hereunder. Subject to the conditions and procedures equivalent to those set
forth in Sections 7(b) and 7(c) of the Participation Agreement, the Owner
Trustee shall defend the claim and the Indenture Trustee shall cooperate in the
defense. The Indenture Trustee may have separate counsel and the Owner Trustee
shall pay the reasonable fees and expenses of such counsel. The Owner Trustee
need not pay for any settlement made without its and the Company's consent.
(b) To secure the payment obligations of the Owner
Trustee pursuant to this Section 9.06, the Indenture Trustee shall have a lien
prior to that of the Holders of the Certificates on all money or property
constituting a part of the Indenture Estate held or collected by the Indenture
Trustee, except that held in trust to pay the principal of, and interest on,
the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least
30 days' prior written notice to the Company, the Owner Trustee and the Holders
of a majority in aggregate principal amount of the Outstanding Certificates.
The Holders of a majority in aggregate principal amount of the Outstanding
Certificates may remove the Indenture Trustee by giving at least 30 days' prior
written notice to the Indenture Trustee, the Owner Trustee and the Company and
may appoint a successor Indenture Trustee with the Owner Trustee's and the
Company's consent. At such time as
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Series SWA 1995 Trust N603SW Certificates are Outstanding, the Owner Trustee
may remove the Indenture Trustee if:
(1) the Indenture Trustee fails to comply with
Section 9.09, fails to perform its payment obligations hereunder or
otherwise fails to perform any of its material obligations hereunder;
(2) the Indenture Trustee is adjudged a bankrupt
or an insolvent;
(3) a receiver or public officer takes charge of
the Indenture Trustee or its property; or
(4) the Indenture Trustee becomes incapable of
acting.
(c) If the Indenture Trustee resigns or is removed, or if
a vacancy exists in the office of Indenture Trustee for any reason, Holders of
a majority in aggregate principal amount of the Certificates or, at such time
as Series SWA 1995 Trust N603SW Certificates are Outstanding, the Owner
Trustee, shall promptly appoint a successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Company, the Owner Trustee or the Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Holder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Company
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the lien provided for in Section 9.06. The successor
Indenture Trustee shall give notice of each appointment of a successor
Indenture Trustee if there are Certificates Outstanding, by mailing written
notice of such event by first-class mail to the Holders.
(g) All provisions of this Section 9.07 except
subparagraphs (b)(l) and (e) and the words "subject to the lien provided for in
Section 9.06" in subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by
Merger, Etc. If the Indenture Trustee or any Agent consolidates with, merges
or converts into, or transfers all or substantially all of its corporate trust
business assets to, another corporation, the successor corporation, without any
further act, shall be the successor Indenture Trustee or Agent, as the case may
be.
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Section 9.09. Eligibility; Disqualification. This
Agreement shall at all times have an Indenture Trustee which shall have a
combined capital and surplus of at least $100,000,000 and shall be a "citizen
of the United States" as defined in the Federal Aviation Act. If such
corporation publishes reports of conditions at least annually, pursuant to law
or to the requirements of Federal, State, Territorial, or District of Columbia
supervising or examining authority, then for the purposes of this Section 9.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
conditions so published.
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in
its individual capacity agrees that it will at its own cost and expense
promptly take such action as may be necessary to duly discharge and satisfy in
full all Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Agreements, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting.
Without limitation of subsections 15.05(d) and 15.05(e), the Indenture Trustee
shall exclude and withhold from each distribution of principal, Premium, if
any, Break Amount, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect to the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders, that
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to
each Holder appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such Holders may reasonably
request from time to time. The Indenture Trustee agrees to file any other
information reports as it may be required to file under United States law. Such
withholding by the Indenture Trustee shall in no event give rise to an
Indenture Event of Default.
Section 9.12. [Reserved for Potential Future Use]
Section 9.13. Certain Rights of Owner Trustee and Owner
Participant. Notwithstanding any other provisions of this Indenture, including
the Granting Clause, the following rights shall be reserved to the Owner
Trustee or the Owner Participant, as the case may be (as separate and
independent rights) to the extent described herein:
(a) at all times the Owner Trustee and the Owner
Participant shall have the right, together with the Indenture Trustee,
to receive from the Lessee all notices, certificates, reports,
filings, opinions of counsel and other documents and all information
which the Company is permitted or required to give or furnish to the
Owner Trustee or the Lessor pursuant to any Indenture Document;
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(b) at all times (unless otherwise specified) the Owner
Trustee shall have the right (1) to the exclusion of the Indenture
Trustee but subject to and without affecting the provisions of Section
11.06, (i) to exercise the rights, elections and options of the Lessor
to make any decision or determination and to give any notice, consent,
waiver or approval with respect to any adjustments under Section 3.7
of the Lease and Sections 17 and 18 of the Participation Agreement,
(ii) to exercise the rights, elections and options of the Lessor with
respect to the termination of the Lease and solicitations of bids and
appraisals pursuant to Section 9 of the Lease, or with respect to
renewals or purchase options and terminations to take effect upon or
after the payment in full (or assumption by the Company) of the
obligations secured hereby, (iii) subject to the terms of Section
8.03(e)(i), to effect cures pursuant to Section 20 of the Lease, and
(iv) to maintain and exercise all rights regarding separate insurance
with respect to the Aircraft for its own account pursuant to Section
11.7 of the Lease (provided, that no such insurance impairs or reduces
coverage under any insurance required to be maintained by the Company
under Section 11 of the Lease) and (2) so long as no Indenture Event
of Default shall have occurred and be continuing, (x) during the
Floating Period, together with the Indenture Trustee (agreement of
both being required) and (y) during the Fixed Period, to the exclusion
of the Indenture Trustee (i) to approve as satisfactory any other
accountants, inspectors, engineers or counsel to render services for
or issue opinions to the Owner Trustee, together with the contents of
any certificates and opinions to be delivered by such Persons, in each
case pursuant to express provisions of the Operative Agreements and
(ii) to grant such consents, approvals and waivers as may be requested
under the Indenture Documents and (3) together with the Indenture
Trustee (each acting separately), to request all certificates and
documents of Lessee, to request assignment of any sublease of the
Aircraft and to exercise inspection rights pursuant to Section 12 of
the Lease;
(c) at all times, the Owner Trustee shall have the
non-exclusive right, as Lessor, to seek specific performance of the
covenants of the Company under the Lease relating to the protection,
insurance, maintenance, possession and use of the Aircraft and to
obtain performance by Lessee under Sections 11(a) and (b) of the
Participation Agreement; and
(d) at all times each of the Owner Trustee (as Owner
Trustee, individually and as Lessor) and the Owner Participant shall
have the right, to the exclusion of the Indenture Trustee, to demand,
collect, sue for or receive the payment of, and waive, modify or
otherwise deal with Excluded Payments due and payable to it, and, in
the case of the Owner Participant, to give the written notice referred
to in the proviso to Section 14.1 of the Lease.
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement;
Defeasance; Termination of Obligations. Subject to Section 10.02, this
Agreement shall cease to be of further effect, and the Owner Trustee and the
Indenture Trustee shall, except as herein provided, be deemed to have been
discharged from their respective obligations with respect to the Certificates
(and the Indenture Trustee, on demand and at the expense of the Owner Trustee,
shall execute proper instruments acknowledging satisfaction and discharge of
this Agreement in respect of the Certificates), when
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(a) (i) all Certificates theretofore executed and
delivered (other than (A) Certificates which have been mutilated, destroyed,
lost or stolen and which have been replaced or exchanged as provided in Section
2.06 and (B) Certificates for the payment of which money held in trust
hereunder has been paid and discharged from such trust, as provided in Section
7.01) have been delivered to the Indenture Trustee for cancellation; or
(ii) all Certificates not theretofore delivered to
the Indenture Trustee for cancellation have become due and payable (whether
upon stated maturity or as a result of redemption or upon acceleration), or
will become due and payable (including as a result of redemption in respect of
which irrevocable notice has been given to the Indenture Trustee on or prior to
the date of such deposit) at maturity within one year, and there has been
deposited with the Indenture Trustee in trust for the purpose of paying and
discharging the entire indebtedness on the Certificates not theretofore
canceled by the Indenture Trustee or delivered to the Indenture Trustee for
cancellation, an amount of cash and/or Government Obligations sufficient to
discharge such indebtedness, including the principal of, Premium, if any, and
interest on the Certificates to the date of such deposit (in the case of
Certificates which have become due and payable), or to the maturity thereof, as
the case may be and, in the case of the Series SWA 1995 Trust N603SW-I
Certificate, Break Amount, if any, and all other amounts payable to the
Original Holder hereunder or under any other Operative Agreement; or
(iii) the Certificates shall have been defeased as
provided in Section 10.05; provided, however, that upon the making of the
deposit referred to in subsection A of Section 10.05, the right of the Owner
Trustee or the Company to cause the redemption of Certificates (except a
redemption in respect of which irrevocable notice has theretofore been given)
shall terminate;
(b) all other amounts then due and payable hereunder have
been paid; and
(c) the Company on behalf of the Owner Trustee has
delivered to the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for or relating to
the satisfaction and discharge of this Agreement contemplated by this Section
10.01 have been complied with.
Section 10.02. Survival of Certain Obligations.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, 2.10, Section 7.01,
Section 9.11, Section 10.03 and Section 10.04, and the rights, duties,
immunities and privileges hereunder of the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All money and
Government Obligations deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment in the case
of the Series SWA 1995 Trust N603SW-I Certificates, as provided for in Section
15.04 or, in the case of the Series SWA 1995 Trust N603SW Certificates, either
directly or through any Paying Agent as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, Premium,
if any, interest, and, in the case of the Series SWA 1995 Trust N603SW-I
Certificates, Break Amount, if any, and all other amounts payable to the
Holders hereunder or under any other Operative Agreement, but such money need
not be segregated from other funds except to the extent required by law.
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Section 10.04. Monies to Be Returned to Owner Trustee. The
Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or Government
Obligations held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Certificates for which
money or Government Obligations have been deposited pursuant to Section 10.01.
Section 10.05. Defeasance. The Owner Trustee may, at any
time, defease the interest of the Indenture Trustee in the Indenture Estate in
whole, but not in part, through the deposit with the Defeasance Trustee, in
accordance with the provisions of this Section 10.05, of cash and/or Government
Obligations; provided, however, that such defeasance shall not be applicable in
respect of the Series SWA 1995 Trust N603SW-I Certificates. Such deposit shall
be made pursuant to a declaration or other appropriate instrument of trust
satisfactory in form and substance to the Defeasance Trustee and the Indenture
Trustee; such deposit shall be absolute and irrevocable and the instrument of
trust shall expressly provide that the Owner Trustee shall have no further
title to or interest in or power to direct the use or application of the cash
and/or Government Obligations so deposited or any of the proceeds arising
therefrom; such instrument shall state that the trust created thereby and the
cash and/or Government Obligations deposited pursuant thereto are for the sole
and exclusive benefit of the Holders and shall expressly provide that the
Defeasance Trustee shall apply such cash and payments of principal and/or
interest on such Government Obligations to, and only to, the punctual payment
of the principal and interest on the Certificates as and when such payments
become due (such declaration or instrument to contain appropriate provisions
for the recording of transfers of Certificates and the names and addresses of
the Holders); and the Owner Trustee shall agree to pay, as the same shall
become due and payable, all fees, costs and charges of the Defeasance Trustee
under such instrument of trust, including those which may become payable after
the date the conditions hereinbelow specified have been met. Upon compliance
with the following conditions, and provided, that no Indenture Event of Default
or Indenture Default shall have occurred and be continuing on a date 91 days
after the date of the deposit of Government Obligations and/or cash with the
Defeasance Trustee as provided in Subsection A below, the Owner Trustee's
obligations with respect to the Certificates will be discharged and this
Indenture shall terminate as provided in Section 10.01:
A. the Owner Trustee shall have deposited with the
Defeasance Trustee absolutely and irrevocably (irrespective of whether
the conditions in Subsections B, C, D and E of this Section 10.05 have
been satisfied) (1) cash and/or (2) Government Obligations which
through the payment of principal and interest in respect thereof in
accordance with their terms, without any reinvestment or further
investment of the principal of or interest earned on such Government
Obligations, will absolutely and unconditionally provide in any and
all circumstances not later than one day before each Payment Date an
amount sufficient to pay and discharge the payment of principal and
interest to be due and payable on such Payment Date;
B. no Indenture Event of Default or Indenture Default
shall have occurred and be continuing on the date of the deposit of
cash and/or Government Obligations as contemplated hereby;
C. the Owner Trustee shall have delivered to the
Defeasance Trustee and to the Certificate Holders written confirmation
by a nationally recognized firm of independent public accountants
(other than the accounting firm then serving as Shawmut Bank
Connecticut,
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National Association's or the Owner Participant's regular auditors)
selected by the Owner Trustee, the form and substance of which
confirmation and the identity of such accounting firm shall be
satisfactory to the Indenture Trustee, that the Government Obligations
deposited for payment of the Certificates, together with any cash
deposited by the Owner Trustee, are sufficient to satisfy the
requirements of Subsection A hereof;
D. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate Holders
an opinion of counsel in form and substance satisfactory to the
Indenture Trustee to the effect that (1) the trust declaration or
other instrument, as the case may be, is legal, valid, binding and
enforceable in accordance with its terms for the sole benefit and use
of the Holders, is irrevocable and the Government Obligations and/or
cash deposited thereunder and the proceeds thereof and therefrom are
held by the Defeasance Trustee thereunder in trust solely for the
benefit of the Holders and will not be subject to any valid interest,
lien, claim or encumbrance of any other Person, including the Owner
Trustee or the Owner Participant or any Person claiming by, through,
under or in the name or on behalf of the Owner Trustee or the Owner
Participant or any creditor or beneficiary of the Owner Trustee or the
Owner Participant, or by any court or trustee in bankruptcy and (2)
such deposit will not constitute a preferential transfer or a
fraudulent conveyance under any bankruptcy or other similar law and
shall cover such other matters as the Indenture Trustee may reasonably
require in connection with such final deposit and matters relating
thereto;
E. the Owner Trustee shall have delivered to the Defeasance
Trustee, the Indenture Trustee and the Certificate Holders an
Officers' Certificate and an Opinion of Counsel (1) to the effect that
there has been published by the Internal Revenue Service a ruling, or
(2) since the date of this Agreement that there has been a change in
or clarification of the applicable Federal income tax law, in either
case to the effect that Holders will not recognize income, gain or
loss for Federal income tax purposes as a result of the exercise by
the Owner Trustee of its option under Section 10.01(a)(iii) and will
be subject to Federal income tax on the same amounts and in the same
manner and at the same times, as would have been the case if such
option had not been exercised; and
F. the Owner Trustee shall have (1) taken such further action
and executed such further documents as may be reasonably required by
any Holder, the Indenture Trustee or the Defeasance Trustee and (2)
delivered to the Defeasance Trustee, the Indenture Trustee and to the
Holders a certificate of a Responsible Officer of the Owner Trustee
stating that all conditions precedent herein to the defeasance of the
Certificates contemplated by this Section 10.05 have been satisfied.
The Owner Participant will pay all expenses (including,
without limitation, reasonable legal fees) incident to the implementation of
the transactions contemplated by this Section 10.05.
For the purpose of this Article 10, the following terms have
the following definitions:
"Defeasance Trustee" shall mean an institution authorized to
transact in the State of New York the business of a trust company
selected by the Owner Trustee and approved by the Indenture Trustee;
provided, that at the time of the delivery of cash and/or Government
Obligations pursuant to this Section 10.05, the institution selected
shall have a combined
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capital and surplus of at least $500,000,000 and shall not be an
Affiliate of the Company, the Owner Participant or Shawmut Bank
Connecticut, National Association.
"Government Obligations" shall mean direct U.S. Dollar
obligations of the United States of America which are not callable,
redeemable or prepayable, directly or indirectly, by any Person.
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent
of Holders. The Owner Trustee and the Indenture Trustee may enter into one or
more agreements supplemental hereto without the consent of any Holder for any
of the following purposes:
(1) to correct any mistake or cure any ambiguity,
defect or inconsistency herein or in the Certificates or to make any
change not inconsistent with the provisions hereof; provided, that
such change does not adversely affect the interests of any Holder;
(2) to evidence the succession of another party
as the Owner Trustee in accordance with the terms of the Trust
Agreement or to evidence (in accordance with Article 9) the succession
of a new trustee hereunder, the removal of the trustee hereunder or
the appointment of any co-trustee or co-trustees or any separate or
additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee or to make any
other provisions with respect to matters or questions arising
hereunder so long as such action shall not adversely affect the
interests of the Holders;
(4) to correct or amplify the description of any
property at any time subject to the Lien of this Agreement or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subject to the Lien of this Agreement or to
subject to the Lien of this Agreement the Airframe or Engines or
airframe or engines substituted for the Airframe or Engines in
accordance herewith or with the Lease; provided, that Trust
Supplements entered into for the purpose of subjecting to the Lien of
this Agreement the Airframe or Engines (or the Replacement Airframe or
any Replacement Engines) in accordance with the Lease need only be
executed by the Owner Trustee;
(5) to add to the covenants of the Owner Trustee,
for the benefit of the Holders, or to surrender any rights or power
herein conferred upon the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
(7) to provide for the assumption by the Company
of the obligations of the Owner Trustee hereunder in accordance with
the terms and conditions applicable thereto specified in Section 7.03;
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(8) to provide for the redemption of the Series
SWA 1995 Trust N603SW-I Certificate and the issuance of the Series SWA
1995 Trust N603SW Certificates in accordance with the terms and
conditions applicable thereto specified in Article 15; or
(9) to include on the Certificates any legend as
may be required by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
Holders. (a) With the written consent of the Holders of a majority of the
aggregate principal amount of the Outstanding Certificates, the Owner Trustee
and the Indenture Trustee may enter into such supplemental agreements to add
any provisions to or to change or eliminate any provisions of this Agreement or
of any such supplemental agreements or to modify the rights of the Holders;
provided, however, that without the consent of each Holder affected thereby, an
amendment under this Section 11.02 may not:
(1) reduce the principal amount of, Premium or
Break Amount, if any, or any installment of interest on, any
Certificate; or
(2) change the date on which any principal amount
of, any Installment Payment Amount payable with respect to, Premium or
Break Amount, if any, or interest on any Certificate, is due or
payable; or
(3) create any Lien on the Indenture Estate prior to
orpari passu with the Lien thereon under this Agreement except such as
are permitted by this Agreement, or deprive any Holder of the benefit
of the Lien on the Indenture Estate created by this Agreement; or
(4) reduce the percentage in principal amount of
the Outstanding Certificates, the consent of whose holders is required
for any such supplemental agreement, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of
this Agreement or of certain defaults hereunder or their consequences)
provided for in this Agreement; or
(5) make any change in Section 8.05, 8.08, or
(but only for so long as the Series SWA 1995 Trust N603SW-I
Certificates shall be Outstanding) Article 15, or this Section
11.02(a).
(b) It is not necessary under this Section 11.02 for the
Holders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and
the Indenture Trustee of any supplemental agreement pursuant to the provisions
of this Section 11.02, the Indenture Trustee shall transmit by first-class mail
a notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of such Holders appear on
the Register. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental agreement.
Section 11.03. Revocation and Effect of Consents. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every
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subsequent Holder, even if notation of the consent is not made on any
Certificate. However, any such Holder or subsequent Holder may revoke the
consent as to his Certificate if the Indenture Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Holder affected by
such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates. The
Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Certificate thereafter executed. The Indenture Trustee in
exchange for such Certificates may execute new Certificates that reflect the
amendment or waiver.
Section 11.05. Indenture Trustee Protected. The Indenture
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, Etc. of Other Operative
Agreements. (a) Subject to Section 11.01, without the consent of the Holders
of a majority in principal amount of Outstanding Certificates, the respective
parties to the Participation Agreement, the Lease and the Trust Agreement may
not modify, amend or supplement any of said agreements, or give any consent,
waiver, authorization or approval thereunder, for any purpose, including adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or modifying in any manner the rights of the respective
parties thereunder; provided, however, that the actions specified in subsection
(b) of this Section 11.06 may be taken without the consent of the Indenture
Trustee or any Holder.
(b) Subject to the provisions of subsection (c) of this
Section 11.06, the respective parties to the Participation Agreement, the Lease
and the Trust Agreement, at any time and from time to time without the consent
of the Indenture Trustee or of any Holder may:
(1) so long as no Indenture Event of Default
shall have occurred and be continuing, modify, amend or supplement the
Lease, or give any consent, waiver, authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 (except as specifically provided below) the parties
to the Lease shall not modify, amend or supplement, or give any
consent, waiver, authorization or approval for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the
respective parties thereunder, with respect to the following
provisions of the Lease as originally executed: Sections 2, 3.1, 3.2
(if the result thereof would be to shorten the Term of the Lease to a
period shorter than the period ending with the final Principal Payment
Date, Installment Date or Maturity Date of the Certificates), 3.3,
3.4, 3.5 (except to the extent such Section relates to Excluded
Payments and amounts payable to the Indenture Trustee in its
individual capacity), 3.6 (except insofar as it relates to the address
or account information of the Owner Trustee or the Indenture Trustee),
the first sentence of Section 3.8 or any proviso in said Section, 4, 5
(but only insofar as it relates to return condition upon termination
of the Lease pursuant to Section 15), 6, 7 (except that further
restrictions may be imposed on the Company), 9, 10 (except that
additional requirements may be imposed on the Company), 11 (except for
Section 11.6 insofar as such Section relates to the Owner Participant
and the Lessor and except that additional insurance requirements may
be imposed on the Company), 12 (except in order to increase the
Company's liabilities or enhance the Lessor's rights thereunder), 13
(except in the case of an assignment by the Lessor in circumstances
where the
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Aircraft shall remain registrable under the Federal Aviation Act), 14
(except to impose additional or more stringent Lease Events of
Default), 15 (except to impose additional remedies), 16, 17, 18.2(b)
(except to impose additional requirements on the Company), 19, 20, 21
and 22, and (i) any definition of terms used in the Lease, to the
extent that any modification of such definition would result in a
modification of the Lease not permitted pursuant to this subsection
(b) and (ii) any other provision of the Lease not hereinabove referred
to if the modification, amendment or supplement thereto, or consent,
waiver, authorization or approval in respect thereof would adversely
affect the Indenture Trustee's interest in the Trust Estate, reduce
Lessee's obligations in respect of maintaining the Aircraft or
otherwise impair the value of the Trust Estate; provided, that in the
event an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as Lessor under the Lease to modify, amend or supplement the
Lease or give any consent, waiver, authorization or approval
thereunder, for any purpose, including, adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or
of modifying in any manner the rights of the Lessor thereunder;
provided, further, that without the prior consent of the Owner
Trustee, and whether or not an Indenture Event of Default shall have
occurred and be continuing, no such action shall be taken with respect
to any of the provisions of Sections 1 (to the extent any modification
of a definition contained therein would result in a modification of
the Lease not permitted by this proviso), 3.7, 3.8, 4, 5 (to the
extent not related to return upon termination of the Lease pursuant to
Section 15 of the Lease), 6 (to the extent such action would reduce
the Company's obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16
(insofar as it relates to the Lessor), 18, 19, 20, 21 and 22 of the
Lease, or any other Section of the Lease to the extent such action
shall affect the amount or timing of any amounts payable by the
Company under the Lease as originally executed (or as subsequently
modified with the consent of the Owner Trustee) which, absent the
occurrence and continuance of an Indenture Event of Default, will be
distributable to the Owner Trustee under Article 3; and provided,
further, that the parties to the Lease may take any such action
without the consent of the Indenture Trustee or any Holder to the
extent such action relates to the payment of amounts constituting, or
the Owner Trustee's, the Owner Participant's or the Company's rights
or obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, in each case only to the extent any such action shall
not adversely affect the interests of the Holders;
(3) modify, amend or supplement the Participation
Agreement, or give any consent, waiver authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 the parties to the Participation Agreement shall
not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to the following provisions of the
Participation Agreement as originally executed: Sections 1(b), 7
(insofar as such Section 7 relates to the Indenture Trustee and the
Holders), 8, 11, 13, 17, 18 and 19 and (i) any definition of terms
used in the Participation Agreement, to the extent that any
modification of such definition would result in a modification of the
Participation Agreement not permitted pursuant to this subsection (b)
and (ii) any other provision of the Participation Agreement not
hereinabove referred to if the
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modification, amendment or supplement thereto, or consent,
authorization or approval in respect thereof would adversely affect
the Indenture Trustee's interest in the Trust Estate or otherwise
impair the value of the Trust Estate; and
(4) modify, amend or supplement any of said
agreements in order to cure any ambiguity, to correct or supplement
any provisions thereof which may be defective or inconsistent with any
other provision thereof or of any provision of this Indenture, or to
make any other provision with respect to matters or questions arising
thereunder or under this Agreement which shall not be inconsistent
with the provisions of this Agreement, provided the making of any such
other provision shall not adversely affect the interests of the
Holders.
(c) No modification, amendment, supplement, consent,
waiver, authorization or approval with respect to the Lease or the
Participation Agreement, whether effected pursuant to subsection (a) or
pursuant to subsection (b) of this Section 11.06 and anything in such
subsections or elsewhere in this Agreement to the contrary notwithstanding,
shall, without the consent of the holder of each Outstanding Certificate
affected thereby,
(1) modify, amend or supplement the Lease in such
a way as to extend the time of, or the manner of making any, payment
of any Advance or Basic Rent, or Stipulated Loss Value or any other
amounts payable to the Indenture Trustee for its own account or for
the account of the Holders (subject in any event to the last paragraph
of Section 3.3 of the Lease) upon the occurrence of an Event of Loss
or Termination Value and any other amounts payable to the Indenture
Trustee for its own account or for the account of the Holders (subject
in any event to the last paragraph of Section 3.3 of the Lease) upon
termination of the Lease with respect to the Aircraft, payable under,
or as provided in, the Lease as originally executed, or reduce the
amount of any installment of any Advance or Basic Rent or Supplemental
Rent so that the same is less than the payment of principal of,
Premium, if any, Break Amount, if any, and interest on the
Certificates, as the case may be, to be made from such installment of
any Advance or Basic Rent or Supplemental Rent, or reduce the
aggregate amount of Stipulated Loss Value, or any other amounts
payable under, or as provided in, the Lease as originally executed
upon the occurrence of an Event of Loss so that the same is less than
the accrued interest on and the principal as of the Lease Loss Payment
Date, and Break Amount, if any, of the Certificates at the time
Outstanding or reduce the amount of Termination Value or Special
Purchase Price and any other amounts payable under, or as provided in,
the Lease as originally executed upon termination of the Lease so that
the same is less than the accrued interest on and principal as of the
date of any such termination and Premium, if any, and Break Amount, if
any of Certificates at the time Outstanding, or
(2) modify, amend or supplement the Lease in such
a way as to, or consent to any assignment of the Lease or give any
consent, waiver, authorization or approval which would, release the
Company from its obligations in respect of payment of Basic Rent or
Supplemental Rent, or Stipulated Loss Value and any other amounts
payable to the Indenture Trustee for its own account or the account of
the Holders (subject in any event to the last paragraph of Section 3.3
of the Lease) upon the occurrence of any Event of Loss, or Termination
Value or Special Purchase Price and any other amounts payable to the
Indenture Trustee for its own account or the account of the Holders
(subject in any event to the last paragraph of Section 3.3 of the
Lease), payable under, or as provided in, the Lease as
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originally executed, except for any such assignment pursuant to
Section 8(s) of the Participation Agreement, and except as provided in
the Lease as originally executed.
Section 11.07. Trust Supplement. The Owner Trustee and the
Indenture Trustee hereby confirm and agree that upon execution and delivery of
any Trust Supplement covering the Aircraft by the Owner Trustee substantially
in the form attached hereto as Exhibit C or any trust supplement covering a
sublease of the Aircraft, this Agreement shall be supplemented by such Trust
Supplement or such trust supplement without further action by the Owner Trustee
or Indenture Trustee.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically
provided herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by courier service, telegram, telex, telemessage, telecopy, telefax, cable or
facsimile (confirmed by telephone or in writing in the case of notice by
telegram, telex, telemessage, telecopy, telefax, cable or facsimile) or any
other customary means of written communication, and any such notice shall be
effective when delivered,
if to the Indenture Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telex: 835437 WILM TR
Facsimile: (302) 651-8882
Telephone: (302) 651-1000
if to the Owner Trustee, to:
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telex: 221086 CTNB-HFD
Facsimile: (203) 240-7920
Telephone: (203) 722-9079
or if to any other Person, addressed to such Person as provided in the
Participation Agreement.
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(b) The Company, the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Original Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Holders of the Series
SWA 1995 Trust N603SW Certificates shall be mailed by first-class mail to the
addresses for Holders shown on the Register kept by the Registrar and to
addresses filed with the Indenture Trustee for other Holders. Failure so to
mail a notice or communication or any defect in such notice or communication
shall not affect its sufficiency with respect to other Holders of such
Certificates of that or any other series entitled to receive notice.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) Notwithstanding the foregoing, all communications or
notices to the Indenture Trustee shall be deemed to be given only when received
by a Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. [Reserved for Potential Future Use]
Section 12.04. Rules by Indenture Trustee and Agents. The
Indenture Trustee may make reasonable rules for action by or a meeting of the
Holders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
Section 12.05. Non-Business Days. With respect to the
Series SWA 1995 Trust N603SW Certificates only, if a payment date is not a
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for
the intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
Section 12.07. No Recourse Against Others. No director,
officer, employee or stockholder, as such, of the Company, the Owner Trustee or
the Owner Participant, as the case may be, shall have any liability for any
obligations of the Company, the Owner Trustee or the Owner Participant, as the
case may be, under this Agreement or for any claim based on, in respect of or
by reason of such obligations or their creation. Each Holder by accepting a
Certificate waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute but one instrument.
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Section 12.09. Applicability Only to Original Holder.
Notwithstanding any provision to the contrary herein, Sections 15.03 through
15.05 shall only be applicable to the Holders of Series SWA Trust N603SW-I
Certificates.
Section 12.10. Severability. Any provision of this
Indenture which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of
Lease. Upon any of:
(a) the voluntary termination of the Lease by the Company
pursuant to Section 9 thereof on the Lease Termination Date, and upon payment
to the Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its
option pursuant to Section 18.2 of the Lease on the Special Purchase Option
Date (unless the Company shall have elected to assume all of the rights and
obligations of the Owner Trustee hereunder as provided for in Section 8(r) of
the Participation Agreement), and upon payment to the Indenture Trustee of an
amount equal to the Redemption Price as at the applicable Redemption Date of
all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss
Payment Date, following an Event of Loss suffered by the Airframe under
circumstances where the Company does not exercise its option to substitute a
Replacement Airframe therefor pursuant to Section 10.1.2 of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price as
at the Redemption Date of all Outstanding Certificates, or
(d) the satisfaction, discharge, defeasance and
termination of obligations under this Agreement in accordance with Section
10.01,
the Lien of this Agreement on the Indenture Estate shall terminate (except for
the Lien on funds held by the Indenture Trustee to pay the Certificates and the
Lien on amounts due from the Company under the Lease necessary to pay the
Certificates or the Indenture Trustee) and the Indenture Trustee shall execute
such instruments as may be requested by the Company or the Owner Trustee to
evidence such termination (at the Company's or the Owner Trustee's expense).
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE]
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ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N603SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N603SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N603SW-I
CERTIFICATES
Section 15.01. Conditions Precedent to Issuance of Series
SWA 1995 Trust N603SW Certificates. The issuance of the Series SWA 1995 Trust
N603SW Certificates pursuant to Section 18 of the Participation Agreement is
subject to all conditions specified in such section.
Simultaneously with the satisfaction of such conditions, the
Owner Trustee shall deliver to the Indenture Trustee a completed version of
Exhibits B, B-l and B-2 with respect to the Series SWA 1995 Trust N603SW
Certificates, which completed Exhibits B, B-l and B-2 shall specify the
maturities and principal amounts of the Series SWA 1995 Trust N603SW
Certificates and the applicable interest rates, together with the reference
dates for purposes of determining the Owner Trustee's rights to redeem such
Certificates as provided for in the Operative Agreements. Such completed
Exhibits B, B-l and B-2 shall be deemed upon such delivery automatically to
have been incorporated herein without further action of the parties hereto.
Section 15.02. Payment upon Issuance of Series SWA 1995
Trust N603SW Certificates. Simultaneously with the receipt of the proceeds of
the issuance of the Series SWA 1995 Trust N603SW Certificates, the Indenture
Trustee, on behalf of the Owner Trustee, shall apply an amount equal to the
Redemption Price of the Series SWA 1995 Trust N603SW-I Certificates to the
redemption of the Series SWA 1995 Trust N603SW-I Certificates in accordance
with Section 15.03.
Section 15.03. Special Provision Governing Refinancing of
the Series SWA 1995 Trust N603SW-I Certificate. Notwithstanding any other
provision of this Agreement, as long as any Series SWA 1995 Trust N603SW-I
Certificate is Outstanding, if a refinancing shall be effected pursuant to
Section 17 or 18 of the Participation Agreement and if all the conditions to
such refinancing set forth herein and in such Section 17 or 18 shall have been
satisfied, the Series SWA 1995 Trust N603SW-I Certificates may be refinanced in
whole at a Redemption Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to, but excluding, the applicable
Redemption Date plus the Break Amount, if any, and any other amounts payable to
the Holders thereof hereunder or under the Participation Agreement, but without
any other premium or penalty; provided, however, that the applicable Redemption
Date for the redemption of the Series SWA 1995 Trust N603SW-I Certificates
pursuant to this Section 15.03 shall be the applicable Refinancing Date or
Section 18 Refinancing Date, as the case may be.
Section 15.04. Special Provision for Payments in Respect of
the Series SWA 1995 Trust N603SW-I Certificate. Notwithstanding any other
provision of this Agreement, all amounts payable in respect of the Series SWA
1995 Trust N603SW-I Certificates shall be paid by the Indenture Trustee (i) if
to the Original Holder by FedWire transfer in immediately available funds
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in Dollars through the Federal Reserve Bank of San Francisco for the account of
Bank of America National Trust and Savings Association ABA #121000358, for
credit to GPO Account Administration #5693, Account No. 12330-14364, ref:
Southwest Airlines Interim Debt, or (ii) if to any other Holder of such
Certificates (or as may otherwise be directed by the Original Holder), to such
account maintained by such Holder with any bank located in the United States
and designated by such Holder to the Indenture Trustee, in any case without
presentment or surrender of any Certificate, except that in the case of any
final payment with respect to any Series SWA 1995 Trust N603SW-I Certificate,
such Certificate shall be surrendered promptly thereafter to the Indenture
Trustee by the Holder thereof for cancellation. Such payment shall be made by
the Indenture Trustee, in the case of any such designated account in New York,
New York, prior to 2:00 P.M., New York time, on the due date thereof if such
payment is received by the Indenture Trustee by 1:00 P.M., New York time, or by
12:00 Noon, New York time on the next succeeding Business Day if such payment
is received after 1:00 P.M., New York time. In the event the Indenture Trustee
shall fail to make any such payment as provided in the immediately foregoing
sentence after its receipt of funds at the place and prior to the time
specified above, the Indenture Trustee, in its individual capacity and not as
trustee, agrees to compensate the Certificate Holders for loss of use of funds
in a commercially reasonable manner.
Section 15.05. Increased Costs, Break Amount, Additional
Interest, Taxes, Etc. (a) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements which are provided for in subsection (c), below) after the
Delivery Date in any law or regulation or in the interpretation thereof by any
government or central bank or other governmental department, agency, board,
service or governmental body charged with responsibility for the administration
or interpretation thereof or (ii) the compliance with any guideline or request
made after the Delivery Date by any government or central bank or other
governmental department, agency, board, service or other governmental body
(whether or not having the force of law), there shall be any increase in the
cost to, or any reduction of the rate of return on assets or equity of, any
Holder (or any of its Affiliates) of the Series SWA 1995 Trust N603SW-I
Certificate of agreeing to make or making, funding or maintaining the loan
evidenced by its Series SWA 1995 Trust N603SW-I Certificate in respect of (x)
any period as to which the applicable Debt Rate is determined by reference to
the Offshore Rate and (y) capital adequacy requirements, then the Owner Trustee
shall from time to time pay to such Holder such amount as shall be necessary to
reimburse such Holder for such increase in cost within 10 Business Days after
delivery to the Owner Trustee, the Indenture Trustee and the Company of a
certificate of an officer of such Holder setting forth in reasonable detail the
event by reason of which it claims such increase in cost and the basis for the
determination of the amount of such increase in cost; provided, however, that
the Original Holder shall not be entitled to assert any claim under this
subsection 15.05(a) in respect of taxes (including Taxes (as defined in the
Participation Agreement) and the taxes referred to in subsections (d) and (e)
of this Section 15.05). Such certificate shall, in the absence of manifest
error, be binding and conclusive. Such Holder shall notify the Owner Trustee,
the Indenture Trustee and the Company as soon as possible of the occurrence of
any event by reason of which it is entitled to make a claim as described in
this subsection (a), but the failure to give such notice shall not affect the
obligations of the Owner Trustee hereunder.
(b) In the event that any Holder of the Series SWA 1995
Trust N603SW-I Certificate incurs any Break Amount (as defined below) in
connection with any payment, prepayment, acceleration, redemption, refinancing
or purchase, in whole or in part, of the principal of its Series SWA 1995 Trust
N603SW-I Certificate in accordance with the provisions of this Agreement or
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otherwise on a date other than the last day of an Interest Period, then the
Owner Trustee shall pay to such Holder such Break Amount on the date of such
payment, prepayment, acceleration, redemption, refinancing or purchase, as the
case may be.
For the purposes hereof, "Break Amount" means an amount equal
to the net funding loss or additional expense which any Holder of a Series SWA
1995 Trust N603SW-I Certificate sustains or incurs or will sustain or incur as
a result of any payment, prepayment, acceleration, redemption, refinancing or
purchase (whether by mandatory or voluntary prepayment, optional purchase,
acceleration or otherwise) of any principal of its Series SWA 1995 Trust
N603SW-I Certificate on a date other than the last day of an Interest Period,
as reasonably determined by such Holder and set forth in a certificate of such
Holder which includes in reasonable detail the basis or the calculations of the
amount being claimed.
(c) The Owner Trustee agrees to pay to any Holder of a
Series SWA 1995 Trust N603SW-I Certificate, to the extent that such Holder
shall require, due to either (i) the introduction of or any change after the
Delivery Date in any law or regulation or in the interpretation thereof by the
Federal Reserve Board (or any governmental authority succeeding thereto) or
(ii) compliance with any guideline or request made after the Delivery Date by
the Federal Reserve Board (whether or not having the force of law), to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
the loan evidenced by its Series SWA 1995 Trust N603SW-I Certificate, in
respect of any period to which such reserve maintenance requirement is so
applicable and the applicable Debt Rate is determined by reference to the
Offshore Rate, in an amount as to any such period equal to the amount obtained
by applying to the outstanding principal amount of such loan during such period
an interest rate equal at all times to the remainder obtained by subtracting
(A) the applicable Offshore Rate from (B) the rate obtained by dividing such
Offshore Rate by a percentage equal to 100% minus the Eurocurrency Reserve
Percentage, if any, applicable from time to time to such Holder. Such
additional interest shall be paid by the Owner Trustee to any Holder of a
Series SWA 1995 Trust N603SW-I Certificate from time to time as and when
interest is payable under such Holder's Certificate, subject to receipt of
notice of the amount of such additional interest for such Holder.
(d) Should any Holder of a Series SWA 1995 Trust N603SW-I
Certificate fail to qualify for a complete exemption from withholding of United
States Federal income tax because of a change in the provisions of the Code or
other relevant laws from those in effect on the Delivery Date, and the
Indenture Trustee is required by law to deduct or withhold United States
Federal income tax from amounts paid to such Holder, the amounts payable
hereunder and under its Series SWA 1995 Trust N603SW-I Certificate shall be
increased as may be necessary so that, after all required deductions and
withholdings for United States Federal income tax resulting from any such
change in the Code, such Holder receives an amount equal to the excess of (i)
the amount it would have received had no such deduction or withholding been
made over (ii) the additional amount of United States Federal income tax that
would have been payable by it under Section 882 of the Code in the absence of
such change in the Code.
(e) Each Holder of a Series SWA 1995 Trust N603SW-I
Certificate by its acceptance of such Series SWA 1995 Trust N603SW-I
Certificate, agrees that it will, promptly after it becomes aware of any event
or the existence of a condition that would give rise to reimbursement or
payment pursuant to subsection 15.05(a), 15.05(c) or 15.05(d) or to increased
payment hereunder and under the Series SWA 1995 Trust N603SW-I Certificate
pursuant to subsection 15.05(d), to the
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
-60-
<PAGE> 67
extent not inconsistent with such Holder's internal policies, use reasonable
efforts to make, fund or maintain the loan evidenced by the Series SWA 1995
Trust N603SW-I Certificate through a different Lending Office if, as a result
thereof, the amount of such reimbursement or payment or increased payment, as
the case may be, which would otherwise be required to be made would be
materially reduced and if, as determined by such Holder in its reasonable
discretion the making, funding or maintaining of such loan through such
different Lending Office would not otherwise adversely affect such loan or such
Holder. Each Holder agrees that it will consult with the Owner Trustee in
connection with any relocation of its Lending Office. The Owner Trustee hereby
agrees to pay all reasonable expenses incurred by each such Holder in
considering or taking action pursuant to this subsection (e).
(f) Amounts payable to the Holder of any Series SWA 1995
Trust N603SW-I Certificate pursuant to this Article 15 that are not paid when
due shall bear interest from the due date thereof to, but excluding the date
paid, at the Past Due Rate.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
-61-
<PAGE> 68
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly provided herein and otherwise
solely as Owner Trustee
By: /s/ Pablo de la Canal
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as otherwise expressly provided herein,
but solely as Indenture Trustee
By: /s/ James P. Lawler
Title: Vice President
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
<PAGE> 69
Exhibit A
to Trust Indenture
and Security Agreement
Form of Series SWA 1995 Trust N603SW-I Certificate
THIS CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS CERTIFICATE MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
$________________ No. ________________
SERIES SWA 1995 TRUST N603SW-I CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but solely as Owner Trustee under a
Trust Agreement
Dated as of July 1, 1995
Issued in Connection with Aircraft N603SW
Leased to
SOUTHWEST AIRLINES CO.
Date: _________ ___, 1995
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement, dated as of July 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (such agreement as the same
may be modified, amended or supplemented being referred to herein as the "Trust
Agreement"), for value received hereby promises to pay to BANK OF AMERICA
ILLINOIS (the "Bank"), the principal sum of ________________ Dollars on or
before _____________________ (the "Maturity Date"), together with interest on
such principal amount remaining unpaid from time to time from the date hereof
until such principal amount is paid in full. The principal amount of this
Certificate shall be payable in installments on the dates (each a "Principal
Payment Date") set forth in Annex A hereto equal to the corresponding
percentage of the original principal amount of this Certificate set forth in
Annex A hereto.
Notwithstanding the foregoing, the final payment made on this
Certificate shall be in an amount sufficient to discharge in full the unpaid
principal amount and all accrued and unpaid
<PAGE> 70
interest on, and any other amounts due under this Certificate or as provided
for in the Trust Indenture and Security Agreement, dated as of July 1, 1995
relating to the Aircraft (such agreement as the same may be modified, amended
or supplemented being referred to herein as the "Indenture"; the defined terms
used therein and not otherwise defined herein being used herein with the same
meanings), between the Owner Trustee and Wilmington Trust Company, as Indenture
Trustee thereunder.
Interest on the principal amount of this Certificate shall
accrue at the applicable Debt Rate (as defined below). The "Debt Rate"
applicable in respect of any day in any Interest Period (as defined below)
selected by the Owner Trustee or Southwest Airlines Co. (the "Company") (acting
on behalf of the Owner Trustee) as provided for below, or portion thereof,
shall be the Offshore Rate (as defined below) applicable to such Interest
Period as selected by the Owner Trustee or the Company (acting on behalf of the
Owner Trustee) as provided for below, plus in each case the margin applicable
from time to time determined pursuant to the following table:
<TABLE>
<CAPTION>
Interest Period:
---------------------------------------------------
Ending on Margin in Basis
Commencing On: And Including: Points Per Annum:
------------- ------------- ----------------
<S> <C> <C>
Delivery Date April 3, 1996 40
April 4, 1996 October 3, 1996 50
October 4, 1996 April 3, 1997 75
April 4, 1997 April 3, 1998 500
April 4, 1998 April 3, 1999 600
April 4, 1999 Any date subsequent to 700
April 4, 1999
</TABLE>
provided, however, for any Interest Period beginning after the second
anniversary of the Delivery Date, the Debt Rate shall never be less than the
Treasury Rate applicable to such Interest Period, plus in each case the margin
applicable from time to time determined pursuant to the foregoing table.
Interest accrued and unpaid on any Interest Payment Date shall
be paid on such Interest Payment Date; provided, however, that all interest
accrued and unpaid on this Certificate on the date this Certificate shall be
paid in full shall be paid on such date; provided, however, that if any
Interest Period Date (as defined below) is not also an Interest Payment Date,
all interest accrued during the Interest Period relevant thereto and unpaid as
at such Interest Period Date shall be compounded until the next succeeding
Interest Payment Date and shall bear interest at the Debt Rate applicable from
time to time hereunder during the period from such Interest Period Date to the
next succeeding Interest Payment Date and all such compounded interest shall be
due and payable on such next succeeding Interest Payment Date; provided,
finally, that any amount of principal or interest payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest,
payable on demand, from the due date therefor until the date of payment at an
interest rate
A-2
<PAGE> 71
equal to the Debt Rate plus 2% per annum. All computations of interest shall be
made by the Original Holder on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring
in the period for which such interest is payable.
Notwithstanding any provision hereof to the contrary, this
Certificate shall not constitute an obligation to pay nor shall the Bank be
entitled hereunder to collect any amount of interest to the extent not
permitted by applicable law.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
For purposes of this Certificate, the following capitalized
terms used herein shall have the following meanings:
"Basis Point" shall mean one one-hundredth of one percent
(1/100 of 1%).
"Interest Payment Date" shall mean each July 1 and January 1
commencing on January 1, 1996.
"Interest Period" shall mean, with reference to the Offshore
Rate, a period of up to 30 consecutive days, as available, or one,
two, three or six months, as selected by the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) as provided for below,
and shall mean, with reference to the Treasury Rate, a period of 30,
60, 90 or 180 days, corresponding to the one, two, three or six month
Interest Period, as the case may be, which shall have been so selected
with reference to the Offshore Rate; provided, however, that (i) the
initial Interest Period shall commence on the Delivery Date; (ii) each
Interest Period immediately succeeding an Interest Period shall
commence on the last day of the preceding Interest Period; (iii) if
any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day; and (iv) notwithstanding anything to the contrary
contained herein, no Interest Period shall extend beyond a date which
is a Principal Payment Date.
"Interest Period Date" shall mean each Business Day on which
an Interest Period expires.
"Offshore Rate" shall mean, for each Interest Period, the rate
at which deposits in U.S. dollars in same day funds would be offered
at 11:00 A.M., New York time, two Business Days prior to the
commencement of such Interest Period by the Bank's Grand Cayman Branch
(or such other office as the Bank may designate for such purpose,
including its London Branch, but in that case such time shall be
London rather than New York time) to major banks in the offshore
interbank market upon request of such major banks for a period equal
to the relevant interest period and in the amount of the advance
scheduled to be outstanding during such interest period. The exact
length of interest periods shall be determined in accordance with
standard practices of the offshore dollar interbank market.
"Treasury Rate" shall mean, as to any Interest Period, the
yield to maturity (rounded to the nearest 1/100 of 1%) of the most
recently auctioned United States Treasury securities
A-3
<PAGE> 72
having maturities most closely corresponding (linearly interpolating
between the next preceding and next succeeding maturities) to the
Maturity Date, as determined at 11 a.m. (New York City time) on the
first day of such Interest Period by reference to the Telerate Trading
Assistant or, if such Telerate Trading Assistant is not available to
provide such data, the average (rounded upwards to the nearest 1/100
of 1%), as determined by the Bank, of quotes furnished at (or as
proximately thereto as is reasonably practicable) such time by two
reputable dealers in United States Treasury securities, which shall be
selected by the Bank.
The selection of the Offshore Rate and the duration of the
Interest Period related thereto shall be made by telephonic notice (followed by
telex, telecopy or other written confirmation) from the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) to the Original Holder or its
designee by not later than (i) 11:00 A.M. (New York time) on the second
Business Day preceding the first day of the relevant Interest Period or (ii)
11:00 A.M. (New York time) on the third Business Day preceding the first day
of the relevant Interest Period, if such Offshore Rate is to relate to the
Bank's London Branch; provided, however, that if a Lease Default shall have
occurred or be continuing or no such notice shall have been given, the Debt
Rate will be deemed, effective upon the last day of the then current Interest
Period, to be determined by reference to the Offshore Rate for an Interest
Period of one month.
All payments of principal, interest and other amounts, if any,
to be made by the Owner Trustee hereunder and under the Indenture shall be made
only from the income and proceeds from the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture and only to the extent
that the Indenture Trustee shall have sufficient income or proceeds from the
Indenture Estate and such other amounts to make such payments in accordance
with the terms of the Indenture, and the Bank, by its acceptance of this
Certificate, agrees that it will look solely to the income and proceeds from
the Indenture Estate and the other amounts referred to in Section 3.03 of the
Indenture to the extent available for distribution to the Holder hereof as
above provided and that none of the Owner Participant, the Owner Trustee or the
Indenture Trustee is personally liable or liable in any manner extending to any
assets, other than the Indenture Estate, to the Bank for any amounts payable
under this Certificate or the Indenture or, except as provided in the
Indenture, for any liability under the Indenture; provided, however, that
nothing herein contained shall limit, restrict or impair the right of the
Indenture Trustee, subject always to the terms and provisions of the Indenture,
to accelerate the maturity of this Certificate upon an Indenture Event of
Default, to bring suit and obtain a judgment against the Owner Trustee on this
Certificate for purposes of realizing upon the Indenture Estate and to exercise
all rights and remedies provided under the Indenture or otherwise realized upon
the Indenture Estate.
Both the original amount of principal due hereunder and
interest and other amounts due hereunder shall be payable in United States
currency in immediately available funds pursuant to Section 15.04 of the
Indenture. Each such payment shall be made on the date such payment is due and
without any presentment or surrender of this Certificate, except that in the
case of any final payment with respect to this Certificate, the Certificate
shall be surrendered promptly thereafter to the Indenture Trustee by the Bank
for cancellation.
The Bank, by its acceptance of this Certificate, agrees that
each payment received by it hereunder shall be applied in the manner provided
in Section 3.08 of the Indenture.
A-4
<PAGE> 73
This Certificate is one of the Series SWA 1995 Trust N603SW-I
Certificates referred to in the Indenture which has been or is to be issued by
the Owner Trustee pursuant to the terms of the Indenture. The Indenture Estate
is held by the Indenture Trustee as security for the Certificates. The rights
of the Owner Trustee under the Indenture, as well as the beneficial interest of
the Owner Participant in and to the properties of the Owner Trustee assigned,
pledged or mortgaged as part of the Indenture Estate, are subject and
subordinate to the rights of the Holders of the Certificates to the extent
provided for in the Indenture. Reference is hereby made to the Indenture for a
statement of the rights of the Bank in respect of, and the nature and extent of
the security for, this Certificate, and the rights of the Owner Trustee, as
well as for a statement of the terms and conditions of the trusts created by
the Indenture, to all of which terms and conditions in the Indenture the Bank
agrees by its acceptance of this Certificate.
Any Holder of this Certificate shall be deemed to have made
the following representation by its acquisition of this Certificate: either
that (a) no part of the funds used by it to acquire this Certificate
constitutes "plan assets" of any "employee benefit plan" within the meaning of
ERISA or any "plan" within the meaning of Section 4975(e)(1) of the Code, or
(b) its purchase or acquisition of this Certificate will not result in a
non-exempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA.
This Certificate is subject to prepayment by redemption or
acceleration as provided in Articles 6 and 15 of the Indenture.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK.
A-5
<PAGE> 74
IN WITNESS WHEREOF, the Owner Trustee has caused this
Certificate to be executed in its corporate name by its officer thereunto duly
authorized on the date hereof.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:_________________________________
A-6
<PAGE> 75
[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: _________________________________
Title:_________________________________
A-7
<PAGE> 76
Annex A to
Equipment Trust
Certificate
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
---------------------- ----------------------
<S> <C>
</TABLE>
A-8
<PAGE> 77
Exhibit A-1 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N603SW Installment Certificates
$________________ No. ________________
Dated as of ______________ __, 199_
SERIES SWA 1995 TRUST N603SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of July 1, 1995
Issued in connection with Aircraft N603SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- ------------- -------------
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of July 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars in
installments on each Installment Payment Date as set forth herein with the
final installment due and payable on the Maturity Date specified above and to
pay interest on the principal amount remaining unpaid from time to time at the
rate per annum specified above from ________________, 1995 or from the most
recent date to which interest has been paid or duly provided for, semiannually,
on _____________ and _______ in each year, commencing ____________________,
1995, until the principal hereof is paid or made available for payment in full.
All amounts payable by the Owner Trustee hereunder and under the Trust
Indenture and Security Agreement dated as of July 1, 1995, as supplemented (as
amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and the other amounts referred to in Section
3.03 of the Indenture for payment of such amounts, to the extent available for
distribution to the Holder hereof as provided in the
<PAGE> 78
Indenture and (b) neither the Owner Trustee, the Owner Participant nor the
Indenture Trustee is or shall be personally liable to the Holder hereof for any
amount payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payments Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more
A-1-2
<PAGE> 79
complete statement of the terms and provisions thereof, including a statement
of the properties thereby conveyed, pledged and assigned, the nature and extent
of the security, the respective rights thereunder of the Owner Trustee, the
Indenture Trustee and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, the terms upon which
the Certificates may be redeemed, as well as for a statement of the terms and
conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein.
<TABLE>
<CAPTION>
Installment Installment
Payment Payment
Date Percentage
----------- -----------
<S> <C>
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
</TABLE>
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Certificates may be
declared due and payable in the manner and with the effect provided in the
Indenture. If, and only if, such an Indenture Event of Default constitutes a
Lease Event of Default by the Company under the Lease, the Indenture Trustee
may, to the exclusion of the Owner Trustee, exercise one or more of the
remedies of the Owner Trustee provided in the Lease. Such remedies include (but
are not limited to) the right to repossess and use or operate the Aircraft, to
sell or relet the Aircraft free and clear of the Company's rights and retain
the proceeds and to require the Company to pay as liquidated damages (i) any
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
Value of the Aircraft over the aggregate fair market rental value thereof for
the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under
A-1-3
<PAGE> 80
the Lease, provided, that such failure of the Company is not the third
consecutive such failure, or the fifth or subsequent cumulative such failure.
The Owner Trustee or the Owner Participant may (but need not) cure any other
default by the Company in the performance of its obligations under the Lease
which can be cured by the payment of money, by making such payment on behalf of
the Company, subject, however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate
A-1-4
<PAGE> 81
and for all other purposes whatsoever whether or not this Certificate be
overdue, and neither the Owner Trustee, the Indenture Trustee, the Paying
Agent, the Registrar, the Owner Participant nor the Company shall be affected
by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-1-5
<PAGE> 82
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: __________________________________
Title:__________________________________
Issue Date:
A-1-6
<PAGE> 83
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: ___________________________________
Authorized officer or signatory
A-1-7
<PAGE> 84
Exhibit A-2 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N603SW Serial Certificates
$________________ No. ________________
Dated as of __________________ __, 199_
SERIES SWA 1995 TRUST N603SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of July 1, 1995
Issued in connection with Aircraft N603SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- ------------- -------------
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of July 1, 1995 between the Owner Trustee
in its individual capacity and the institution referred to therein as the
"Owner Participant" relating to the Aircraft (herein as such Trust Agreement
may be amended or supplemented from time to time called the "Trust Agreement"),
for value received, hereby promises to pay to ________________ or registered
assigns the principal sum of ________________ Dollars on the Maturity Date
specified above and to pay interest thereon at the rate per annum specified
above from ________________, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on
_______________________ and ___________________ in each year, commencing
______________________, 1995, until the principal hereof is paid or made
available for payment. All amounts payable by the Owner Trustee hereunder and
under the Trust Indenture and Security Agreement dated as of July 1, 1995, as
supplemented (as amended or supplemented from time to time referred to herein
as the "Indenture", the defined terms therein not otherwise defined herein
being used herein with the same meanings), by and among the Owner Trustee and
Wilmington Trust Company, as Indenture Trustee thereunder, shall be made only
from the income and proceeds of the Indenture Estate and the other amounts
referred to in Section 3.03 of the Indenture. Each Holder hereof, by its
acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for any amount
payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
<PAGE> 85
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, the terms upon which the Certificates may be
redeemed, as well as for a statement of the terms and conditions of the trust
created by the Indenture, to all of which terms and conditions in the Indenture
each Holder hereof agrees by its acceptance of this Certificate.
A-2-2
<PAGE> 86
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the right
to repossess and use or operate the Aircraft, to sell or relet the Aircraft
free and clear of the Company's rights and retain the proceeds and to require
the Company to pay as liquidated damages (i) any unpaid Basic Rent plus an
amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
A-2-3
<PAGE> 87
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
CertifiCate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-2-4
<PAGE> 88
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:_________________________________
Issue Date:
A-2-5
<PAGE> 89
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By:_____________________________________
Authorized officer or signatory
A-2-6
<PAGE> 90
Exhibit B to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts and
Interest Rates of Series SWA 1995 Trust N603SW Certificates
<TABLE>
<CAPTION>
Premium
Principal Termination
Maturity Date Amount Interest Rate Date
- ------------- -------- ------------- ------------
<S> <C> <C> <C>
</TABLE>
[To be completed at time of issuance of Series SWA 1995 Trust N603SW
Certificates, if any shall be issued hereunder.]
<PAGE> 91
Exhibit B-1 to
Trust Indenture and
Security Agreement
Installment Payment Dates and Installment Payment Percentages
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N603SW Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
Installment Certificate No. 2 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N603SW Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
<PAGE> 92
Exhibit B-2 to
Trust Indenture and
Security Agreement
Issuance of Series SWA 1995 Trust N603SW Certificates
The Series SWA 1995 Trust N603SW Certificates issued hereunder
shall be issued to and shall be payable to _________ under the __________ with
respect to the [grantor trusts created thereby], in each case as set forth
below:
<PAGE> 93
Exhibit C to
Trust Indenture and
Security Agreement
[FORM OF]
TRUST AGREEMENT AND TRUST INDENTURE AND
SECURITY AGREEMENT SUPPLEMENT
This TRUST AGREEMENT AND TRUST INDENTURE AND SECURITY
AGREEMENT SUPPLEMENT, is dated ____________, 1995 (herein called the
"Supplement") of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as Owner Trustee (herein called the "Owner
Trustee"), under the Trust Agreement, dated as of July 1, 1995 (herein called
the "Trust Agreement"), between the Owner Trustee and the Owner Participant
named therein,
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and
delivery of one or more supplements thereto substantially in the form hereof,
which shall particularly describe the Aircraft (such term and other terms
defined in the Trust Indenture referred to below, or in the Lease therein
referred to, being used herein as therein defined) included in the property
covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Security Agreement, dated as
of July 1, 1995 (herein called the "Trust Indenture"), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee (herein called the
"Indenture Trustee"), provides for the execution and delivery of a supplement
thereto substantially in the form hereof, which shall particularly describe the
Aircraft, and shall specifically mortgage such Aircraft to the Indenture
Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture
relates to the Airframe and Engines described below, and a counterpart of the
Trust Indenture is attached hereto and made a part hereof and this Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, This Supplement Witnesseth, that, to secure
the prompt payment of the principal of, Break Amount, if any, Premium, if any,
and interest on, and all other amounts due with respect to, all Certificates
from time to time Outstanding and all other amounts due to the Holders under
the Trust Indenture and the Participation Agreement and the performance and
observance by each of the Company and the Owner Trustee of all the agreements,
covenants and provisions in the Trust Indenture and in the other Operative
Agreements for the benefit of the Indenture Trustee and the Holders of the
Certificates and in the Certificates contained, and the prompt payment of all
amounts from time to time owing under the Operative Agreements to the Holders
of the Certificates, and for the uses and purposes of the Trust Indenture, and
in consideration of the premises and of the covenants contained in the Trust
Indenture, and of the acceptance of the Certificates by the Holders thereof,
and of the sum of $1.00 paid to the Owner Trustee by the Indenture Trustee at
or before the delivery hereof, the receipt whereof is hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm unto the Indenture Trustee, its
successors and assigns, for the security
<PAGE> 94
and benefit of the Holders from time to time of the Certificates, upon the
trusts created by the Trust Indenture, all right, title and interest of the
Owner Trustee in, to and under the following described property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ ---------------
<S> <C> <C> <C>
The Boeing Company 737-3H4 N603SW 27954
</TABLE>
together with all Parts relating to such airframe.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, whether or not such
engines shall be installed in or attached to the Airframe or any other
airframe, identified as follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ ----- ---------------
<S> <C> <C>
CFM International CFM56-3-B1 858185
CFM International CFM56-3-B1 858186
</TABLE>
together with all Parts relating to such engines.
Together with all substitutions or replacements of and
additions, improvements, accessories and accumulations to the property above
described for which title vests in the Owner Trustee under the Operative
Agreements and all property which shall hereafter become physically attached to
or incorporated in the property above described, whether the same are now owned
by the Owner Trustee or shall hereafter be acquired by it for which title vests
in the Owner Trustee under the Operative Agreements.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, in the trust created by the Trust Indenture, all of the right,
title and interest of the Owner Trustee in, to and under the Lease Supplement
of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment
shall constitute security for any of the aforementioned obligations.
C-2
<PAGE> 95
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Holders from time to time of the Certificates for
the uses and purposes and subject to the terms and provisions set forth in the
Trust Indenture.
This Supplement shall be construed as supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
AND, FURTHER, the Owner Trustee hereby acknowledges that the
Aircraft referred to in this Supplement and the aforesaid Lease Supplement has
been delivered to the Owner Trustee and is included in the property of the
Owner Trustee covered by all the terms and conditions of the Trust Agreement,
subject to the pledge and mortgage thereof under the Trust Indenture.
THIS SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
C-3
<PAGE> 96
IN WITNESS WHEREOF, the Owner Trustee has caused this
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:_________________________________
C-4
<PAGE> 1
EXHIBIT 4.28
________________________________________________________________________________
FIRST AMENDMENT
TO
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly set forth herein and
otherwise solely as Owner Trustee
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
One Boeing 737-3H4 Aircraft N603SW
Southwest Airlines Co.
Series 1995 Trust N603SW Certificates
(Southwest Airlines 1995 Trust N603SW)
________________________________________________________________________________
<PAGE> 2
FIRST AMENDMENT TO
TRUST INDENTURE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO TRUST INDENTURE AND SECURITY AGREEMENT dated
as of October 1, 1995 (this "Amendment") between SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual capacity only as expressly set forth
herein and otherwise solely as Owner Trustee under that certain Trust Agreement
establishing the Southwest Airlines 1995 Trust N603SW and dated as of July 1,
1995 (in such capacity, the "Owner Trustee") and WILMINGTON TRUST COMPANY, as
Indenture Trustee (the "Indenture Trustee"), amends that certain related Trust
Indenture and Security Agreement dated as of July 1, 1995 (the "Original
Indenture") between the Owner Trustee and the Indenture Trustee (the Original
Indenture, as supplemented by Trust Agreement and Trust Indenture and Security
Agreement Supplement dated July 13, 1995 by the Owner Trustee, relating to the
aircraft having U.S. registration number N603SW, being referred to herein as
the "Indenture"),
W I T N E S S E T H :
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Indenture;
WHEREAS, a counterpart to the Indenture was recorded by the Federal
Aviation Administration on August 22, 1995 and assigned Conveyance No. H86443;
WHEREAS, the Owner Trustee has agreed to refinance the Series SWA 1995
Trust N603SW-I Certificates with Series 1995 Trust N603SW Certificates; and
WHEREAS, in order to effect such refinancing, the Owner Trustee and
the Indenture Trustee have agreed to amend the Indenture as provided for below;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to the Indenture. The Indenture is, effective
as of the date hereof, hereby amended as follows:
(a) The definitions of "Business Day" and "Holder" in
Section 1.01(b) of the Indenture are amended in their entirety to read
as follows:
"Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or
authorized to close in the City of Dallas, Texas; New York,
New York; or the city and state in which (i) so long as any
Certificates shall be Outstanding, each of the Indenture
Trustee and the Pass Through Trustee and (ii) thereafter, the
Owner Trustee, has its principal place of business; or the
city and state in which the Indenture Trustee, the Pass
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
-1-
<PAGE> 3
Through Trustee or the Owner Trustee, as the case may be,
receives and disburses funds.
"Holder" or "Certificate Holder" means a Person in
whose name a Certificate is registered on the Register
including, so long as it holds a Series SWA 1995 Trust N603SW
Certificate, the Pass Through Trustee.
(b) The following new definitions are inserted in Section
1.01(b) of the Indenture after the definition of "Owner Trustee":
"Pass Through Certificates" means any of the Pass
Through Certificates issued pursuant to the Pass Through Trust
Agreements.
"Pass Through Trust" means each pass through trust
created pursuant to the Pass Through Trust Agreements.
"Pass Through Trust Agreements" means the Pass
Through Trust Agreement dated as of February 1, 1993, between
the Company and the Pass Through Trustee, as supplemented by
the four Trust Supplements Nos. 1995-A1, 1995-A2, 1995-A3 and
1995-A4 each dated as of October 1, 1995, as the same may from
time to time be further amended, supplemented or otherwise
modified.
"Pass Through Trustee" means Wilmington Trust Company
in its capacity as trustee under each Pass Through Trust
Agreement, and such other Person that may from time to time be
acting as successor trustee under any such Pass Through Trust
Agreement.
(c) The first sentence of Section 6.02 of the Indenture
is amended by adding at the end thereof ", in respect of any
Certificate, if such purchase or redemption is effected prior to the
Premium Termination Date in respect of such Certificate".
(d) Exhibits A-1, A-2, B, B-1 and B-2 to the Indenture
are replaced in their entirety by Exhibits A-1, A-2, B, B-1 and B-2
hereto. Said revised Exhibits B, B-1 and B-2 shall, for all purposes,
be deemed to have been, and are, completed in accordance with Article
15 of the Indenture.
Section 2. Lease Amendment. As of the date hereof, the Lessee
and the Owner Trustee are entering into First Amendment to Sale and Lease
Agreement (the "Lease Amendment") to the Sale and Lease Agreement dated as of
July 1, 1995 relating to the Aircraft, which Sale and Lease Agreement (together
with Sale and Lease Agreement Supplement No. One, dated July 13, 1995 thereto)
was recorded with the Federal Aviation Administration on August 22, 1995 and
assigned Conveyance No. H86444. The Lease Amendment is attached hereto and,
without limiting the generality of the Granting Clause of the Indenture, is
covered by the Lien of the Indenture and is made part of the Indenture Estate.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
-2-
<PAGE> 4
Section 3. Amendment and Incorporation by Reference. This
Amendment is and shall be construed as an amendment and supplement to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated herein by reference and is hereby ratified, approved and
confirmed.
Section 4. GOVERNING LAW. THIS AMENDMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 5. Execution in Counterparts. This Amendment may be
executed by the Owner Trustee and the Indenture Trustee in separate
counterparts, each of which when so executed and delivered is an original, but
all such counterparts shall together constitute but one and the same
instrument.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
-3-
<PAGE> 5
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity
only as expressly set forth
herein and otherwise solely as
Owner Trustee
By: /s/ Philip G. Kane, Jr.
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual
capacity, except as otherwise
expressly provided herein,
but solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
-4-
<PAGE> 6
Exhibit A-1 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N603SW Installment Certificates
$______________ No._____________
Dated as of July 13, 1995
SERIES SWA 1995 TRUST N603SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of July 1, 1995
Issued in connection with Aircraft N603SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, _____
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of July 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to _______________ or
registered assigns the principal sum of ______________ Dollars in installments
on each Installment Payment Date as set forth herein with the final installment
due and payable on the Maturity Date specified above and to pay interest on the
principal amount remaining unpaid from time to time at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment in full. All amounts payable by the Owner
Trustee hereunder and under the related Trust Indenture and Security Agreement
dated as of July 1, 1995, as supplemented and amended
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-1-1
<PAGE> 7
by Trust Agreement and Trust Indenture and Security Agreement Supplement dated
July 13, 1995 and First Amendment to Trust Indenture and Security Agreement
dated as of October 1, 1995 (as further amended or supplemented from time to
time referred to herein as the "Indenture", the defined terms therein not
otherwise defined herein being used herein with the same meanings), by and
among the Owner Trustee and Wilmington Trust Company, as Indenture Trustee
thereunder, shall be made only from the income and proceeds of the Indenture
Estate and the other amounts referred to in Section 3.03 of the Indenture.
Each Holder hereof, by its acceptance of this Certificate, agrees that (a) it
will look solely to the income and proceeds of the Indenture Estate and the
other amounts referred to in Section 3.03 of the Indenture for payment of such
amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) neither the Owner Trustee, the Owner
Participant nor the Indenture Trustee is or shall be personally liable to the
Holder hereof for any amount payable hereunder or under the Indenture or,
except as provided in the Indenture, for any liability under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-1-2
<PAGE> 8
debts; provided, however, that payment of interest and Installment Payment
Amounts (other than that payable on the Maturity Date hereof) may be made at
the option of the Indenture Trustee or the Paying Agent by check mailed on or
before the due date to the address of the Holder entitled thereto as such
address shall appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of any authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein, all as shown on Exhibit A hereto.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Interim Rent or
Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of
the Aircraft over the aggregate fair market rental value thereof for the
remainder of the term for the Aircraft, (ii) any unpaid Interim Rent or Basic
Rent plus the excess of the Stipulated Loss Value of the Aircraft over the fair
market sales value thereof or (iii) if the Aircraft has been sold, any unpaid
Interim Rent or Basic Rent plus the excess of the Stipulated Loss Value thereof
over the net sales proceeds.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-1-3
<PAGE> 9
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Interim Rent or Basic Rent under the Lease, provided
that such failure of the Company is not the third consecutive such failure, or
the fifth or subsequent cumulative such failure. The Owner Trustee or the
Owner Participant may (but need not) cure any other default by the Company in
the performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company, subject,
however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-1-4
<PAGE> 10
No service charge shall be made for any such registration or
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-1-5
<PAGE> 11
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-1-6
<PAGE> 12
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: ___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-1-7
<PAGE> 13
Exhibit A-2 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N603SW Serial Certificates
$___________________ No._______________
Dated as of July 13, 1995
SERIES SWA 1995 TRUST N603SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of July 1, 1995
Issued in connection with Aircraft N603SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, ______
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of July 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ___________ or
registered assigns the principal sum of ___________ Dollars on the Maturity
Date specified above and to pay interest thereon at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment. All amounts payable by the Owner Trustee
hereunder and under the related Trust Indenture and Security Agreement dated as
of July 1, 1995, as supplemented and amended by Trust Agreement and Trust
Indenture and Security Agreement Supplement dated July 13, 1995 and First
Amendment to Trust Indenture and Security Agreement dated as of
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-2-1
<PAGE> 14
October 1, 1995 (as further amended or supplemented from time to time referred
to herein as the "Indenture", the defined terms therein not otherwise defined
herein being used herein with the same meanings), by and among the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder, shall be
made only from the income and proceeds of the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture. Each Holder hereof, by
its acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and other amounts referred to in
Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for any amount
payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-2-2
<PAGE> 15
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Interim Rent or
Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of
the Aircraft over the aggregate fair market rental value thereof for the
remainder of the term for the Aircraft, (ii) any unpaid Interim Rent or Basic
Rent plus the excess of the Stipulated Loss Value of the Aircraft over the fair
market sales value thereof or (iii) if the Aircraft has been sold, any unpaid
Interim Rent or Basic Rent plus the excess of the Stipulated Loss Value thereof
over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Interim Rent or Basic Rent under the Lease, provided
that such failure of the Company is not the third consecutive such failure, or
the fifth or subsequent cumulative such failure. The Owner Trustee or the
Owner Participant may (but need not) cure any other default by the Company in
the performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company, subject,
however, to certain limitations.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-2-3
<PAGE> 16
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-2-4
<PAGE> 17
absolute owner hereof for the purpose of receiving payment of the principal of
and interest on this Certificate and for all other purposes whatsoever whether
or not this Certificate be overdue, and neither the Owner Trustee, the
Indenture Trustee, the Paying Agent, the Registrar, the Owner Participant nor
the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-2-5
<PAGE> 18
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-2-6
<PAGE> 19
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: ___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
A-2-7
<PAGE> 20
Exhibit B to
First Amendment to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N603SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A1 July 1, 1997 $525,230 6.16% * Serial
1995-A2 July 1, 1998 $557,584 6.29% * Serial
1995-A3 July 1, 2013 $22,306,624 7.22% October 4, 2007 Installment
1995-A4 January 1, 2018 $453,285 7.64% January 4, 2016 Installment
</TABLE>
* Not applicable.
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
B-1
<PAGE> 21
Exhibit B-1 to
First Amendment to
Trust Indenture and
Security Agreement
PAYMENT DATES AND PAYMENT PERCENTAGES AND AMOUNTS
TRUST INDENTURE AND SECURITY AGREEMENT [N385SW]
B-1-1
<PAGE> 22
Exhibit B-2 to
First Amendment to
Trust Indenture and
Security Agreement
ISSUANCE OF SERIES SWA 1995 TRUST N603SW CERTIFICATES
The Series SWA 1995 Trust N603SW Certificates issued hereunder
shall be issued to and shall be payable to the Pass Through Trustee under each
Pass Through Trust Agreement with respect to the grantor trust created thereby,
in each case as set forth below:
1995-A1 Trust:
6.16% Certificate due July 1, 1997
1995-A2 Trust:
6.29% Certificate due July 1, 1998
1995-A3 Trust:
7.22% Certificate due July 1, 2013
1995-A4 Trust:
7.64% Certificate due January 1, 2018
TRUST INDENTURE AND SECURITY AGREEMENT [N603SW]
B-2-1
<PAGE> 1
EXHIBIT 4.30
PARTICIPATION AGREEMENT
dated as of July 1, 1995
among
SOUTHWEST AIRLINES CO.,
Lessee,
BANC ONE ARIZONA LEASING CORPORATION
Owner Participant,
BANK OF AMERICA ILLINOIS,
Original Loan Participant,
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N603SW
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Certain Definitions; Participations in Lessor's Cost of the Aircraft . . . . . . . . . . . . 2
SECTION 2. Lessee's Notice of Delivery Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee . . . . . . . . . . . . . . . . . . . 5
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the Aircraft . . . . . . . . . . . . . . 6
(i) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ii) No Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(iii) Original Loan Participant's Commitment . . . . . . . . . . . . . . . . . . . 7
(iv) Owner Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Authorization, Execution and Delivery of Documents . . . . . . . . . . . . . 7
(vi) UCC-1's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(vii) Proof of Corporate Action, Etc . . . . . . . . . . . . . . . . . . . . . . . 8
(viii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . 9
(x) Representations and Warranties Accurate; No Event of
Default; No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xi) Opinions of Lessee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 10
(xii) Opinion of Manufacturer's Counsel . . . . . . . . . . . . . . . . . . . . . . 10
(xiii) Opinion of Owner Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . 10
(xiv) Opinions of Owner Participant's Counsel . . . . . . . . . . . . . . . . . . . 10
(xv) Opinion of Oklahoma City Counsel . . . . . . . . . . . . . . . . . . . . . . 11
(xvi) Opinion of Indenture Trustee's Counsel . . . . . . . . . . . . . . . . . . . 11
(xvii) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xviii) Lessee's Bringdown Certificate . . . . . . . . . . . . . . . . . . . . . . . 11
(xix) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) No Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiii) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiv) Bringdown of Other Parties' Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxv) Opinion of Owner Participant's Tax Counsel . . . . . . . . . . . . . . . . . 12
(xxvi) No Tax Law Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxvii) Copy of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxviii) Withholding Tax Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Conditions Precedent to the Obligations of Lessee . . . . . . . . . . . . . . . . . . 13
SECTION 5. Confidentiality of Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6. Extent of Interest of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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<TABLE>
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SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . 15
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 15
(iii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(iv) Valid Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vi) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vii) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(viii) Registration and Recordation . . . . . . . . . . . . . . . . . . . . . . . . 16
(ix) Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(x) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xi) No Misstatement or Omission . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xii) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiv) Effective Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xv) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xvii) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xviii) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xix) No Federal Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xx) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(iii) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(iv) Notice and Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(v) Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iii) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iv) Right to Defend; Subrogation; Fees and Expenses of
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Owner Participant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8. Other Representations, Warranties, Covenants and Indemnities . . . . . . . . . . . . . . . . 28
(a) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Chief Executive Office of SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Owner Participant's Representations and Warranties . . . . . . . . . . . . . . . . . . 30
</TABLE>
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(g) Lessor Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Indenture Trustee Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) Termination Instructions to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . 31
(j) Excess Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) Representations and Warranties of Indenture Trustee in Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(l) Transfers of Equity Interests; Rights of Owner Participant and
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(m) Obligations of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(n) Compliance with Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(o) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(p) SBC's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 34
(q) Owner Participant's Lease Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(r) Lessee's Assumption of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(s) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(t) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(u) Lease Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(v) Revocation of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(w) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(x) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(y) Discharge of Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(z) Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(aa) Special Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(cc) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(dd) Deferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(ee) Lessee as Pricing Agent for Certificate . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9. Payments to Lessee of Trust Indenture Monies . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10. Other Documents; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 11. Certain Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) FAA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(e) Engine Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(f) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(h) Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(i) No Certificate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 12. Ownership of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 13. Notices; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 14. Change of Situs of Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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SECTION 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) Consents under Lease and Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Counterparts; Waivers; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) No Recourse Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(e) Duties Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Binding on Parties and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) Enforceability Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(h) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 16. Transaction Costs; Invoices and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 48
SECTION 17. Optional Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 18. Interim Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 19. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
SCHEDULE III
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
EXHIBIT A - Form of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B - Form of Assignment and Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
PARTICIPATION AGREEMENT [N603SW]
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of July 1, 1995 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) BANC ONE ARIZONA LEASING CORPORATION, an Arizona corporation
(the "Owner Participant"), (iii) BANK OF AMERICA ILLINOIS, an Illinois banking
corporation, (the "Original Loan Participant"), (iv) SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, a national banking association, in its individual
capacity, only as expressly provided herein (in such capacity, "SBC") and
otherwise, solely as Owner Trustee under the Trust Agreement (in such capacity,
the "Owner Trustee"), and (v) WILMINGTON TRUST COMPANY, a Delaware banking
corporation, in its individual capacity and as Indenture Trustee under the
Trust Indenture (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, one of which having U.S. Registration No. N603SW and Manufacturer's
serial number 27954 has been recently purchased by Lessee and is the subject of
this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, on the Delivery Date,
(i) Lessee and the Owner Trustee will enter into
a Purchase Agreement Assignment whereby Lessee agrees to assign to the
Owner Trustee certain rights and interests of Lessee under the
Purchase Agreement with respect to the Aircraft; and
(ii) the Manufacturer will have executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and
WHEREAS, the Indenture Trustee and the Owner Trustee
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and
PARTICIPATION AGREEMENT [N603SW]
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deliver the Trust Supplement covering the Aircraft, supplementing the Trust
Agreement and the Trust Indenture; and
WHEREAS, as described in Section 2 hereof, the Owner Trustee
and Lessee are entering into the Lease whereby, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to purchase the Aircraft
from Lessee and to lease the same back to Lessee, and Lessee agrees to sell the
Aircraft to the Owner Trustee and to lease the same back from the Owner
Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "Owner Trustee" and "Indenture Trustee" shall have
the further meanings attributed thereto in the Sale and Lease Agreement dated
as of the date hereof (the "Lease") between the Owner Trustee and Lessee
relating to the Aircraft referred to in the first recital herein, and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease or the Trust Indenture.
The term "Trust Supplement" has the meaning attributed to the term "Indenture
and Trust Supplement" in the Lease and to the term "Trust Supplement" in the
Trust Indenture. The terms "Indenture Estate," "Outstanding," "Permitted
Investments," "Register" and "Trust Office" shall have the meanings set forth
in the Trust Indenture, and the term "Trust Estate" shall have the meaning set
forth in the Trust Agreement. Unless the context otherwise requires, any
reference herein to any of the Operative Agreements refers to such document as
it may be amended from time to time in accordance with its terms and the terms
of each other agreement restricting the amendment thereof.
(b) Subject to the terms and conditions of this Agreement,
(i) the Original Loan Participant agrees to finance, in part, the Owner
Trustee's payment of Lessor's Cost for the Aircraft by making a secured loan to
the Owner Trustee (herein called the "Loan") on a date to be designated
pursuant to Section 2 hereof, but in no event later than September 30, 1995, in
the amount in Dollars equal to the percentage of Lessor's Cost set forth
opposite its name on Schedule II hereto and (ii) the Owner Participant hereby
agrees, in connection with its equity investment in the beneficial ownership of
the Aircraft and the sale of the Aircraft by Lessee to the Owner Trustee
pursuant to the Lessee FAA Bill of Sale and Lessee Warranty Bill of Sale, as
contemplated hereby, to make its equity investment in the beneficial ownership
of the Aircraft on a date to be designated pursuant to Section 2 hereof, but in
no event later than September 30, 1995, in an amount in Dollars equal to the
percentage of Lessor's Cost set forth opposite its name on Schedule II hereto.
In the case of the Owner Participant, the amount of its participation to be
made as provided above in the payment of Lessor's Cost and, in the case of the
Original Loan Participant, the aggregate principal amount of the Series SWA
1995 Trust N603SW-I Certificate to be simultaneously issued to it, is
hereinafter called such Participant's "Commitment" for the Aircraft. In case
either Participant shall default in its obligation to make the amount of its
Commitment available pursuant to Section 2 hereof in respect of the Aircraft,
the other Participant shall have no obligation to make any portion of such
amount available or to increase the amount of its Commitment and the obligation
of the nondefaulting Participant shall remain subject to the terms and
conditions set forth in this Agreement.
PARTICIPATION AGREEMENT [N603SW]
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(c) In the event that either Participant shall for any
reason fail or refuse to make the full amount of its Commitment available to
the Owner Trustee in accordance with the terms of paragraph (b) of this Section
1 (such Participant, for the purpose of this Agreement, being called a
"Defaulting Participant"), the Owner Trustee shall give, at the earliest
practicable time (which may be the next Business Day), each party hereto
telephonic notice (to be confirmed promptly in writing) of such failure or
refusal and the funds received by the Owner Trustee in connection with the
Aircraft will be held in accordance with the terms of, and for the period
provided in, paragraph (b) of Section 2. In such event the Defaulting
Participant will have no further right to participate in, or make a loan for,
as the case may be, the payment of Lessor's Cost for the Aircraft. Lessee
shall have the right to designate a financial institution (which term, as used
in this paragraph (c), shall mean any banking or financial institution,
institutional investor or fund which is not affiliated with Lessee or with
Owner Participant) to be substituted for the Defaulting Participant; provided,
however, that (i) such substituted financial institution shall sign and deliver
an amendment to this Agreement, in form and substance satisfactory to the Owner
Trustee, the Indenture Trustee and the remaining Participant, whereby such
financial institution agrees to be a party to this Agreement, to be bound by
all the terms hereof and to undertake all the obligations of the Defaulting
Participant contained herein, other than obligations, if any, arising from the
aforesaid failure or refusal by such Defaulting Participant, (ii) if the
Defaulting Participant is Owner Participant (A) such substituted financial
institution shall have been approved by all Original Loan Participants, (B)
each such substituted financial institution shall be domiciled in the United
States and shall be a citizen of the United States within the meaning of the
Act and shall have the requisite power and authority to enter into and carry
out the transactions contemplated by this Agreement and the Trust Agreement,
(C) such substituted financial institution shall enter into amendments to the
Trust Agreement, in form and substance satisfactory to the Owner Trustee, the
Indenture Trustee and the Original Loan Participants, whereby such substituted
financial institution agrees to be a party to the Trust Agreement, to be bound
by all the terms thereof and to undertake all the obligations of the Defaulting
Participant contained therein, and (D) the substitution of such substituted
financial institution as above provided shall not violate any provisions of the
Act or the regulations promulgated thereunder, or create a relationship which
would be in violation thereof and such substituted financial institution shall
so represent in writing to each other party hereto, and (iii) if the Defaulting
Participant is an Original Loan Participant, such substituted financial
institution shall be approved in writing by Owner Participant. No action by
Lessee in finding a financial institution to be substituted as above provided
shall be deemed to constitute a waiver or release of any right which Lessee may
have against the Defaulting Participant. Each financial institution
substituted for an Original Loan Participant pursuant to this paragraph (c)
shall be deemed an Original Loan Participant for all purposes of this
Agreement; and each financial institution substituted for the Owner Participant
pursuant to this paragraph (c) shall (collectively, if more than one) be deemed
the Owner Participant for all purposes of this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. (a) Lessee
agrees to give the Owner Participant, the Owner Trustee, the Original Loan
Participant and the Indenture Trustee at least three (3) Business Days' written
notice of the Delivery Date for the Aircraft, which Delivery Date shall be a
Business Day not later than September 30, 1995, which notice shall specify (i)
the amount of Lessor's Cost, (ii) the amount of each Participant's Commitment
for the Aircraft, and (iii) the model and FAA registration number of the
Aircraft and the manufacturer's serial numbers of the Airframe and each Engine.
As to each Participant, the making of its Commitment for such Aircraft
PARTICIPATION AGREEMENT [N603SW]
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available in the manner required by this Section 2 shall constitute a waiver of
such notice. The Owner Trustee and the Indenture Trustee shall be deemed to
have waived such notice if the Owner Trustee shall have received from the Owner
Participant funds in the full amount of the Owner Participant's Commitment and
the proceeds of the sale of the Series SWA 1995 Trust N603SW-I Certificate in
the full amount of the Original Loan Participant's Commitment.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue and the Indenture Trustee shall
authenticate the Series SWA 1995 Trust N603SW-I Certificate which shall be
delivered simultaneously to the Original Loan Participant. On the Delivery
Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. 98120109 at Bank One, Dallas, N.A., ABA No. 111000614,
1717 Main Street, Dallas, Texas.
The Original Loan Participant and the Owner Participant each
agree to make its Commitment available to Shawmut Bank Connecticut, National
Association, Hartford, Connecticut, Account No. 0067548290, ABA No.
011-900-445, Reference: Southwest Airlines 1995 Trust N603SW, at or before
10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's notice
referred to in the first paragraph of this Section 2 (such specified Delivery
Date being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than September 30, 1995. In the event that
no Delayed Delivery Date is designated or, if designated, such closing does not
occur on the Delayed Delivery Date, or if any Participant shall so request,
such funds of each Participant shall be promptly returned to it by the Owner
Trustee or the Indenture Trustee, as the case may be.
If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
for the period from and including the Scheduled Delivery Date to but excluding
the Delayed Delivery Date, or, as the case may be, to but excluding the
Business Day on which such Participant's funds are returned if such return is
made by 10:00 a.m. (New York City time) or to but excluding the next following
Business Day if such return is not made by such time and, in the case of the
Original Loan Participant, for the Break Amount, if any, applicable to the
Series SWA 1995 Trust N603SW-I Certificate.
PARTICIPATION AGREEMENT [N603SW]
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"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Original
Loan Participant, the rate per annum borne by the Series SWA 1995 Trust
N603SW-I Certificate in respect of which such Original Loan Participant's
Commitment is made available. "Federal Funds Effective Rate" means, for any
period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for the day of such
transactions received by the Owner Participant from three federal funds brokers
of recognized standing selected by it; provided, that the "Federal Funds
Effective Rate" for any non-Business Day shall be the "Federal Funds Effective
Rate" for the previous Business Day.
SBC agrees that in the event it has received telephonic notice
(to be confirmed promptly in writing) from Lessee on the Scheduled Delivery
Date that the closing of the transactions contemplated hereby will not be
consummated on the Scheduled Delivery Date, it will, if instructed in the
notice from Lessee in regard to the funds received by it from the Participants,
use reasonable efforts to invest, at the risk, expense and direction of Lessee,
the funds received by it from the Participants in marketable direct obligations
of the United States of America or obligations of any of its agencies that are
guaranteed as to principal and interest by the United States of America, in any
such case having a stated maturity not later than 91 days from the date of
acquisition. Any such investment may be made through a repurchase agreement in
commercially reasonable form with SBC or a bank or other financial institution
having capital, surplus and undivided profits of at least $100,000,000;
provided, that title to the underlying obligations shall pass to SBC and that
such underlying securities shall be segregated in a custodial or trust account
of or for the benefit of the Owner Trustee. Any such obligations purchased by
SBC, whether directly or through a repurchase agreement, shall be held in trust
by SBC (but not as part of the Trust Estate or Trust Indenture Estate) for the
benefit of the respective Participants. Lessee shall, on the Delayed Delivery
Date or the date the funds furnished by the Participants are required to be
returned to the Participants, as the case may be, reimburse SBC for the benefit
of the respective Participant, for any losses incurred on such investments.
All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the respective accounts of the
Participants (such income and profits to be credited against Lessee's
obligation to reimburse the Participants for the loss of use of funds made
available to SBC) and all other income and profits and all losses on the
investment of such funds shall be for the account of Lessee; and SBC shall not
be liable for failure to invest such funds or for any losses incurred on such
investments except for its own willful misconduct or negligence.
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee. Subject to the terms and conditions of this Agreement, the
Owner Trustee, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with instructions from such Participant or its special
counsel to release such funds to Lessee, shall transfer such funds to Lessee
and the Owner Trustee shall purchase the Aircraft from Lessee and lease the
Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
PARTICIPATION AGREEMENT [N603SW]
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(a) to pay to Lessee (on behalf of the Owner Trustee) the
Lessor's Cost in the manner set forth in Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
(c) to accept from Lessee the Lessee Warranty Bill of Sale
and the Lessee FAA Bill of Sale and the invoice with respect to the Aircraft;
(d) to execute an aircraft registration application, a Lease
Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow the Loan from the Holders to finance a portion
of Lessor's Cost and to issue to the Original Loan Participant a Series SWA
1995 Trust N603SW-I Certificate in a principal amount equal to the amount
borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be taken
by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. Conditions. (a) Conditions
Precedent to the Participations in the Aircraft. It is agreed that the
respective obligations of the Participants to participate in the payments of
Lessor's Cost are subject to the satisfaction prior to or on the Delivery Date
of the following conditions precedent, except that paragraphs (iii), (xx),
(xxiv) (insofar as it relates to the Original Loan Participant), (xxv) and
(xxvi) shall not be a condition precedent to the obligation of the Original
Loan Participant, and paragraphs (iv), (x) (insofar as it relates to the Owner
Participant), (xiv), (xix), (xxiv) (insofar as it relates to the Owner
Participant) and (xxvii) shall not be a condition precedent to the obligation
of the Owner Participant:
(i) Notice. Each Participant shall have received
due notice with respect to such participation pursuant to Section 2
hereof (or shall have waived such notice either in writing or as
provided in Section 2).
(ii) No Change in Law. No change shall have
occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is a party or (y) the
Original Loan Participant or the Owner Participant to make its
Commitment available or, in the case of the Original Loan Participant,
to acquire the Series SWA 1995 Trust N603SW-I Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
PARTICIPATION AGREEMENT [N603SW]
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(iii) Original Loan Participant's Commitment. In
the case of the Owner Participant, the Original Loan Participant shall
have made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(iv) Owner Participant's Commitment. In the case
of the Original Loan Participant, the Owner Participant shall have
made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(v) Authorization, Execution and Delivery of
Documents. The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto,
shall each be satisfactory in form and substance to the Participants
and shall be in full force and effect and executed counterparts shall
have been delivered to each Participant and its respective counsel;
provided, that only the Original Loan Participant shall receive an
executed original of the Series SWA 1995 Trust N603SW-I Certificate,
only the Indenture Trustee, acting on behalf of the Holders, shall
receive the original counterpart of the Lease and the initial Lease
Supplement, and only Lessee and the Owner Participant shall receive
copies of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering the
Aircraft and dated the Delivery
Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering the
Aircraft and dated the Delivery
Date;
(6) the Bills of Sale and an invoice
from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement Assignment;
(8) an acceptance certificate covering
the Aircraft in the form agreed to by the Participants and
Lessee (the "Acceptance Certificate") duly completed and
executed by the Owner Trustee or its agent, which shall be a
representative of Lessee, and by such representative on behalf
of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1995 Trust N603SW-I
Certificate;
(11) the Manufacturer's Consent; and
PARTICIPATION AGREEMENT [N603SW]
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<PAGE> 13
(12) the Guaranty.
(vi) UCC-1's. Uniform Commercial Code financing
statement or statements covering all of the security interests created
by or pursuant to the Granting Clause of the Trust Indenture and
precautionary Uniform Commercial Code financing statement or
statements with respect to the Lease shall have been executed and
delivered, and all such financing statement or statements shall have
been duly filed in all places necessary or advisable, and any
additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Original Loan Participant
shall have been executed and delivered by Lessee, the Indenture
Trustee or the Owner Trustee and duly filed.
(vii) Proof of Corporate Action, Etc. Each
Participant and the Indenture Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(1) a certified copy of the Restated
Articles of Incorporation and Bylaws of Lessee and a copy of
resolutions of the board of directors of Lessee or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of Lessee, duly authorizing the execution,
delivery and performance by Lessee of this Agreement, the
Lease, the Purchase Agreement Assignment, the Lessee Warranty
Bill of Sale, the Lessee FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with
the provisions hereof and thereof;
(2) such other documents and evidence
with respect to Lessee, the Manufacturer, the Owner Trustee,
the Indenture Trustee and the Participants, as the Original
Loan Participant or the Owner Participant, or their respective
counsel, may reasonably request in order to establish the
authority of such parties to consummate the transactions
contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and the compliance with
the conditions herein set forth;
(3) a certificate of Lessee as to the
person or persons authorized to execute and deliver this
Agreement, the other Lessee Documents, and any other documents
to be executed on behalf of Lessee in connection with the
transactions contemplated hereby and as to the signature of
such person or persons;
(4) a copy of the Purchase Agreement (to
the Owner Participant and the Indenture Trustee only)
certified by the Treasurer, the Assistant Treasurer or an
Assistant Secretary of Lessee as being a true and accurate
copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations
or any right in such Agreement assigned by Lessee to the Owner
Trustee pursuant to the Purchase Agreement Assignment; and
(5) a copy of the general authorizing
resolutions of the boards of directors (or executive
committees) or other satisfactory evidence of
PARTICIPATION AGREEMENT [N603SW]
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authorization of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, certified
as of the Delivery Date by the Secretary or an Assistant
Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the
Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, respectively, of all of the Operative
Agreements to which it is a party, together with such other
documents and evidence with respect to the Indenture Trustee
(in its individual capacity), SBC and the Owner Participant as
either the Original Loan Participant (or its counsel) or the
Owner Participant (or its counsel) may reasonably request in
order to establish the consummation of the transactions
contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and compliance with the
conditions herein set forth; provided, this clause shall not be
a condition precedent as to any Participant as to documents to
be provided by that Participant.
(viii) Governmental Approvals. All appropriate
action required to have been taken by the Federal Aviation
Administration, or any other governmental or political agency,
subdivision or instrumentality of the United States, prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders, permits, waivers, authorizations, exemptions and approvals
shall be in full force and effect on the Delivery Date.
(ix) Title, Registration, Airworthiness, Etc. On
the Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:
(1) the Owner Trustee has good and
marketable title (subject to filing and recording of the
Lessee FAA Bill of Sale with the Federal Aviation
Administration in accordance with the Act) to the Aircraft,
free and clear of Liens other than the rights of Lessee under
the Lease and Lease Supplement covering the Aircraft, the
mortgage and security interest created by the Trust Indenture,
the rights of the Owner Participant under the Trust Agreement
and the Trust Supplement and Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the
Lease;
(2) application for registration of the
Aircraft in the name of the Owner Trustee (together with any
required affidavits), the FAA Bill of Sale and the Lessee FAA
Bill of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the Trust
Indenture and the Trust Supplement and the Lease and the Lease
Supplement have been duly filed with the FAA for recordation
pursuant to the Act;
PARTICIPATION AGREEMENT [N603SW]
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<PAGE> 15
(4) each of the Owner Trustee, as lessor
under the Lease, and the Indenture Trustee, as assignee
thereof, is entitled to the protection of Section 1110 of the
United States Bankruptcy Code in connection with its right to
take possession of the Airframe and Engines in the event of a
case under Chapter 11 of the United States Bankruptcy Code in
which Lessee is a debtor; and
(5) the Aircraft has been duly
certificated by the FAA as to type and airworthiness in
accordance with the terms of the Lease and has a current,
valid U.S. standard certificate of airworthiness issued by the
FAA.
(x) Representations and Warranties Accurate; No
Event of Default; No Adverse Change. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which case such representations and warranties shall be true and
accurate on and as of such earlier date), (B) no event shall have
occurred and be continuing, or would result from the purchase, sale,
lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) a
Lease Event of Default or an Indenture Event of Default, and (C) no
material adverse change shall have occurred in the consolidated
financial condition of Lessee and its subsidiaries from that shown in
the consolidated financial statements of Lessee and its subsidiaries
as of December 31, 1994.
(xi) Opinions of Lessee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee and the Owner Trustee from Deborah Ackerman,
Associate General Counsel for Lessee.
(xii) Opinion of Manufacturer's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee, the Indenture Trustee and Lessee from counsel to the
Manufacturer.
(xiii) Opinion of Owner Trustee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Shipman &
Goodwin, counsel for the Owner Trustee.
(xiv) Opinions of Owner Participant's Counsel. The
Original Loan Participant shall have received a favorable opinion, in
form and substance satisfactory to it, addressed to the Indenture
Trustee, the Original Loan Participant, the Owner Trustee and Lessee
from (a) Morgan, Lewis & Bockius, special counsel to the Owner
Participant and (b) in-house or other counsel for the Owner
Participant in a position to address the Owner Participant's due
incorporation and due authorization and execution of the Operative
Agreements to which the Owner Participant is a party.
PARTICIPATION AGREEMENT [N603SW]
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(xv) Opinion of Oklahoma City Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma.
(xvi) Opinion of Indenture Trustee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee and Lessee from Potter Anderson & Corroon, special counsel for
the Indenture Trustee.
(xvii) [Intentionally Reserved].
(xviii) Lessee's Bringdown Certificate. Each
Participant and the Indenture Trustee shall have received a
certificate signed by the President, any Vice President, the Treasurer
or the Assistant Treasurer of Lessee, dated the Delivery Date,
certifying as to the fulfillment of all conditions in this Section
4(a) insofar as they relate to Lessee and as to the matters stated in
paragraphs (x) (insofar as it relates to Lessee), (xxii) and (xxiii)
(to the knowledge of Lessee, except in regard to matters relating to
the Participants, Indenture Trustee or the Owner Trustee, in which
event such representation shall be to the knowledge of Lessee without
any investigation whatsoever) of this Section 4(a).
(xix) Guarantor's Financial Statements.
Lessee, the Original Loan Participant and Indenture Trustee shall have
received a copy of the March 31, 1995 Consolidated Reports of
Condition and Income of Guarantor.
(xx) Appraisal. The Owner Participant shall have
received an opinion, in form and substance reasonably satisfactory to
the Owner Participant, from Aero Economics, Inc., independent aircraft
appraisers, or such other recognized aircraft appraiser selected by
the Owner Participant, to the effect set forth in Schedule III hereto.
(xxi) Insurance Certificates. Each Participant,
the Owner Trustee and the Indenture Trustee shall have received an
independent insurance broker's report and certificates of insurance,
in form and substance reasonably satisfactory to the Participants, as
to the due compliance with the terms of Section 11 of the Lease
relating to insurance with respect to the Aircraft.
(xxii) No Event of Loss. On the Delivery Date, it
shall be true that no Event of Loss (or event which with the passage
of time would become an Event of Loss) with respect to the Airframe or
any Engine has occurred.
(xxiii) No Proceedings. No action or proceeding
shall have been instituted, nor shall action or proceeding be
threatened before any court or governmental agency, nor shall any
order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency at the time of the Delivery Date to
set aside, restrain,
PARTICIPATION AGREEMENT [N603SW]
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enjoin or prevent the completion and consummation of this Agreement or
the transactions contemplated hereby.
(xxiv) Bringdown of Other Parties' Representations
and Warranties. The respective representations and warranties of each
Participant, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof shall be true and accurate as of the Delivery Date as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which event such representations and warranties shall have been true
and accurate on and as of such earlier date) and (a) each Participant
shall, by making its Commitment available as provided in Section 1(b)
of this Agreement, (b) the Indenture Trustee shall, by authenticating
the Series SWA 1995 Trust N603SW-I Certificate issued on the Delivery
Date, and (c) the Owner Trustee shall, by accepting the Lessee
Warranty Bill of Sale and the Lessee FAA Bill of Sale, be respectively
deemed to have reaffirmed as of the Delivery Date the representations
and warranties made by it (individually or in its trust capacities, as
the case may be) in Section 8 of this Agreement.
(xxv) Opinion of Owner Participant's Tax Counsel.
The Owner Participant shall have received from Morgan, Lewis &
Bockius, special counsel to the Owner Participant, a favorable
opinion, in form and substance satisfactory to the Owner Participant,
with respect to income tax aspects of the transactions contemplated by
the Operative Agreements.
(xxvi) No Tax Law Change. In the opinion of the
Owner Participant and its special counsel, there shall have been,
since July 1, 1995, no amendment, modification, addition or change in
or to the provisions of the Code (including for this purpose, any
non-Code provisions of legislation affecting the Code such as
transition rules or effective date provisions), the regulations
promulgated under the Code (including temporary or proposed
regulations), Internal Revenue Service Revenue Procedures or Revenue
Rulings, or other administrative interpretations, applicable judicial
precedents or Executive Orders of the President of the United States
which would adversely affect the accuracy of the Tax Assumptions set
forth in Section 2 of the Tax Indemnity Agreement.
(xxvii) Copy of Appraisal. The Original Loan
Participant shall have received a copy of the opinion referred to in
paragraph (xx) above (without any tax-sensitive provisions) in form
and substance reasonably satisfactory to the Original Loan Participant
to the effect that the fair market value of the Aircraft on the
Delivery Date is at least equal to Lessor's Cost, and that the
assumptions made in reaching such conclusion are fair and reasonable,
but otherwise without regard to the form and substance thereof.
(xxviii) Withholding Tax Forms. If the Original Loan
Participant is required to execute any form or document in order for
payments to it to qualify for exemption from, or reduction of,
withholding tax imposed by the Government, in respect to such
payments, such Original Loan Participant shall have executed such form
or document (including, without limitation, United States Internal
Revenue Forms 1001, W-8 and/or 4224) and delivered it to the Indenture
Trustee in accordance with applicable regulations to qualify for such
exemption or reduction.
PARTICIPATION AGREEMENT [N603SW]
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Promptly upon the registration of the Aircraft and the
recording of the Lease, the Trust Indenture, the Trust Agreement, the Lease
Supplement and the Trust Supplement covering the Aircraft pursuant to the
Federal Aviation Act, Lessee will request Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, to deliver to the Owner Participant, the
Indenture Trustee, the Original Loan Participant, the Owner Trustee and Lessee
an opinion as to the due and valid registration of the Aircraft in the name of
the Owner Trustee, the due recording of the FAA Bill of Sale, the Lessee FAA
Bill of Sale, the Trust Indenture, the Lease Supplement, the Trust Supplement,
the Lease and the Trust Agreement and the lack of filing of any intervening
documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee. It
is agreed that the obligations of Lessee (A) to participate in the sale of the
Aircraft to the Owner Trustee, (B) to accept delivery of the Aircraft under the
Lease, and (C) to enter into its other Operative Agreements, are all subject to
the fulfillment to the satisfaction of Lessee prior to or on the Delivery Date
of the following conditions precedent:
(i) The conditions specified in Sections
4(a)(iii), 4(a)(iv), 4(a)(viii), 4(a)(xix), 4(a)(xxii), 4(a)(xxiii)
and 4(a)(xxviii) hereof shall have been satisfied, unless such
nonsatisfaction is the result of the actions of Lessee.
(ii) Those documents described in Section 4(a)(v)
shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Lessee) in the manner
specified in Section 4(a)(v), shall each be satisfactory in form and
substance to Lessee, shall be in full force and effect on the Delivery
Date, and an executed counterpart of each thereof (other than the
Series SWA 1995 Trust N603SW-I Certificate) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of the Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the Indenture
Trustee (in its individual capacity), SBC and the Owner Participant,
respectively, of all the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to the
Indenture Trustee (in its individual capacity), SBC and the Owner
Participant as Lessee or its counsel may reasonably request in order
to establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and compliance with the conditions herein set forth.
(iv) The representations and warranties of each
Participant, the Indenture Trustee and the Owner Trustee contained in
Section 8 hereof shall be true and accurate as of the Delivery Date as
though made on and as of such date except to the extent that such
representations and warranties relate solely to an earlier date (in
which event such representations and warranties shall have been true
and accurate on and as of such earlier date).
PARTICIPATION AGREEMENT [N603SW]
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(v) Lessee shall have received the opinions set
forth in Sections 4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv) and
4(a)(xvi), in each case addressed to Lessee and dated the Delivery
Date.
(vi) No change shall have occurred after the date
of the execution and delivery of this Agreement in applicable law or
regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of Lessee,
would make it a violation of law or regulations for Lessee to execute,
deliver or perform the Operative Agreements to which it is a party.
(vii) In the opinion of Lessee and its counsel,
there shall have been, since July 1, 1995, no amendment, modification,
addition or change in or to the Code (including for this purpose, any
non-Code provisions of legislation affecting the Code such as
transition rules or effective date provisions), the regulations
promulgated under the Code (including temporary or proposed
regulations), Internal Revenue Service Revenue Procedures or Revenue
Rulings, or other administrative interpretations, applicable judicial
precedents or Executive Orders of the President of the United States
which might give rise to an indemnity obligation under any of the
Operative Agreements, or as a result of which any adjustments to the
Lease payments are requested by the Owner Participant which would
adversely affect the accuracy of the Tax Assumptions set forth in
Section 2 of the Tax Indemnity Agreement.
SECTION 5. Confidentiality of Purchase Agreement. The
Owner Trustee, the Participants and the Indenture Trustee shall keep the
Purchase Agreement confidential and shall not disclose the same to any Person,
except (A) to prospective and permitted transferees of the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
interest who agree to hold such information confidential, (B) to the
aforementioned prospective and permitted transferees', the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
counsel or special counsel, independent insurance brokers or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, including federal or state banking examiners, tax auditors or
taxing authorities, or (D) as may be necessary or desirable for purposes of
protecting the interest of any such Person or for enforcement of any Operative
Agreement by the Owner Trustee, the Original Loan Participant, the Owner
Participant or the Indenture Trustee; provided, however, that any disclosures
of any part of the Purchase Agreement which are permitted by clause (C) or (D)
above shall be made only to the extent necessary to meet the specific
requirements or needs of the Persons to whom such disclosures are hereby
permitted.
SECTION 6. Extent of Interest of Holders. No Holder
shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
outstanding principal amount of, Break Amount, if any, Premium, if any, and
interest on all Certificates held by such Holder and all other sums payable to
such Holder hereunder, under the Trust Indenture and under such Certificates
shall have been paid in full. Each Holder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to such Holder as
provided in Section 2.09 of the Trust Indenture and that neither the Owner
Participant nor the Owner Trustee shall be personally liable to any Holder for
any amounts payable under the Certificates, the Trust
PARTICIPATION AGREEMENT [N603SW]
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Indenture, hereunder, or under any other Operative Agreement (including,
without limitation, amounts payable as Premium or Break Amount), except as
expressly provided in this Agreement or (in the case of the Owner Trustee) in
the Trust Indenture.
SECTION 7. Lessee's Representations and Warranties;
Indemnities.
(a) In General. Lessee represents warrants, covenants and
agrees that:
(i) Organization, Citizenship, Etc. Lessee (A)
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas, (B) is a "citizen of the United
States" (as defined in Section 40102 of Title 49, U.S.C.) holding an
air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties
and to enter into and perform its obligations under this Agreement and
the other Operative Agreements to which Lessee is or will be a party,
and (D) is duly qualified to do business as a foreign corporation in
good standing in each state in which the nature of its business makes
such qualification necessary or the failure to be so qualified or so
to be in good standing would have a material adverse effect on its
business or operations or would impair its ability to perform its
obligations under the Operative Agreements.
(ii) Corporate Authorization, Etc. The execution,
delivery and performance of this Agreement and the other Operative
Agreements to which Lessee is or will be a party (A) have been duly
authorized by all necessary corporate action on the part of Lessee,
(B) do not require any shareholder approval, or approval or consent of
any trustee or holders of indebtedness or obligations of Lessee or of
any lessor under any lease to Lessee except such as have been duly
obtained, and (C) do not and will not (1) contravene any law,
judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) Governmental Approvals. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
and 4(a)(ix)(3), and
PARTICIPATION AGREEMENT [N603SW]
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(C) such federal and state securities law approvals or filings that
will be required in connection with the public offering, if any, of
the Certificates.
(iv) Valid Agreements. This Agreement and the
other Operative Agreements to which Lessee is or will be a party, as
and when entered into, do or will, assuming due authorization,
execution and delivery by the party or parties thereto other than
Lessee, constitute legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
(v) No Proceedings. There are no pending or, to
Lessee's knowledge, threatened actions or proceedings before any court
or administrative agency which, having regard to both the size of the
claim and the possibility of an adverse determination, are likely to
materially adversely affect the consolidated financial condition of
Lessee and its subsidiaries, or the ability of Lessee to perform its
obligations under this Agreement and the other Operative Agreements to
which Lessee is or will be a party.
(vi) Taxes. Lessee and its subsidiaries have
filed or caused to be filed all federal, state, local and foreign tax
returns which are required to be filed and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessment received by Lessee or any of its subsidiaries to the extent
that such taxes have become due and payable (except to the extent
being contested in good faith and by appropriate proceedings and for
the payment of which adequate provisions have been made).
(vii) Financial Condition. The audited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Annual Report to Shareholders for the year ended
December 31, 1994 and the unaudited consolidated financial statements
of Lessee and its subsidiaries contained in the Lessee's Quarterly
Report on Form 10-Q for the period ended March 31, 1995 (copies of
each of which have been furnished to each Participant) have been
prepared in accordance with generally accepted accounting principles,
present fairly, in all material respects, the consolidated financial
position of Lessee and its subsidiaries as of such dates and the
consolidated results of their operations and their cash flows for the
periods then ended, and since December 31, 1993, there has been no
material adverse change in such consolidated financial position.
(viii) Registration and Recordation. Except for (A)
the registration of the Aircraft with the FAA pursuant to the Act in
the name of Owner Trustee, (B) the filing for recordation of the
instruments referred to in Section 4(a)(ix)(2) and (3) and this
Agreement, if deemed necessary due to the incorporation by reference
in such other instruments of terms defined herein, (C) the filing of
the UCC financing statements referred to in Section 4(a)(vi) and
continuation statements at periodic intervals, (D) the taking of
possession by the Indenture Trustee of the original counterparts of
the Lease and the initial Lease Supplement, and (E) the affixation of
the nameplate referred to in Section 7.1.2 of the Lease, no further
action, including any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the
Uniform Commercial Code of any applicable jurisdiction), is necessary
or advisable in order to establish and perfect the right, title or
interest of Owner Trustee in the property constituting the Trust
Estate, or of
PARTICIPATION AGREEMENT [N603SW]
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Indenture Trustee in the property constituting the Trust Indenture
Estate, in any applicable jurisdiction within the United States of
America.
(ix) Chief Executive Office. The chief executive
office (as such term is defined in Article 9 of the UCC) of Lessee is
2702 Love Field Drive, Dallas, Texas 75235, and Lessee agrees to give
the Participants, Owner Trustee and Indenture Trustee 10 days' prior
written notice of any relocation of said chief executive office from
its present location.
(x) Securities Laws. Neither Lessee nor anyone
acting on behalf of Lessee has directly or indirectly offered any
beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, or any similar interest or
security, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security
to, any Person other than the Participants and not more than 27 other
leasing companies or other institutional investors (in the case of
such beneficial interest or securities), or six other institutional
investors (in the case of the Certificates and other similar interests
and securities) or (assuming the accuracy of the representations in
Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii)) to any Person in
violation of the Securities Act or applicable state securities laws,
or both, and Lessee will take no action which would constitute or
cause such violation.
(xi) No Misstatement or Omission. Neither the
financial statements referred to in Section 7(a)(vii) nor any other
documents furnished by Lessee to Owner Trustee, Indenture Trustee or
any Participant in connection with the transactions contemplated by
this Agreement or the other Operative Agreements contains any untrue
statement of a material fact or omits a material fact necessary to
make the statements contained therein (in the case of statements
referred to in Section 7(a)(vii), as of the date made) not misleading;
there is no fact known by Lessee which Lessee has not disclosed to
such parties in writing which materially adversely affects or, so far
as Lessee can now reasonably foresee, will materially adversely affect
the ability of Lessee to carry on its business and perform its
obligations under this Agreement or the other Operative Agreements to
which it is a party.
(xii) Investment Company. Neither Lessee nor any
subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) No Event of Default. No Lease Event of
Default or Lease Default has occurred and is continuing under the
Lease.
(xiv) Effective Sale. On the Delivery Date, the
Aircraft will be situated in Texas and the sale of the Aircraft by
Lessee to Owner Trustee shall be complete and effective and not
voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee
PARTICIPATION AGREEMENT [N603SW]
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Retirement Income Security Act of 1974, as amended ("ERISA"), and (in
reliance upon the Participants' representations in Section 8(o)) the
transactions contemplated by this Agreement do not constitute a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available by
statute, regulation or class exemption. The execution and delivery of
this Agreement and the other Operative Agreements and the consummation
of the transactions contemplated hereby and thereby will not involve
any non-exempt prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code (such representation being
made solely in reliance upon and subject to the accuracy of the
representations contained in Section 8(o)).
(xvi) Title to Aircraft, etc. Good and marketable
title to the Aircraft will be at the time of delivery to Owner Trustee
vested in Lessee free and clear of all Liens other than the rights of
Lessee under the Lease and the Lease Supplement covering the Aircraft,
the Lien of the Trust Indenture, the beneficial interest of the Owner
Participant in the Aircraft and the Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the Lease; and,
subject to the filing for recordation of the Lessee FAA Bill of Sale
in accordance with the Act, good and marketable title to the Aircraft
will have been duly conveyed by Lessee to Owner Trustee, free and
clear of all Liens other than the rights of Lessee under the Lease and
the Lease Supplement covering the Aircraft, the Lien of the Trust
Indenture, the beneficial interest of the Owner Participant in the
Aircraft, and the Liens permitted by clause (d) (solely for taxes not
yet due) or (e) of Section 6 of the Lease.
(xvii) Condition of Aircraft. The Aircraft has been
duly certificated by the FAA as to type and airworthiness, is fully
equipped to operate in commercial service and complies with all
material governmental requirements governing such service; the
Aircraft has been continuously operated and maintained by Lessee (in a
manner that would satisfy the provisions of Sections 7.1.3 and 8.1 of
the Lease) since its delivery to Lessee by Manufacturer, Lessee is
unaware of any material mechanical or structural defects in or damage
to the Aircraft since its delivery to Lessee by Manufacturer and there
has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event
of Loss.
(xviii) Use of Proceeds. None of the proceeds from
the issuance of the Certificates or from the acquisition by the Owner
Participant of its beneficial interest in the Trust Estate will be
used directly or indirectly by Lessee so as to result in a violation
of Regulation G or U of the Board of Governors of the Federal Reserve
System.
(xix) No Federal Approvals. No governmental
approval in the United States of any kind is required of the Owner
Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance
under this Agreement or any agreement contemplated hereby solely by
reason of any fact or circumstance peculiar to: (a) Lessee (as
contrasted to other airlines), (b) the nature of the Aircraft, or (c)
Lessee's proposed operations or use of the Aircraft.
(xx) Section 1110. Owner Trustee, as lessor under
the Lease, and the Indenture Trustee, as assignee thereof, are
entitled to the protection of Section 1110 of the
PARTICIPATION AGREEMENT [N603SW]
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United States Bankruptcy Code in connection with their right to take
possession of the Airframe and Engines in the event of a case under
Chapter 11 of the United States Bankruptcy Code in which Lessee is a
debtor. Southwest acquired the Aircraft new from the Manufacturer
after October 22, 1994, and Southwest first placed the Aircraft in
service after such date.
(b) General Tax Indemnity.
(i) Indemnity. Lessee hereby agrees to pay, to
indemnify, and, on written demand, reimburse and hold each Indemnified
Party (which, unless otherwise indicated herein, for purposes of this
Section 7(b) shall include any Affiliate of any Participant, and all
entities which are included in a consolidated, combined or unitary
return with such Indemnified Party) harmless from, any and all
license, documentation, recording and registration fees and any and
all taxes (including, without limitation, sales, use, turnover,
value-added, property (tangible and intangible), ad valorem,
consumption, rental, license, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature
whatsoever together with any and all penalties, fines, additions to
tax or interest thereon or computed with reference thereto
(collectively "Taxes"), howsoever imposed by any federal, state or
local government or governmental subdivision or taxing authority in or
of the United States of America (including any possession or territory
of the United States of America), or by any foreign government, taxing
authority or governmental subdivision of a foreign country, upon,
against, or with respect to any Indemnified Party, Lessee, the
Aircraft, Airframe, any Engine, any other engine installed on the
Airframe, Part or any other part thereof or interest therein or upon
or with respect to the purchase, acquisition, acceptance, rejection,
mortgaging, financing, refinancing, manufacture, sale, transfer of
title, ownership, delivery, nondelivery, insuring, inspection,
leasing, possession, use, registration, reregistration,
deregistration, operation, repair, replacement, abandonment,
redelivery, modification, rebuilding, importation, exportation, return
or other disposition thereof, or the imposition of any Lien (or the
occurrence of any liability to refund or pay over any amount as a
result of any Lien) thereon, or upon or with respect to the rentals,
receipts or earnings arising therefrom, or upon or with respect to
this Agreement, the Trust Agreement, the Trust Indenture, the Lease, a
Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Certificates or the issuance, reissuance, acquisition,
redemption, expiration or subsequent transfer thereof under the Trust
Indenture, or the beneficial interests in the Trust Estate or the
creation thereof, or any payment made pursuant to any such agreement
or instrument or upon or with respect to the property, held by Owner
Participant or by the Trust Estate or by Indenture Trustee under the
Trust Indenture, or otherwise with respect to or in connection with
the transactions contemplated by the Operative Agreements.
(ii) Exceptions. The indemnity set forth in
Section 7(b)(i) shall not extend in the case of any Indemnified Party
to Taxes (1) on, based on, or measured by, the receipts, gross or net
income, capital or net worth of such Indemnified Party (whether
denominated as franchise, excess profits, conduct of business, capital
gains, minimum and/or alternative minimum taxes) or accumulated
earnings, personal holding company, succession taxes and estate or
franchise taxes (other than taxes which are in the nature of sales or
use taxes, value-added taxes, rental taxes, license taxes, consumption
taxes, ad valorem taxes or
PARTICIPATION AGREEMENT [N603SW]
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property taxes) imposed by (A) the federal government of the United
States (including without limitation any taxes collected by
withholding) (but specifically excluding any excise taxes imposed in
connection with the occurrence of a "prohibited transaction", within
the meaning of Section 406 of ERISA or Section 4975 of the Code, for
which an exemption is not available by statute, regulation or class
exemption) or (B) any state or local government or governmental
subdivision or state or local taxing authority in the United States of
America (including any possession or territory of the United States of
America) other than in the case of (B) any such tax which is a Covered
Income Tax, as defined below; (2) on, based on, or measured by, any
fees or compensation received by Owner Trustee or Indenture Trustee in
its individual capacity for services rendered in connection with the
transactions contemplated hereby; (3) relating to the Aircraft for any
period after the later of (A) the expiration or early termination of
the Lease and the return of the Aircraft in connection therewith in
accordance with the terms thereof and (B) payment in full of
Stipulated Loss Value or Termination Value, as the case may be, and
all Rent due and owing in accordance with the Lease; (4) arising out
of or caused by the wilful misconduct or gross negligence of such
Indemnified Party or the inaccuracy or breach of any representation,
warranty or covenant of such Indemnified Party contained in any
Operative Agreement; (5) imposed on the income of such Indemnified
Party by a foreign government or taxing authority, except to the
extent such Taxes are imposed by reason of the location, operation,
use or rental of the Aircraft or any Part thereof in such jurisdiction
or the presence of Lessee or Sublessee or other user in such
jurisdiction or the making of payments from such jurisdiction; (6)
which may become payable in connection with the occurrence of a
"prohibited transaction", within the meaning of Section 406(b) of
ERISA or Section 4975(c)(1)(E) or (F) of the Code, involving the
assets of any "employee benefit plan" within the meaning of Section
3(3) of ERISA, or of any "plan" within the meaning of Section
4975(e)(1) of the Code, with respect to which the Owner Participant is
the "plan sponsor" within the meaning of Section 3(16)(B) of ERISA;
and (7) which become payable as a result of any involuntary
disposition attributable to the bankruptcy of the Owner Participant or
Owner Trustee or any voluntary sale, transfer, mortgaging, pledging or
financing by such Indemnified Party of all or a portion of its
interest in the Aircraft, the Trust Estate, the Trust Indenture
Estate, the Lease, or any other Operative Agreement in a transaction
not contemplated by the Operative Agreements (it being understood that
any disposition of the Aircraft or any Part as a result of a
substitution, replacement or modification thereof or thereto by Lessee
shall not be treated as voluntary) unless, in each case, such transfer
shall occur (A) pursuant to the exercise of remedies under Section 15
of the Lease or (B) pursuant to Section 7, 8, 9, 10 or 18 thereof. As
used in clause (1)(B) of this Section 7(b)(ii), the term "Covered
Income Tax" means a Tax described in said clause (1)(B) imposed on an
Indemnified Party by any taxing authority (A) in whose jurisdiction
such Indemnified Party (including for this purpose all entities with
which it is combined, integrated or consolidated in such taxing
authority's jurisdiction) did not engage in business, did not maintain
an office or other place of business and was not otherwise located, if
such Tax resulted from the operation of the Aircraft or any Engine in
such jurisdiction or the transactions contemplated by the Operative
Agreements, or (B) in whose jurisdiction such Indemnified Party in
fact is doing business, maintaining an office or other place of
business or is otherwise located, if such circumstance was no factor
in the imposition of such Tax.
PARTICIPATION AGREEMENT [N603SW]
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(iii) Calculation. Lessee agrees that, with
respect to any payment or indemnity pursuant to Section 7(b)(i)
hereof, such payment or indemnity shall include an amount payable to
the Indemnified Party sufficient to hold such Indemnified Party
harmless on an after-tax basis from all Taxes required to be paid by
such Indemnified Party with respect to such payment or indemnity under
the laws of any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America,
including any possession or territory of the United States, or under
the laws of any foreign government, taxing authority or governmental
subdivision of a foreign country; provided, that if any Indemnified
Party realizes a reduction in Taxes not subject to indemnification
hereunder (a "tax benefit") by reason of such payment or indemnity
(whether such tax benefit shall be by means of investment tax credit,
foreign tax credit, depreciation deduction or otherwise), such
Indemnified Party shall, so long as no Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred or be continuing, pay Lessee (but not
before Lessee shall have made all payments or indemnities to such
Indemnified Party then due under the Operative Agreements) an amount
equal to the sum of such tax benefit plus any other tax benefit
realized by such Indemnified Party as the result of any payment made
pursuant to this proviso; provided, however, that such payment by an
Indemnified Party shall not exceed the aggregate payments by Lessee to
such Indemnified Party under Section 7(b)(i) hereof (but any such
excess shall be carried forward and shall reduce Lessee's obligation
to make any subsequent payments to such Indemnified Party pursuant to
Section 7(b) or 7(c) hereof). Each such Indemnified Party shall in
good faith use reasonable efforts in filing its tax returns and in
dealing with taxing authorities to seek and claim any such tax benefit
of which it is actually aware or of which it has been given notice.
Any Taxes that are imposed on any Indemnified Party as a result of the
disallowance or reduction of such tax benefit referred to in the next
preceding sentence in a taxable year subsequent to the year of
allowance and utilization by such Indemnified Party (including the
expiration of any tax credit carryovers or carrybacks of such
Indemnified Party that would not otherwise have expired) shall be
indemnifiable pursuant to the provisions of Section 7(b)(i) without
regard to Section 7(b)(ii). In determining the amount of any net
reduction in Taxes which is attributable to more than one transaction,
an Indemnified Party shall be deemed to have utilized its deductions
and credits attributable first, to all transactions other than
leveraged equipment leasing transactions and then to this transaction
and to all such other leveraged equipment leasing transactions on a
pari passu basis.
If as a result of any Advance (as hereinafter defined)
to an Indemnified Party the aggregate taxes paid or accrued by such
Indemnified Party for any taxable year shall be more than the amount
of such taxes which would have been payable by the Indemnified Party
had no such Advance been made, and if such increase in taxes was not
taken into account in determining the amount of the Advance, then such
increase in taxes will be treated as Taxes for which Lessee must
indemnify the Indemnified Party pursuant to this Section 7(b). Upon
the final determination of any contest pursuant to Section 7(b)(iv)
hereof in respect of any Taxes for which Lessee has made an Advance,
the amount of Lessee's obligation shall be determined under this
Section 7(b)(iii) as if such Advance had not been made. Any
obligation of Lessee under this Section 7(b) and the Indemnified
Party's obligation to repay
PARTICIPATION AGREEMENT [N603SW]
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the Advance will be satisfied first by set off against each other and
any difference owing by either party will be paid within 10 days of
such final determination.
(iv) Notice and Contest. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 15 days after its receipt; provided, that failure to provide
such notice within 15 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of Vinson & Elkins L.L.P. or other independent counsel selected by
Lessee and reasonably satisfactory to Indemnified Party to the effect
that a reasonable basis in law and fact exists under ABA opinion
85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or permit Lessee, if desired by Lessee, to contest in
the name of Lessee) if permissible under applicable laws, the
validity, applicability or amount of such Taxes by (i) resisting
payment thereof if practicable, (ii) not paying the same except under
protest, if protest shall be necessary and proper, (iii) if payment
shall be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings, and (iv) taking
such other action as is reasonably requested by Lessee from time to
time. The Indemnified Party shall determine the method of any contest
and (in good faith consultation with Lessee) control the conduct
thereof. Notwithstanding anything contained in this Section 7(b)(iv),
an Indemnified Party will not be required to contest, or to continue
to contest, the validity, applicability or amount of any Tax (or
portion thereof) (w) unless Lessee shall have acknowledged in writing
its obligation to indemnify the Indemnified Party hereunder in the
event the Indemnified Party does not prevail in such contest, (x) if
such contest would result in any material risk of criminal penalties
or any material risk of sale, forfeiture or loss (or loss of use) of
the Aircraft, the Airframe or any Engine or any Part or any interest
therein, (y) if a Lease Event of Default has occurred and is
continuing or (z) if the claim (when aggregated with related or
correlative adjustments with respect to such Indemnified Party) will
not exceed $10,000. The Owner Participant shall not be required to
appeal, or seek leave to appeal, an adverse judicial determination
with respect to such Taxes to the United States Supreme Court. If an
Indemnified Party contests a Tax by making a payment and seeking a
refund thereof, then Lessee shall advance to such Indemnified Party,
on an interest-free basis, an amount equal to the Taxes and any
penalties, additions to tax, fines and interest thereon (which shall
collectively be known, only for the purpose of this Section 7(b), as
an "Advance") that are paid by such Indemnified Party in connection
with such contest. Such Advance shall be repayable to Lessee at the
time and in the manner specified in the last paragraph of Section
7(b)(iii). If any Indemnified Party shall obtain a refund of all or
any part of such Taxes for which an indemnity was paid by Lessee, such
Indemnified Party shall pay Lessee the
PARTICIPATION AGREEMENT [N603SW]
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amount of such refund as is attributable to the Taxes for which such
indemnity was paid; provided, however, that such amount shall not be
payable before such time as Lessee shall have made all payments or
indemnities to such Indemnified Party then due under this Section 7(b)
and under the Lease. If in addition to such refund such Indemnified
Party shall receive an amount representing interest on the amount of
such refund, Lessee shall be paid that proportion of such interest
which is fairly attributable to Taxes paid with an indemnity payment
or Advance by Lessee prior to the receipt of such refund, reduced by
taxes imposed on such Indemnified Party on receipt of such refund or
interest and increased by any taxes saved by reason of the
deductibility of such payment by the Indemnified Party. Any
subsequent determination that such Indemnified Party was not entitled
to all or any portion of any refund paid to Lessee shall be treated as
a Tax indemnifiable under Section 7(b)(i) without regard to Section
7(b)(ii). Lessee shall not be deemed to be in default under any of
the indemnification provisions under this Section 7(b) so long as it
or any Indemnified Party shall diligently prosecute such contest;
provided, that Lessee shall nonetheless be required to pay all
Advances and expenses required hereunder. In case any report or
return is required to be made with respect to any obligation of Lessee
under this Section 7(b) or arising out of this Section 7(b), Lessee
will either timely make such report or return in such manner as will
show the ownership of the Aircraft in Owner Trustee, and send a copy
of such report or return to Owner Trustee (except for any report or
return that an Indemnified Party has notified Lessee that the
Indemnified Party intends to file or that the Indemnified Party is
required by law to file), or will notify Owner Trustee of such
requirement and prepare and deliver such report or return to the
Indemnified Party in such manner as shall be satisfactory to such
Indemnified Party and Owner Trustee.
Notwithstanding the above provisions of this Section 7(b), any
Indemnified Party in its sole discretion (by written notice to Lessee) may
unconditionally waive its rights to the indemnities provided for in this
Section 7(b) with respect to any Taxes, and refrain from contesting, or
continuing the contest of such Taxes, in which event Lessee shall have no
liability to such Indemnified Party hereunder with respect to such Taxes. In
addition, if an Indemnified Party shall agree to a settlement of any contest
under this Section 7(b) without the prior written consent of Lessee, then the
Indemnified Party shall be deemed to have waived its rights to the indemnities
provided in this Section 7(b) with respect to the subject matter of such
settlement.
(v) Withholdings. Notwithstanding the exceptions in Section
7(b)(ii), Lessee agrees that each payment of Rent and any amount payable on the
Certificates shall be free of all withholdings (other than a U.S. withholding
tax, except to the extent described in Section 15.05(d) of the Trust Indenture)
of any nature whatsoever except to the extent otherwise required by law, and in
the event that any such withholding is so required, Lessee shall pay an
additional amount of Rent such that after the deduction of all amounts required
to be withheld, the net amount actually received by each Indemnified Party will
equal the amount that would be due absent such withholding. In the event
additional Rent is paid by Lessee to provide for withholdings pursuant to the
preceding sentence in respect of Taxes that are excepted from indemnification
hereunder pursuant to Section 7(b)(ii), the Indemnified Party on whom the Tax
is imposed by way of withholding on payments to such person shall, promptly
upon receipt of notice from Lessee, reimburse Lessee for such additional Rent.
As used in this Section 7(b)(v), a "U.S. withholding tax" shall mean any
withholding tax imposed by the United States of America (A) with respect to
interest payments under any
PARTICIPATION AGREEMENT [N603SW]
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Certificate pursuant to treaty or federal law imposing withholding tax
generally on interest payments to Persons not resident in the United States or
(B) in the nature of backup withholding under section 3406 of the Code and the
regulations thereunder, or any successor or similar provision of the Code,
federal tax law or regulations thereunder. All U.S. withholding taxes with
respect to interest payments shall be borne by the Holder of the relevant
Certificate and none of Lessee, Owner Participant, Indenture Trustee or Owner
Trustee shall be responsible for any U.S. withholding tax with respect to
interest payments on such Certificate. Owner Trustee may (or, if Lessee is
making any payment directly to the Holder of any Certificate or to the
Indenture Trustee, Lessee shall) withhold any applicable U.S. withholding tax
from the amount of the interest payment then due and pay (and, if Lessee is
making any payment to the Holder or the Indenture Trustee, Lessee shall pay)
any amount withheld to the appropriate federal taxing authority; provided, that
Lessee shall indemnify and hold the Owner Trustee and the Owner Participant
harmless on an after-tax basis from and against any and all liability arising
from any failure by any Person to withhold any U.S. withholding taxes with
respect to payments required to be made with respect to the Certificates, and
Lessee shall timely prepare and file, or, if required by applicable law,
present to the Owner Trustee for filing, all information returns required to be
prepared with respect to any such withholding tax payments or otherwise with
respect to payments under the Certificates.
(c) General Indemnity.
(i) Indemnity. Lessee hereby agrees, whether or
not any of the transactions contemplated hereby shall be consummated,
to pay, assume liability for and indemnify, protect, defend, save and
keep harmless each Indemnified Party from and against, on a net
after-tax basis as provided in Section 7(b)(iii), any and all
liabilities, obligations, losses, damages, settlements, claims,
actions, suits, penalties, costs, expenses and disbursements
(including but not limited to reasonable legal and investigative fees
and expenses and Transaction Costs to the extent not required to be
paid by Owner Participant pursuant to Section 16 hereof, and all costs
and expenses relating to amendments, supplements, waivers and consents
to and under the Operative Agreements, but excluding internal overhead
costs and expenses such as salaries (other than a reasonable
allocation in respect of the Original Loan Participant's in-house
counsel)) of whatsoever kind and nature, including but not limited to
negligence, liability of an owner, strict or absolute liability,
liability without fault and liability in tort (any of the foregoing
being called a "Loss") which may from time to time be imposed on,
incurred by or asserted against any Indemnified Party or the Aircraft,
Airframe, any Engine or any Part or any portion of the Trust Estate or
the Trust Indenture Estate (whether or not any such Loss is also
indemnified or insured against by any other Person or such Indemnified
Party has also indemnified any other Person against such Loss) in any
way relating to or arising out of (a) any Operative Agreement, the
enforcement thereof or any of the transactions contemplated thereby
(including, without limitation, the performance or observance of all
obligations and conditions of Lessee thereunder, or the falsity of any
representations or warranties of Lessee therein or thereunder or in
any document or certificate delivered pursuant thereto), (b) the
purchase, acceptance or rejection of the Aircraft, (c) the Aircraft,
the Airframe, any Engine, any engine or any Part, any data or any
other thing delivered or to be delivered under an Operative Agreement,
including without limitation, the ownership, financing, refinancing,
delivery, nondelivery, lease, sublease, assignment, registration,
reregistration, deregistration, possession, use, non-
PARTICIPATION AGREEMENT [N603SW]
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use, presence, operation, condition, storage, preparation,
installation, testing, manufacture, design, fitness for use,
merchantability, modification, replacement, substitution, alteration,
maintenance, repair, re-lease, sale, return, transportation, transfer,
abandonment or other disposition thereof or any portion thereof
(including, without limitation, latent and other defects, whether or
not discoverable, and any claim for patent, trademark or copyright
infringement, or arising under environmental control, noise or
pollution laws or regulations, and loss of or damage to any property
or the environment or death or injury to any person), or (d) the
offer, sale or delivery of the Certificates, whether before or after
the Delivery Date (the indemnity in this clause (d) to extend also to
any Person who controls an Indemnified Party, its successors, assigns,
employees, servants and agents within the meaning of Section 15 of the
Securities Act).
(ii) Exceptions. The indemnity set forth in
Section 7(c)(i) shall not extend to any Loss with respect to such
Indemnified Party (A) to the extent that such Loss is caused by acts,
omissions or events which occur after full and final compliance by
Lessee with all the terms of the Operative Agreements, (B) to the
extent such Loss is caused by acts, omissions or events which occur
following the earlier of: (I) acceptance of possession of the Airframe
or any Engine or Part by Lessor or its designee pursuant to the terms
of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long
as Lessor shall be entitled to exercise remedies under such Section
15), (II) the termination of the Term in accordance with Section 9 of
the Lease, or (III) the transfer of title to the Aircraft to Lessee
(or its designee) pursuant to Section 10.1.4 or Section 18.2 of the
Lease, (C) to the extent that such Loss is a Tax or a loss of tax
benefits, whether or not Lessee is required to indemnify therefor
pursuant to Section 7(b) hereof, (D) to the extent that such Loss is
caused by the willful misconduct or gross negligence of such
Indemnified Party (other than willful misconduct or gross negligence
imputed to such Indemnified Party solely by reason of its interest in
the Aircraft) or any material misrepresentation or violation or breach
of any obligations of such Indemnified Party contained in the
Operative Agreements then in force unless such misrepresentation,
violation or breach is a result of Lessee's failure to comply with the
terms of any Operative Agreement to which it is a party, or (E) to the
extent such Loss is associated with a sale, assignment or transfer by
such Indemnified Party of its respective interest in the Aircraft, the
Certificates or the transactions contemplated hereby (other than (1)
as required by the Operative Agreements and (2) during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of
the Lease) or a Lease Event of Default or the exercise of remedies
under the Lease). This Section 7(c) does not constitute a guarantee
of the useful life or residual value of the Aircraft or a guarantee
that the Certificates will be paid.
(iii) Notice. If any Indemnified Party or Lessee
has knowledge of any Loss for which Lessee is obligated to indemnify
under this Section 7(c), it shall give prompt written notice thereof
to Lessee or such Indemnified Party, as the case may be, but failure
to give such notice shall not relieve Lessee of its obligations
hereunder or from any other obligation that Lessee may have to such
Indemnified Party at law or in equity, and no payment by Lessee to an
Indemnified Party pursuant to this Section 7(c) shall be deemed to
constitute a waiver or release of any right or remedy which Lessee may
have against such
PARTICIPATION AGREEMENT [N603SW]
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Indemnified Party for any actual damages as a result of the failure by
such Indemnified Party to give Lessee such notice.
(iv) Right to Defend; Subrogation; Fees and
Expenses of Trustees. Lessee shall be entitled (and, at the
Indemnified Party's election, shall be obligated), at its sole cost
and expense, acting through counsel selected by Lessee reasonably
acceptable to the respective Indemnified Party, (A) in any judicial or
administrative proceeding that involves solely a claim for which
payment or indemnity is sought under this Section 7(c), to assume
responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for which payment or
indemnity is sought under this Section 7(c), and other claims related
or unrelated to the transactions contemplated by the Operative
Agreements, to assume responsibility for and the control of such claim
for which payment or indemnity is sought under this Section 7(c) to
the extent that the same may be and is severed from such other claims
(and such Indemnified Party shall use its reasonable best efforts to
obtain such severance), and (C) in any other case, to be consulted by
such Indemnified Party with respect to judicial proceedings subject to
the control of such Indemnified Party. Notwithstanding any of the
foregoing to the contrary, Lessee shall not be entitled to assume
responsibility for and control of any such judicial or administrative
proceedings (1) while any Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or Lease Event of Default shall
have occurred and be continuing, (2) if such proceedings will involve
a material risk of the sale, forfeiture or loss of, or the creation of
any Lien (other than a Permitted Lien) on, the Aircraft or the Trust
Estate or the Trust Indenture Estate or any part thereof or the loss
or impairment of the Lien of the Trust Indenture on all or any part of
the Trust Indenture Estate, (3) if such proceedings could, in the good
faith opinion of the Indemnified Party, entail any risk of material
criminal liability or material civil penalty or (4) if in the written
opinion of counsel to such Indemnified Party an actual or potential
material conflict of interest exists making it advisable for such
Indemnified Party to be represented by separate counsel. The
Indemnified Party may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to
the preceding provisions.
The Indemnified Party shall supply Lessee, at Lessee's
expense, with such information within its possession reasonably requested by
Lessee as is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c). Such Indemnified
Party shall not enter into a settlement or other compromise with respect to any
Loss without the prior written consent of Lessee (except during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default when such consent shall not be required if such
Indemnified Party gives 10 days' prior written notice to Lessee describing the
proposed settlement or other compromise), which consent shall not be
unreasonably withheld or delayed, unless such Indemnified Party waives its
right to be indemnified with respect to such Loss under this Section 7(c).
Lessee shall supply the Indemnified Party with such
information reasonably requested by the Indemnified Party as is necessary or
advisable for the Indemnified Party to control or participate in any proceeding
to the extent permitted by this Section 7(c).
PARTICIPATION AGREEMENT [N603SW]
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Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.
In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person seeking indemnification from Lessee pursuant to any provision of
this Agreement may proceed directly against Lessee without first seeking to
enforce any other right of indemnification.
Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 9.02(c) of
the Trust Indenture) and, as provided in Section 6.07 of the Trust Agreement,
the Owner Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel), without cost, on a net after-tax basis, to the Owner
Participant, for acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay the reasonable
fees and expenses of any separate owner trustee or co-trustee appointed
pursuant to Section 9.02 of the Trust Agreement as a result of any requirement
of law or if otherwise required by any Operative Agreement or if requested, or
consented to, by the Lessee.
(d) Owner Participant's Indemnity. Owner Participant
covenants and agrees that if (i) Lessee has elected pursuant to Section 9.1 of
the Lease to terminate the Lease by causing the Aircraft to be sold pursuant to
Section 9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of
the Lease, given to Lessee written notice of Lessor's election to retain title
to the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
on or before the proposed termination date over the price for which the
Aircraft may subsequently be sold (but disregarding any portion of such bid or
such price in excess of the applicable Termination Value), any additional Rent
paid by Lessee (less an amount representing the fair value to Lessee of its use
of the Aircraft for the period of time in respect of which such Rent was paid)
and any reasonable
PARTICIPATION AGREEMENT [N603SW]
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fees and expenses of lawyers, appraisers, brokers or accountants) incurred as a
consequence of such failure by Owner Trustee.
(e) Payments. Any payments made pursuant to this Section 7
shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.
(f) Interest on Overdue Amounts. If any amount payable by
Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.
(g) Survival. All indemnities, obligations, adjustments and
payments provided for in this Section 7 shall survive, and remain in full force
and effect, notwithstanding the expiration or other termination of this
Agreement, the Lease or any other Operative Agreement. The obligations of
Lessee in respect of all such indemnities, obligations, adjustments and
payments are expressly made for the benefit of, and shall be enforceable by,
each Indemnified Party or other indemnitee entitled thereto, without taking any
action under the Lease.
SECTION 8. Other Representations, Warranties, Covenants
and Indemnities. (a) Securities Laws. The Owner Participant represents that
it is acquiring its interest in the Trust Estate for investment purposes only
and not with a present intent as to any resale or distribution thereof except
as otherwise permitted by Rule 144A under the Securities Act, (subject
nonetheless to any requirement of law that the disposition of its properties
shall at all times be and remain within its control) and that neither it nor
anyone acting on its behalf has directly or indirectly offered any interest in
the Trust Estate or any Certificates or any similar securities for sale to, or
solicited any offer to acquire any of the same from, anyone in a manner which
would result in a violation of the Securities Act or the securities laws, rules
and regulations of any state.
(b) Citizenship. Each of the Owner Participant and SBC, in
its individual capacity, represents and warrants to the other parties to this
Agreement that it is a "citizen of the United States" as defined in 49 U.S.C.
Section 40102(a)(15)(C). The Owner Participant agrees, solely for the benefit
of Lessee, each Sublessee, the Indenture Trustee and the Holders, that if at
any time (i) it shall not be a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) and (ii) the Aircraft shall be, or
would therefore become, ineligible for registration in the name of the Owner
Trustee under the Act and regulations then applicable thereunder (it being
understood that the effect of any such status shall be determined without
giving consideration to any provision of the Act (or any superseding statute)
which permits United States registration of an aircraft based on conditions
which impose restrictions on the location and use of such aircraft or otherwise
restrict the ability of an air carrier to operate an aircraft in the ordinary
course of its business), then the Owner Participant shall (at its own expense
and without any reimbursement or indemnification from Lessee) as soon as is
reasonably practicable but in any event within 30 days
PARTICIPATION AGREEMENT [N603SW]
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after a Responsible Company Officer of the Owner Participant shall obtain
actual knowledge of such loss of citizenship (A) effect voting trust or other
similar arrangements or take any other action as may be necessary to prevent
any deregistration or to maintain the United States registration of the
Aircraft and (to the extent such recordation is dependent on the U.S.
registration of the Aircraft) the recordation with the FAA of the Trust
Indenture and the Lease, or (B) transfer its beneficial interest in the Trust
Estate in accordance with Section 8(l) hereof. It is understood that: (1) the
Owner Participant shall be liable to any of the other parties hereto for any
damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section
8(b) proving to be untrue as of the Delivery Date; and (2) the Owner
Participant shall be liable to Lessee, any Sublessee and any Holder for any
damages which may be incurred by Lessee, any Sublessee or such Holder as a
result of such loss of citizenship by the Owner Participant and the inability
to register (or maintain the registration of) the Aircraft in the name of the
Owner Trustee under the Act and regulations then applicable thereunder as a
result of such loss of citizenship. Each of Lessee (as provided in Section
11(b)), the Original Loan Participant, the Owner Trustee and the Indenture
Trustee agrees, upon the request and at the sole expense of the Owner
Participant, to take all reasonable acts requested by the Owner Participant in
complying with its obligations under clause (A) or (B) of the second sentence
of this Section 8(b). SBC, in its individual capacity, agrees that if at any
time a responsible officer of SBC shall obtain actual knowledge that SBC has
ceased to be a "citizen of the United States" within the meaning of the Act, it
will promptly resign as Owner Trustee (if and so long as such citizenship is
necessary under the Act as in effect at such time or, if it is not necessary,
if and so long as the Owner Trustee's citizenship would have any adverse effect
on a Holder, Lessee, a Sublessee or the Owner Participant), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of the
Trust Agreement.
(c) Chief Executive Office of SBC. SBC in its individual
capacity represents and warrants that both the principal place of business of
the Owner Trustee and the place where its records concerning the Aircraft and
all of its interest in, to and under the Operative Agreements to which it is a
party are or will be kept is Hartford, Connecticut (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture)
and has its chief executive office (as such term is used in Article 9 of the
Uniform Commercial Code) in Hartford, Connecticut. SBC in its individual
capacity agrees that it will not change the location of such office to a
location outside of Hartford, Connecticut, without 10 days' prior written
notice to Lessee, Indenture Trustee and the Owner Participant.
(d) Securities Laws. The Original Loan Participant
represents and warrants that the Series SWA 1995 Trust N603SW-I Certificate to
be issued to it pursuant to the Trust Indenture is being acquired by it with no
present intent to make any resale or distribution thereof which would require
registration under the Securities Act and it will not offer or sell any
Certificate in violation of the Securities Act; provided, that the disposition
of its property shall at all times be and remain within its control, and that
neither it nor anyone acting on its behalf has offered any Certificates or any
similar securities relating to the Aircraft for sale to, or solicited any offer
to buy any Certificates or any similar securities relating to the Aircraft
from, any person or entity other than in a manner required by the Securities
Act and the rules and regulations thereunder and the securities laws, rules and
regulations of any state.
PARTICIPATION AGREEMENT [N603SW]
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(e) [Intentionally Reserved].
(f) Owner Participant's Representations and Warranties. The
Owner Participant represents and warrants as follows:
(i) the Owner Participant is an Arizona
corporation duly organized and validly existing and in good standing
under the laws of the State of Arizona and has the corporate power and
authority to carry on its business as now conducted, to own or hold
under lease its properties and to enter into and perform its
obligations under the Owner Participant Agreements;
(ii) the Owner Participant Agreements have been
duly authorized by all necessary corporate action on the part of the
Owner Participant, do not require any approval not already obtained of
stockholders of the Owner Participant or any approval or consent not
already obtained of any trustee or holders of any indebtedness or
obligations of the Owner Participant, and have been duly executed and
delivered by the Owner Participant, and, subject to and in reliance
upon the representations made by the Original Loan Participant and
Lessee in Sections 8(o) and 7(a)(xv), respectively, and compliance
with the covenants of Section 8(d), neither the execution and delivery
thereof by the Owner Participant, nor the consummation of the
transactions contemplated thereby by the Owner Participant, nor
compliance by the Owner Participant with any of the terms and
provisions thereof will contravene any United States federal or state
law, judgment, governmental rule, regulation or order applicable to or
binding on the Owner Participant (it being understood that no
representation or warranty is made with respect to laws, rules or
regulations relating to aviation or to the nature of the equipment
owned by the Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of the Owner Participant
under applicable aviation law) or contravene or result in any breach
of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a)
of the definition thereof) upon the Trust Estate under any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement, corporate charter, by-law or other
agreement or instrument to which the Owner Participant is a party or
by which it or its properties may be bound or affected;
(iii) assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, each
of the Owner Participant Agreements constitutes a legal, valid and
binding obligation of the Owner Participant enforceable against the
Owner Participant in accordance with the terms thereof;
(iv) there are no pending or, to the knowledge of
the Owner Participant, threatened actions or proceedings against the
Owner Participant before any court or administrative agency which, if
determined adversely to the Owner Participant, would materially
adversely affect the financial condition of the Owner Participant or
the ability of the Owner Participant to perform its obligations under
the Owner Participant Agreements;
(v) on the Delivery Date, there will be no Lessor
Liens attributable to the Owner Participant; and
PARTICIPATION AGREEMENT [N603SW]
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(vi) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to the Owner
Participant and which is presently continuing.
(g) Lessor Liens. Each of SBC in its individual capacity
and the Owner Participant severally covenants and agrees (i) that it shall not
cause or permit to exist a Lessor Lien attributable to it with respect to the
Aircraft or any other portion of the Trust Estate, (ii) that it will promptly,
at its own expense, take such action as may be necessary duly to discharge such
Lessor Lien attributable to it, and (iii) that it will make restitution to the
Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it.
(h) Indenture Trustee Liens. Wilmington Trust Company in
its individual capacity covenants and agrees that it shall not cause or permit
to exist any Lien, arising as a result of (i) claims against the Indenture
Trustee not related to its interest in the Aircraft or the administration of
the Trust Estate pursuant to the Trust Indenture, (ii) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to take any
action required by, the Operative Agreements to the extent such acts arise or
such failure arises from or constitutes gross negligence or willful misconduct,
(iii) claims against the Indenture Trustee relating to Taxes or Losses which
are excluded from the indemnification provided by Section 7 hereof pursuant to
said Section 7, or (iv) claims against the Indenture Trustee arising out of the
transfer by the Indenture Trustee of all or any portion of its interest in the
Aircraft, the Trust Estate, the Trust Indenture Estate or the Operative
Agreements other than (A) a transfer of the Aircraft pursuant to Section 9, 10
or 18 of the Lease or Article 5 or 8 of the Trust Indenture, (B) any borrowing
pursuant to Section 17 hereof, or (C) a transfer of the Aircraft pursuant to
Section 15 of the Lease while a Lease Event of Default is continuing and prior
to the time that the Indenture Trustee has received all amounts due pursuant to
the Trust Indenture.
(i) Termination Instructions to Owner Trustee. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.
(j) Excess Payment. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly (other than the recourse liability of
the Owner Participant under this Agreement), to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and (iii) any such Holder or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects
any payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Holder or the Indenture
Trustee shall promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made such payment) such Excess Payment. For purposes of
this Section 8(j), "Excess Payment" means the amount by which such payment
exceeds the amount which would have been received by such Holder or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the
Owner
PARTICIPATION AGREEMENT [N603SW]
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Participant had not become subject to the recourse liability referred to in
clause (ii) above. Nothing contained in this Section 8(j) shall prevent such
Holder or the Indenture Trustee from enforcing any personal recourse obligation
(and retaining the proceeds thereof) of the Owner Trustee (in its individual
capacity) or the Owner Participant under this Agreement or the Trust Indenture
(and any exhibits or annexes thereto).
(k) Representations and Warranties of Indenture Trustee in
Individual Capacity. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States" as
defined in the Act, that it will notify promptly all parties to this
Agreement if in its reasonable opinion its status as a "citizen of the
United States" is likely to change and that it will resign as
Indenture Trustee as provided in Section 9.07 of the Trust Indenture
if it should cease to be a "citizen of the United States";
(ii) it is a banking corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into and
perform its obligations under the Trust Indenture and this Agreement
and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and the
authentication of the Certificates have been duly authorized by all
necessary corporate action on its part, and neither the execution and
delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation governing its banking or trust powers or any judgment or
order binding on it or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it or its properties may be bound or affected;
(iv) each of the Indenture Trustee Agreements has
been duly executed and delivered by it and, assuming that each such
agreement is the legal, valid and binding obligation of each other
party thereto, is the legal, valid and binding obligation of the
Indenture Trustee, enforceable against it in accordance with its
terms;
(v) neither the execution and delivery by it, in
its individual capacity or as Indenture Trustee, as the case may be,
of this Agreement or the Trust Indenture nor the consummation of any
of the transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, or the registration
with, any governmental authority or agency pursuant to any law of the
State of Delaware or the United States governing the banking or trust
powers of the Indenture Trustee; and
(vi) neither it nor anyone authorized to act on
its behalf has directly or indirectly offered any beneficial interest
or security relating to the ownership of the Aircraft or the Lease or
any interest in the Trust Estate or the Trust Indenture Estate, or any
of the Certificates or any other interest in or security under the
Trust Indenture, for sale to, or solicited any offer to acquire any
such interest or security from, or has sold any interest
PARTICIPATION AGREEMENT [N603SW]
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or security to, any Person, and it will not directly or indirectly
make any such offer, solicitation or sale.
(l) Transfers of Equity Interests; Rights of Owner
Participant and Owner Trustee. So long as the Aircraft shall be leased to
Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion (in
form, scope and substance reasonably satisfactory to the Indenture Trustee and
Lessee) of counsel reasonably satisfactory to the Indenture Trustee and Lessee
to the effect that the agreement referred to in clause (O) below and any
guaranty required by clause (B) or (C) below, are the legal, valid, binding and
enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital, surplus and undivided profits of
at least $75,000,000 or a limited partnership or corporation whose net worth is
at least $75,000,000, (B) any subsidiary of such a bank, financial institution,
limited partnership or corporation; provided, that such bank, financial
institution, limited partnership or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty substantially in the form of
Exhibit A with respect to the Owner Participant's obligations, in the case of
the Owner Trustee, under the Trust Agreement and, in the case of the Indenture
Trustee and Lessee, the Owner Participant's obligations hereunder, or (C) any
other corporation or limited partnership, provided such obligations are
guaranteed (such guaranty to be substantially in the form of Exhibit A) by the
transferor Owner Participant; provided, however, that unless otherwise
consented to by Lessee any Transferee shall not be an air carrier, an air
freight forwarder or other similar Person or a corporation controlling,
controlled by or under common control with such an air carrier, an air freight
forwarder or other similar Person. Each such transfer to a Transferee shall be
subject to the conditions that (M) upon giving effect to such transfer, the
Transferee is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) or the Transferee, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), shall
have entered into a voting trust or similar arrangement which permits the
registration of the Aircraft under the Act in the name of the Owner Trustee
without any restriction on the operation of the Aircraft, (N) the Transferee
has the full power and authority to enter into and carry out the transactions
contemplated hereby, (O) the Transferee enters into an agreement or agreements
substantially in the form of Exhibit B, (P) such transfer does not result in a
nonexempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA with respect to such Holders about which the Owner Participant shall
have received such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Original Loan Participant and the Indenture Trustee shall cooperate
in providing such information as may be available), (Q) such transfer does not
violate any applicable law including, without limitation, the Act, or any rules
or regulations promulgated thereunder, the Securities Act or the Trust
Indenture Act of 1939, (R) after giving effect to such transfer, there shall be
no more than one Owner Participant of record at that time and (S) such transfer
will not give rise to an Indenture Default or Indenture Event of Default; and
Lessee or the Indenture Trustee may request such Transferee to provide an
opinion of counsel (who shall be reasonably satisfactory to Lessee and the
Indenture Trustee) in form, scope and substance reasonably satisfactory to
Lessee and the Indenture Trustee as to any matter set forth in clause (Q) and
as to such other matters as Lessee
PARTICIPATION AGREEMENT [N603SW]
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or the Indenture Trustee may reasonably request. Upon any such transfer by the
Owner Participant as above provided, the Transferee shall be deemed the Owner
Participant for all purposes hereof and of the other Operative Agreements and
each reference herein to the transferor Owner Participant shall be deemed for
all purposes, with respect to circumstances existing and requirements arising
thereafter, to be to the Transferee and the transferor Owner Participant shall
be relieved of all obligations of the transferring Owner Participant under the
Owner Participant Agreements arising after the date of such transfer except to
the extent fairly attributable to acts or events occurring prior thereto and
not assumed by the transferee Owner Participant. If the Owner Participant
intends to transfer its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than ten (10) Business
Days prior thereto, to the Indenture Trustee, the Owner Trustee and Lessee,
specifying the name and address of the proposed Transferee and the facts
necessary to determine whether or not the requirements for a Transferee, as set
forth herein, are satisfied. The Owner Participant shall pay, or shall cause
the transferee Owner Participant to pay, all of the reasonable costs and
expenses (including, without limitation, legal fees and expenses) of the other
parties hereto (except the costs and expenses of Lessee if such transfer is
effected during the continuance of a Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or a Lease Event of Default or in connection
with the exercise of remedies under the Lease), on a net after-tax basis, of
any such transfer. For purposes of this Agreement, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined
in accordance with generally accepted accounting principles consistently
applied.
(m) Obligations of Trustees. The Indenture Trustee shall be
responsible for the payment, performance and discharge of, and shall fully and
completely pay, perform and discharge, all of its obligations under the Trust
Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Trust Agreement, the Owner Trustee shall be responsible for
the payment, performance and discharge of, and shall fully and completely pay,
perform and discharge, all of its obligations under the Lease in accordance
with the terms thereof.
(n) Compliance with Trust Indenture. SBC and Wilmington
Trust Company, each in its individual capacity, agrees for the benefit of
Lessee to comply with the terms of the Trust Indenture which it is required to
comply with in its individual capacity.
(o) ERISA. The Owner Participant represents and warrants
that no part of the funds used by it to acquire its interest in the Trust
Estate constitutes "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4975(e)(1) of
the Code, as interpreted by the Department of Labor. The Original Loan
Participant represents and warrants that no part of the funds used by it to
acquire the Certificates or any interest therein (including any participation
in such Certificates) constitutes "plan assets" of any "employee benefit plan"
within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code.
(p) SBC's Representations and Warranties. SBC, in its
individual capacity, represents, warrants and covenants that:
PARTICIPATION AGREEMENT [N603SW]
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(i) each of the Owner Trustee Documents has been
duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such instruments on behalf of the
Owner Trustee or SBC, as the case may be;
(ii) the Trust Estate is free and clear of Lessor
Liens attributable to SBC in its individual capacity, and there are no
Liens affecting the title of the Owner Trustee to the Aircraft or
resulting from any act or claim against SBC in its individual capacity
arising out of any event or condition not related to the ownership,
leasing, use or operation of the Aircraft or to any other transaction
contemplated by this Agreement or any of the other Operative
Agreements, including any Lien resulting from the nonpayment by SBC in
its individual capacity of any Taxes imposed or measured by its net
income;
(iii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to SBC in its
individual capacity and which is presently continuing;
(iv) it is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States and (assuming due authorization, execution and delivery
of the Trust Agreement by the Owner Participant) has the corporate
power and authority to enter into and perform its obligations under
the Trust Agreement and this Agreement (in its individual capacity),
and (assuming due authorization, execution and delivery of the Trust
Agreement by the Owner Participant) has full right, power and
authority to enter into and perform its obligations as Owner Trustee
pursuant to the Trust Agreement under each of the other Owner Trustee
Documents;
(v) each of the Trust Agreement and this
Agreement (in its individual capacity) and the Owner Trustee Documents
(in its trust capacity) has been duly authorized by all necessary
corporate action on its part, and neither the execution and delivery
thereof nor its performance of any of the terms and provisions thereof
will violate any federal or Connecticut law or regulation relating to
its banking or trust powers or contravene or result in any breach of,
or constitute any default under, its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant, each of the
Owner Trustee Documents has been duly executed and delivered by it
and, each of the Trust Agreement and this Agreement (to the extent
executed by the Owner Trustee in its individual capacity) is a legal,
valid and binding obligation of SBC in its individual capacity and as
Owner Trustee, as the case may be, enforceable against such party in
accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall
have received whatever title to the Aircraft as was conveyed to it by
Lessee;
PARTICIPATION AGREEMENT [N603SW]
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(viii) neither it nor anyone acting on its behalf
has offered any interest in the Trust Estate or any Certificates or
any similar securities for sale to, or solicited any offer to acquire
the same from, anyone, and no responsible officer or responsible
employee of SBC has knowledge of any such offer or solicitation,
except as set forth in Section 7(a)(x) hereof;
(ix) assuming due authorization, execution and
delivery of each of the Owner Trustee Documents by each of the parties
thereto (other than the Owner Trustee), each of the Owner Trustee
Documents is a legal, valid and binding obligation of the Owner
Trustee, enforceable against the Owner Trustee in accordance with its
respective terms;
(x) there are no proceedings pending or, to the
best knowledge of SBC, threatened, against SBC in any court or before
any governmental authority or arbitration board or tribunal which, if
adversely determined, would materially and adversely affect the right,
power and authority of SBC to enter into or perform its obligations
under the Owner Trustee Documents;
(xi) neither the due execution and delivery of the
Owner Trustee Documents by SBC, in its individual capacity or as Owner
Trustee under the Trust Agreement, as the case may be, nor the
consummation by it of any of the transactions contemplated thereby
require the consent or approval of, the giving of notice to, or the
registration with, any federal or Connecticut governmental authority
or agency pursuant to any federal or Connecticut law governing the
banking or trust powers of SBC; and
(xii) no later than sixty (60) days after Lessee
shall so request, Owner Trustee shall execute and deliver to Lessee
(on a form to be supplied by Lessee) a Texas Sales and Use Tax
Certificate of Resale reflecting Owner Trustee's Texas or Connecticut
sales tax permit number and Owner Trustee's purchase of the Aircraft
pursuant to the Lease for lease to Lessee thereunder, and, if
necessary to permit Owner Trustee to issue such Certificate, Owner
Trustee shall apply for (on a form to be supplied by Lessee) a Texas
sales tax permit.
(q) Owner Participant's Lease Expenses. The Owner
Participant covenants and agrees to pay or cause the Owner Trustee to pay those
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) Lessee's Assumption of Debt. Subject to compliance by
Lessee with all of its obligations under the Operative Agreements and provided
that the Series SWA 1995 Trust N603SW-I Certificate is no longer outstanding,
each of the Owner Trustee, the Indenture Trustee and the Owner Participant
covenants and agrees that, at Lessee's expense on a net after-tax basis
(including, without limitation, reasonable attorneys' fees and expenses of each
of such parties), (i) if Lessee elects to terminate the Lease and to purchase
the Aircraft pursuant to Section 18.2(b) of the Lease, each of such parties
will, subject to due compliance by Lessee with the provisions of said Section
18.2(b), execute and deliver appropriate documentation to Transfer to Lessee
the Aircraft, and (ii) Lessee, in connection with such purchase, may (if no
Lease Event of Default shall have occurred and be continuing, unless such Lease
Event of Default is waived by the Indenture Trustee)
PARTICIPATION AGREEMENT [N603SW]
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assume (and, as set forth in Section 18.2(c) of the Lease, receive a credit in
an amount equal to the principal amount of the debt assumed, against the
purchase price payable by Lessee pursuant to Section 18.2(b) of the Lease) the
obligations of the Owner Trustee pursuant to Section 7.03 of the Trust
Indenture and the Certificates (and the Lease, to the extent that the Owner
Trustee's obligations thereunder are incorporated into the Trust Indenture or
the Certificates), and in such event each of the parties shall execute and
deliver appropriate documentation as contemplated by Section 7.03 of the Trust
Indenture.
(s) [Intentionally Reserved].
(t) [Intentionally Reserved].
(u) Lease Adjustments. Section 3.7 of the Lease
contemplates that, under certain circumstances, the Owner Participant will make
certain recalculations and the Owner Participant hereby agrees to promptly take
such actions as may be necessary or desirable to give effect to and to cause
the Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.
(v) Revocation of Trust Agreement. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee that it will not
revoke or otherwise terminate the Trust Agreement as long as the Trust
Indenture is in effect, and (ii) solely for the benefit of Lessee that it will
not revoke or otherwise terminate the Trust Agreement during the Term without
the prior written consent of Lessee, except that, notwithstanding the foregoing
clauses (i) and (ii), or any other provision of the Operative Agreements to the
contrary, the Owner Participant shall have the right to terminate the trusts
set forth in the Trust Agreement without the consent of any other party to the
Operative Agreements, at any time, if in connection therewith the Owner
Participant shall simultaneously create a new trust upon substantially the same
terms and conditions as the trusts so terminated and shall cause the Trust
Estate to be vested in the Owner Trustee under the new trust upon the same
terms and conditions so applied to such terminated trust; provided, however,
that in connection with any such termination (A) none of the creation of such
new trust, the termination of the trust set forth in the Trust Agreement or the
transactions consummated in connection therewith will have any adverse impact
on any of Lessee's rights or the Indenture Trustee's rights under the Operative
Agreements (including the first priority lien status of the Lien of the Trust
Indenture), (B) Lessee shall have no responsibility to indemnify any
Indemnified Party under any provision of any Operative Agreement for any Taxes
or other consequences that in either case would not have been incurred but for
such termination and transfer, (C) the Owner Participant shall indemnify Lessee
and the Indenture Trustee for any costs, expenses, taxes or other consequences
that in either case would not have been incurred but for such termination and
transfer, (D) the Owner Participant shall provide Lessee and the Indenture
Trustee with an opinion in form and substance reasonably satisfactory to them
as to the effect of such termination and transfer, and (E) immediately after
such transfer, the beneficiary of the new trust shall be the same as the
beneficiary of the trust set forth in the Trust Agreement. The Owner
Participant further agrees (x) promptly to provide instructions to the Owner
Trustee, upon the request of the Owner Trustee and as otherwise required or
permitted under the Trust Agreement, so as to enable the Owner Trustee to
perform its duties and obligations under the Operative Agreements in accordance
with the terms and provisions thereof and (y) not to remove the institution
acting as Owner Trustee, and not to replace the institution acting as Owner
Trustee in the event that
PARTICIPATION AGREEMENT [N603SW]
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such institution resigns as Owner Trustee, unless the Owner Participant shall
have consulted in good faith with Lessee prior to such removal or replacement;
provided, that no such consultation shall be required if a Lease Event of
Default shall have occurred and be continuing.
(w) [Intentionally Reserved].
(x) Withholding Taxes. The Original Loan Participant
represents that it is exempt from United States withholding taxes, and
covenants that, if required to obtain or renew such exemption, it will properly
prepare and promptly furnish to each of the Owner Trustee, the Indenture
Trustee and Lessee Internal Revenue Service Form 1001, Form 4224 (with respect
to each tax year) or Form W-8, whichever is applicable. The Original Loan
Participant represents, warrants and covenants that it will promptly notify the
Owner Trustee, the Indenture Trustee and Lessee if it transfers any interest in
its Series SWA 1995 Trust N603SW-I Certificate to any Person, other than
pursuant to Section 17 or 18 hereof or Section 8.03(e)(ii) of the Indenture.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee, Lessee and
the Owner Participant against any United States withholding taxes (and related
interest and penalties) which the Indenture Trustee fails to withhold on
payments to it as a result of its failure to provide the required certificate
or form or the invalidity of any certificate or form provided by it pursuant to
this Section 8(x) or as a result of any inaccuracy of the representations set
forth in the immediately preceding paragraph. Any amount payable hereunder
shall be paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor and shall include interest at the Overdue Rate from
the date any withholding tax has been paid by such party until the date
indemnified by the Original Loan Participant.
(y) Discharge of Trust Indenture. The Owner Participant
agrees that, at Lessee's expense (including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses of the Owner Trustee and Owner
Participant), upon request of Lessee, the Owner Participant will negotiate
promptly in good faith with respect to any arrangements pursuant to which the
Trust Indenture may be satisfied and discharged in respect of the Certificates
in accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that it will
not, and the Owner Participant agrees that during such time as a Lease Event of
Default has not occurred it will not cause the Owner Trustee to, take any
action to effect such satisfaction and discharge except upon the request of
Lessee made pursuant to this Section 8(y).
(z) Permitted Investments. The Owner Trustee agrees that
(i) so long as the Trust Indenture has not been duly discharged, any profit,
income, interest, dividend or gain realized upon the maturity, sale or other
disposition of any Permitted Investment made by the Indenture Trustee pursuant
to Section 9.04 of the Trust Indenture, and paid to Lessee on behalf of the
Owner Trustee by the Indenture Trustee in accordance with the terms of such
Section 9.04, shall be entirely for the account of, and the sole property of,
Lessee who, for such purposes, shall not be deemed to be acting as agent of the
Owner Trustee, and Lessee shall have no obligation to pay over such profit,
income, interest, dividend or gain to the Owner Trustee, (ii) any such profit,
income, interest,
PARTICIPATION AGREEMENT [N603SW]
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dividend or gain not theretofore distributed shall, upon discharge of the Trust
Indenture, be paid by the Indenture Trustee to Lessee, unless instructed by the
Owner Participant to distribute such funds to the Owner Participant or the
Owner Trustee to the extent the Owner Participant or the Owner Trustee is owed
any amounts under the Operative Agreements that have not been paid when due,
and (iii) except to the extent the Owner Trustee or Owner Participant is owed
any amounts under the Operative Agreements by Lessee and such amounts are not
paid when due, the Owner Participant may cause the Indenture Trustee to
distribute and apply such profit, income, interest, dividend or gain realized
upon the maturity, sale or other disposition of investment of funds pursuant to
Section 22.1 of the Lease, in satisfaction or partial satisfaction of the
amounts so due.
(aa) [Intentionally Reserved].
(bb) Transfers of Debt Interests. Except in connection with
any transfer pursuant to Section 17 or 18 hereof, or Section 8.03(e)(ii) of the
Indenture, the Original Loan Participant covenants that it will not (i)
transfer or (ii) grant participations in, its Certificate to any Person unless
such Person represents, warrants and covenants in writing to the Original Loan
Participant and, in the case of a transfer, to the Owner Participant and
Lessee, (A) to the effect set forth in Section 8(x) hereof and (B) further
represents and warrants to the Original Loan Participant and, in the case of a
transfer, to the Owner Participant and Lessee either that (a) no part of the
funds used by it to acquire its Series SWA 1995 Trust N603SW-I Certificate or
participation constitutes "plan assets" of any "employee benefit plan" within
the meaning of ERISA or any "plan" within the meaning of Section 4975(e)(1) of
the Code, or (b) its purchase or acquisition of such Series SWA 1995 Trust
N603SW-I Certificate or participation will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of ERISA. Any such
Person shall require any transferee of its interest to make the
representations, warranties and covenants in the preceding sentence.
(cc) [Intentionally Reserved].
(dd) Deferred Equity. The Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and not with any
other party to this Agreement or the Holders of any Certificates), that, so
long as no Lease Event of Default or Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) shall have occurred and be continuing, it
will pay or cause to be paid to the Indenture Trustee on the Deferred Equity
Date sufficient funds to effect the payment of an amount (the "Deferred Equity
Amount") equal to the amount due on such date in respect of accrued interest on
the Certificates from their date of issuance to and including the Deferred
Equity Date. The Owner Participant and the Owner Trustee hereby direct the
Indenture Trustee, and the Indenture Trustee hereby agrees, to apply the
Deferred Equity Amount to the payment of interest on the Certificates which may
be due and payable pursuant to the provisions of the Trust Indenture on the
Deferred Equity Date. The Owner Participant agrees to make payment of the
Deferred Equity Amount in immediately available funds on or before 11:00 a.m.,
New York City time, on the Deferred Equity Date; provided, that the Owner
Participant agrees to give Lessee notice by 11:00 a.m., New York City time, on
the second Business Day prior to the Deferred Equity Date if it shall not make
such payment. The Indenture Trustee agrees to give Lessee prompt notice if it
shall not have received such payment by noon, New York City time, on the
Deferred Equity Date. The Owner Participant further agrees to fund the
obligations of the Owner Trustee arising pursuant to clause (5) of Section
18(a). In the event the Owner Participant fails to make such payment, or if
the
PARTICIPATION AGREEMENT [N603SW]
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Owner Trustee shall fail to make the payment required pursuant to clause (5) of
Section 18(a), and in either case Lessee shall make an Advance as required by
Section 3.8 of the Lease, Lessee may obtain reimbursement in the manner and to
the extent provided in Section 3.8 of the Lease for the Advance, together with
interest on such amount at the rate described below from (and including) the
date of the making of such Advance to (but excluding) the date of reimbursement
by the Owner Participant or the date Lessee deducts such Advance from other
payments to the extent and as provided in Section 3.8 of the Lease and, without
duplication of the foregoing, shall have such remedies as may be available to
it against the Owner Participant at law or in equity in respect of the recovery
of any such Advance. Interest shall accrue on the amount of the Advance at an
annual rate equal to 5% in excess of the Base Rate, unless the Advance is made
when any Lease Event of Default or Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) shall have occurred and be continuing, in
which event interest shall accrue on the amount of the Advance at the Base
Rate, but in each case not to exceed to maximum rate permitted by applicable
law. All amounts paid to Lessee by the Owner Participant in respect of the
Advance or deducted by Lessee pursuant to Section 3.8 of the Lease shall be
applied first to payment to Lessee of interest and then to payment to Lessee of
amounts equal to the Advance.
(ee) Lessee as Pricing Agent for Certificate. The Owner
Trustee hereby appoints Lessee as its agent to select the pricing provisions
and related Interest Periods in respect of the Series SWA 1995 Trust N603SW-I
Certificate, such appointment to be effective so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing.
SECTION 9. Payments to Lessee of Trust Indenture Monies.
The Owner Participant hereby agrees to instruct the Owner Trustee to promptly
distribute any money received by it pursuant to Section 7.01 or 10.04 of the
Trust Indenture to Lessee to the extent such amounts were paid by Lessee or on
behalf of Lessee and the Owner Trustee or the Owner Participant is not owed any
amounts under any of the Operative Agreements by Lessee (and if the Owner
Trustee or Owner Participant is owed any such amount, the monies received under
Section 7.01 or 10.04 of the Trust Indenture may be applied in satisfaction or
partial satisfaction thereof). Lessee agrees to hold any money received by it
pursuant to the foregoing sentence in trust for the benefit of the Owner
Participant and may, in its discretion, invest and reinvest all money so held
by it in such Permitted Investments as Lessee deems appropriate. Lessee will
apply such money to the payment of previously unclaimed payments with respect
to the Certificates when and as claims for payment are made by the Holders of
such Certificates. As compensation for its services pursuant to this Section
9, Lessee shall be entitled to an annual fee from the Owner Participant in an
amount to be agreed to at the time by Lessee and the Owner Participant but in
no event shall such fee exceed at any time the amount of earnings on the monies
so held in trust distributable at such time to the Owner Participant. Any net
losses on such investment shall be for the account of Lessee. Any net earnings
on such investment shall be distributed from time to time by Lessee to the
Owner Participant after deducting therefrom any portion of such fee then due
and unpaid. Upon the date required by applicable law dealing with unclaimed
property, Lessee will distribute to the Owner Participant any amount held by it
pursuant to this Section 9 and not previously applied to the payment of the
Certificates, after deducting therefrom any portion of such fee then due and
unpaid.
SECTION 10. Other Documents; Amendment. Lessee
acknowledges receipt of executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to
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the execution and delivery of the Trust Agreement and Trust Indenture and to
all the terms thereunder, including, without limitation, the assignment under
the Trust Indenture of Lessor's rights under the Lease. Each of the Owner
Participant and the Owner Trustee hereby (A) agrees with Lessee and the
Indenture Trustee to comply with all of the terms of the Trust Agreement and,
to the extent the same purports or is stated to bind the Owner Participant, the
Trust Indenture (each as the same may hereafter be amended or supplemented from
time to time in accordance with the terms thereof) applicable to it, to the
extent such non-compliance would be adverse to such party; and (B) subject to
Section 8(v), agrees with Lessee and the Indenture Trustee not to amend,
supplement or otherwise modify any provision of the Trust Agreement in a manner
adversely affecting such party without the prior written consent of such party.
In addition, unless a Lease Default (of the type referred to in Section 14.1 or
14.5 of the Lease) or Lease Event of Default shall have occurred and be
continuing and so long as the Lease has not been terminated, the Indenture
Trustee and the Owner Trustee hereby agree for the benefit of Lessee that
without the consent of Lessee they will not (and the Owner Participant agrees
that it will not cause the Owner Trustee to) amend, supplement or otherwise
modify any provision of the Trust Indenture in a manner adversely affecting
Lessee. The Indenture Trustee and the Owner Trustee agree to promptly furnish
to Lessee copies of any supplement, amendment, waiver or modification of any of
the Operative Agreements to which Lessee is not a party. Each Holder agrees
that it will not take any action in respect of the Trust Indenture Estate
except through the Indenture Trustee pursuant to the Trust Indenture or as
otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee
covenants and agrees with the Participants, the Indenture Trustee and the Owner
Trustee, in its capacity as such and in its individual capacity, as follows:
(a) Further Assurances. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of the Owner Trustee, or shall furnish to the Owner Trustee such information as
may be required to enable the Owner Trustee to make application for such
registration (at the expense of Lessee, including, without limitation,
reasonable attorneys' fees and expenses), and shall promptly furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to timely file any reports required to be filed by it as the lessor under the
Lease or as the owner of the Aircraft with any governmental authority
(including tax authorities), it being understood that Lessee shall not be
required to comply with this covenant to the extent that SBC's or the Owner
Participant's failure to comply with its covenant in Section 8(b) with regard
to its citizenship makes such compliance by Lessee impossible.
(b) Filing and Recording, Etc. Lessee, at its expense,
will, at the request of any party hereto, take, or cause to be taken, such
action with respect to the recording, filing, rerecording and refiling of the
Trust Agreement, the Lease, all Lease Supplements, the Trust Indenture, all
Trust Supplements and any financing statements or other instruments as are
necessary to maintain, so long as the Trust Indenture or the Lease is in
effect, the perfection of the security interests created by the Trust Indenture
and any security interest that may be claimed to have been created by the Lease
and
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the ownership interest of the Owner Trustee in the Aircraft. Lessee agrees,
upon the request and at the sole expense of the Owner Participant, to take all
reasonable acts requested by the Owner Participant in complying with its
obligations under clause (A) or (B) of the second sentence of Section 8(b).
(c) FAA Filings. Upon the execution and delivery of the
Lessee FAA Bill of Sale, the Lease Supplement and Trust Supplement covering the
Aircraft, the Lease and the Trust Indenture shall be filed for recording with
the FAA in the following order of priority: first, the Lessee FAA Bill of
Sale; second, the FAA registration application; third, the Trust Indenture,
with the Trust Agreement and the Trust Supplement covering the Aircraft
attached; and fourth, the Lease, with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement covering the Aircraft
attached. Lessee agrees to furnish the Participants and the Indenture Trustee
with copies of the foregoing documents with recording data as promptly as
practicable following the issuance of same by the FAA.
(d) Annual Compliance Opinions. Lessee will furnish to
Owner Trustee and Indenture Trustee annually after the execution hereof (but
not later than December 1 of each year), commencing with the year 1996,
opinions of counsel for Lessee selected by Lessee and reasonably satisfactory
to Owner Trustee and Indenture Trustee stating that, in the opinion of such
counsel, either (a) such action has been taken (or specifying any action which
must be taken) with respect to the recording, filing, rerecording and refiling
of (i) the appropriate Operative Agreements and any supplements and amendments
thereto, (ii) UCC financing statements, and (iii) such other filings or
recordings as are necessary to maintain for the 15-month period succeeding the
date of such opinion the perfection of Owner Trustee's and Indenture Trustee's
title to and interest in the Aircraft and the Operative Agreements and the
ownership interest of Owner Trustee in the Aircraft, reciting the details of
such actions, or (b) no such action is necessary to maintain for the 15-month
period succeeding the date of such opinion the perfection of such title and
interest.
(e) Engine Purchase Agreement. Lessee agrees to furnish the
Owner Trustee and the Indenture Trustee, promptly upon demand therefor, an
agreement (the "Engine Purchase Agreement Assignment") assigning the rights of
Lessee under the purchase agreement pursuant to which Lessee originally
acquired the Engines (the "Engine Purchase Agreement") to the Owner Trustee
(which rights are collaterally assigned to the Indenture Trustee),
substantially in the form of the Purchase Agreement Assignment, and to use its
best efforts to obtain from the Engine Manufacturer a consent and agreement in
substantially the form of the Manufacturer's Consent.
(f) Merger. Lessee will not consolidate with or merge into
any other corporation or convey, transfer or lease all or substantially all of
its assets to any Person unless:
(i) the corporation formed by such consolidation
or into which Lessee is merged or the Person which acquires by
conveyance, transfer or lease all or substantially all of the assets
of Lessee as an entirety, as the case may be (the "Successor") shall
be (i) a corporation organized and existing under the laws of the
United States of America or any state thereof or the District of
Columbia, (ii) a "citizen of the United States" as defined in the Act,
and (iii) a United States certificated air carrier;
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(ii) the Successor shall execute and deliver to
the Owner Trustee, the Indenture Trustee and the Participants an
agreement in form reasonably satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant containing an assumption by the
Successor of the due and punctual performance and observance of each
covenant and condition of the Operative Agreements to be performed or
observed by Lessee;
(iii) immediately after giving effect to such
transaction and as a result of giving effect to such transaction, no
Lease Default or Lease Event of Default shall have occurred and be
continuing;
(iv) Lessee shall have delivered to the Owner
Trustee, the Indenture Trustee and each Participant an Officer's
Certificate and an opinion of counsel to the Successor reasonably
satisfactory to the Owner Trustee, the Indenture Trustee and each
Participant, each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
subparagraph (ii) above comply with this Section 11(f) (except that
such opinion need not refer to subparagraph (iii) above), that the
agreements entered into to effect such consolidation, merger,
conveyance, transfer or lease and such assumption agreement are legal,
valid and binding obligations of the Successor, enforceable against
the Successor in accordance with their respective terms (subject to
applicable bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and to general principles
of equity), and that all conditions precedent herein provided for
relating to such transaction have been complied with; and
(v) the Successor shall make such filings and
recordings with the FAA pursuant to the Act, as shall be necessary or
desirable to evidence such consolidation, merger, conveyance, transfer
or lease with or to such Successor.
Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor corporation or Person which shall theretofore have become such in the
manner prescribed in this Section 11(f) from its liability in respect of any
Operative Agreement to which it is a party. Nothing contained herein shall
permit any lease, sublease or other arrangement for the use, operation or
possession of the Aircraft except in compliance with the applicable provisions
of the Lease (or any assignment by Lessee of its rights under the Lease, except
in connection with a transaction in compliance with the express provisions of
this Section 11(f)).
(g) Corporate Existence. Except as permitted by Section
11(f) hereof, Lessee shall at all times maintain its corporate existence.
Lessee covenants and agrees that it will at all times be a "citizen of the
United States" within the meaning of the Act.
(h) Certificate Schedule. Lessee will provide on behalf of
the Owner Trustee the amortization schedule for the Certificate to be issued to
the Original Loan Participant at least two days before the Delivery Date.
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(i) No Certificate Ownership. Lessee agrees that it will
not, at any time, hold any Certificates.
SECTION 12. Ownership of Aircraft. It is hereby agreed
among Lessee, the Owner Participant and the Owner Trustee that for all purposes
the Owner Trustee will be the owner of the Aircraft (except that the Owner
Participant will be the owner for income tax purposes and except under the
circumstances contemplated by the proviso to Section 18.2(d) of the Lease) and
Lessee will be the lessee thereof, and each party hereto agrees to characterize
the Lease as a lease for income tax purposes and all other relevant purposes
(subject to the election referred to above).
SECTION 13. Notices; Consent to Jurisdiction. (a)
Except as otherwise provided in this Agreement respecting telephone notices,
all notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be in writing and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, or by prepaid telex, TWX or telegram (with messenger delivery
specified in the case of a telegram), or by telecopier, or by prepaid courier
service, and shall be deemed to be given for purposes of this Agreement on the
day that such writing is delivered or, if given by certified mail, three (3)
Business Days after being deposited in the mails, in accordance with the
provisions of this Section 13(a). Unless otherwise specified in a notice sent
or delivered in accordance with the foregoing provisions of this Section 13(a),
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) as follows:
(A) if to Lessee, the Owner Trustee, the Original Loan Participant, the
Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I hereto (and in the case of Owner Trustee a copy shall be
sent to the Owner Participant) or (B) if to a subsequent Owner Participant,
addressed to such subsequent Owner Participant at such address as such
subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Holder, addressed to such Holder at its
address set forth in the Register maintained pursuant to Section 2.03 of the
Trust Indenture.
(b) Each party to this Agreement (individually a "Party" and
collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises solely out of or relates
solely to the Operative Agreements or any of the transactions contemplated
hereby or thereby or any document referred to herein or therein, may be
instituted in the competent courts of the State of New York in New York County
or the United States District Court for the Southern District of New York and
that they, to the maximum extent permitted by law, hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
parties in the same or different jurisdictions. The agreement set forth in
this Section 13(b) is given solely for the benefit of the Parties, and such
agreement is not intended to and shall not (i) confer exclusive jurisdiction on
any court or (ii) inure to the benefit of any other Person.
SECTION 14. Change of Situs of Owner Trust. The Owner
Participant agrees that if, at any time, the Trust Estate becomes subject to
any Taxes for which it is indemnified
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pursuant to Section 7(b) hereof and if, as a consequence thereof, Lessee should
request that the situs of the trust be moved to another state in the United
States from the state in which it is then located, the situs of the trust may
be moved and the Owner Participant will take whatever action may be reasonably
necessary to accomplish such removal; provided, that (A) Lessee shall provide
such additional tax indemnification as the Owner Participant may reasonably
request, (B) the rights and obligations under the Operative Agreements of the
Owner Participant shall not be adversely altered as a result of the taking of
such action, or the Owner Participant shall be indemnified by Lessee to its
reasonable satisfaction for any such alteration, (C) the lien of the Trust
Indenture on the Trust Indenture Estate shall not be adversely affected by such
action, and Lessee shall execute and deliver such documents as may be requested
by the Indenture Trustee to continue the perfection and priority of the lien on
the Trust Indenture Estate, (D) the Owner Participant shall have received an
opinion or opinions of counsel (reasonably satisfactory to the Owner
Participant) in scope, form and substance reasonably satisfactory to the Owner
Participant to the effect that (I) the trust, as thus removed, shall remain a
validly established trust and the Trust Agreement and other Operative
Agreements shall remain valid, binding and enforceable in accordance with their
terms, (II) any amendments to the Trust Agreement necessitated by such removal
shall have been duly authorized, executed and delivered by the parties thereto
and shall constitute the legal, valid and binding obligations of such parties,
enforceable in accordance with their terms, (III) such removal will not result
in the imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify the Owner Participant, the Owner Trustee or the Trust
Estate pursuant to Section 7(b) hereof (taking into account any additional
indemnification provided by Lessee pursuant to clause (A) of this sentence),
(IV) such removal will not result in any Loss of MACRS Deductions, Transaction
Expense Deductions, Interest Deductions or an Inclusion (as defined in the Tax
Indemnity Agreement) with respect to which Lessee is not required to indemnify
the Owner Participant pursuant to Section 6 of the Tax Indemnity Agreement
(taking into account any additional indemnification provided by Lessee pursuant
to clause (A) of this sentence), and (V) covering such other matters as the
Owner Participant may reasonably request, (E) if such removal involves the
replacement of the Owner Trustee, the Owner Participant shall have received an
opinion of counsel to such successor Owner Trustee in form and substance
reasonably satisfactory to the Owner Participant covering the matters addressed
by the opinion delivered pursuant to Section 4(a)(xiii) hereof, and (F) Lessee
shall indemnify and hold harmless the Owner Participant on a net after-tax
basis against any and all reasonable and actual costs and expenses including
attorneys' fees and disbursements, registration, recording or filing fees
incurred by the Owner Trustee or Owner Participant, in connection with such
change of situs.
SECTION 15. Miscellaneous.
(a) Consents under Lease and Trust Indenture. Each of the
Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.
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(b) Survival. The representations, warranties, indemnities
and agreements of Lessee, the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Original Loan Participant provided for in this Agreement,
and Lessee's, the Owner Trustee's, the Indenture Trustee's, the Original Loan
Participant's and the Owner Participant's obligations under any and all
thereof, shall survive the making available of the respective Commitments by
the Participants, the delivery or return of the Aircraft, the transfer of any
interest of the Owner Participant in the Trust Estate or the Aircraft or any
Engine or the transfer of any interest by any Holder in any Certificate or the
Trust Indenture Estate and the expiration or other termination of this
Agreement or any other Operative Agreement, except as otherwise expressly
provided herein or therein.
(c) Counterparts; Waivers; Governing Law. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. Neither this
Agreement nor any of the terms hereof may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement, waiver
or modification is sought; and no such termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy thereof shall
have been delivered to Lessee, the Indenture Trustee and the Owner Trustee.
The terms of this Agreement shall be binding upon, and inure to the benefit of
and shall be enforceable by, Lessee, the Participants, the Indenture Trustee
and the Owner Trustee. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS
AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(d) No Recourse Against Owner Trustee. The parties hereto
agree that all of the statements, representations, covenants and agreements
made by the Owner Trustee (when made in such capacity) contained in this
Agreement and any agreement referred to herein other than the Trust Agreement,
unless expressly otherwise stated, are made and intended only for the purpose
of binding the Trust Estate and establishing the existence of rights and
remedies which can be exercised and enforced against the Trust Estate.
Therefore, anything contained in this Agreement or such other agreements to the
contrary notwithstanding (except for any express provisions that the Owner
Trustee is responsible for or is acting in or making representations or
agreements in its individual capacity), no recourse shall be had with respect
to this Agreement or such other agreements against the Owner Trustee in its
individual capacity or against any institution or person which becomes a
successor trustee or co-trustee or any officer, director, trustee, servant or
direct or indirect parent or controlling person or persons of any of them;
provided, however, that this Section 15(d) shall not be construed to prohibit
any action or proceeding against any party hereto for its own willful
misconduct or grossly negligent conduct; and provided, further, that nothing
contained in this Section 15(d) shall be construed to limit the exercise and
enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement and the other Operative Agreements.
(e) Duties Limited. No Participant shall have any
obligation or duty to Lessee, to any other Participant or to others with
respect to the transactions contemplated hereby except those
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obligations or duties of such Participant expressly set forth in this Agreement
and the other Operative Agreements and no Participant shall be liable for
performance by any other party hereto of such other party's obligations or
duties hereunder. Without limitation of the generality of the foregoing, under
no circumstances whatsoever (except as provided in Section 7(d) hereof) shall
any Participant be liable to Lessee, nor shall any Participant be liable to any
other Participant, for any action or inaction on the part of the Indenture
Trustee or the Owner Trustee in connection with the transactions contemplated
herein, whether or not such action or inaction is caused by the willful
misconduct or gross negligence of the Indenture Trustee or the Owner Trustee.
(f) Binding on Parties and Successors. This Agreement shall
be binding upon and shall inure to the benefit of and shall be enforceable
against, the parties hereto and their respective successors and permitted
assigns including each successive holder of the Owner Participant's interest
and each successive holder of any Certificate issued and delivered pursuant to
this Agreement or the Trust Indenture whether or not an express assignment to
such holder of rights and obligations under this Agreement has been made.
(g) Enforceability Representations. Every representation or
warranty contained herein as to the enforceability of any Operative Agreement
shall be deemed to be made subject to the effects of applicable bankruptcy,
insolvency and similar laws affecting the enforcement of creditors' rights
generally and of general principles of equity.
(h) Quiet Enjoyment. So long as no Lease Event of Default
shall have occurred and be continuing during the Term, none of the
Participants, the Indenture Trustee or the Owner Trustee will, through its own
actions or breaches of any of its obligations under the Operative Agreements,
interfere in the quiet enjoyment of the Aircraft by Lessee or any Permitted
Sublessee.
SECTION 16. Transaction Costs; Invoices and Payment of
Expenses. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the
subsequent placement of the permanent debt pursuant to Section 17 or 18 hereof,
the reasonable and actual fees, expenses and disbursements of (1) Potter
Anderson & Corroon, special counsel for the Indenture Trustee, (2) Shipman &
Goodwin, counsel for the Owner Trustee, (3) Daugherty, Fowler & Peregrin,
special counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special
counsel for the underwriters in a potential refinancing transaction pursuant to
Section 18 hereof, (5) Vinson & Elkins L.L.P., special counsel for Lessee, but
only to the extent of their expenses and disbursements and (6) Office of the
General Counsel of the Original Loan Participant, (ii) all fees, taxes and
other charges payable in connection with the recording or filing of instruments
and financing statements, (iii) the initial fee and initial reasonable and
actual disbursements of the Owner Trustee under the Trust Agreement, (iv) the
initial fee and initial reasonable and actual disbursements of the Indenture
Trustee under the Trust Indenture, (v) the fee and expenses of Aero Economics,
Inc. (or of such other appraiser as shall be acceptable to Lessee and the Owner
Participant) with respect to the appraisal of the Aircraft required on or
before the Delivery Date pursuant to Section 4(a) hereof, (vi) the advisory
fees and expenses of Babcock & Brown Financial Corporation, (vii) the
reasonable out-of-pocket disbursements, costs and expenses of the Original Loan
Participant relating to the transactions contemplated hereby, (viii) the
reasonable out-of-pocket expenses of the Owner Participant relating to the
transactions contemplated hereby, excluding the fees and expenses of Owner
Participant's counsel, (ix) the initial fee, if any, of the
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Original Loan Participant, (x) the placement or underwriting fees, commissions
and expenses, if any, in placing the permanent debt pursuant to Section 18
hereof and all costs and expenses associated with a public offering, if any,
pursuant thereto, and (xi) printing and distribution costs.
(b) Each of the Owner Trustee, the Indenture Trustee, Lessee
and the Participants shall promptly submit to the Owner Participant copies of
invoices of the Transaction Costs as they are received. Lessee shall also be
provided with a copy of any bill for legal expenses, with an opportunity to
review and approve it (such approval not to be unreasonably withheld or
delayed). The Owner Participant agrees to pay such amounts directly or to
transfer to the Owner Trustee from time to time promptly upon receipt of
invoices of Transaction Costs such amount as shall be necessary in order to
enable the Owner Trustee to pay such Transaction Costs. To the extent of funds
received by it, the Owner Trustee agrees to pay all invoices of Transaction
Costs that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, Lessee, (x) at its option, may pay directly any
Transaction Costs in excess of (i) 0.365% of Lessor's Cost incurred in
connection with the closing of this transaction on the Delivery Date and (ii)
0.625% of Lessor's Cost incurred in connection with the refinancing or
refunding of the Certificates pursuant to Section 18, (y) shall pay the fees of
its special counsel and, (z) in the event that the transactions contemplated
hereby shall not be consummated, Lessee shall pay all Transaction Costs, plus
the fees and expenses of Owner Participant's counsel, except that the fees and
expenses referred to in clause (a) (viii) above, and the fees, expenses and
disbursements of the Owner Participant's counsel, shall be borne by the Owner
Participant if such failure to consummate the transactions results from the
failure of the Owner Participant to close after all conditions precedent to the
Owner Participant's funding (other than those conditions within the control of
the Owner Participant) of its Commitment set forth herein have been satisfied.
In any and all events, Lessee agrees to pay on a net after-tax basis the
reasonable out-of-pocket costs and expenses (including counsel fees) of each
Indemnified Party incurred in connection with the entering into or giving or
withholding of any future waiver, modification, supplement, consent, amendment
or other action with respect to any Operative Agreement which (a) is requested
by Lessee, (b) results from any adjustment pursuant to Section 3.7 of the
Lease, or (c) is necessary to effectuate the intent of any Operative Agreement.
In addition, upon such failure to consummate, Lessee shall pay the Original
Loan Participant any applicable Break Amount.
SECTION 17. Optional Redemption of Certificates. (a)
Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of the
Outstanding Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith to conclude an agreement with Lessee as to the terms of such
refunding or refinancing transaction (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new
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debt to be issued and the other aspects of such refunding or
refinancing transaction to be consummated (such date, the "Refinancing
Date", which date shall be determined so as to comply with Section
6.03(a) of the Trust Indenture) and (ii) the following information:
(A) subject to the limitations set forth in this Section 17, the
proposed adjusted ratio of debt evidenced by the Certificates to the
Owner Participant's investment in the beneficial ownership of the
Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date, and (C) the proposed revised debt amortization and schedules of
Basic Rent, Stipulated Loss Value percentages and Termination Value
percentages and the revised Special Purchase Price (including any
installments thereof). The Refinancing Certificate shall not provide
for a Debt/Equity ratio of more than 4:1. Within ten (10) Business
Days of its receipt of the Refinancing Certificate, Lessee may demand
a verification of the information set forth in the Refinancing
Certificate in the manner described in Section 3.7 of the Lease. Upon
the acceptance by Lessee of the accuracy of the information set forth
in the Refinancing Certificate or the determination of such
information pursuant to such verification procedures (such
information, the "Refinancing Information") the appropriate parties
will take the actions specified in subparagraphs (2) through (6)
below;
(2) the appropriate parties will enter into a
financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities) or the sale of the Owner
Trustee's interest in the Trust Estate and/or the Aircraft and its
simultaneous resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities in an aggregate principal
amount specified in the Refinancing Information, which amount shall be
at least equal to the aggregate principal amount of all Certificates
Outstanding on the Refinancing Date (such debt securities, the "New
Debt"), (ii) the application of the proceeds of the sale of the New
Debt to the redemption of all such Certificates on the Refinancing
Date and the payment of any other amounts payable to the Holders under
the Operative Agreements on the Refinancing Date, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend the
Lease to provide that (i) Interim Rent (if applicable) and Basic Rent
payable in respect of the period from and after the Refinancing Date
shall be as provided in the Refinancing Information (and shall take
into account any variation of the Deferred Equity Amount paid by or on
behalf of the Owner Participant pursuant to Section 8(dd), if
applicable, from the corresponding Assumed Interest Amount with
respect to the Deferred Equity Date), (ii) amounts payable in respect
of Stipulated Loss Value and Termination Value from and after the
Refinancing Date shall be as provided in the Refinancing Information,
and (iii) in the event that the Series SWA 1995 Trust N603SW
Certificates shall have been publicly issued, the early termination
notice
PARTICIPATION AGREEMENT [N603SW]
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revocation and payment provisions shall be modified to comport with
the applicable notice and payment requirements of The Depository Trust
Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the New Debt in
like manner as the Certificates and will enter into such amendments
and supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to or required by the
Owner Participant to be paid as a Transaction Cost and whether or not
such refunding or refinancing transaction is consummated, Lessee shall
pay on a net after-tax basis all of the reasonable out-of-pocket
expenses of all parties to such refunding or refinancing, including,
without limitation, the reasonable fees and expenses of such parties'
counsel (including allocated costs of the Original Loan Participant's
in-house counsel) and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee
with all applicable terms and conditions for voluntary redemption
under the Trust Indenture and this Agreement, each Holder of a
Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
interest thereon, Premium, if any, plus in the case of the Series SWA
1995 Trust N603SW-I Certificates, Break Amount, if any, together with
payment in full of all other amounts then payable to such Holder and
the Indenture Trustee hereunder or under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a
public offering of the New Debt, the Owner Participant shall have the right
(but not the obligation) to review and approve (which approval shall not be
unreasonably withheld) any registration statement filed with the SEC to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as required by Lessee, contain any restrictions on the sale to
Holders who may use ERISA funding sources. It is expressly understood that the
Owner Participant shall have no obligation hereunder to consent to such public
refunding or refinancing if, in its good faith judgment, such refunding or
refinancing increases its or any of its Affiliates' exposure to (i) liabilities
under federal or state securities laws, (ii) regulation under state or federal
securities laws, (iii) the need to disclose publicly information that is not
generally available to the public, or (iv) being adversely affected in its
ability to engage in any other financing transaction, in each case to a level
unacceptable to it in its reasonable, good faith judgment. Any trustee of
public debt shall be (i) Wilmington Trust Company or (ii) a bank or trust
company in the United States and having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of trustee upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least thirty
(30) days' irrevocable written notice of the proposed date of the optional
refunding or refinancing.
PARTICIPATION AGREEMENT [N603SW]
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(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee shall be
required to execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would result in any unreimbursed
increased costs or liability, including any adverse tax consequences or risk
thereof (unless indemnified against to its reasonable satisfaction) or would
result in any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional investment in
connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
(f) Any refunding or refinancing pursuant to this Section 17
shall be of all Certificates then Outstanding and shall be effected in
accordance with Section 6.03(a) of the Trust Indenture.
(g) When calculating any of the information required to be
set forth in a Refinancing Certificate, the Owner Participant shall make such
calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or
any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) uses the same methodology
and assumptions used by the Owner Participant in determining Interim Rent,
Basic Rent, Stipulated Loss Values, Termination Values and Special Purchase
Price on the Delivery Date (except to the extent such assumptions have been
altered since the Delivery Date in connection with an adjustment to Rent
pursuant to Section 3.7 of the Lease).
(h) No refinancing or refunding pursuant to this Section 17
shall be permitted during the continuance of a Lease Default or a Lease Event
of Default.
SECTION 18. Interim Debt. (a) The parties hereto
acknowledge and agree that each Series SWA 1995 Trust N603SW-I Certificate
originally issued to the Original Loan Participant on the Delivery Date
represents interim debt financing and that it is intended that the Series SWA
1995 Trust N603SW-I Certificates be refinanced by Series SWA 1995 Trust N603SW
Certificates issued to new Holders. In connection therewith, in the event that
Lessee shall have given written notice to the Owner Trustee, the Indenture
Trustee, the Owner Participant and the Original Loan Participant that Lessee is
requesting a voluntary redemption of the Series SWA 1995 Trust N603SW-I
Certificates (in compliance with the provisions of Articles 6 and 15 of the
Trust Indenture) by the Owner Trustee as part of a refunding or refinancing
transaction, the Owner Participant agrees to negotiate promptly in good faith
with Lessee in connection therewith (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Agreements as may be necessary in order to
facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
PARTICIPATION AGREEMENT [N603SW]
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(1) within five (5) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Section 18 Refinancing Certificate") setting forth
(i) the proposed date on which the Outstanding Series SWA 1995 Trust
N603SW-I Certificates will be redeemed, describing the new debt to be
issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, to be determined so as to
comply with Section 6.03(a) or 6.03(b) of the Trust Indenture (as
appropriate), the "Section 18 Refinancing Date") and (ii) the
following information: (A) the principal amount of debt to be issued
by the Owner Trustee on the Section 18 Refinancing Date, (B) and, if
such amount is less than the principal amount of the Outstanding
Series SWA 1995 Trust N603SW-I Certificates, then the amount of any
additional contribution to the Trust Estate to be made by the Owner
Participant on the Section 18 Refinancing Date and (C) the proposed
revised debt amortization and schedules of Interim Rent, Basic Rent,
Stipulated Loss Value percentages and Termination Value percentages
and the revised Special Purchase Price (including any installments
thereof). The principal amount of debt to be issued by the Owner
Trustee on the Section 18 Refinancing Date shall not equal more than
80.00% of Lessor's Cost. Within five (5) Business Days of its receipt
of the Section 18 Refinancing Certificate, Lessee may demand a
verification of the information set forth in the Section 18
Refinancing Certificate in the manner described in Section 3.7 of the
Lease. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Section 18 Refinancing Certificate or the
determination of such information pursuant to such verification
procedures (such information, the "Section 18 Refinancing
Information") the appropriate parties will take the actions specified
in paragraphs (2) through (10) below;
(2) the appropriate parties will enter into a
financing or loan agreement in form and substance reasonably
satisfactory to Lessee, the Owner Participant and the Owner Trustee
(which, subject to subsection (d) below, may involve an underwriting
agreement in connection with a public offering of such debt or the
purchase of such debt by a publicly funded entity (or entities)) with
the institution or institutions to be named therein (A) providing for
(i) the issuance and sale by the Owner Trustee to such institution or
institutions on the Section 18 Refinancing Date of Series SWA 1995
Trust N603SW Certificates in an aggregate principal amount specified
in the Section 18 Refinancing Information (such debt securities, the
"Section 18 New Debt"), (ii) the application of the proceeds of the
sale of the Section 18 New Debt, plus any additional contribution to
the Trust Estate, to the redemption of the Series SWA 1995 Trust
N603SW-I Certificates Outstanding on the Section 18 Refinancing Date
and the payment of any other amounts payable to the Holders under the
Operative Agreements on the Section 18 Refinancing Date, all in
accordance with Section 6.03(b) of the Trust Indenture, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt (other than any
representations, warranties and covenants deemed made by such Holders
by virtue of their accepting any Certificate issued to them)) make
such representations, warranties and covenants as the Owner
Participant or Lessee may reasonably require;
PARTICIPATION AGREEMENT [N603SW]
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(3) Lessee and the Owner Trustee will amend the
Lease to provide that (i) Interim Rent (if applicable) and Basic Rent
payable in respect of the period from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information (and shall take into account any variation of the sum of
any interest payment made pursuant to paragraph (5) or (5A) of this
Section 18(a) and the Deferred Equity Amount paid by or on behalf of
the Owner Participant pursuant to Section 8(dd), if applicable, from
the Assumed Interest Amount with respect to the Deferred Equity Date),
(ii) amounts payable in respect of Stipulated Loss Value, Termination
Value and Special Purchase Price from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information, and (iii) in the event that the Series SWA 1995 Trust
N603SW Certificates shall have been publicly issued, the early
termination notice revocation and payment provisions shall be modified
to comport with the applicable notice and payment requirements of The
Depository Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the Section 18 New
Debt in like manner as the Series SWA 1995 Trust N603SW-I Certificates
and will enter into such amendments and supplements to the Trust
Indenture (or such new indenture or other security agreement) as may
be necessary to effect such security;
(5) if such refunding or refinancing shall be
consummated on or prior to the Deferred Equity Date, the Owner Trustee
shall pay to the Original Loan Participant the Break Amount, if any
(as indemnification for the loss resulting from such refunding or
refinancing), and all accrued and unpaid interest on the Certificates,
subject to Lessee's obligations under Section 3.4 of the Lease;
(5A) if such refunding or refinancing shall be
consummated after the Deferred Equity Date, Lessee on behalf of the
Owner Trustee shall pay to the Original Loan Participant as
Supplemental Rent the Break Amount, if any (as indemnification for the
loss resulting from such refunding or refinancing), and all accrued
and unpaid interest on the Certificates (in each case, without
duplication of other amounts, if any, payable pursuant to any other
provision of the Operative Agreements);
(6) except as provided in paragraph (5) above,
the Owner Trustee shall pay all of the costs of any such refunding or
refinancing so consummated, such costs shall be considered as
Transaction Costs and paid in accordance with and subject to the
limitations of Section 16 above and such Transaction Costs shall be
appropriately considered in calculating the proposed revised debt
amortization and schedules of Basic Rent, Stipulated Loss Value
percentages and Termination Value percentages;
(7) each Holder of the Series SWA 1995 Trust
N603SW-I Certificates will deliver to the Owner Trustee the Series SWA
1995 Trust N603SW-I Certificate held by it immediately prior to such
refunding or refinancing for cancellation (and the Owner Trustee shall
cancel the same), against simultaneous receipt by such Holder of
payment of the then outstanding principal amount of such Series SWA
1995 Trust N603SW-I Certificate, accrued and unpaid interest thereon
plus Break Amount, if any, together with payment in full of all
PARTICIPATION AGREEMENT [N603SW]
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other amounts then payable to such Holder hereunder or under the
Series SWA 1995 Trust N603SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such of
the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee
shall be required to execute and deliver any such agreement or
instrument or to make any other arrangements which in its opinion
would result in any unreimbursed increased costs or liability,
including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would result in
any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional
investment in connection with any such refinancing (other than the
Deferred Equity Amount, if applicable);
(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel; and
(10) the Owner Participant shall not be obligated
to proceed with any refinancing under this Section 18 if, in its
opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax consequences);
provided, however, that the Owner Participant will be obligated to
proceed with such refinancing if Lessee agrees to indemnify the Owner
Participant for such unindemnified adverse consequences (any such
indemnity to be satisfactory to the Owner Participant).
Notwithstanding the foregoing, the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 unless
(i) the Lessee requires in the case of a private refinancing, each
Holder to represent to the Lessee that it is not using ERISA funding
sources, or that an exemption is available with respect to its
purchase and holding of the debt, or (ii) in the case of a public
refinancing, an exemption with respect to pass through certificates
(such as Prohibited Transaction Exemption 89-89 or 90-24 or any other
comparable exemption) is available.
(b) Only one optional refinancing or refunding pursuant to
this Section 18 shall be permitted during the Term and such refinancing shall
occur on or prior to the second anniversary of the Delivery Date.
(c) Any refinancing or refunding pursuant to this Section 18
shall be of all Series SWA 1995 Trust N603SW-I Certificates then Outstanding.
(d) Any public refinancing pursuant to this Section 18 shall
comply with all the restrictions, limitations and conditions applicable in the
case of a public refinancing pursuant to Section 17(b) hereof.
PARTICIPATION AGREEMENT [N603SW]
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(e) No refunding or refinancing pursuant to this Section 18
shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to be
set forth in a Section 18 Refinancing Certificate, the Owner Participant shall
make such calculations in a manner which (A) maintains its Net Economic Return,
(B) minimizes the Net Present Value of Rents to the extent possible consistent
with clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28
(or any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) uses the same methodology
and assumptions used by the Owner Participant in determining Interim Rent,
Basic Rent, Stipulated Loss Values, Termination Values and Special Purchase
Price on the Delivery Date (except to the extent such assumptions have been
altered since the Delivery Date in connection with an adjustment to Rent
pursuant to Section 3.7 of the Lease).
SECTION 19. Section 1110 Compliance. The Participants
and Lessee agree that the transactions contemplated by this Agreement and the
other Operative Agreements are intended to be, shall be and should be construed
so as to be, entitled to the full benefits of 11 U.S.C. Section 1110.
PARTICIPATION AGREEMENT [N603SW]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ John D. Owen
Treasurer
BANC ONE ARIZONA LEASING CORPORATION
Owner Participant
By: /s/ Sue Baaden
Vice President
BANK OF AMERICA ILLINOIS,
Original Loan Participant
By: /s/ Timothy C. Hintz
Managing Director
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual
capacity only as expressly provided herein
and otherwise solely as Owner Trustee,
By: /s/ Michelle K. Blezard
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as otherwise
expressly provided herein, but solely as
Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services Officer
PARTICIPATION AGREEMENT [N603SW]
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SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee: With a copy to:
Southwest Airlines Co. Timothy C. Hintz, Managing Director
2702 Love Field Drive Bank of America National Trust and
P.O. Box 36611 Savings Association
Dallas, Texas 75235-1611 Unit 5618
Attn: Treasurer 555 South Flower Street, 11th Floor
Telecopy: (214) 904-4022 Los Angeles, California 90071
Telephone: (213) 228-2810
Owner Participant:
Banc One Arizona Leasing Corporation
c/o Bank One, Arizona, NA Payment Instructions:
241 North Central, 8th fl. Federal Reserve Bank of S.F.
Phoenix, Arizona 85004 ABA No. 121000358
Attn: Accounting Dept. A719 For the account of Bank of America National
With a copy to: Trust and Savings Association
Bank One, Arizona, NA For credit to GPO Account Administration #5693
c/o Banc One Leasing Corporation Account No. 12331-83980
2400 Corporate Exchange Drive Reference: Southwest Airlines Interim Debt
Suite 300 Attn: Mandy Sneary
Columbus, Ohio 43231
and Bank One, Arizona, NA
c/o Banc One Leasing Corporation Owner Trustee:
111 Monument Circle, Ste. 1931 Shawmut Bank Connecticut, National
Indianapolis, IN 46204-5100 Association
Telecopy: (317) 321-8828 777 Main Street
Hartford, Connecticut 06115
Payment Instructions: Attn: Corporate Trust Administration
Banc One Arizona Leasing Corporation Telecopy: (203) 240-7920
c/o Banc One Arizona, N.A.
ABA No. 122-1000-24
Account No. 40-0987 Indenture Trustee:
Attn: Accounting Department A719 Wilmington Trust Company
Reference: Southwest Airlines Rodney Square North
1100 North Market Street
Original Loan Participant: Wilmington, Delaware 19890-0001
Bank of America Illinois Attn: Corporate Trust Administration
GPO Account Admin. #5693 Telecopy: (302) 651-8882
1850 Gateway Boulevard Payment Instructions:
Concord, California 94520 Wilmington Trust Company
Attn: Mandy Sneary Wilmington, Delaware
Telecopy: (510) 675-7531 ABA No. 031100092
Telephone: (510) 675-7480 For the account of Southwest Airlines 1995-1
Account No. 30875-0
Reference: N603SW
Attn: David A. Vanaskey
Corporate Trust Administration
</TABLE>
PARTICIPATION AGREEMENT [N603SW]
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SCHEDULE II
Commitments
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
----------------- ------------- -------------
<S> <C> <C>
Bank of America Illinois 74.50853737% $23,842,731.96
Owner Participant:
Banc One Arizona Leasing
Corporation 25.49146263% $ 8,157,268.04
------------ --------------
Total Commitments: 100% $32,000,000.00
================= ==== ==============
</TABLE>
PARTICIPATION AGREEMENT [N603SW]
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SCHEDULE III
Appraisal
1. The fair market value of the Aircraft on the Delivery Date is equal to
Lessor's Cost.
2. The Aircraft is reasonably estimated to have:
(A) a useful life of 30.5 years;
(B) a residual value as of November 6, 2019 of more than 20% of
Lessor's Cost (without taking into account any increase or
decrease for inflation or deflation); and
(C) an estimated fair market value (taking into account expected
inflation or deflation) of not more than the Special Purchase
Price on January 1, 2015.
3. The Aircraft will not be "limited use property" as described in Rev.
Proc. 76-30, 1976-7. CB. 647.
4. Such other matters as may be reasonably requested by the Owner
Participant.
PARTICIPATION AGREEMENT [N603SW]
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EXHIBIT A
TRANSFEREE OP GUARANTY
TRANSFEREE OP GUARANTY, dated as of by ,
a corporation ("Transferee OP Guarantor") to and for the benefit of the
Indenture Trustee, the Owner Trustee, individually and as Owner Trustee, the
Lessee and the Original Loan Participant referred to in the Participation
Agreement described below (collectively, together with their permitted
successors and assigns, "Beneficiaries" and, individually, a "Beneficiary").
WITNESSETH:
WHEREAS, _________________ a _____________
[corporation] ("Transferor"), is Owner Participant under that certain
Participation Agreement, dated as of _______________ among Southwest Airlines
Co., as Lessee, Banc One Arizona Leasing Corporation, as Owner Participant [and
Transferor's predecessor in interest], Bank of America Illinois, as the
Original Loan Participant, Shawmut Bank Connecticut, National Association, in
its individual capacity only as expressly provided therein and otherwise solely
as Owner Trustee, and Wilmington Trust Company, in its individual capacity and
as Indenture Trustee (the "Participation Agreement");
WHEREAS, Transferor wishes to transfer, except to the
extent expressly reserved to Transferor, all of its right, title and interest
in and to the Participation Agreement, the Trust Estate and the other Operative
Agreements to which Transferor is a party, and all proceeds therefrom as set
forth in the Assignment and Assumption Agreement dated the date hereof between
Transferor and , a corporation
("Transferee"); and
WHEREAS, the terms of the Participation Agreement
provide that the aforementioned transfer is conditioned upon the execution and
delivery of this Guaranty by Transferee OP Guarantor;
NOW, THEREFORE, Transferee OP Guarantor hereby agrees
with and for the benefit of Beneficiaries as follows:
1. Definitions. Capitalized terms used herein and
not otherwise defined herein shall have the meanings given such terms in the
Sale and Lease Agreement, dated as of July 1, 1995 between the Owner Trustee
and Lessee, and the rules of usage set forth therein shall apply hereto.
2. Guaranty. (a) Transferee OP Guarantor hereby
unconditionally and irrevocably guarantees, as primary obligor and not as a
surety, to Beneficiaries and their respective successors, endorsees,
transferees and assigns, the prompt and complete payment by Transferee when due
(whether at the stated maturity, by acceleration or otherwise) of, and the
faithful performance of and compliance with, all payment obligations of
Transferee under the Participation Agreement and
PARTICIPATION AGREEMENT [N603SW]
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each other Operative Agreement to which Owner Participant is a party or by
which it is bound (collectively, the "Relevant Documents"), strictly in
accordance with the terms thereof and the timely performance of all other
obligations of Transferee thereunder (such payment and other obligations, the
"Obligations"), and Transferee OP Guarantor further agrees to pay all expenses
(including, all fees and disbursements of counsel) that may be paid or incurred
by Beneficiaries in enforcing any rights with respect to, or collecting, any or
all of the Obligations and/or enforcing any rights with respect to, or
collecting against, Transferee OP Guarantor under this Guaranty.
(b) No payment or payments made by Transferee,
Transferee OP Guarantor, any other guarantor or any other Person or received or
collected by any Beneficiary from Transferee, Transferee OP Guarantor, any
other guarantor or any other person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of Transferee OP Guarantor
hereunder until the Obligations are paid and performed in full.
(c) If for any reason any Obligation (whether
affirmative or negative in character) shall not be observed or performed or
paid promptly when due and payable, Transferee OP Guarantor shall promptly
perform or observe or cause to be performed or observed each such Obligation or
undertaking and shall forthwith pay such amount at the place and to the person
or entity entitled thereto pursuant to the Relevant Documents regardless of
whether or not any Beneficiary or anyone on behalf of any Beneficiary shall
have instituted any suit, action or proceeding or exhausted its remedies or
taken any steps to enforce any rights against Transferee or any other person or
entity to compel any such performance or to collect all or any part of such
amount pursuant to the provisions of the Relevant Documents or at law or in
equity, or otherwise, and regardless of any other condition or contingency.
3. No Subrogation. Notwithstanding any payment or
payments made by Transferee OP Guarantor hereunder or any set-off or
application of funds of Transferee OP Guarantor by any Beneficiary, Transferee
OP Guarantor shall not be entitled to be subrogated to any of the rights of any
Beneficiary against Transferee or any collateral, security or guarantee or
right of set-off held by any Beneficiary for the payment of the Obligations,
nor shall Transferee OP Guarantor seek or be entitled to seek any reimbursement
from Transferee in respect of payments made by Transferee OP Guarantor
hereunder, unless all amounts and performance then owing to Beneficiaries by
Transferee on account of the Obligations shall have been paid and performed in
full.
4. Amendments, etc., with respect to the
Obligations; Waiver of Rights. The Transferee OP Guarantor shall remain fully
obligated hereunder notwithstanding that, without any reservation of rights
against the Transferee OP Guarantor and without notice to or further assent by
the Transferee OP Guarantor, any demand for payment or performance of any of
the Obligations made by any Beneficiary may be rescinded by such party and any
of the Obligations continued, and the Obligations, or the liability of any
other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by any Beneficiary
and any Relevant Document, and/or any collateral security document or other
guarantee or document in connection therewith may be amended,
PARTICIPATION AGREEMENT [N603SW]
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modified, supplemented or terminated, in whole or in part, as the parties
thereto may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by any Beneficiary for the
payment or performance of the Obligations may be sold, exchanged, waived,
surrendered or released. No Beneficiary shall have any obligation to protect,
secure, perfect or insure any lien at any time held by it as security for the
Obligations or for this Guaranty or any property subject thereto. When making
any demand hereunder against the Transferee OP Guarantor, a Beneficiary may,
but shall be under no obligation to, make a similar demand on the Transferee or
any other guarantor, and any failure by a Beneficiary to make any such demand
or to collect any payments from the Transferee or any such other guarantor or
any release of the Transferee or such other guarantor shall not relieve the
Transferee OP Guarantor of its obligations or liabilities hereunder, and shall
not impair or affect the rights and remedies, express or implied, or as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. For
purposes hereof, "demand" shall include the commencement and continuance of any
legal proceedings.
5. Guaranty Absolute and Unconditional. The
Transferee OP Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by any Beneficiary upon this Guaranty or acceptance of this Guaranty;
the Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Guaranty; and all dealings between the Transferee or the
Transferee OP Guarantor and any Beneficiary shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Guaranty. The
Transferee OP Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Transferee or the
Transferee OP Guarantor with respect to the Obligations. The Transferee OP
Guarantor understands and agrees that this Guaranty shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
(and not merely of collectibility) without regard to (a) the validity,
regularity or enforceability of any Relevant Document, any of the Obligations
or any collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by any Beneficiary, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by the
Transferee against any Beneficiary, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Transferee or the Transferee OP
Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of the Transferee for the Obligations, or of the Transferee
OP Guarantor under this Guaranty, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against the Transferee OP Guarantor,
any Beneficiary may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Transferee or any other person or
entity or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by any Beneficiary to
pursue such other rights or remedies or to collect any payments from the
Transferee or any such other person or entity or to realize upon any such
collateral security or guarantee or exercise any such right of offset, or any
release of the Transferee or any such other person or entity or any such
collateral security, guarantee or right of offset, shall not relieve the
Transferee 0P Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. This
Guaranty shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Transferee OP Guarantor and the
successors and assigns thereof, and shall inure to the benefit of the
Beneficiaries, and their respective
PARTICIPATION AGREEMENT [N603SW]
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successors, endorsees, transferees and assigns, until all of the Obligations
and the obligations of the Transferee OP Guarantor under this Agreement shall
have been satisfied by payment and performance in full. The Transferee OP
Guarantor further agrees that, without limiting the generality of this
Guaranty, if any Beneficiary (or any assignee thereof) shall be prevented by
applicable law from exercising its remedies (or any of them) against the
Transferee under any Operative Document, such Beneficiary (or any assignee
thereof) shall be entitled to receive hereunder from the Transferee OP
Guarantor, upon demand therefor, the sums that would have otherwise been due
from the Transferee had such remedies been able to be exercised.
6. Reinstatement. This Guaranty shall continue to
be effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, or any of the Obligations is rescinded or must otherwise be
restored or returned by any Beneficiary upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Transferee or the Transferee
OP Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Transferee
or the Transferee OP Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made. The Transferee OP
Guarantor shall not commence any "case" (as defined in Title 11 of the United
States Code) against the Transferee.
7. Payments. The Transferee OP Guarantor hereby
guarantees that payments hereunder shall be paid without set-off, counterclaim,
deduction or withholding, except as required by applicable law, and shall be
made in Dollars, provided, if any withholding Taxes are so imposed under
applicable law, the Transferee OP Guarantor shall pay an additional amount such
that the net amount actually received by the Person entitled thereto, free of
withholding, will equal the amount then due absent such withholding.
8. Representations and Warranties. The Transferee OP
Guarantor hereby represents and warrants that:
(a) it is a [corporation] duly organized and
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power
and authority to carry on its business as now conducted, to
own or hold under lease its properties and to enter into and
perform its obligations under this Guaranty;
(b) this Guaranty has been duly authorized by all
necessary corporate action on the part of the Transferee OP
Guarantor, does not require any approval not already obtained
of stockholders of the Transferee OP Guarantor or any approval
or consent not already obtained of any trustee or holders of
any indebtedness or obligations of the Transferee OP
Guarantor, and has been duly executed and delivered by the
Transferee OP Guarantor;
(c) this Guaranty constitutes a legal, valid and
binding obligation of the Transferee OP Guarantor enforceable
in accordance with its terms;
PARTICIPATION AGREEMENT [N603SW]
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(d) there are no pending or, to the knowledge of
the Transferee OP Guarantor, threatened actions or proceedings
against the Transferee OP Guarantor before any court or
administrative agency which, if determined adversely to the
Transferee OP Guarantor, would materially adversely affect the
financial condition of the Transferee OP Guarantor or the
ability of the Transferee OP Guarantor to perform its
obligations under this Guaranty;
(e) its net worth (as defined in Section 8(l) of
the Participation Agreement) is at least $75,000,000; and
(f) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the
passage of time or the giving of notice or both, constitute)
an Indenture Event of Default which has been caused by or
relates to the Transferee OP Guarantor and which is presently
continuing.
9. Severability. Any provision of this Guaranty
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
10. No Waiver; Cumulative Remedies . No
Beneficiary shall by any act (except by a written instrument pursuant to
Section 12 hereof), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any Beneficiary, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by a Beneficiary of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy that such Beneficiary
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
11. Integration. This Guaranty represents the
entire agreement of Transferee OP Guarantor with respect to the subject matter
hereof and there are no promises or representations by any Beneficiary relative
to the subject matter hereof not reflected herein.
12. Amendments and Waivers. None of the terms or
provisions of this Guaranty may be waived, amended or supplemented or otherwise
modified except by a written instrument executed by Transferee OP Guarantor and
each Beneficiary.
13. Section Headings. The Section headings used
in this Guaranty are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
PARTICIPATION AGREEMENT [N603SW]
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14. Successors and Assigns. This Guaranty shall be
binding upon the successors and assigns of Transferee OP Guarantor and shall
inure to the benefit of Beneficiaries and their respective successors and
assigns.
15. GOVERNING LAW. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO ANY CONFLICT OF
LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION.
16. Notices. All notices and other
communications required under the terms and conditions hereof shall be given
and shall be effective in accordance with the provisions of Section 13(a) of
the Participation Agreement; provided that notices to the Transferee OP
Guarantor shall be sent to .
PARTICIPATION AGREEMENT [N603SW]
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IN WITNESS WHEREOF, the undersigned has caused this
Transferee OP Guaranty to be duly executed and delivered by its duly authorized
officer as of the day and the year first above written.
[NAME OF TRANSFEREE OP GUARANTOR]
By: __________________________
Title: _______________________
PARTICIPATION AGREEMENT [N603SW]
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<PAGE> 72
EXHIBIT B
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of _______, between
_______________, a ______________ [corporation] ("Assignor") and _____________,
a _______________ [corporation] ("Assignee") (the "Agreement").
WITNESSETH:
WHEREAS, the parties hereto desire to effect (a) the transfer by
Assignor to Assignee of all of the right, title and interest of the Assignor
(except as reserved below) in, under and with respect to, among other things,
(i) the Participation Agreement, dated as of July 1, 1995, among Southwest
Airlines Co., as Lessee, Banc One Arizona Leasing Corporation, as Owner
Participant, Bank of America Illinois, as Original Loan Participant, Shawmut
Bank Connecticut, National Association, in its individual capacity only as
expressly provided therein and otherwise solely as Owner Trustee, and
Wilmington Trust Company, in its individual capacity and as Indenture Trustee,
as the same may be amended, modified or supplemented from time to time (the
"Participation Agreement"), (ii) the Trust Agreement identified in the
Participation Agreement, (iii) the Trust Estate (as defined in the Trust
Agreement) and (iv) the proceeds therefrom and (b) the assumption by Assignee
of the obligations of Assignor accruing thereunder;
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings given such terms in the Sale and Lease
Agreement, dated as of July 1, 1995 between the Owner Trustee and Lessee, and
the rules of usage set forth therein shall apply hereto.
2. Assignment. Assignor does hereby sell, convey, assign, transfer
and set over unto Assignee, as of the date hereof, all of its right, title and
interest in, under and with respect to the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement, the Trust Estate or any other contract,
agreement, document or instrument relating to the Trust Estate by which
Assignor is bound, and any proceeds therefrom, together with all other
documents and instruments evidencing any of such right, title and interest,
except such rights of Assignor as have accrued to Assignor prior to the date
hereof (including the right to receive any amounts due or accrued to Assignor
under the Trust Agreement as of a date prior to such date and the right to
receive any indemnity payment pursuant to the Participation Agreement or the
Tax Indemnity Agreement with respect to events occurring prior to such date).
3. Assumption. Assignee hereby undertakes, for the benefit of
Assignor, Indenture Trustee, Owner Trustee, Original Loan Participant and
Lessee and their successors and assigns, all of the duties and obligations of
Assignor whenever accrued (other than duties and obligations of Assignor
required to be performed by it on or prior to the date hereof under the
Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement or
any other contract, agreement, document or other instrument relating to the
Trust Estate to which Assignor is a party or by which it is bound) pursuant to
the Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement
or any other
PARTICIPATION AGREEMENT [603SW]
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contract, agreement, document or other instrument relating to the Trust Estate
to which Assignor is a party or by which it is bound, and hereby confirms that
it shall be deemed a party to the Participation Agreement, the Trust Agreement,
the Tax Indemnity Agreement and each other contract, agreement, document or
other instrument relating to the Trust Estate to which Assignor is a party or
by which it is bound as if therein named as Owner Participant.
4. Release of Assignor. Except for liabilities not assumed as
provided in Section 3 hereof and except to the extent applicable as a condition
to the continued enforcement of any rights thereunder retained by Assignor,
upon the execution of this Assignment and Assumption Agreement, Assignor shall
have no further duty or obligation under the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement or under any other contract, agreement,
document or other instrument relating to the Trust Estate to which Assignor is
a party or by which it is bound; provided, however, that Assignor shall in no
event be released from any liability on account of any breach by it of any
representations or warranties, covenants or obligations set forth in the
Participation Agreement or for any fraudulent or willful misconduct engaged in
by it on or prior to the date hereof; provided further, that Assignor shall
remain liable for, and shall indemnify and hold harmless the Original Loan
Participant from and against any reduction in the amount payable out of the
Trust Estate to the Original Loan Participant, and any other losses, costs or
expenses incurred by the Original Loan Participant to the extent that any such
reduction, loss, cost or expense shall result from the imposition or
enforcement of any Lien or any claim against the Trust Estate by a taxing
authority because of the nonpayment by Assignor of taxes imposed on or measured
by its income or gross receipts by such taxing authority arising from the
assignment hereunder.
5. Appointment as Attorney-in-Fact. In furtherance of the within
assignment, Assignor hereby constitutes and appoints Assignee, and its
successors and assigns, the true and lawful attorneys of Assignor, with full
power of substitution, in the name of Assignee or in the name of Assignor but
on behalf of and for the benefit of and at the expense of Assignee, to collect
for the account of Assignee all items sold, transferred or assigned to Assignee
pursuant hereto; to institute and prosecute, in the name of Assignor or
otherwise, but at the expense of Assignee, all proceedings that Assignee may
deem proper in order to collect, assert or enforce any claim, right or title of
any kind in or to the items sold, transferred or assigned; to defend and
compromise at the expense of Assignee any and all actions, suits or proceedings
as to title to or interest in any of the property acquired by Assignee; and to
do all such acts and things in relation thereto at the expense of Assignee as
Assignee shall reasonably deem advisable. Assignor hereby acknowledges that
this appointment is coupled with an interest and is irrevocable by Assignor in
any manner or for any reason.
6. Payments. Assignor hereby covenants and agrees to pay over to
Assignee, if and when received following the date hereof, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of Assignor that, under Section 2 hereof, belong to Assignee, and
Assignee hereby covenants and agrees to pay over to Assignor, if and when
received following the date hereof, any amounts (including any sums payable as
interest in respect thereof) paid to or for the benefit of Assignee that, under
Section 2 hereof, belong to Assignor.
PARTICIPATION AGREEMENT [603SW]
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7. Representations and Warranties. Assignee represents and warrants
that:
(a) it is a [corporation] duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority to carry on its business as now conducted, to own
or hold under lease its properties and to enter into and perform its
obligations under this Agreement and the Owner Participant Agreements;
(b) this Agreement has been duly authorized by all necessary corporate
action on the part of the Assignee, does not require any approval not already
obtained of stockholders of the Assignee or any approval or consent not already
obtained of any trustee or holders of any indebtedness or obligations of the
Assignee, and has been duly executed and delivered by the Assignee;
(c) assuming that this Agreement and each of the Owner Participant
Agreements is the legal, valid and binding obligation of each other party
thereto, this Agreement and each such Owner Participant Agreement constitute
the legal, valid and binding obligations of the Assignee enforceable in
accordance with their respective terms;
(d) subject to and in reliance upon the representations made by the Original
Loan Participant and Lessee in Sections 8(o) and 7(a)(xv) of the Participation
Agreement, respectively, and compliance with the covenants of Section 8(d) and
8(bb) of the Participation Agreement, neither the execution and delivery by the
Assignee of this Agreement, nor the consummation of the transactions
contemplated hereby or by the Owner Participant Agreements, nor compliance by
the Assignee with any of the terms and provisions hereof or of the Owner
Participant Agreements will contravene any United States federal or state law,
judgment, governmental rule, regulation or order applicable to or binding on
the Assignee (it being understood that no representation or warranty is made
with respect to laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws, rules
or regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a) of the
definition thereof) upon the Trust Estate under any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, corporate charter, by-law or other agreement or instrument to
which the Assignee is a party or by which it or its properties may be bound or
affected;
(e) there are no pending or, to the knowledge of the Assignee, threatened
actions or proceedings against the Assignee before any court or administrative
agency which, if determined adversely to the Assignee, would materially
adversely affect the financial condition of the Assignee or the ability of the
Assignee to perform its obligations under this Agreement or the Owner
Participant Agreements;
(f) on the Delivery Date, there will be no Lessor Liens attributable to the
Assignee;
(g) the Assignee's net worth (as defined in Section 8(l) of the
Participation Agreement) is at least $75,000,000;
PARTICIPATION AGREEMENT [603SW]
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(h) there has not occurred any event which constitutes (or to the best of
its knowledge would, with the passage of time or giving of notice or both,
constitute) an Indenture Event of Default which has been caused by or relates
to the Assignee and which is presently continuing;
(i) it is a permitted Transferee under Section 8(l)(A) of the Participation
Agreement;
(j) it is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) [or it has, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), entered
into a voting trust or similar arrangement which permits the registration of
the Aircraft under the Act in the name of the Owner Trustee without any
restriction on the operation of the Aircraft]; and
(k) it has the full power and authority to enter into the transactions
contemplated by the Owner Participant Agreements.
8. GOVERNING LAW. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO ANY
CONFLICT OF LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION.
PARTICIPATION AGREEMENT [603SW]
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IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Assumption Agreement as of the day and year first above written.
[ASSIGNOR]
By _____________________________________
Title: _________________________________
[ASSIGNEE]
By _____________________________________
Title: _________________________________
PARTICIPATION AGREEMENT [603SW]
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<PAGE> 1
EXHIBIT 4.31
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO.,
as Lessee
BANC ONE ARIZONA LEASING CORPORATION,
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
and in its capacity as Pass Through Trustee under
each of the four Pass Through Trust Agreements
and as Holder
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N603SW)
<PAGE> 2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT dated as of October 1,
1995 (this "Amendment") by and among (i) Southwest Airlines Co., a Texas
corporation ("Lessee"), (ii) Banc One Arizona Leasing Corporation, an Arizona
corporation ("Owner Participant"), (iii) Shawmut Bank Connecticut, National
Association, a national banking association, not in its individual capacity,
except as expressly provided herein, but solely as Owner Trustee under the
Trust Agreement ("Owner Trustee"), and (iv) Wilmington Trust Company, a
Delaware banking corporation, in its individual capacity and as Indenture
Trustee under the Trust Indenture (the "Indenture Trustee") and in its capacity
as Pass Through Trustee under each of the four separate Pass Through Trust
Agreements ("Pass Through Trustee") and as Holder, amends that certain
Participation Agreement respecting the aircraft having U.S. registration number
N603SW and dated as of July 1, 1995 (the "Participation Agreement"), by and
among Lessee, Owner Participant, Bank of America Illinois (the "Original Loan
Participant"), Owner Trustee and Indenture Trustee,
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, the Delivery Date occurred on July 13, 1995; and
WHEREAS, concurrently with the execution of this Amendment, the Series
SWA 1995 Trust N603SW-I Certificate held by the Original Loan Participant is
being refinanced by the issuance of one or more new Certificates issued to Pass
Through Trustee as Holder; and
WHEREAS, as contemplated by Section 18 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
Section 1. Amendment to Schedule I. Schedule I to the
Participation Agreement is hereby deleted in its entirety and replaced with
Schedule I to this Agreement.
Section 2. Amendments to Section 7(b). Section 7(b) of the
Participation Agreement is hereby amended in the following manner:
(i) Section 7(b) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase is
hereby amended to be and read in its entirety as follows:
"Operative Agreement or each Pass Through Trust Agreement" and
"Operative Agreements or each Pass Through Trust Agreement"
PARTICIPATION AMENDMENT [N603SW]
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<PAGE> 3
except in the case of Section 7(b)(iii) where the phrase "Operative
Agreements" is hereby amended to be and read, in its entirety, "Operative
Agreements and the Pass Through Trust Agreements."
(ii) Section 7(b)(i) is hereby amended as follows:
(a) the following language is added immediately after the
words "combined or unitary return with such Indemnified
Party)" and before the words "harmless from, any and all":
"except that for purposes of this Section 7(b)(i) an
Indemnified Party shall not include any Holder other than
Original Loan Participant";
(b) unless as otherwise provided in (c) below, wherever the
term "Certificates" is used, such term is hereby amended to be
and read in its entirety as follows:
"Certificates and each Pass Through Certificate"; and
(c) the language immediately after the phrase "or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture" is
hereby amended to be and read in its entirety as follows:
"and each Pass Through Trust Agreement, or the beneficial
interests in the Trust Estate and each Pass Through Trust
Estate or the creation thereof, or any payments made pursuant
to any such agreement or instrument or upon or with respect to
the property held by Owner Participant or by the Trust Estate
or by Indenture Trustee under the Trust Indenture or the
property held by Pass Through Trustee under the respective
Pass Through Trust Estate, amounts payable with respect to the
Certificates and each Pass Through Certificate, including
withholding Taxes imposed on payments of principal, interest,
Premium or Break Amount on the Certificates or payments of
principal of, interest on or any other amounts payable with
respect to each Pass Through Certificate that are asserted
against the Owner Participant, Owner Trustee or Pass Through
Trustee, as withholding agent, or otherwise with respect to or
in connection with the transactions contemplated by the
Operative Agreements."
Section 3. Amendments to Section 7(c). Section 7(c) of the
Participation Agreement shall be amended in the following manner:
(i) Section 7(c) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase
includes each Pass Through Trust Agreement.
(ii) Clause (d) of Section 7(c)(i) is hereby amended to be
and read in its entirety as follows:
PARTICIPATION AMENDMENT [N603SW]
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"(d) the offer, sale or delivery of the Certificates or the
Pass Through Certificates, whether before or after the
Delivery Date (the indemnity in this clause (d) to extend also
to any Person who controls an Indemnified Party, its
successors, assigns, employees, servants and agents within the
meaning of Section 15 of the Securities Act)."
(iii) The final paragraph of Section 7(c) is hereby amended
to be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of Indenture Trustee (including the reasonable fees
and expenses of its counsel and any agent appointed in
accordance with Section 9.02(c) of the Trust Indenture) and
Pass Through Trustee and, as provided in Section 6.07 of the
Trust Agreement, Owner Trustee (including, but not limited to,
the reasonable fees and expenses of its counsel), without
cost, on a net after-tax basis, to Owner Participant, for
acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay
the reasonable fees and expenses of any separate owner trustee
or co-trustee appointed pursuant to Section 9.02 of the Trust
Agreement as a result of any requirement of law or if
otherwise required by any Operative Agreement or if requested,
or consented to, by the Lessee."
Section 4. Amendments to Section 8. Section 8 of the
Participation Agreement is hereby amended in the following respects:
(i) Section 8(e) is hereby amended to be and read in its
entirety as follows:
"(e) (i) Pass Through Trustee hereby agrees that, except
as otherwise required by applicable law including, without
limitation, any law which requires Pass Through Trustee to act
within its own discretion, it shall not, without the prior
written consent of Owner Trustee, direct Indenture Trustee to
take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization,
direction or consent of, or notice from, the Holders holding a
specified percentage in principal amount of Outstanding (as
defined in the Trust Indenture) Certificates unless Pass
Through Trustee receives a Direction (as defined in the
relevant Pass Through Trust Agreement) to so direct the
Indenture Trustee from Certificateholders (as defined in the
relevant Pass Through Trust Agreement) holding the same
percentage of Certificates (as defined in the relevant Pass
Through Trust Agreement) evidencing Fractional Undivided
Interests (as defined in the relevant Pass Through Trust
Agreement) in the Trust (as defined in the relevant Pass
Through Trust Agreement) holding the Certificates.
(ii) Lessee and Pass Through Trustee hereby agree
that Article X of each Pass Through Trust Agreement (to the
extent relating to the Certificates) shall not be amended
without the prior written consent of Owner Participant.
PARTICIPATION AMENDMENT [N603SW]
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<PAGE> 5
(iii) Pass Through Trustee hereby agrees that,
except as otherwise required by applicable law including,
without limitation, any law which requires Pass Through
Trustee to act within its own discretion, if requested to do
so by Owner Trustee or Owner Participant, Pass Through Trustee
shall request a Direction from the relevant Certificateholders
to establish whether Pass Through Trustee, in its capacity as
a Holder, may direct the Indenture Trustee to take or refrain
from taking any action under the Operative Agreements."
(ii) Section 8(l) is hereby amended by deleting the
references therein to the Original Loan Participant.
(iii) Section 8(bb) is hereby amended to be and read in its
entirety as follows:
"(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or
Section 8.03(e)(ii) of the Indenture, each Holder covenants
that it will not transfer its Certificate to any Person unless
such Person represents and warrants in writing to such Holder,
the Owner Participant and Lessee either that (a) no part of
the funds used by it to acquire its Certificate constitutes
`plan assets' of any `employee benefit plan' within the
meaning of ERISA or any `plan' within the meaning of Section
4975(e)(1) of the Code or (b) its purchase or acquisition of
such Certificate will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of
ERISA. Any such Person shall require any transferee of its
interest to make the representations and warranties in the
preceding sentence."
(iv) Section 8(dd) is hereby amended to be and read in its
entirety as follows:
"(dd) Deferred Equity. Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and
not with any other party to this Agreement or the Holders of
any Certificates), that, so long as no Lease Event of Default
or Lease Default (of the type described in Section 14.1 or
14.5 of the Lease) shall have occurred and be continuing, it
will pay or cause to be paid to Indenture Trustee on the
Deferred Equity Date sufficient funds to effect the payment of
an amount (the "Deferred Equity Amount") equal to the amount
due on such date in respect of accrued interest on the
Certificates from the Section 18 Refinancing Date (as defined
in Section 18 hereof) to and including the Deferred Equity
Date. Owner Participant and Owner Trustee hereby direct the
Indenture Trustee, and Indenture Trustee hereby agrees, to
apply the Deferred Equity Amount to the payment of interest on
the Certificates which may be due and payable pursuant to the
provisions of the Trust Indenture on the Deferred Equity Date.
Owner Participant agrees to make payment of the Deferred
Equity Amount in immediately available funds on or before
11:00 a.m., New York City time, on the Deferred Equity Date,
provided that the Owner Participant agrees to give Lessee
notice by 11:00 a.m., New York City time, on the second
Business Day prior to the Deferred Equity Date if it shall not
make such payment. Indenture Trustee agrees to give Lessee
prompt notice if it shall not have received such
PARTICIPATION AMENDMENT [N603SW]
-4-
<PAGE> 6
payment by noon, New York City time, on the Deferred Equity
Date. In the event Owner Participant fails to make such
payment, and Lessee shall make an Advance as required by
Section 3.8 of the Lease, Lessee may obtain reimbursement in
the manner and to the extent provided in Section 3.8 of the
Lease for the Advance, together with interest on such amount
at the rate described below from (and including) the date of
the making of such Advance to (but excluding) the date of
reimbursement by the Owner Participant or the date Lessee
deducts such Advance from other payments to the extent and as
provided in Section 3.8 of the Lease and, without duplication
of the foregoing, shall have such remedies as may be available
to it against the Owner Participant at law or in equity in
respect of the recovery of any such Advance. Interest shall
accrue on the amount of the Advance at an annual rate equal to
5% in excess of the Base Rate, unless the Advance is made when
any Lease Event of Default or Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) shall have
occurred and be continuing, in which event interest shall
accrue on the amount of such Advance at the Base Rate, but in
each case not to exceed the maximum rate permitted by
applicable law. All amounts paid to Lessee by the Owner
Participant in respect of any Advance or deducted by Lessee
pursuant to Section 3.8 of the Lease shall be applied first to
payment to Lessee of interest and then to payment to Lessee of
amounts equal to such Advance."
Section 5. Amendments to Section 11(f). Section 11(f) of the
Participation Agreement is hereby amended such that wherever the phrase
"Operative Agreement" or "Operative Agreements" is used, such phrase is hereby
amended to be and read in its entirety as follows:
"Operative Agreement and each Pass Through Trust Agreement"
and "Operative Agreements and each Pass Through Trust
Agreement."
Section 6. Amendments to Section 15. Section 15(b) of the
Participation Agreement is hereby amended to be and read in its entirety as
follows:
"(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, Owner Trustee, Indenture
Trustee, Owner Participant, Pass Through Trustee and any
Holder provided for in this Agreement, and Lessee's, Owner
Trustee's, Indenture Trustee's, Owner Participant's, Pass
Through Trustee's and any Holder's obligations under any and
all thereof, shall survive the making available of the Owner
Participant's Commitment, the delivery or return of the
Aircraft, the transfer of any interest of Owner Participant in
the Trust Estate or the Aircraft or any Engine or the transfer
of any interest by any Holder in any Certificate or the Trust
Indenture Estate and the expiration or other termination of
this Agreement, any other Operative Agreement or the Pass
Through Trust Agreements, except as otherwise expressly
provided herein or therein."
PARTICIPATION AMENDMENT [N603SW]
-5-
<PAGE> 7
Section 7. Amendment to Section 16. Section 16(b) of the
Participation Agreement is hereby amended by changing "0.365%" in clause (i)
thereof to read "0.362338" and by changing "0.625%" in clause (ii) thereof to
read "0.62992."
Section 8. Amendment to Section 17. Section 17(a)(3) of the
Participation Agreement is hereby amended by deleting the second parenthetical
contained in clause (i) thereof.
Section 9. Ratification. Except as amended hereby, the
Participation Agreement continues and shall remain in full force and effect in
all respects.
Section 10. Authorization to Execute Amendments. By execution of
this Amendment, Owner Participant hereby authorizes, directs and instructs
Owner Trustee to execute and deliver this Amendment and any and all other
amendments, agreements and certificates as may be necessary as a result of the
refinancing contemplated hereby and by Section 18 of the Participation
Agreement.
Section 11. Pass Through Trustee a Party. Effective as of the
date hereof, Pass Through Trustee shall be a party to the Participation
Agreement and shall have the rights and obligations of the Holders as set forth
in the Participation Agreement, as amended hereby.
Section 12. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 13. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
PARTICIPATION AMENDMENT [N603SW]
-6-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Participation Agreement to be duly delivered in the State of New
York and executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By: /s/ John D. Owen
Treasurer
BANC ONE ARIZONA
LEASING CORPORATION,
Owner Participant
By: /s/ Sue Baaden
Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By: /s/ Philip G. Kane, Jr.
Vice President
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as otherwise expressly
provided herein, but solely as
Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Senior Financial Services Officer
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By: /s/ David A. Vanaskey, Jr.
Senior Financial Services Officer
PARTICIPATION AMENDMENT [N603SW]
-7-
<PAGE> 9
SCHEDULE I
Names and Addresses
Lessee:
Southwest Airlines Co. Owner Trustee:
2702 Love Field Drive Shawmut Bank Connecticut,
P.O. Box 36611 National Association
Dallas, Texas 75235-1611 777 Main Street
Hartford, Connecticut 06115
Attn: Treasurer
Telecopy: (214) 904-4022 Attn: Corporate Trust
Administration
Owner Participant: Telecopy: (203) 240-7920
Banc One Arizona Leasing Corporation
c/o Bank One, Arizona, NA
241 North Central, 8th floor Indenture Trustee and Pass Through
Phoenix, Arizona 85004 and Trustee Holder:
Attn: Accounting Dept. A719 Wilmington Trust Company
With a copy to: Rodney Square North
Bank One, Arizona, NA 1100 North Market Street
c/o Banc One Leasing Corporation Wilmington, Delaware 19890-0001
2400 Corporate Exchange Drive
Suite 300 Attn: Corporate Trust
Columbus, Ohio 43231 Administration
and Bank One, Arizona, NA Telecopy: (302) 651-8882
c/o Banc One Leasing Corporation
111 Monument Circle, Ste. 1931 Payment Instructions:
Indianapolis, IN 46204-5100 Wilmington Trust Company
Telecopy: (317) 321-8828 Wilmington, Delaware
ABA No. 031100092
Payment Instructions: For the account of Southwest
Banc One Arizona Leasing Corporation Airlines 1995-1
c/o Banc One Arizona, N.A. Account No. 30875-0
ABA No. 122-1000-24 Reference: N603SW
Account No. 40-0987 Attn: David A. Vanaskey
Attn: Accounting Department A719 Corporate Trust Administration
Reference: Southwest Airlines
PARTICIPATION AGREEMENT [N603SW]
I-1
<PAGE> 1
EXHIBIT 4.32
________________________________________________________________________________
SALE AND LEASE AGREEMENT
dated as of July 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N603SW
________________________________________________________________________________
All right, title and interest of Lessor in and to this Sale and Lease
Agreement and the Aircraft (including the Engines) has been assigned to and is
subject to a security interest in favor of WILMINGTON TRUST COMPANY, as
Indenture Trustee. This Sale and Lease Agreement has been executed in several
counterparts. No security interest in Lessor's right, title and interest in
and to this Sale and Lease Agreement may be created through the transfer or
possession of any counterpart other than the counterpart identified, for
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart. [This is not the original
counterpart.]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Sale, Lease and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Interim and Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Variable Amounts on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Adjustment to Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value . . . . . . . . 16
3.7.1 Adjustments upon Payment by Lessor of Transaction Costs, Etc . . . . . . . . . . . . . . 16
3.7.2 Recalculation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.8 Certain Advances; Reimbursement Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain Agreements of Lessee . . . . . . . . . 18
4.1 Lessor's Representations and Warranties; DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 General Condition upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.1 Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.2 Free of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.3 Operating Configuration and Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.4 Cleanliness and Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.5 Parts and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Return of Other Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Return at End of Base Lease Term or Renewal Lease Term . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 Manuals; Service Bulletins, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Failure to Return Aircraft or Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 Aid in Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.7 Storage upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7. Registration, Operation, Possession, Subleasing and Records . . . . . . . . . . . . . . . . . . . . 23
7.1 Registration and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7.1.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.2 Nameplate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.4 Insurance Requirements; Government Requisition; Indemnity . . . . . . . . . . . . . . . . 24
7.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.1 Interchange and Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.2 Testing and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.3 Civil Reserve Air Fleet Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.4 Installation of Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.5 Installation of Engines on Other Airframes . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.6 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.7 Wet Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.8 Sublease to Permitted Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.2 Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations; Modifications and Additions . . . . . . 29
8.1 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.1 Maintenance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.2 Compliance with Government Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.3 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.4 Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.4.1 Mandatory Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.4.2 Voluntary Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Right of Termination upon Obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Sale of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Retention by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4 Termination As to Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10. Loss, Destruction, Requisition, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1 Event of Loss with Respect to Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.1 Lessee's Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.2 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.3 Payment of Stipulated Loss Value and Rent . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.4 Stipulated Loss Value Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.5 Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.6 Conditions to Replacement of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.6.1 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
SALE AND LEASE AGREEMENT [N603SW]
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
10.1.6.2 Tax Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.6.3 Lessee's Obligations with Respect to Replacement Aircraft . . . . . . . . . . . 36
10.1.7 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1.8 Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2 Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2.2 Conditions; Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2.3 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.4 Conveyance; Replacement Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.5 No Reduction of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Application of Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3.1 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3.2 Replacement of Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.3 Nonreplacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.4 Requisition of Aircraft for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 41
10.5 Requisition of an Engine for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 41
10.6 Application of Payments During Existence of Default . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1 Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1.2 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1.3 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2 Insurance Against Loss of or Damage to Aircraft and Engines . . . . . . . . . . . . . . . . . . . . 42
11.2.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2.2 War-Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3 Certain Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3.1 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3.2 Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.4 Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.5 Government Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3 General Policy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.1 Primary Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.2 Coverage for Each Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.3 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.5 Notice of Termination or Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.6 Nonliability for Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.7 Identity of Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.8 Fifty-fifty Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Application of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.5 Certificates; Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
SALE AND LEASE AGREEMENT [N603SW]
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<TABLE>
<S> <C> <C>
11.6 Lessor's Right to Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.7 Insurance for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.8 Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.2 Security for Lessor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.1 Failure to Pay Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.2 Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.3 General Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.4 Misrepresentation and Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.5 Bankruptcy, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1 Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1.1 Return; Repossession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1.2 Sale; Use Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1.3 Certain Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.3.1 Liquidated Damages--Fair Market Rental Value . . . . . . . . . . . . . . . . . 50
15.1.3.2 Liquidated Damages--Fair Market Sales Value . . . . . . . . . . . . . . . . . . 50
15.1.4 Liquidated Damages upon Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.5 Rescission and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.2 Determination of Fair Market Rental Value and Fair Market Sales Value . . . . . . . . . . . . . . . 52
15.3 No Waiver, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17. Net Lease; Lessee's Obligations; No Setoff, Counterclaim, Etc . . . . . . . . . . . . . . . . . . . 53
Section 18. Renewal and Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
18.1 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
18.2 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 19. Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 20. Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 21. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 22. Investment of Security Funds; Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
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<TABLE>
<S> <C> <C>
22.1 Investment of Security Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
22.2 Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 23. Permitted Foreign Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
EXHIBIT A Form of Sale and Lease Agreement Supplement
EXHIBIT B-1 Stipulated Loss Value Schedule
EXHIBIT B-2 Termination Value Schedule
EXHIBIT C Rent Payment Schedule and Special Purchase Price
EXHIBIT D Permitted Foreign Air Carriers
EXHIBIT E Assumed Interest Amounts
APPENDIX A Certain Return Conditions
SALE AND LEASE AGREEMENT [N603SW]
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THIS SALE AND LEASE AGREEMENT, dated as of July 1, 1995, is between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity except as expressly stated herein, and otherwise
as Owner Trustee under the Trust Agreement hereinafter referred to (together
with any successor in such capacity and its permitted assigns, "Lessor"), and
SOUTHWEST AIRLINES CO., a Texas corporation (together with its successors and
permitted assigns, "Lessee").
RECITALS
1. On June 5, 1995, an AC Form 8050-2 Bill of Sale dated April
21, 1995, from Manufacturer (as defined below) in favor of Lessee covering the
Aircraft (as defined below) was recorded by the FAA (as defined below) as
Conveyance Number P02609.
2. The parties hereto desire that Lessor purchase the Aircraft
from and lease it back to Lessee as hereinbelow provided.
In consideration of the premises and the mutual agreements herein
contained, Lessor and Lessee agree as follows:
Section 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease and shall be equally applicable to both the singular and the plural forms
of the terms herein defined. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified (including as the same may be
amended and restated) from time to time, to the extent permitted by, and in
accordance with, the terms thereof. For all purposes of this Lease the
capitalized terms used but not defined herein are used as defined in the Trust
Indenture or, if not defined therein, as defined in the Participation
Agreement.
"Act" means Subtitle VII of Title 49 of the United States Code, as
amended from time to time.
"Advance" is defined in Section 3.8.
"Affiliate" means, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aircraft" means the Airframe, together with the two Engines, whether
or not any of such Engines may from time to time be installed on the Airframe
or may be installed on any other airframe or on any other aircraft.
SALE AND LEASE AGREEMENT [N603SW]
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"Airframe" means (i) the Boeing Model 737-3H4 aircraft (excluding
Engines or engines from time to time installed thereon) specified in the
initial Lease Supplement, manufactured by Manufacturer and sold by Manufacturer
to Lessee pursuant to the Purchase Agreement, sold hereunder by Lessee to
Lessor, and leased back by Lessor to Lessee, all hereunder and under the
initial Lease Supplement, (ii) any Replacement Airframe, (iii) any and all
Parts so long as the same shall be incorporated in such aircraft and title
thereto shall have vested in Lessor pursuant to the terms of Section 8, and any
and all Parts removed from such aircraft so long as title thereto shall remain
vested in Lessor in accordance with the terms of Section 8, and (iv) all
Records at any time maintained with respect to the foregoing property;
provided, however, that at such time as a Replacement Airframe shall be
substituted hereunder and the replaced Airframe shall be released from the Lien
of the Trust Indenture, such replaced Airframe shall cease to be the Airframe
hereunder.
"Assumed Interest Rate" means 6.40% per annum, compounded
semi-annually and computed on the basis of a 360-day year of twelve 30-day
months.
"Assumed Interest Amount" means, with respect to the Deferred Equity
Date and each Rent Payment Date, the amount set forth on Exhibit E opposite
such date.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time, or any successor statute.
"Base Lease Term" means the period commencing on the Base Lease Term
Commencement Date and expiring at the end of the day on May 13, 2019.
"Base Lease Term Commencement Date" means July 1, 1996.
"Base Rate" means the interest rate publicly announced in New York
City from time to time by The Chase Manhattan Bank (National Association) as
its prime or base lending rate.
"Basic Rent" means the rent identified as Basic Rent in and payable
pursuant to Section 3.3.
"Bills of Sale" means the FAA Bill of Sale, the Warranty Bill of Sale,
the Lessee FAA Bill of Sale and the Lessee Warranty Bill of Sale.
"Break Amount" is defined in Section 15.05(b) of the Trust Indenture.
"Business Day" shall have the meaning attributed thereto in the Trust
Indenture, so long as the Trust Indenture shall remain in effect, and otherwise
means a day on which banks are not required or authorized to close in any of
the City of New York, New York, Dallas, Texas, and Hartford, Connecticut, or
such other city as shall be the situs of the principal office of Lessee or
Lessor at the time in question.
SALE AND LEASE AGREEMENT [N603SW]
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"Certificate Holder" is defined in Section 1.01(b) of the Trust
Indenture.
"Certificate Rate" means, as of any date of determination thereof, (i)
in respect of amounts owing or distributable pursuant to the Trust Indenture to
the Holders of Certificates issued prior to the Section 18 Refinancing Date,
the applicable Assumed Interest Rate, (ii) in respect of amounts owing to the
Holders of Certificates issued on or after the Section 18 Refinancing Date, the
interest rate or, if such Certificates shall have been issued with more than
one Maturity Date, the weighted average of the interest rates (which weighting
is to be based on the Outstanding principal amounts of the Certificates of each
Maturity Date), then in effect with respect to the then Outstanding principal
amounts of the Certificates, (iii) in respect of any portion of Stipulated Loss
Value expected to be distributed to the Owner Participant, an interest rate
equal to the yield utilized in calculating the Owner Participant's Net Economic
Return, and (iv) in respect of any other amount owing to the Owner Participant
(and which is not distributed to the Holders pursuant to the Trust Indenture),
1% in excess of the Base Rate, but in no event to exceed the maximum rate
permitted by applicable law.
"Certificates" means the Certificates (as defined in the Trust
Indenture) issued under the Trust Indenture.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Debt Payments" is defined in Section 18.2(e)(1)(b).
"Deferred Equity Amount" is defined in Section 8(dd) of the
Participation Agreement.
"Deferred Equity Date" means January 1, 1996.
"Delivery Date" means the date of the initial Lease Supplement, which
date shall be the date on which the Aircraft is delivered by Lessee to, and
accepted by, Lessor hereunder and in turn leased back by Lessor to Lessee
hereunder, which date shall be a Business Day.
"Dollars" and "$" mean the lawful currency of the United States of
America.
"DOT" means the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"Engine" means (i) each of the CFM International Model CFM56-3-B1
engines identified by manufacturer's serial number in the initial Lease
Supplement subjecting the Aircraft to this Lease and originally installed on
the Airframe covered by such Lease Supplement, whether or not from time to time
thereafter installed on such Airframe or installed on any other airframe or on
any other aircraft, and (ii) any Replacement Engine, whether or not from time
to time thereafter installed on the Airframe or any other airframe or on any
other aircraft, together in each case with any and all Parts incorporated in
such Engine and any and all Parts removed from such Engine, in each case so
long as title thereto shall have been and shall remain vested in Lessor in
accordance with the terms
SALE AND LEASE AGREEMENT [N603SW]
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of Section 8, and all Records at any time maintained with respect to the
foregoing property. Except as otherwise set forth herein, at such time as a
Replacement Engine shall be substituted hereunder and the Engine for which the
substitution is made shall be released from the Lien of the Trust Indenture,
such replaced Engine shall cease to be an Engine hereunder. The term "Engines"
means, as of any date of determination, all Engines then leased hereunder.
"Engine Manufacturer" means CFM International, Inc., a Delaware
corporation, in its capacity as manufacturer of the Engines.
"Equity Payments" is defined in Section 18.2(e)(1)(b).
"Estate" means the Trust Estate as that term is defined in the Trust
Agreement.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such property: (i)
disappearance or theft of such property or the loss of the use thereof for any
reason not covered by any other clause of this definition, including hijacking,
for a period of three consecutive months or for a period continuing through the
last day of the Term, whichever first occurs, or destruction, damage beyond
economic repair or rendition of such property permanently unfit for normal use
for any reason whatsoever; (ii) any damage to such property which results in an
insurance settlement with respect to such property on the basis of a total loss
or a constructive or compromised total loss; (iii) the confiscation,
condemnation or requisition of use of such property by the Government or any
other government or any instrumentality or agency thereof for a period in
excess of six consecutive months or for a period continuing beyond the Term,
whichever first occurs; (iv) as a result of any rule, regulation, order or
other action by the FAA, DOT or other governmental body (including any court)
having jurisdiction, the use of such property in the normal course of
interstate air transportation of persons shall have been prohibited for a
period of more than six consecutive months, unless Lessee, prior to the
expiration of such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit normal use by Lessee, but in any event (a) in any case in which such
prohibition shall apply generally to all similar Boeing Model 737-300 series
aircraft, if such prohibition is continuing on the last day of the Term, or (b)
in all other cases, if such prohibition is continuing on the earlier of the
first anniversary of such prohibition and the last day of the Term; provided,
however, that if such prohibition is continuing on the last day of the Term, no
Event of Loss pursuant to this clause (iv) shall exist if Lessor shall have
delivered to Lessee a written notice not less than two days prior to the end of
the Term that such prohibition on the last day of the Term shall not be deemed
an Event of Loss; (v) the confiscation, condemnation or requisition of title to
such property by the Government or any other government or any instrumentality
or agency thereof; or (vi) respecting any Engine, any divestiture of title
treated as an Event of Loss pursuant to Section 7.2.1 or any other provision of
this Lease. An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if an Event of Loss occurs with respect to the Airframe. An
Event of Loss shall be deemed to occur as of the date of the disappearance,
theft, loss of use, insurance settlement, prohibition, confiscation,
condemnation or requisition of title or of use, as applicable, except that no
Event of Loss shall be deemed to have occurred pursuant to clause (i), (iii) or
(iv) above until the expiration of the applicable period referred to therein.
SALE AND LEASE AGREEMENT [N603SW]
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"FAA" or "Federal Aviation Administration" means the Federal Aviation
Administration or any governmental person, agency or other authority succeeding
to the functions of the Federal Aviation Administration.
"FAA Bill of Sale" means a bill of sale for the Aircraft on AC Form
8050-2 delivered to Lessee on the date of delivery of the Aircraft to Lessee by
Manufacturer under the Purchase Agreement.
"FAA Regulations" means the Federal Aviation Regulations issued
pursuant to the Act from time to time, or any successor regulations thereto.
"Fixed Rate Renewal Term" means a six-month period following the end
of the Base Lease Term and with respect to which Lessee shall have exercised
its option pursuant to Section 18.1 hereof.
"Floating Rate Renewal Term" means any of three successive periods of
six months or one, two or three years each, not to exceed three years and six
months in the aggregate, which follow the Fixed Rate Renewal Term and with
respect to which Lessee shall have exercised its option pursuant to Section
18.1 hereof.
"Government" means the federal government of the United States of
America or any instrumentality or agency thereof having the full faith and
credit of the United States of America.
"Guarantor" means Bank One, Arizona, NA, a national banking
association, and its successors and permitted assigns.
"Guaranty" means the Guaranty, dated as of July 1, 1995, of the
Guarantor in favor of the Persons named therein.
"Holder" is defined in Section 1.01(b) of the Trust Indenture.
The term "incorporated in" means incorporated or installed in or
attached to or otherwise made a part of.
"Indemnified Parties" means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N603SW-I
Certificate (including without limitation the Original Loan Participant), (v)
the Estate and the Trust Indenture Estate, (vi) the respective Affiliates,
successors and assigns of the foregoing, and (vii) the respective directors,
officers, employees, agents, partners and servants of the foregoing.
"Indenture and Trust Supplement" means a supplement to the Trust
Agreement and the Trust Indenture, substantially in the form of Exhibit C to
the Trust Indenture.
SALE AND LEASE AGREEMENT [N603SW]
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"Indenture Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Indenture Trustee under the Trust Indenture
and any successor, separate or additional Indenture Trustee thereunder.
"Indenture Trustee Agreements" means the Participation Agreement and
the Trust Indenture.
"Interim Lease Term" means the period commencing on January 6, 1996
and expiring at the end of the day on the day before the Base Lease Term
Commencement Date.
"Interim Rent" means the rent identified as Interim Rent in and
payable pursuant to Section 3.3.
"Investment Grade" is defined in Section 11.8.
"Lease", "this Lease", "this Agreement", "hereby", "herein", "hereof",
"hereunder" or other words mean this Sale and Lease Agreement, including
without limitation supplementation hereof by one or more Lease Supplements.
"Lease Default" means any event or condition which, with notice or
lapse of time or both, would constitute a Lease Event of Default.
"Lease Event of Default" is defined in Section 14.
"Lease Period" means each of the Preliminary Lease Term, the Interim
Lease Term, and each six-month period commencing on a January 1 or July 1, as
the case may be, thereafter during the Term.
"Lease Supplement" means a supplement to this Lease, in the case of
the initial such supplement substantially in the form attached as Exhibit A
hereto, subjecting the Aircraft or other property to this Lease.
"Lessee FAA Bill of Sale" means a bill of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the FAA and delivered to
Lessor on the Delivery Date by Lessee.
"Lessee Warranty Bill of Sale" means a full warranty bill of sale
covering the Aircraft delivered to Lessor on the Delivery Date by Lessee.
"Lessor's Cost" for the Aircraft means the amount identified as such
in the initial Lease Supplement subjecting the Aircraft to this Lease.
"Lessor Liens" means Liens of any Person claiming by, through or under
Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant which arise as a result of (i) claims against Lessor, the
Person serving as Owner Trustee, in its individual capacity, or Owner
Participant, as the case may be, not related to the transactions contemplated
by the Operative Agree-
SALE AND LEASE AGREEMENT [N603SW]
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ments, (ii) any act or omission of Lessor, the Person serving as Owner Trustee,
in its individual capacity, or Owner Participant, as the case may be, which is
not related to the transactions contemplated by the Operative Agreements, or is
in violation of any of the express terms of any of the Operative Agreements,
(iii) Taxes or Losses imposed against or incurred by Lessor, the Person serving
as Owner Trustee, in its individual capacity, or Owner Participant, as the case
may be, for which Lessee is not obligated to indemnify pursuant to the
Participation Agreement or the Tax Indemnity Agreement, other than Liens for
Taxes not yet due or for Taxes or Losses being contested in good faith (and for
the payment of which adequate reserves have been provided in accordance with
generally accepted accounting principles) by appropriate proceedings so long as
such proceedings do not involve any material danger of the sale, forfeiture,
loss or loss of use of the Aircraft, the Airframe or any Engine or any interest
therein, or (iv) claims against Lessor, the Person serving as Owner Trustee, in
its individual capacity, or Owner Participant, as the case may be, arising out
of any transfer by any of such Persons in violation of the express terms of the
Operative Agreements.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest, or any claim or exercise of rights, affecting the title to
or any interest in property.
"Losses" is defined in Section 7(c)(i) of the Participation Agreement.
"Maintenance Program" is defined in Section 8.1.1.
"Manufacturer" means The Boeing Company, a Delaware corporation, or
any Affiliate thereof whose obligations are guaranteed by The Boeing Company,
and their respective successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
Manufacturer to be attached to the Purchase Agreement Assignment and, if
applicable, the Agreement of Subsidiary by Boeing Domestic Sales Corporation of
even date therewith.
"Net Economic Return" means after-tax economic yield, total aggregate
after-tax cash flow and Owner Participant's monthly weighted-average return on
assets expected by the initial Owner Participant with respect to the Aircraft
for the Base Lease Term, utilizing the same assumptions (including tax
assumptions and constraints) as were utilized by Owner Participant in
determining Interim Rent, Basic Rent, Stipulated Loss Value and Termination
Value percentages as of the Delivery Date, as such assumptions may be adjusted
from time to time to take into account the impact of any change of the type
specified in Section 3.7 which theretofore has resulted in an adjustment of the
percentages of Interim Rent, Basic Rent, Stipulated Loss Value or Termination
Value.
"Net Present Value of Rents" means, as of any date of determination,
the net present value, as of the Delivery Date, of each of (i) all unpaid
Interim Rent and Basic Rent through the end of the Term and (ii) for any date
of determination prior to the Special Purchase Option Date, all unpaid Interim
Rent and Basic Rent through the Special Purchase Option Date plus the Special
Purchase Price, in each case utilizing a semi-annual discount rate that, on an
annual basis, is equal to 8.60%.
SALE AND LEASE AGREEMENT [N603SW]
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"Officer's Certificate" means a certificate signed by the Chairman,
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Assistant Secretary of the Person providing
such certificate.
"Operative Agreements" means this Agreement, each Lease Supplement,
the Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement
and the Manufacturer's Consent, including any consents included in or attached
to any thereof.
"Original Loan Participant" means Bank of America Illinois, and its
successors and permitted assigns as holder of the Series SWA 1995 Trust
N603SW-I Certificates.
"Overdue Rate" means (i) in respect of that portion of Interim Rent,
Basic Rent, Stipulated Loss Value, Termination Value or Special Purchase Price
(or any installment thereof) expected to be applied to principal of or interest
on the Certificates, the Past Due Rate, or if Certificates shall have been
issued after the Section 18 Refinancing Date with more than one Maturity Date,
the weighted average of the Past Due Rates in respect of the then- outstanding
Certificates of each Maturity Date (which weighting is to be based on the
Outstanding principal amounts of the Certificates of each Maturity Date) and
(ii) in respect of any other portion of Interim Rent, Basic Rent, Stipulated
Loss Value, Termination Value or Special Purchase Price (or any installment
thereof), any Renewal Rent, any Supplemental Rent owing to any Person, or any
amount payable to Lessee (except as otherwise provided), 2% in excess of the
Base Rate, but in no event to exceed the maximum rate permitted by applicable
law. Any interest payable at the Overdue Rate that is determined with
reference to clause (i) of this definition shall be computed on the same basis
as the Past Due Rate, and any interest payable at the Overdue Rate that is
determined with reference to clause (ii) of this definition shall be computed
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed.
"Owner Participant" means Banc One Arizona Leasing Corporation, an
Arizona corporation, and its successors and permitted assigns.
"Owner Participant Agreements" means the Participation Agreement, the
Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means Shawmut Bank Connecticut, National Association,
not in its individual capacity but solely as trustee under the Trust Agreement,
and any successor, separate or additional Owner Trustee thereunder.
"Owner Trustee Documents" means the Participation Agreement, this
Lease, the Trust Agreement, the Trust Indenture, the Certificates and the
Purchase Agreement Assignment.
SALE AND LEASE AGREEMENT [N603SW]
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"Participant" means Owner Participant and Original Loan Participant
and their respective successors and permitted assigns.
"Participation Agreement" means the Participation Agreement, dated as
of July 1, 1995, among Lessee, Participants, Lessor and Indenture Trustee,
relating to the Aircraft.
"Parts" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(other than (a) complete Engines or engines and (b) any items leased by Lessee
from a third party (other than Lessor)) which may from time to time be
incorporated in the Airframe or any Engine and title to which shall vest in
Lessor (and "Part" means any of the foregoing) or, so long as title thereto
shall remain vested in Lessor in accordance with Section 8.2 hereof, after
removal therefrom.
"Permitted Foreign Air Carrier" means a "foreign air carrier" (as
defined in the Act) named in Exhibit D hereto (as the same may be modified from
time to time in accordance with Section 23) and any successor of any such
carrier.
"Permitted Lien" means any Lien referred to in clauses (a) through (g)
of Section 6.
"Permitted Sublease" means a sublease permitted under Section 7.2.8.
"Permitted Sublessee" means the sublessee under a Permitted Sublease.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Preliminary Lease Term" means the period commencing on the Delivery
Date and expiring at the end of the day on January 5, 1996.
"Purchase Agreement" means the Purchase Agreement between Manufacturer
and Lessee specified in the Purchase Agreement Assignment providing, among
other things, for the manufacture and sale by Manufacturer to Lessee of certain
Boeing Model 737-300 series aircraft (including the Aircraft), as the same has
been or may hereafter (to the extent permitted by the terms of the Purchase
Agreement Assignment) be amended, modified or supplemented and including,
without limitation, as part thereof, the detail specifications referred to
therein and any and all change orders from time to time entered into with
respect thereto (to the extent permitted by the terms of the Purchase Agreement
Assignment), as such Purchase Agreement relates to the Aircraft and has been
assigned pursuant to the Purchase Agreement Assignment.
"Purchase Agreement Assignment" means the Purchase Agreement
Assignment to be entered into, between Lessee and Lessor, assigning to Lessor
certain of Lessee's rights and interests under the Purchase Agreement with
respect to the Aircraft, which Purchase Agreement Assignment will have annexed
thereto the Manufacturer's Consent, executed by Manufacturer.
SALE AND LEASE AGREEMENT [N603SW]
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"Records" is defined in Section 5.4.
"Refinancing Date" is defined in Section 17(a) of the Participation
Agreement.
"Renewal Rent" means the rent payable in respect of a Renewal Term
determined pursuant to Section 18.1.
"Renewal Term" means the Fixed Rate Renewal Term or any Floating Rate
Renewal Term.
"Rent" means Interim Rent, Basic Rent, Renewal Rent and Supplemental
Rent.
"Rent Differential Amount" is defined in Section 3.3.
"Rent Payment Date" means each January 1 and July 1 during the Base
Lease Term and any Renewal Term, commencing with July 1, 1996.
"Replacement Aircraft" means any Aircraft of which a Replacement
Airframe is a part.
"Replacement Airframe" means a Boeing Model 737-300 (or an improved
model) aircraft (except Engines or engines from time to time installed thereon)
which shall be leased hereunder pursuant to Section 10.1.2.
"Replacement Engine" means a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer or an engine
of another manufacturer of at least equivalent utility, remaining useful life
and value, in each case suitable for installation and use on the Airframe and
fully compatible with the other Engine or engine installed thereon) which shall
have been substituted for an Engine leased hereunder pursuant to Section 5.2,
9.4, 10.1 or 10.2.
"Section 18 Refinancing Date" is defined in Section 18(a) of the
Participation Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"SLV Determination Date" means any date set forth in Exhibit B-1
hereto.
"Special Purchase Option Date" is defined in Section 18.2(b).
"Special Purchase Price" is defined in Section 18.2(b).
"Special Purchase Price After-Tax Yield" means the after-tax economic
yield, total aggregate after-tax cash flow and Owner Participant's monthly
weighted average return on assets expected by the Owner Participant with
respect to the Aircraft through the Special Purchase Option Date if the Special
Purchase Option were exercised, utilizing the multiple investment sinking fund
method of analysis and the same assumptions as used by such Owner Participant
(including the Tax
SALE AND LEASE AGREEMENT [N603SW]
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Assumptions set forth in Section 2 of the Tax Indemnity Agreement and the
assumption that the amount of interest payable on the Certificates on each Rent
Payment Date occurring prior to or concurrent with the Special Purchase Option
Date will be the Assumed Interest Amount set forth on Exhibit E in respect of
such Rent Payment Date) in its economic analysis of the transaction as of the
Delivery Date.
"Stipulated Loss Value" means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment (and, to the
extent that the actual amount of interest paid and to be paid on the
Certificates during the Lease Period in which such SLV Determination Date
occurs up to and including such date is greater or less than the amount
included in calculating the percentage set forth in Exhibit B-1 with respect to
such SLV Determination Date on account of such interest, such percentage shall
be adjusted appropriately to compensate for such differential). Stipulated
Loss Value may be subject to adjustment in accordance with Section 3.7 and
Section 18.2(d) of this Agreement.
"Supplemental Rent" means, without duplication, all amounts,
liabilities and obligations (other than Interim Rent, Basic Rent or Renewal
Rent) which Lessee assumes or agrees to pay to Lessor or any other Person
hereunder, under the Participation Agreement or any of the other Operative
Agreements, including, without limitation (i) Stipulated Loss Value and
Termination Value payments and Special Purchase Price payments, (ii) all
amounts required to be paid by Lessee under the agreements, covenants and
indemnities contained in the Participation Agreement and the Tax Indemnity
Agreement, and (iii) all amounts required to be paid pursuant to Sections 3.4,
3.5 and 3.8 hereof.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement, dated as
of July 1, 1995, between Owner Participant and Lessee, relating to the
Aircraft.
"Taxes" is defined in Section 7(b)(i) of the Participation Agreement.
"Term" means the term for which the Aircraft is leased pursuant to
Section 3 hereof and, unless earlier terminated, shall include the Preliminary
Lease Term, the Interim Lease Term, the Base Lease Term and any Renewal Term
then in force or committed to in accordance with Section 18.1.
"Termination Date" is defined in Section 9.1.
"Termination Value" means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined (and, to the extent that the actual amount of interest paid and to
be paid on the Certificates during the Lease Period in which such TV
Determination Date
SALE AND LEASE AGREEMENT [N603SW]
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occurs up to and including such date is greater or less than the amount
included in calculating the percentage set forth in Exhibit B-2 with respect to
such TV Determination Date on account of such interest, such percentage shall
be adjusted appropriately to compensate for such differential). Termination
Value may be subject to adjustment in accordance with Section 3.7 of this
Agreement.
"Transfer" means, with respect to any Person, to transfer, by bill of
sale or otherwise, all such Person's right, title and interest in and to the
Aircraft, Airframe or any Engine, as the case may be, to another Person on an
"as is, where is" basis, free and clear of any Lessor Lien but otherwise
without recourse, representation or warranty, express or implied, and including
an express disclaimer of warranties, representations and guarantees in a manner
comparable to that set forth in Section 4.1.
"Trust Agreement" means the Trust Agreement, dated as of July 1, 1995,
between Owner Participant and Shawmut Bank Connecticut, National Association,
in its individual capacity, relating to the Aircraft.
"Trust Indenture" means the Trust Indenture and Security Agreement,
dated as of July 1, 1995, between Owner Trustee and Indenture Trustee, relating
to the Aircraft.
"Trust Indenture Estate" has the meaning attributed to the term
"Indenture Estate" in the Trust Indenture.
"TV Determination Date" means any date set forth in Exhibit B-2 hereto.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to 49 U.S.C. Section 41102 and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
"Warranty Bill of Sale" means the full warranty bill of sale for the
Aircraft delivered to Lessee on the date of delivery of the Aircraft to Lessee
by the Manufacturer under the Purchase Agreement.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which the Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under the Act for the performance by such employees of
similar functions within the United States of America (it being understood that
cabin attendants need not be regular employees of Lessee), (ii) shall be
maintained by Lessee in accordance with its Maintenance Program, and (iii)
shall be and remain, in the hands of such third party, subject to all other
terms and conditions of this Lease.
SALE AND LEASE AGREEMENT [N603SW]
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Section 2. Sale, Lease and Acceptance.
(a) Lessor, subject to satisfaction or waiver of the conditions
set forth in Section 4 of the Participation Agreement and the concurrent
acceptance hereunder by Lessee of the Aircraft, hereby agrees, to the extent
that the funds received by it pursuant to Section 2 of the Participation
Agreement are adequate for the purpose, to purchase at a purchase price equal
to Lessor's Cost and to accept delivery on the Delivery Date from Lessee
hereunder and to lease back (immediately after extension of the Lien of the
Trust Indenture to the Aircraft) to Lessee hereunder, and Lessee hereby agrees
to sell to Lessor and to lease back (immediately after extension of the Lien of
the Trust Indenture to the Aircraft) from Lessor hereunder on the Delivery
Date, the Aircraft, which shall have been accepted by Lessor and Lessee
hereunder as evidenced by the execution by Lessor and Lessee of the Lease
Supplement conveying to Lessor and leasing to Lessee the Aircraft hereunder;
provided, however, that Lessor and Lessee shall have no further obligation
hereunder with respect to the Aircraft if the Delivery Date shall not have
occurred on or before September 30, 1995. The purchase price of the Aircraft
shall be paid by Lessor to Lessee on the Delivery Date in the manner specified
in Section 2 of the Participation Agreement.
(b) Lessor hereby authorizes each of Gary C. Kelly, John D. Owen
and Laura Wright, all of whom are employees of Lessee, as the authorized
representative or representatives of Lessor to accept delivery of the Aircraft
from Lessee pursuant hereto. Lessee hereby agrees that in the event delivery
of the Aircraft shall be accepted by an employee or employees of Lessee
pursuant to such authorization by Lessor, such acceptance of delivery by such
employee or employees on behalf of Lessor shall, without further act, also
irrevocably constitute (i) acceptance by such employee of such appointment and
(ii) acceptance by Lessee of the Aircraft for all purposes of this Agreement.
Section 3. Term and Rent.
3.1 General. Except as otherwise provided herein, the Term for
the Aircraft shall commence on the Delivery Date specified in the initial Lease
Supplement and shall terminate as herein provided.
3.2 Lease Term. Except as provided herein, the Aircraft shall be
leased hereunder for the Preliminary Lease Term, the Interim Lease Term, the
Base Lease Term and each Renewal Term, if any.
3.3 Interim and Basic Rent. No Interim Rent or Basic Rent shall
be paid during the Preliminary Lease Term. Lessee hereby agrees to pay to
Lessor (i) Interim Rent for the Interim Lease Term with respect to the Aircraft
on the first Rent Payment Date set forth on Exhibit C, and (ii) Basic Rent for
the Base Lease Term with respect to the Aircraft on each subsequent Rent
Payment Date set forth in Exhibit C, in each case in an amount equal to the
percentage of Lessor's Cost of the Aircraft set forth in Exhibit C opposite
such Rent Payment Date, subject to the terms of the next succeeding paragraphs
of this Section 3.3 and Section 3.7. Each installment (or portion of an
installment) of Interim Rent or Basic Rent under the heading "Advance" in
Exhibit C payable on a Rent Payment Date shall relate to the respective Lease
Period immediately following such Rent
SALE AND LEASE AGREEMENT [N603SW]
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Payment Date, and each installment (or portion of an installment) of Interim
Rent or Basic Rent under the heading "Arrears" in Exhibit C payable on a Rent
Payment Date shall relate to the respective Lease Period immediately preceding
such Rent Payment Date.
Although the Interim Rent and Basic Rent amounts set forth in Exhibit
C hereto have been computed on the assumption that the amount of interest
payable on the Certificates on the Rent Payment Dates throughout the Base Lease
Term will be the Assumed Interest Amounts, Lessor and Lessee recognize that the
actual amount of interest payable on the Certificates may, from time to time
during Interim Lease Term and the Base Lease Term, be different from the
Assumed Interest Amounts. Accordingly, Interim Rent and Basic Rent shall be
increased or decreased (but not below zero), as the case may be, by the Rent
Differential Amount (as defined herein). Any increase in Interim Rent or Basic
Rent shall constitute additional arrears Rent on the date in question, and any
decrease in Interim Rent or Basic Rent shall first decrease arrears Rent before
affecting advance Rent on the date in question. For purposes hereof, "Rent
Differential Amount" shall mean, as of any Rent Payment Date, the absolute
value of the difference between (i) the aggregate amount of interest due and
payable on such Rent Payment Date on the Certificates (or due and payable on
the next following or next preceding Business Day, as the case may be, if such
date shall not constitute a Business Day) and (ii) the Assumed Interest Amount
with respect to such Rent Payment Date. If, as of such Rent Payment Date, the
amount determined in accordance with clause (i) of the immediately preceding
sentence shall be greater than the amount determined in accordance with clause
(ii) of such sentence, the amount of Interim Rent or Basic Rent payable on such
Rent Payment Date shall be increased by the Rent Differential Amount. If, as
of such Rent Payment Date, the amount determined in accordance with such clause
(ii) shall exceed the amount determined in accordance with such clause (i), the
amount of Interim Rent or Basic Rent due on such Rent Payment Date shall be
decreased (but not below zero) by the Rent Differential Amount.
Anything contained in the Participation Agreement or this Lease or any
other Operative Agreement to the contrary notwithstanding, (a) each installment
of Basic Rent payable under this Lease, whether or not adjusted in accordance
with the immediately preceding paragraph or the provisions of Section 3.7,
shall be, under any circumstances and in any event, in an amount at least
sufficient to pay in full, on the Rent Payment Date on which such installment
is due and payable, any scheduled payments then required to be made on account
of the principal of and interest on the Certificates, and (b) Stipulated Loss
Value, Termination Value and, unless Lessee shall have assumed the Certificates
pursuant to Section 18.2(c) hereof, the Special Purchase Price, in each case
whether or not adjusted in accordance with the provisions of Section 3.7, as of
any date of determination thereof, together with any amount of Basic Rent
required to be paid on such date and all other amounts payable on such date,
shall equal, under any circumstances and in any event, an amount at least
sufficient to pay in full any payments then required to be made on account of
the principal of and interest (including, without limitation, any interest on
overdue principal and, to the extent permitted by applicable law, interest),
Premium, if any, and Break Amount, if any, on the Certificates and all amounts
which would be payable prior thereto or on a parity therewith if Section 3.03
of the Trust Indenture were applicable at the time of such payment.
SALE AND LEASE AGREEMENT [N603SW]
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3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Break Amount (if any) or the Premium (if any) payable on the Certificates,
amounts due pursuant to Section 15.05 of the Trust Indenture and each other
amount required to be paid (other than principal and interest on the
Certificates) by Lessor as Owner Trustee under the Trust Indenture, on the same
date that such amounts are due under the Trust Indenture, and as provided in
Section 3.6.
3.5 Supplemental Rent. In addition to the amounts payable as
Supplemental Rent pursuant to Section 3.4, Lessee also agrees to pay (or cause
to be paid) to Lessor, or to whomsoever shall be entitled thereto, all
Supplemental Rent with respect to Stipulated Loss Value or Termination Value
when and as the same shall become due and owing and all other amounts of
Supplemental Rent (other than as covered by Section 3.4) within five days after
demand or such other relevant period as may be provided in any Operative
Agreement. Lessee will also pay to Lessor, or to whomsoever shall be entitled
thereto, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Overdue Rate on any part of any installment of Interim Rent,
Basic Rent or Renewal Rent not paid when due for any period from and including
the date on which the same was due to but excluding the date of payment in full
and (to the extent permitted by applicable law) on any payment of Supplemental
Rent not paid when due to Lessor, or to whomsoever shall be entitled thereto,
as the case may be, for the period from the date on which the same was due to
but excluding the date of payment in full. The expiration or other termination
of Lessee's obligation to pay Interim Rent, Basic Rent or Renewal Rent
hereunder shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent.
3.6 Payments. Payments of Rent and any and all other payments
payable to Lessor hereunder shall be paid in funds of the United States of
America which shall be immediately available not later than 11:00 A.M., New
York City time, on the date due at the office of Lessor at 777 Main Street,
Hartford, Connecticut 06115, Attention: Corporate Trust Administration, Re:
Southwest Airlines 1995 Trust N603SW, or as otherwise directed by Lessor in
writing at least five Business Days prior to the date such payment is due;
provided, that so long as the Trust Indenture shall not have been terminated
pursuant to Section 10.01 of the Trust Indenture, Lessor hereby directs and
Lessee agrees, that, unless the Indenture Trustee shall otherwise direct, all
Rent (other than Excluded Payments) shall be paid prior to 11:00 A.M., New York
City time, on the due date thereof directly to Indenture Trustee to its account
set forth in Schedule I to the Participation Agreement. All payments of
Supplemental Rent owing to Indenture Trustee or to any Holder pursuant to the
Participation Agreement shall be made in immediately available funds prior to
11:00 A.M. New York City time, on the due date thereof at the office of
Indenture Trustee or at such other office of such other financial institution
located in the continental United States as the party entitled thereto may so
direct at least five Business Days prior to the due date thereof. All payments
of Supplemental Rent payable to Owner Participant, to the extent that such
amounts constitute Excluded Payments (as defined in the Trust Indenture), shall
be made by wire transfer prior to 11:00 A.M., New York City time, on the due
date thereof, to its account set forth in Schedule I to the Participation
Agreement, with sufficient information to identify the source and application
of the funds. Except as otherwise expressly provided herein, whenever any
payment of Rent or other payment to be made hereunder shall be due on a day
which is not a Business Day, such payment
SALE AND LEASE AGREEMENT [N603SW]
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shall be made on the next succeeding day which is a Business Day and (provided
such payment is made on such next succeeding Business Day) no interest shall
accrue on the amount of such payment from and after such scheduled date.
3.7 Adjustment to Interim Rent, Basic Rent, Stipulated Loss Value
and Termination Value.
3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a)
of the Participation Agreement paid by Owner Participant in connection
with the closing of this transaction on the Delivery Date are equal to
an amount which is other than .365% of Lessor's Cost, (b) the
Transaction Costs referred to in Section 16(a) of the Participation
Agreement paid by Owner Participant in connection with the initial
refinancing or refunding of the Certificates pursuant to Section 17 or
18 of the Participation Agreement are equal to an amount which is
other than .625% of Lessor's Cost, (c) the Delivery Date is not July
6, 1995, (d) a refinancing or refunding of the Certificates pursuant
to Section 17 or 18 of the Participation Agreement occurs, (e) any
recalculation of Interim Rent, Basic Rent, Stipulated Loss Value and
Termination Value is required by the terms of the Tax Indemnity
Agreement (including at Lessee's election pursuant to Section 16
thereof), or (f) the Deferred Equity Amount is not equal to the
Assumed Interest Amount with respect to the Deferred Equity Date, and
there shall not have occurred a refunding or refinancing pursuant to
Section 17 or 18 of the Participation Agreement prior to the first
Rent Payment Date, then in each case, the Interim Rent and Basic Rent
percentages set forth in Exhibit C, the Stipulated Loss Value
percentages set forth in Exhibit B-1 and the Termination Value
percentages set forth in Exhibit B-2 shall be recalculated by Owner
Participant (i) in the case of a recalculation pursuant to clause (a)
or (c), prior to July 6, 1996, (ii) in the case of a recalculation
pursuant to clause (b) or (d), prior to the relevant Refinancing Date
or Section 18 Refinancing Date, as the case may be, (iii) in the case
of a recalculation pursuant to clause (e), prior to the Rent Payment
Date next following the event described in clause (e), or (iv) in the
case of a recalculation pursuant to clause (f), prior to the first
Rent Payment Date, in each case in order to: (A) maintain Net
Economic Return and (B) minimize the Net Present Value of Rents to the
extent possible consistent with clause (A). In addition, in the event
of an adjustment pursuant to this Section 3.7, the Special Purchase
Price shall be recalculated in accordance with the terms of Section
18.2(b).
3.7.2 Recalculation Procedures. Any recalculation of
Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value
percentages and the Special Purchase Price pursuant to this Section
3.7 shall be determined by Owner Participant, and shall be subject to
the verification of Lessee and its advisors. Such recalculated
Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value
percentages and Special Purchase Price shall be set forth in a Lease
Supplement and, in the case of Interim Rent or Basic Rent, shall
become effective as of the next succeeding Rent Payment Date and, in
the case of Interim Rent or Stipulated Loss Value, Termination Value
and the Special Purchase Price, shall be retroactive to the inception
of this Lease. Such recalculated Interim Rent or Basic Rent and,
SALE AND LEASE AGREEMENT [N603SW]
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if applicable, the Special Purchase Price shall be determined so as to
conform, in the opinion of Owner Participant's tax counsel, to all
applicable tax constraints and requirements, including the
requirements of Section 467 of the Code and Sections 4.(1)(B), 4.(6)
and 5. of Revenue Procedure 75-21, 75-1 Cum. Bull. 715; provided,
however, that notwithstanding the foregoing, all adjustments provided
for herein shall be based on the same calculation methods and
assumptions (including tax assumptions set forth in Section 2 of the
Tax Indemnity Agreement) as were used initially by the Owner
Participant in determining Interim Rent, Basic Rent, Stipulated Loss
Values, Termination Values and the Special Purchase Price for the
Aircraft (except and only to the extent such assumptions are required
to be changed by virtue of the event giving rise to the adjustment or
any event giving rise to any prior adjustments pursuant to the terms
of this Lease) and shall take into account the amount and timing of
any contribution made by the Owner Participant to the Estate
subsequent to the Delivery Date. If, upon verification of the
percentages determined by Owner Participant pursuant to this Section
3.7, Lessee does not agree with the determination of Owner
Participant, then Interet, Inc. ("Interet") shall verify the
computations, it being understood that the Owner Participant shall
have delivered a copy of its final pricing file to Interet on the
Delivery Date. Interet shall be requested to make its determination
within 30 days. Owner Participant shall provide to Interet such
additional information as it may reasonably require, including a
description of the methodology of the calculations used in computing
such adjustments and such other information as is necessary to
determine whether the computations are mathematically accurate.
Interet shall hold in strict confidence such methodology and other
information. The computations of Owner Participant or Interet
whichever is applicable, shall be final, binding and conclusive upon
Lessee and Lessor, and Lessee shall have no right to inspect the
books, records, tax returns or other documents of or relating to Owner
Participant to verify such computations or for any other purpose in
connection with such adjustments. All fees and expenses payable to
Interet shall be borne by Lessee, except that such fees and expenses
shall be payable by Owner Participant if the computations provided by
Owner Participant are higher than those provided by Interet and the
computations of Interet causes the present value of the Interim Rent
and Basic Rent (utilizing a semi-annual discount rate that, on an
annual basis, is equal to 8.60%) as computed by Owner Participant to
decrease by ten basis points or more.
Section 3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received (i) the Deferred
Equity Amount on the Deferred Equity Date, or (ii) the payment to be made by
the Owner Trustee pursuant to clause (5) of Section 18(a) of the Participation
Agreement on the Section 18 Refinancing Date, then Lessee shall pay to the
Indenture Trustee on behalf of the Owner Participant or the Owner Trustee, as
the case may be, on the Deferred Equity Date, or the Section 18 Refinancing
Date, as the case may be, an amount equal to the amount not so paid by the
Owner Participant or the Owner Trustee, as the case may be (such amount herein
referred to as an "Advance"). In the event Lessee makes any Advance pursuant
to this Section 3.8, then, notwithstanding any provision to the contrary herein
or in any other Operative Agreement, Lessee shall be entitled to demand
immediate repayment of such Advance from the Owner Participant and, in
addition, shall be entitled to offset and deduct (without duplication) against
each succeeding payment (other than as limited by the provisos to this
sentence) due from Lessee
SALE AND LEASE AGREEMENT [N603SW]
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to Persons other than the Holders, the Indenture Trustee and Lessor in its
individual capacity (including, without limitation, Interim Rent, Basic Rent,
payments due under Sections 5, 9, 10, 15 and 18 hereof, and payments due to
Persons other than the Holders, the Indenture Trustee and Lessor in its
individual capacity under Section 7 of the Participation Agreement) the amounts
(including interest at the rates provided therein) due and owing by the Owner
Participant to Lessee under Section 8(dd) of the Participation Agreement until
Lessee has been fully reimbursed for such amounts; provided, that in the case
of any payment due from Lessee which is distributable under the terms of the
Trust Indenture, Lessee's right of offset and deduction shall be limited to
amounts distributable to Lessor or the Owner Participant thereunder (and shall
not include any amounts distributable to the Indenture Trustee or the Holders);
and provided, further, that in no event shall any such offset or aggregate
combined effect of separate offsets reduce the amount of (i) any installment of
Basic Rent to an amount that is insufficient to pay in full the scheduled
payments then required to be made on account of the Certificates then
Outstanding or (ii) any payment of Stipulated Loss Value, Termination Value or
Special Purchase Price to an amount that, together with any other amounts then
required to be paid by Lessee hereunder in connection therewith, is
insufficient to pay in full as of the date of payment thereof, the aggregate
unpaid principal of the Outstanding Certificates, together with all unpaid
interest, Premium (if any) and Break Amount (if any) thereon. Notwithstanding
any provision of this Section 3.8 to the contrary, Lessee's obligation to make
any Advance shall terminate at such time as its obligation to pay Basic Rent
terminates under this Lease.
Section 4. Lessor's Representations and Warranties; DISCLAIMER;
Certain Agreements of Lessee.
4.1 Lessor's Representations and Warranties; DISCLAIMER. LESSEE
EXPRESSLY AGREES TO TAKE THE AIRCRAFT "AS IS", AND LESSEE HAS SELECTED THE
AIRCRAFT AND THE MANUFACTURER THEREOF (AND EACH PORTION THEREOF) AND ALL
MAINTENANCE FACILITIES REQUIRED FOR THE AIRCRAFT OR HEREUNDER. NEITHER LESSOR
(INDIVIDUALLY OR AS OWNER TRUSTEE) NOR THE INDENTURE TRUSTEE (INDIVIDUALLY OR
AS INDENTURE TRUSTEE) NOR ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO
HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Shawmut Bank
Connecticut, National Association, in its individual capacity (i) represents
and warrants that on the Delivery Date Lessor shall have received whatever
title thereto as was conveyed to it by the Lessee, (ii) represents and warrants
that on the Delivery Date the Aircraft shall be free of Lessor Liens
attributable to it, (iii) agrees that it will not directly or indirectly
create, incur, assume or suffer to exist any Lessor Lien attributable to it on
or with respect to the Airframe or any Engine or any other portion of the
Estate, and (iv) represents and
SALE AND LEASE AGREEMENT [N603SW]
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warrants that it is a "citizen of the United States" as defined in the Act.
Lessor covenants that during the Term (so long as no Lease Event of Default
shall have occurred and be continuing) it will not, through its own actions or
breaches of any of its obligations under the Operative Agreements, interfere in
the quiet enjoyment of the Aircraft by Lessee or any Permitted Sublessee.
Nothing in this Section 4.1 shall be deemed to modify or otherwise
affect the respective rights and obligations of Lessee and of Manufacturer
under the Purchase Agreement.
4.2 Certain Agreements of Lessee. All obligations of Lessee in
this Lease shall be done, performed or complied with at Lessee's cost and
expense, whether or not so expressed, unless otherwise expressly stated.
Lessee hereby agrees with Lessor for the benefit of the Participants that it
shall perform the agreements, covenants and indemnities set forth in the
Participation Agreement (including, without limitation, Sections 7(b) and 7(c)
of the Participation Agreement) which are incorporated herein, and hereby
restates Lessee's representations and warranties set forth in the Participation
Agreement and the Tax Indemnity Agreement, as fully and to the same extent and
with the same force and effect as if set forth in full in this Section 4.2.
Section 5. Return of Aircraft.
5.1 General Condition upon Return. Unless purchased by Lessee
pursuant to Section 18.2, and subject to Section 10, upon the expiration or
termination of this Lease, Lessee will return the Aircraft to Lessor by
delivering the same at any location in the continental United States at which
Lessee has maintenance facilities (and Section 5.7 shall apply). Lessee shall
give Lessor not less than 15 days prior notice of the return location. All
costs associated with the return flight shall be for the account of Lessee. At
the time of such return, the Airframe and Engines or engines installed thereon:
5.1.1 Airworthiness. Subject to the exception described
in clause (iii) of Section 8.1.1, shall be duly certificated as an
airworthy aircraft by the FAA under Part 121 of the Federal Aviation
Regulations or any successor provision; provided, that Lessee's
ability to satisfy such return condition shall not preclude the
occurrence of an Event of Loss pursuant to clause (iv) of the
definition thereof;
5.1.2 Free of Liens. Shall be free and clear of all Liens
(except Lessor Liens);
5.1.3 Operating Configuration and Condition. Shall be in a
configuration suitable for operation in regularly scheduled commercial
airline passenger service in the United States and shall be in as good
operating condition as when delivered new to Lessee by Manufacturer,
ordinary wear and tear excepted or, in the case of any such engines
owned by Lessee, shall have a value, utility, airworthiness and
remaining useful life at least equal to, and shall be in as good
operating condition as required by the terms hereof with respect to,
Engines constituting part of the Aircraft but not then installed on
the Airframe. All Lessee or Permitted Sublessee exterior markings, as
the case may be, shall have been painted over in matching exterior
colors. In addition, any appliance, part, instrument, appurtenance,
SALE AND LEASE AGREEMENT [N603SW]
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accessory, furnishing or other equipment leased by Lessee from a third
party (other than Lessor) and incorporated in the Aircraft shall be
removed prior to the date of such return without any damage to the
Aircraft and without diminishing or impairing the value, utility,
remaining useful life or condition which the Aircraft would have had
at such time had such equipment not been installed, and Lessee shall
make all repairs which are required as a result of such removal;
5.1.4 Cleanliness and Operability. Shall be clean by
United States commercial airline operating standards with all systems
and components operable; and
5.1.5 Parts and Equipment. Shall have installed thereon
all Engines and Parts installed thereon at the commencement of the
Term therefor or replacements therefor made in accordance with the
terms of this Lease.
5.2 Return of Other Engines. In the event that any engine not
owned by Lessor shall be installed on the Airframe returned in accordance with
Section 5.1, such engine shall be a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer, or an engine
of another manufacturer of at least equivalent utility, value, airworthiness
and remaining useful life in each case suitable for installation and use on the
Airframe and fully compatible with the other Engine or engine installed on the
Airframe). At the time of such replacement, such engine shall have performance
and durability characteristics and a value, condition, utility, airworthiness
and remaining useful life at least equal to the Engine it replaced hereunder,
assuming such Engine was maintained in accordance with the requirements of this
Lease, and at the time the Airframe is returned shall fully comply with all the
requirements of this Lease, including this Section 5, which are applicable to
Engines. Upon return of the Aircraft, Lessee shall duly convey to Lessor good
title to any such replacement engine, free and clear of (i) all rights of third
parties under any arrangement, including pooling, interchange, overhaul, repair
or other similar agreements or arrangements and (ii) Liens other than Lessor
Liens; and, upon such conveyance and as a condition thereto, Lessee will (a)
furnish Lessor with a full warranty (as to title) bill of sale, in form and
substance reasonably satisfactory to Lessor, with respect to each such
replacement engine, together with an opinion of counsel to the effect that such
bill of sale has been duly authorized and delivered and is enforceable in
accordance with its terms and that each such replacement engine is free and
clear of all Liens other than Lessor Liens, and (b) take such other action as
Lessor may reasonably request in order that title to such replacement engine
may be duly and properly vested in Lessor to the same extent as the Engine
replaced thereby. Upon compliance by Lessee with the foregoing, Lessor will,
so long as no Lease Event of Default has occurred and is continuing, comply
with the applicable provisions of the Trust Indenture and, upon Indenture
Trustee's release of the Engine from the Lien of the Trust Indenture Estate,
Transfer to Lessee any Engine not installed on the Airframe at the time of
return.
5.3 Return at End of Base Lease Term or Renewal Lease Term. Upon
return of the Aircraft at the expiration or termination of this Lease, Lessee
shall have caused all FAA Airworthiness Directives applicable to the Aircraft
and all mandatory service bulletins from Manufacturer, Engine Manufacturer or
other manufacturer of an engine then installed on the
SALE AND LEASE AGREEMENT [N603SW]
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Airframe (in compliance with Section 5.2) applicable to the Aircraft to have
been complied with (except for any such FAA Airworthiness Directives and
bulletins that permit compliance after the return date and would not, in the
normal course of the Maintenance Program, be complied with on or prior to the
return date). Lessee shall have treated the Aircraft, including without
limitation with respect to maintenance, additions and modifications (including
compliance with FAA Airworthiness Directives), during the Term similarly to all
other Boeing 737-300 aircraft in its fleet, without in any way discriminating
against the Aircraft, whether by reason of its leased status or otherwise.
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of such return, the Airframe shall have remaining until the
next scheduled "C" check (which term, as used in this paragraph, shall include
a "C" check and any other check equivalent thereto) at least 50% of the
allowable hours between "C" checks permitted under the Maintenance Program then
used by Lessee (or such Permitted Sublessee, as the case may be), and the
condition set forth in Appendix A shall have been satisfied. In the event that
Lessee (or any Permitted Sublessee then in possession of the Aircraft) shall
then be using a continuous or "progressive" maintenance program with respect to
the Airframe, then the Airframe shall be current on such program. If the
conditions set forth in the first sentence of this paragraph shall be
applicable to the Airframe but shall not have been met at the time of such
return, Lessee shall perform (or cause to be performed) all maintenance work
necessary to meet such conditions or, if Lessee shall so elect, Lessee shall
pay or cause to be paid to Lessor an amount computed by multiplying (i) the
current market cost of a "C" check by (ii) a fraction of which (x) the
numerator shall be the excess of 50% of hours of operation allowable between
such "C" checks over the actual number of hours of operation remaining on the
Airframe to the next such "C" check, and (y) the denominator shall be the
number of hours of operation allowable between such "C" check in accordance
with such Maintenance Program.
Lessee further agrees that, whether or not the then-current engine
maintenance program is on-condition, the number of hours or cycles of operation
(whichever shall be applicable under the Maintenance Program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 3,000 allowable hours
or cycles (whichever shall be applicable), in the aggregate for both Engines or
engines; provided, that each life-limited Part within each Engine or engine
shall have a minimum of 1,200 allowable hours or cycles (whichever shall be
applicable) remaining until its next required replacement. If, at the time of
such return, the Engines or engines do not meet the aggregate 3,000 hour
condition specified in the previous sentence, Lessee shall perform (or cause to
be performed) all maintenance work necessary to meet such conditions or, if
Lessee shall so elect, Lessee shall pay or cause to be paid to Lessor an amount
computed by multiplying (i) the current market cost of performing for an engine
of the same model as such Engines or engines the scheduled engine refurbishment
under the Maintenance Program then used by Lessee (or such Permitted Sublessee,
as the case may be) for engines of such model by (ii) a fraction of which (x)
the numerator shall be the excess of 3,000 hours or cycles (whichever is
applicable) over the aggregate number of hours or cycles of operation on such
Engines or engines remaining until the next scheduled engine refurbishment, and
(y) the denominator shall be the number of hours or cycles allowable between
SALE AND LEASE AGREEMENT [N603SW]
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such scheduled engine refurbishments. If, at the time of such return, any
life-limited Part within such Engine or engine does not meet the 1,200 hour
condition specified in the first sentence of this paragraph, Lessee shall
perform (or cause to be performed) all maintenance work necessary to meet such
conditions or, if Lessee shall so elect, Lessee shall pay or cause to be paid
to Lessor an amount computed by multiplying (i) the current market cost of
replacing such life-limited Part by (ii) a fraction of which (x) the numerator
shall be the excess of 1,200 hours or cycles (whichever is applicable) over the
number of remaining hours or cycles (whichever is applicable) of operation of
such life-limited Part, and (y) the denominator shall be the total number of
hours or cycles allowable on such life-limited Part.
5.4 Manuals; Service Bulletins, Etc. Upon return of the Aircraft
at the expiration or termination of this Lease, Lessee shall deliver or cause
to be delivered to Lessor all logs, manuals, drawings and data and inspection,
modification and overhaul records in respect of the Aircraft required to be
maintained under applicable rules and regulations of the FAA, updated through
the date of return (collectively, "Records"). All "no-charge" service bulletin
kits received by or on behalf of Lessee from Manufacturer, Engine Manufacturer
or vendors for the Aircraft and Engines or engines and not incorporated therein
shall be returned at no charge to Lessor as cargo on board the Aircraft at the
time of its return. At the time the Aircraft is returned, Lessor shall have
the option to purchase from Lessee, at Lessee's cost therefor, any "charge"
service bulletin kits purchased by Lessee which have not been incorporated in
the Aircraft. All such items shall thereupon become the property of Lessor.
5.5 Failure to Return Aircraft or Engines. If Lessee shall, for
any reason whatsoever, fail to return the Aircraft or any Engine at the time
specified herein, the obligations of Lessee as provided in this Lease
(including the obligation to pay Rent on the same basis as that applicable
immediately prior to such failure) shall continue in effect with respect to the
Aircraft or such Engine until the Aircraft or such Engine is returned to
Lessor; but this Section 5.5 shall not be construed as permitting Lessee to
fail to meet its obligation to return the Aircraft or such Engine in accordance
with the requirements of this Lease or constitute a waiver of a Lease Event of
Default.
5.6 Aid in Disposition. Lessee agrees that, unless Lessee shall
have elected to purchase the Aircraft pursuant to Section 18.2, during the last
six months of the Term it will cooperate in all reasonable respects with any
efforts of Lessor to lease or sell the Aircraft, including without limitation
(subject to the provisions of Section 12) permitting potential lessees or
purchasers to inspect the Aircraft and the records relating thereto.
5.7 Storage upon Return. Upon written request of Lessor or Owner
Participant received by Lessee at least 10 days prior to its return of the
Aircraft at the expiration or termination of this Lease, Lessee will attempt to
arrange for parking facilities for the Aircraft for a period not exceeding 60
days following return thereof by Lessee at the location of return pursuant to
Section 5.1; and Lessor shall bear or reimburse Lessee for Lessee's
out-of-pocket expenses of such storage (including maintenance and insurance
expenses).
SALE AND LEASE AGREEMENT [N603SW]
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Section 6. Liens. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, the Airframe or any Engine, title thereto or any interest therein or
in this Lease except: (a) the respective rights of the parties to the
Operative Agreements; (b) the rights of others under agreements or arrangements
to the extent expressly permitted by the terms of Sections 7.2 and 8.3; (c)
Lessor Liens; (d) Liens for taxes, assessments or other governmental charges
either not yet due or being contested in good faith (and for the payment of
which adequate reserves have been provided in accordance with generally
accepted accounting principles) by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture, loss or
loss of use of the Aircraft, the Airframe or any Engine or any interest
therein; (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 due or not overdue for a period of more than
60 days or is being contested in good faith (and for the payment of which
adequate reserves have been provided in accordance with generally accepted
accounting principles) by appropriate proceedings so long as such Liens do not
involve any material danger of the sale, forfeiture, loss or loss of use of the
Aircraft, the Airframe or any Engine or any interest therein; (f) Liens arising
out of any judgment or award against Lessee, unless the judgment secured shall
not, within 45 days after entry thereof, have been discharged or vacated or
execution thereof stayed pending appeal or shall not have been discharged,
vacated or reversed within 45 days after the expiration of such stay; and (g)
any other Lien with respect to which Lessee shall have provided a bond or other
security adequate in the reasonable judgment of Lessor. Lessee will promptly
take (or cause to be taken) such action at its own expense as may be necessary
duly to discharge any such Lien not excepted above if the same shall arise at
any time.
Section 7. Registration, Operation, Possession, Subleasing and
Records.
7.1 Registration and Operation.
7.1.1 Registration. Lessee shall forthwith upon the
delivery of the Aircraft hereunder cause the Aircraft to be duly
registered and at all times thereafter to remain duly registered in
the name of Lessor with the FAA pursuant to and as permitted by the
Act (it being understood that Lessee shall not be required to comply
with this covenant to the extent that Shawmut Bank Connecticut,
National Association's or Owner Participant's failure to comply with
its covenant set forth in Section 8(b) of the Participation Agreement
with regard to its citizenship makes such compliance by Lessee
impossible).
7.1.2 Nameplate. Lessee agrees to affix within 10 days of
the Delivery Date and thereafter to maintain in the cockpit of the
Airframe adjacent to the airworthiness certificate and on each Engine
a nameplate bearing the inscription "OWNED BY AND LEASED FROM SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND
LESSOR" and, so long as the Trust Indenture shall be in effect,
"SUBJECT TO A SECURITY INTEREST IN FAVOR OF WILMINGTON TRUST COMPANY,
AS INDENTURE TRUSTEE" (such nameplate to be replaced, if necessary,
with a nameplate reflecting the name of any successor Lessor or
successor Indenture Trustee). Except as above provided, Lessee will
not allow the name of any person,
SALE AND LEASE AGREEMENT [N603SW]
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association or corporation to be placed on the Airframe or on any
Engine as a designation that might be interpreted as a claim of
ownership; provided, that nothing herein contained shall prohibit
Lessee (or any Permitted Sublessee) from placing its customary colors
and insignia on the Airframe or any Engine or displaying information
concerning the registration or manufacture of the Aircraft, the
Airframe, any Engine or Part.
7.1.3 Compliance with Laws. Lessee agrees that it will
not use or operate the Aircraft, the Airframe or any Engine in
violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign) or in violation of any airworthiness certificate, license or
registration relating to the Aircraft, the Airframe or any Engine
issued by any such authority, except to the extent Lessee is
contesting in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor's interest in the Aircraft.
7.1.4 Insurance Requirements; Government Requisition;
Indemnity. Lessee agrees not to operate, use or locate the Aircraft,
the Airframe or any Engine, or permit any Permitted Sublessee to
operate, use or locate the Aircraft, the Airframe or any Engine, (i)
in any area excluded from coverage by any insurance required by the
terms of Section 11, except in the case of a requisition by the
Government where Lessee obtains indemnity (backed by the full faith
and credit of the United States of America) in lieu of such insurance
from the Government against the risks and in the amounts required by
Section 11 covering such area, or (ii) in any area where maintenance
of war-risk insurance is required by Section 11 unless fully covered
by war-risk insurance satisfying the terms of Section 11, or unless
the Aircraft, the Airframe or such Engine is operated or used under
contract with the Government under which contract the Government
assumes liability (backed by the full faith and credit of the United
States of America) in an amount not less than the amount of insurance
otherwise required by Section 11 for any damage, loss, destruction or
failure to return possession of the Aircraft, the Airframe or such
Engine at the end of the term of such contract or for injury to
persons or damage to property of others, or (iii) in any area referred
to in subclause 3(iv) immediately following Section 7.2.8.
7.2 Possession. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine or install
any Engine, or permit any Engine to be installed, on any airframe other than
the Airframe; provided, however, that so long as no Lease Default (of the type
described in Section 14.1 or 14.5) or Lease Event of Default shall have
occurred and be continuing, and so long as Lessee shall comply with the
provisions of Section 11, and all FAA approvals required for such purposes have
been obtained, Lessee may, without such prior written consent:
7.2.1 Interchange and Pooling. Subject or permit any
Permitted Sublessee to subject (i) the Aircraft, Airframe or any
Engine to normal interchange agreements customary in the airline
industry and entered into by Lessee or such Permitted Sublessee in the
ordinary course of its business with, in the case of the Airframe, a
U.S. Air Carrier or a Permitted
SALE AND LEASE AGREEMENT [N603SW]
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Foreign Air Carrier, in either case that is not then subject to
bankruptcy or similar proceedings, and (ii) any Engine to pooling
agreements or arrangements customary in the United States domestic
commercial airline industry and entered into by Lessee or such
Permitted Sublessee in the ordinary course of its business; but in
either case (A) no transfer of the registration of the Airframe or any
Engine shall be effected in connection therewith and the terms of this
Lease and the Participation Agreement shall be observed and (B) no
such agreement or arrangement shall contemplate or require the
transfer of title to the Aircraft, Airframe or any Engine and if
Lessor's title to any Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect thereto and Lessee shall comply with
Section 10.2 hereof;
7.2.2 Testing and Service. Deliver or permit any
Permitted Sublessee to deliver possession of the Aircraft, Airframe or
any Engine or Part, to the manufacturer thereof for testing or other
similar purposes, or to any organization for service, repair,
maintenance or overhaul work on the Aircraft, Airframe or any Engine
or Part, or for alterations or modifications in or additions to the
Aircraft, Airframe or any Engine to the extent required or permitted
by the terms of Section 8.4;
7.2.3 Civil Reserve Air Fleet Program. Transfer or permit
any Permitted Sublessee, if required by law to do so, to transfer
possession of the Aircraft, Airframe or any Engine to the Government
pursuant to the Civil Reserve Air Fleet Program or any similar or
substitute programs, so long as such transfer of possession does not
continue beyond the end of the Term and so long as Lessee shall (A)
promptly notify Lessor upon subjecting the Airframe or any Engine to
such program and provide Lessor with the name and address of the
appropriate party to whom notice must be given in connection with any
repossession of the Aircraft under Section 15.1.1, and (B) promptly
notify Lessor upon transferring possession of the Airframe or any
Engine to the Government pursuant to such program;
7.2.4 Installation of Engines. Install or permit any
Permitted Sublessee to install an Engine on an airframe owned by
Lessee or such Permitted Sublessee, as the case may be, free and clear
of all Liens, except (A) Permitted Liens and those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of air carriers under normal interchange
agreements which are customary in the airline industry and do not
contemplate, permit or require the transfer of title to the airframe
or engines installed thereon, and (C) mortgage liens or other security
interests, provided, that (as regards this clause (C)) such mortgage
liens or other security interests effectively provide that such Engine
shall not become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such airframe,
unless and until Lessee shall become the owner of such Engine;
7.2.5 Installation of Engines on Other Airframes. Install
or permit any Permitted Sublessee to install an Engine on an airframe
leased to, or purchased by, Lessee or any Permitted Sublessee subject
to a lease, conditional sale, trust indenture or other security
SALE AND LEASE AGREEMENT [N603SW]
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agreement, but only if (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease, conditional
sale, trust indenture or other security agreement covering such
airframe, or their successors or assigns, and except Liens of the type
permitted by clauses (A) and (B) of Section 7.2.4, and (B) the lease,
conditional sale, trust indenture or other security agreement covering
such airframe effectively provides that such Engine will not become
subject to the Lien thereof at any time while such Engine is subject
to this Lease, notwithstanding the installation thereof on such
airframe;
7.2.6 Pooling of Parts. To the extent permitted by
Section 8.3, subject any Parts owned by Lessor and removed from the
Airframe or any Engine to any pooling arrangement referred to in
Section 8.3;
7.2.7 Wet Lease. Enter into a Wet Lease for the Airframe
and Engines or engines then installed thereon with any third party for
a term not to continue beyond the Term;
7.2.8 Sublease to Permitted Air Carriers. So long as the
proposed sublessee is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the date
the sublease is entered into, enter into a sublease of the Aircraft,
or the Airframe and Engines or engines then installed on the Airframe,
or any Engine, for use on the sublessee's regularly scheduled or
charter routes, with any U.S. Air Carrier or Permitted Foreign Air
Carrier, in any such case for a term not to continue beyond the
remaining Term.
Provided, further, with respect to this Section 7.2, that:
(1) the rights of any transferee who receives
possession by reason of a transfer permitted by this Section
7.2 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be effectively subject and subordinate
to, and any sublease permitted by this Section 7.2 shall be
made expressly subject and subordinate to, all the terms of
this Lease and the Lien of the Trust Indenture, and to
Lessor's rights, powers and remedies under this Lease,
including the rights to repossession pursuant to Section 15
and to terminate and avoid such sublease upon such
repossession and to require such sublessee to forthwith
deliver the Aircraft, Airframe and Engines subject to such
sublease upon such repossession;
(2) Lessee shall remain primarily liable
hereunder for the performance of all the terms of this Lease
(including, without limitation, the payment of Supplemental
Rent representing any indemnities payable as a result of acts
or circumstances respecting a sublease or a sublessee's
operation of the Aircraft) to the same extent as if such
sublease, transfer or relinquishment of possession had not
occurred (it being understood that, without limitation of the
foregoing, any standards established under this Lease with
reference to Lessee's practices respecting other aircraft
owned or operated by it shall continue to refer to such
practices of Lessee rather than of any transferee); provided,
that performance of any such terms by any
SALE AND LEASE AGREEMENT [N603SW]
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Permitted Sublessee shall be as effective, for purposes of
this Lease, as performance thereof directly by Lessee;
(3) any such sublease shall (i) be consistent
with the requirements of this Lease and the applicable
requirements of the Participation Agreement, (ii) include
appropriate provisions for the continued maintenance in
accordance with applicable maintenance standards in the
appropriate jurisdiction, operation, insurance (appropriate
certificates as to which shall be furnished to Lessor and
Indenture Trustee prior to Lessee's entry into any such
sublease with any Permitted Foreign Air Carrier or within 10
days thereafter) and return of the subleased property as
required hereunder, (iii) provide that the sublessee may not
assign or further sublease the Aircraft, (iv) provide that the
Aircraft may not be operated into a country with which the
United States does not maintain diplomatic relations or in
which there is open warfare, whether or not declared, (v) not
provide for sublease rentals to be prepaid or assigned to a
third party; provided, however, that (x) up to six months'
rentals may be prepaid to Lessee and (y) this clause (v) shall
not preclude Lessee's establishing and holding appropriate
reserves for any obligations arising under such sublease, and
(vi) not require the sublessee to purchase the Aircraft or
grant the sublessee any purchase options, or any options for
the renewal of such sublease for a term beyond the Base Lease
Term, in each case on dates other than, or at amounts less
than, corresponding options granted to Lessee hereunder;
(4) no interchange agreement, transfer,
sublease or other relinquishment of possession permitted
hereunder shall affect the registration of the Aircraft or
shall permit any action not permitted to Lessee in this Lease;
and
(5) no such interchange agreement, sublease,
transfer or other relinquishment of possession of the
Aircraft, Airframe or any Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or
under any other Operative Agreement or constitute a waiver of
Lessor's rights or remedies hereunder or under any other
Operative Agreement.
Lessee shall notify Lessor within 10 days after the commencement of
any sublease permitted hereunder and shall deliver to Lessor within such period
a duly executed copy of any sublease or interchange or pooling agreement
permitted hereunder. Upon request of Lessor, Lessee shall promptly duly
execute and deliver to Lessor an assignment of any such sublease having a term
in excess of 12 months in favor of Lessor in form and substance reasonably
satisfactory to Lessor. Lessor hereby agrees, for the benefit of Lessee (and
any Permitted Sublessee) and for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any airframe or engine leased to
or purchased by Lessee (or any Permitted Sublessee) subject to a lease,
conditional sale, trust indenture or other security agreement, that Lessor will
not acquire or claim, as against such lessor, conditional seller, indenture
trustee or secured party, or any successor or assign thereof, any right, title
or interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security
SALE AND LEASE AGREEMENT [N603SW]
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agreement and owned by such lessor or conditional seller or subject to a trust
indenture or security interest in favor of such indenture trustee or secured
party; provided, however, that such agreement of Lessor shall not be for the
benefit of any lessor or secured party of any airframe (other than the
Airframe) leased to Lessee (or any Permitted Sublessee) or purchased by Lessee
(or any Permitted Sublessee) subject to a conditional sale or other security
agreement or for the benefit of any mortgagee of or any other holder of a
security interest in an airframe owned by Lessee (or any Permitted Sublessee),
unless such lessor, conditional vendor, other secured party or mortgagee has
expressly agreed (which agreement may be contained in such lease, conditional
sale or other security agreement or mortgage) that neither it nor its
successors or assigns will acquire, as against Lessor, any right, title or
interest in an Engine as a result of such Engine being installed on such
airframe.
A consolidation, merger, conveyance, transfer, or lease permitted by
Section 11(f) of the Participation Agreement shall not be deemed to be a
transaction to which this Section 7.2 shall apply.
7.3 Records and Reports. Lessee shall:
7.3.1 Records. Maintain or cause to be maintained all
records, logs and other materials required by the FAA or any other
governmental authority having jurisdiction to be maintained in respect
of the Aircraft, the Airframe and each Engine;
7.3.2 Information and Reports. Upon request, promptly
furnish or cause to be furnished to Lessor (in sufficient number) such
information as may be required to enable Lessor or any Participant to
file any reports, including tax returns, required to be filed by
Lessor or such Participant with any governmental authority because of
Lessor's ownership of the Aircraft, Airframe or any Engine or because
of receipt of Rent or because of the interest of any Participant in
the Estate or Trust Indenture Estate; provided, however, that with
respect to any such information (other than with respect to income
taxes) which Lessee deems commercially sensitive or confidential, if
reasonably feasible, Lessor shall afford Lessee a reasonable
opportunity to seek from any such governmental authority a waiver of
Lessor's or such Participant's obligation to file any such information
or consent to the filing of such information directly by Lessee in
lieu of filing by Lessor or such Participant and if any such waiver or
consent is evidenced to the reasonable satisfaction of Lessor, then
Lessee shall not be required to furnish such information to Lessor;
and
7.3.3 Financial Information. Promptly provide Lessor, the
Owner Participant, the Original Loan Participant and Indenture Trustee
with (i) such financial information concerning Lessee as is provided
from time to time to the public shareholders of Lessee, (ii) within 60
days after the end of each of the first three quarterly periods of
each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of such
period, together with the related consolidated statements of income
for such period, (iii) within 120 days after the close of each fiscal
year of Lessee, a consolidated balance sheet of Lessee and its
consolidated subsidiaries as of the close of such fiscal year,
together with the related consolidated statements of income for such
fiscal year, as certified by independent public accountants, (iv)
promptly upon the sending, making
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available or filing of the same, all such reports (other than reports
on Form 11-K or similar forms) as Lessee shall file with the
Securities and Exchange Commission, and (v) from time to time such
other information as to its financial condition as Lessor, Indenture
Trustee or any Participant may reasonably request. In addition,
Lessee shall promptly notify Lessor, Indenture Trustee, the Original
Loan Participant and the Owner Participant after a Responsible Company
Officer of Lessee shall acquire knowledge of a Lease Default or Lease
Event of Default.
Section 8. Maintenance; Replacement and Pooling of Parts;
Alterations; Modifications and Additions.
8.1 Maintenance.
8.1.1 Maintenance Program. Lessee shall maintain,
service, repair, overhaul, alter, modify, add to and test (or cause to
be maintained, serviced, repaired, overhauled, altered, modified,
added to and tested) the Aircraft, the Airframe and each Engine, and
each other engine installed from time to time on the Airframe, in
accordance with Lessee's FAA-approved maintenance program for the
Aircraft, Airframe and Engines (the "Maintenance Program"), (i) so as
to keep the Aircraft, the Airframe and each Engine in as good
operating condition as when delivered new to Lessee by the
Manufacturer, ordinary wear and tear excepted, (ii) in the same manner
and with the same care as used by Lessee with similar aircraft owned
or operated by Lessee, without in any way discriminating against the
Aircraft, whether by reason of its leased status or otherwise, and
(iii) so as to keep the Aircraft, the Airframe and each Engine in such
condition as required to enable the FAA certificate of airworthiness
for the Aircraft to be maintained in good standing at all times under
the Act, except when all comparable Boeing Model 737-300 series
aircraft registered in the United States of America have been grounded
by the FAA other than as a result of actions taken or omitted to be
taken by Lessee (or, if a sublease is then in effect, any Permitted
Sublessee).
8.1.2 Compliance with Government Requirements. Lessee will
comply with all service, inspection, maintenance, repair and overhaul
regulations, directives and instructions which are made mandatory by
the FAA or other applicable government authority upon operators of
Boeing Model 737-300 series aircraft and CFM International Model
CFM56-3-B1 engines and which require compliance during the Term and
prior to return of the Aircraft under this Lease.
8.2 Replacement of Parts. Lessee, at its own cost and expense,
will promptly replace (or cause to be replaced) all Parts which may from time
to time be incorporated in the Aircraft, Airframe or any Engine and which may
from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever, except as otherwise provided in Section 8.4. In
addition, Lessee may, at its own cost and expense, remove in the ordinary
course of maintenance, service, repair, overhaul or testing any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair
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or permanently rendered unfit for use; provided, however, Lessee, except as
otherwise provided in Section 8.4, at its own cost and expense, will replace
such Parts as promptly as possible. All replacement parts shall be free and
clear of all Liens (except for Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof. All Parts at any
time removed from the Aircraft, Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by parts which have been incorporated in the Aircraft,
Airframe or such Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement part becoming incorporated
in the Aircraft, Airframe or such Engine as above provided, without further
act, (i) unless the replacement property is temporarily installed on an
emergency basis, title to the replaced Part shall thereupon vest in Lessee free
and clear of all rights of Lessor, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement part shall thereupon
vest in Lessor (subject only to Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis), and (iii)
such replacement part shall become a Part subject to this Lease and be deemed
part of the Aircraft, Airframe or such Engine for all purposes hereof to the
same extent as the Parts originally incorporated in such Aircraft, Airframe or
Engine.
8.3 Pooling of Parts. Any Part removed from the Aircraft,
Airframe or any Engine as provided in Section 8.2 may be subjected by Lessee
(or a Permitted Sublessee) to a normal pooling arrangement customary in the
airline industry entered into in the ordinary course of business of Lessee or
such Permitted Sublessee, so long as a part replacing such removed Part shall
be incorporated in the Aircraft, Airframe or such Engine in accordance with
Section 8.2 as promptly as practicable after the removal of such removed Part.
In addition, any replacement part when incorporated in the Aircraft, Airframe
or any Engine in accordance with Section 8.2 may be owned by any third party
subject to such a normal pooling arrangement, so long as Lessee (or any
Permitted Sublessee), at its own cost and expense, as promptly thereafter as
practicable either (i) causes title to such replacement part to vest in Lessor
in accordance with Section 8.2 by Lessee (or any Permitted Sublessee) acquiring
title thereto for the benefit of, and transferring such title to, Lessor free
and clear of all Liens (except Permitted Liens), or (ii) replaces such
replacement part by incorporating in the Aircraft, Airframe or such Engine a
further replacement part owned by Lessee (or any Permitted Sublessee) free and
clear of all Liens (except Permitted Liens) and by causing title to such
further replacement part to vest in Lessor in accordance with Section 8.2.
8.4 Alterations, Modifications and Additions.
8.4.1 Mandatory Alterations, Etc. Lessee shall make (or
cause to be made) such alterations and modifications in and additions
to the Aircraft, Airframe and each Engine as may be required from time
to time to meet the standards of the FAA or other governmental
authority having jurisdiction and to maintain the FAA certificate of
airworthiness for the Aircraft; provided, however, that Lessee may
contest in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
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materially adversely affect Lessor's interest in the Aircraft. All
alterations and modifications made pursuant to this Section 8.4.1
shall be made at the cost and expense of Lessee.
8.4.2 Voluntary Alterations, Etc. Lessee, at its own cost
and expense, may, from time to time make (or cause to be made),
subject to the standards set forth in Section 8.1.1, such alterations
and modifications in and additions to the Aircraft, Airframe or any
Engine as Lessee may deem desirable in the proper conduct of its
business, including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine; provided, however, that no such
alteration, modification, addition or removal shall diminish the
value, remaining useful life, or utility of the Aircraft, Airframe or
such Engine, or impair the condition or airworthiness thereof, below
the value, remaining useful life, utility, condition and airworthiness
thereof immediately prior to such alteration, modification or addition
assuming the Aircraft, Airframe or such Engine was then of the value
and utility and in the condition and airworthiness required to be
maintained by the terms of this Lease. Title to all parts
incorporated in the Aircraft, Airframe or such Engine as the result of
such alteration, modification or addition shall remain vested in
Lessee and Lessee may, at any time during the Term, remove any such
part if (i) such part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated in the Aircraft,
Airframe or such Engine at the time of delivery thereof hereunder or
any Part in replacement of or substitution for any such Part, (ii)
such part is not required to be incorporated in the Aircraft, Airframe
or such Engine pursuant to the terms of this Section 8, (iii) such
part can be removed from the Aircraft, Airframe or such Engine without
diminishing or impairing the value, remaining useful life, utility,
condition or airworthiness required to be maintained by the terms of
this Lease which the Aircraft, Airframe or such Engine would have had
at such time had such alteration, modification or addition not
occurred, and (iv) no Lease Event of Default or Lease Default shall
have occurred and be continuing. Title to all other such parts shall,
without further act, vest in Lessor and shall constitute "Parts" for
all purposes hereunder. Upon the removal of any part title to which
is retained by Lessee, Lessee shall promptly repair any damage to the
Airframe or Engine from which it was removed which resulted from such
removal and such part shall no longer be deemed part of the Airframe
or such Engine from which it was removed. Any part not removed by
Lessee as above provided prior to the return of the Aircraft, Airframe
or such Engine to Lessor hereunder shall, without further act, vest in
Lessor and shall constitute a "Part" for all purposes hereunder.
Section 9. Voluntary Termination.
9.1 Right of Termination upon Obsolescence. So long as no Lease
Event of Default or Lease Default shall have occurred and be continuing, Lessee
shall have the right at its option to terminate this Lease with respect to the
Aircraft during the Base Lease Term on the first day of any month (a
"Termination Date") occurring on or after the seventh anniversary of the
Delivery Date on at least three months' prior written notice to Lessor, each
Participant and Indenture Trustee specifying a proposed Termination Date;
provided, that such notice shall also include copies of resolutions of Lessee's
board of directors stating that such board of directors has determined, in good
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faith, that the Aircraft either has become economically obsolete or is surplus
to Lessee's requirements. Lessee may revoke any notice of termination referred
to in this Section 9.1 by notice to Lessor, each Participant and the Indenture
Trustee not less than 30 days prior to the proposed Termination Date, if Lessor
shall not have received a bid to purchase the Aircraft for at least the
Termination Value thereof pursuant to Section 9.2 and if Lessor shall not have
furnished to Lessee the notice referred to in Section 9.3, and upon doing so,
shall reimburse Lessor and Owner Participant on an after-tax basis for all
reasonable out-of-pocket expenses incurred by them in contemplation of such
termination; provided, however, that Lessee may so revoke a notice of
termination no more than three times during the Term.
9.2 Sale of Aircraft. Lessee, as agent for Lessor, shall, from
the date of such notice of termination until no more than 30 days' prior to the
proposed Termination Date specified by Lessee, use its reasonable best efforts
to obtain bids (in the worldwide market) for the cash purchase of the Aircraft
and Lessor may, if it desires to do so, seek to obtain such bids and may itself
bid to retain the Aircraft. In the event Lessee receives any bid, Lessee shall
at least 30 days prior to the proposed Termination Date, certify to Lessor in
writing the amount and terms of such bid, and the name and address of the
Person submitting such bid (who shall not be Lessee, an Affiliate of Lessee or
a Person who shall be a party to any arrangement for the further use of the
Aircraft by Lessee or any of its Affiliates). In the event Lessor receives any
bid, Lessor shall, at least five Business Days prior to the proposed
Termination Date, certify to Lessee in writing the amount and terms of such bid
and the name and address of the Person submitting such bid. Subject to Section
9.3, on the Termination Date, (a) Lessee shall deliver the Airframe and Engines
or engines constituting part of the Aircraft to the bidder, if any, which shall
have submitted the highest cash bid (net of any brokerage commissions) prior to
such date, in the same manner as if delivery were made to Lessor pursuant to
Section 5 and in full compliance with the terms thereof, and shall duly
transfer to Lessor under a full warranty (as to title) bill of sale title to
any such engines not owned by Lessor, all in accordance with the terms of
Section 5, and (b) unless Lessor is the successful bidder, Lessor shall
simultaneously therewith Transfer the Airframe and Engines or engines to such
bidder for cash paid to Lessor in the manner and in funds of the type specified
in Section 3.6. The total sales price realized at such sale shall be paid to
and retained by Indenture Trustee, so long as the Trust Indenture remains in
effect, and otherwise shall be paid to and retained by Lessor and, in addition,
on such Termination Date, and as a condition precedent to such sale and the
delivery of the Aircraft and Engines or engines to such bidder, Lessee shall
pay to Indenture Trustee, so long as the Trust Indenture remains in effect, and
otherwise to Lessor the sum of (i) the excess, if any, of (A) the Termination
Value for the Aircraft, computed as of such Termination Date, over (B) the
sales price of the Airframe and Engines or engines sold (or if the winning
bidder is Lessor, the amount of such bid) after deducting the reasonable fees
and expenses incurred by Lessor, Indenture Trustee and the Participants, if
any, in connection with such termination and sale, (ii) all unpaid Interim Rent
or Basic Rent due on or prior to the TV Determination Date with reference to
which the Termination Value is computed (it being understood and agreed that
Lessee shall not be required to pay the portion, if any, of such Interim Rent
or Basic Rent designated in Exhibit C hereto as payable in advance on such TV
Determination Date), and (iii) (without duplication) all other amounts
(including, without limitation, Break Amount, if any, or Premium, if any) owing
by Lessee under this Lease or under any other Operative Agreement. Upon such
payment, Lessor will comply with
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Section 10.01 of the Trust Indenture and, upon Indenture Trustee's release of
such Engines from the Lien of the Trust Indenture Estate, Transfer to Lessee
any Engines constituting part of the Aircraft but which were not then installed
on the Airframe and sold therewith. If no sale shall have occurred on or as of
the Termination Date specified in such notice of termination, this Lease shall
continue in full force and effect, Lessee shall pay the reasonable expenses
incurred by Lessee, Lessor, each Participant and Indenture Trustee in
connection with the proposed sale, and Lessee shall have the right at any time
to submit another notice of termination pursuant to, and subject to the terms
of, Section 9.1. In the event of any such sale and receipt by Lessor or
Indenture Trustee, as appropriate, of such sale price and other amounts as
provided herein, and upon compliance by Lessee with the provisions of this
Section 9.2, the obligation of Lessee to pay Interim Rent or Basic Rent due
after the TV Determination Date with reference to which the Termination Value
is computed shall cease and the Base Lease Term shall end effective as of the
date of such sale. Lessor shall be under no duty to solicit bids, to inquire
into the efforts of Lessee to obtain bids or otherwise to take any action in
connection with any such sale other than to Transfer to the purchaser named in
the highest bid as referred to above the Airframe and Engines or engines
against receipt of the payments provided for herein.
9.3 Retention by Lessor. Notwithstanding anything in this Section
9 to the contrary, Lessor may, by irrevocable notice to Lessee at least 45 days
prior to the proposed date of sale referred to in Section 9.1, reject all bids
and retain title to the Aircraft (and take possession thereof); provided, that
Lessor shall pay (and, by delivering such notice, Lessor shall be obligated to
pay) to Indenture Trustee on the proposed Termination Date an amount equal to
the unpaid principal amount of the Certificates, together with all interest due
thereon. Upon receipt of notice of such an election by Lessor, Lessee shall
cease any efforts to obtain bids as provided in Section 9.1 and shall reject
all bids theretofore or thereafter received for the Aircraft. In the event
Lessor elects to retain the Aircraft as provided in this Section 9.3, and upon
its payment to Indenture Trustee of such amount, Lessee shall deliver the
Aircraft and Engines to Lessor on the proposed Termination Date pursuant to
Section 5 and in full compliance with the terms thereof and upon such delivery
and payment in full of the amounts specified in the first sentence hereof and
the next following sentence and shall have no obligation to make any payment of
Termination Value. The foregoing shall in no way affect the obligation of
Lessee to make payment of any Interim Rent or Basic Rent accrued and unpaid on
or before the proposed Termination Date and all other amounts of Rent and other
amounts payable hereunder or under the other Operative Agreements and due on or
prior to such date, including, without limitation, all other sums due and
payable to the Holders under the Certificates (including, without limitation,
Break Amount or Premium, if any, as of such TV Determination Date). If the
amounts required to be paid pursuant to this Section 9.3 shall not be received
by the respective payees thereof on the proposed Termination Date, this Lease
shall continue in full force and effect.
9.4 Termination As to Engines. So long as no Lease Event of
Default or Lease Default shall have occurred and be continuing, Lessee shall
have the right, at its option at any time during the Term, on at least 30 days'
prior written notice to Lessor, Indenture Trustee, the Original Loan
Participant and the Owner Participant, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe. In such event,
and prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10.2 to the same
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extent as if an Event of Loss had occurred with respect to such Engine, and,
upon Indenture Trustee's release of the replaced Engine from the Lien of the
Trust Indenture Estate, Lessor shall Transfer to Lessee the replaced Engine as
provided in Section 5.2.
Section 10. Loss, Destruction, Requisition, Etc.
10.1 Event of Loss with Respect to Airframe.
10.1.1 Lessee's Election. Upon the occurrence of an Event
of Loss with respect to the Aircraft, Lessee shall forthwith (and in
any event within 15 days after such occurrence) give Lessor, Indenture
Trustee and each Participant written notice of such Event of Loss and,
within 60 days after such occurrence, give Lessor, Indenture Trustee
and each Participant written notice of its election to comply either
with Section 10.1.2 or Section 10.1.3, and if Lessee shall not have
given notice of such election within 60 days after such occurrence
Lessee shall be deemed to have elected to comply with Section 10.1.3.
10.1.2 Replacement of Airframe and Engines. As promptly as
practicable, and in any event on or before the Business Day next
preceding the 180th day following the date of occurrence of such Event
of Loss, Lessee shall, in compliance with Section 10.1.6, convey or
cause to be conveyed to Lessor, to be leased by Lessee hereunder in
replacement thereof, a Replacement Airframe (which need not be a new
Replacement Airframe but shall have been placed in service not earlier
than October 22, 1994) together with the same number of Replacement
Engines as the Engines, if any, subject to such Event of Loss, such
Replacement Airframe and Replacement Engines to be free and clear of
all Liens (except Permitted Liens), to have a value, remaining useful
life and utility at least equal to, and to be in as good operating
condition as, the Airframe and Engines, if any, so replaced (for such
purpose, it shall be assumed that the Airframe and such Engines were
in the condition and repair required by the terms of this Lease). If
Lessee shall not effect such replacement hereunder on or before the
Business Day next preceding the 150th day following the date of the
occurrence of such Event of Loss, then Lessee shall immediately
deposit with Lessor, in the manner and in funds of the type specified
in Section 3.6, an amount equal to the excess of the Stipulated Loss
Value for the Aircraft over any funds then being held by Lessor or the
Indenture Trustee with respect to such Event of Loss. If Lessee shall
not perform its obligation to effect such replacement hereunder on or
before the Business Day next preceding the 180th day following the
date of the occurrence of such Event of Loss, then Lessee shall
immediately pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, the aggregate amount specified in clauses
(A), (B) and (C) of Section 10.1.3, net of any amount deposited with
Lessor pursuant to the next preceding sentence of this Section 10.1.2.
10.1.3 Payment of Stipulated Loss Value and Rent. On or
before the Business Day next preceding the earlier of (i) the 180th
day following the date of the occurrence of such Event of Loss, or
(ii) the later of 15 days following the receipt of insurance proceeds
with respect to such occurrence or the date Lessee shall have made or
shall be deemed to have made its election under Section 10.1.1 to
comply with Section 10.1.3, Lessee shall pay to
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Lessor, in the manner and in funds of the type specified in Section
3.6, (A) the Stipulated Loss Value for the Aircraft, determined as of
the date of payment (as described in the definition of Stipulated Loss
Value), (B) all unpaid Basic Rent due on or prior to the SLV
Determination Date with reference to which the Stipulated Loss Value
is computed (it being understood and agreed that Lessee shall not be
required to pay the portion, if any, of such Interim Rent or Basic
Rent designated in Exhibit C hereto as payable in advance on such SLV
Determination Date), and (C) (without duplication) any other Rent
which is due and payable through and including the date of payment.
10.1.4 Stipulated Loss Value Payment. In the event of
payment in full of the Stipulated Loss Value for the Aircraft pursuant
to Section 10.1.2 or 10.1.3 and, in either case, the amounts referred
to in clauses (B) and (C) of Section 10.1.3, (A) the obligation of
Lessee to pay Interim Rent and Basic Rent due after the SLV
Determination Date with reference to which such Stipulated Loss Value
is computed shall terminate (but Lessee shall remain liable for all
payments of Supplemental Rent due through and including the date of
such payment of Stipulated Loss Value), (B) the Term for the Aircraft
shall end, and (C) Lessor will comply with the applicable provisions
of Section 10.01 of the Trust Indenture and, upon Indenture Trustee's
release of the Aircraft from the Lien of the Trust Indenture Estate,
will Transfer to Lessee the Aircraft.
10.1.5 Payment of Rent. In the event of an Event of Loss,
during the period between the occurrence of the Event of Loss and the
date of payment pursuant to Section 10.1.3 or replacement, the
obligation of Lessee to pay Interim Rent, Basic Rent or Renewal Rent
shall continue unchanged, except that upon such replacement, it shall
become an obligation to pay such Rent in respect of the Replacement
Aircraft.
10.1.6 Conditions to Replacement of Aircraft. Lessee's
right to exercise the replacement options contemplated by Section
10.1.1 with respect to the Aircraft shall be subject to the
fulfillment prior to or at the time of any such replacement, in
addition to the requirements contained in Section 10.1.2, of the
conditions precedent set forth below:
10.1.6.1 No Default. No Lease Event of Default or
Lease Default shall have occurred and be continuing.
10.1.6.2 Tax Loss. Owner Participant and Lessor
shall have received, at Lessee's expense, a tax opinion of tax
counsel selected by Lessee, to the effect that the Event of
Loss or the Replacement of the Airframe or Aircraft in
connection therewith will not cause any adverse tax
consequences to Lessor or Owner Participant or its Affiliates
(or, in lieu thereof, Lessee shall have agreed to indemnify
for such tax risk), or if Owner Participant and Lessee shall
have agreed upon the amount, if any, payable and upon the
manner of payment thereof with respect to such replacement by
Lessee pursuant to the Tax Indemnity Agreement or Section 7(b)
of the Participation Agreement, then any such amount shall be
paid.
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10.1.6.3 Lessee's Obligations with Respect to
Replacement Aircraft. Lessee will promptly (all writings
referred to below to be reasonably satisfactory in form and
substance to Lessor):
(a) furnish Lessor with (i) a full
warranty bill of sale and FAA bill of sale duly
conveying to Lessor the Replacement Airframe and
Replacement Engines, if any, and (ii) an assignment
of the purchase agreement with respect to the
Replacement Airframe and Replacement Engines, if any
(if Lessee shall have any rights thereunder)
substantially in the form of the Purchase Agreement
Assignment and a consent and agreement of the
manufacturer thereof substantially in the form of
the Manufacturer's Consent;
(b) cause a Lease Supplement
subjecting such Replacement Airframe and Replacement
Engines, if any, to this Lease, duly executed by
Lessee, to be delivered to Lessor for execution, and
an Indenture and Trust Supplement to be delivered to
Lessor for execution and, in each case upon such
execution, to be filed for recordation with the FAA
pursuant to the Act;
(c) furnish Lessor with such evidence
of compliance with (i) Section 5.01(b) of the Trust
Indenture (if the Trust Indenture shall be in effect
at such time) and (ii) the insurance provisions of
Section 11 hereof with respect to the Replacement
Airframe and Replacement Engines, if any, and the
payment of all premiums then due with respect to all
such insurance, as Lessor may reasonably request;
(d) furnish Lessor with an opinion or
opinions of counsel reasonably satisfactory to
Lessor to the effect that, upon such conveyance,
Lessor will acquire good title to the Replacement
Airframe and Replacement Engines, if any, free and
clear of all Liens other than Permitted Liens, the
Replacement Airframe and Replacement Engines, if
any, will be leased hereunder and subject to the
Lien of the Trust Indenture (if then in effect) to
the same extent as the Airframe and Engines replaced
thereby, Lessor and (assuming the Trust Indenture is
still in effect) the Indenture Trustee shall be
entitled to the benefit of Section 1110 of the
Bankruptcy Code with respect to the Replacement
Aircraft to the same extent as the Aircraft, and to
such further effect as Lessor may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Airframe
which shall be identified by manufacturer,
model, FAA registration number and
manufacturer's serial number;
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(ii) a description of the Replacement
Airframe to be received (including the
manufacturer, model, FAA registration
number and manufacturer's serial number)
as consideration for the Airframe to be
released;
(iii) that on the date of the Indenture
and Trust Supplement and the Lease
Supplement relating to the Replacement
Airframe, Lessor will be the legal owner
of such Replacement Airframe free and
clear of all Liens (other than Permitted
Liens), that such Replacement Airframe
will on such date be in good working order
and condition, and that such Replacement
Airframe has been or, substantially
concurrently with such replacement, will
be duly registered in the name of Lessor
under the Act and that an airworthiness
certificate has been duly issued under the
Act with respect to such Replacement
Airframe, and that such registration and
certificate are in full force and effect,
and that Lessee will have the full right
and authority to use such Replacement
Airframe;
(iv) that the insurance required by
Section 11 is in full force and effect
with respect to such Replacement Airframe
and all premiums then due thereon have
been paid in full;
(v) that the Replacement Airframe is
of the same or an improved model as the
Airframe requested to be released from the
Lien of the Trust Indenture;
(vi) that no Lease Default or Lease
Event of Default has occurred and is
continuing or would result from the making
and granting of the request for release
and the addition of a Replacement
Airframe; and
(vii) if the Trust Indenture has not
theretofore been discharged, the release
of the Airframe so to be released will not
impair the security of the Trust Indenture
or be in contravention of any of the
provisions of the Trust Indenture;
(f) furnish Lessor with a certificate
or certification of qualified independent aircraft
appraisers reasonably satisfactory to Lessor
certifying that the Replacement Airframe and
Replacement Engines, if any, have a value, remaining
useful life and utility at least equal to, and are
in at least as good operating condition as, the
Airframe and Engines, if any, so replaced (assuming
the Airframe and Engines were in the condition and
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repair required by the terms hereof immediately
prior to the occurrence of such Event of Loss); and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to
the financing statements filed on or before the
Delivery Date) as Lessor or any Participant may
reasonably request to effect such replacement.
10.1.7 Recordation and Opinions. In the case of any
Replacement Airframe and/or Replacement Engines conveyed to Lessor
under this Section 10.l, promptly upon the registration of the
Replacement Aircraft and the recordation of the Lease Supplement and
Indenture and Trust Supplement covering the Replacement Airframe and
Replacement Engines, if any, pursuant to the Act, Lessee will cause to
be delivered to Lessor an opinion of Daugherty, Fowler & Peregrin or
other FAA counsel satisfactory to Lessor as to the due registration of
the Replacement Aircraft and the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.1.8 Conveyance. Upon compliance by Lessee with all of
the terms of this Section 10.1, (i) Lessor will comply with the
applicable provisions of Section 10.01 of the Trust Indenture and,
upon Indenture Trustee's release of the Aircraft and Engines (if
applicable) from the Lien of the Trust Indenture Estate, Transfer to
Lessee the replaced Airframe and Engines (if any), and (ii) Lessee
will be subrogated to all claims of Lessor, if any, against third
parties for damage to or loss of such Airframe and Engines to the
extent of the then insured value thereof.
10.2 Event of Loss with Respect to an Engine.
10.2.1 Event of Loss. Upon the occurrence of an Event of
Loss with respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe, Lessee
shall forthwith (and in any event within 15 days after such
occurrence) give Lessor, Indenture Trustee and each Participant
written notice thereof and shall, as promptly as possible and in any
event within 60 days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement for the
Engine with respect to which such Event of Loss occurred, title to a
Replacement Engine free and clear of all Liens, other than Permitted
Liens, and having a value, remaining useful life and utility at least
equal to, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such Engine was
of the value, remaining useful life and utility and in the condition
and repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss.
10.2.2 Conditions; Lessee's Obligations. Prior to or at
the time of any such conveyance, Lessee will promptly:
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(a) furnish Lessor with a full warranty (as to
title) bill of sale duly conveying to Lessor such Replacement
Engine;
(b) cause a Lease Supplement subjecting such
Replacement Engine to this Lease, duly executed by Lessee, to
be delivered to Lessor for execution, and an Indenture and
Trust Supplement to be delivered to Lessor for execution and,
in each case upon execution, to be filed for recordation with
the FAA pursuant to the Act;
(c) furnish Lessor with such evidence of
compliance with (i) Section 5.01(b) of the Trust Indenture (if
the Trust Indenture shall be in effect at such time) and (ii)
the insurance provisions of Section 11 hereof with respect to
such Replacement Engine and the payment of all premiums then
due with respect to such insurance, as Lessor may reasonably
request;
(d) furnish Lessor with an opinion or opinions
of Lessee's counsel, in form, substance and scope reasonably
satisfactory to Lessor, to the effect that, upon such
conveyance, Lessor will acquire good title to such Replacement
Engine free and clear of all Liens other than Permitted Liens,
and that such Replacement Engine will be leased hereunder and
subject to the Lien of the Trust Indenture (if then in effect)
to the same extent as the Engine replaced thereby and to such
further effect as Lessor or Indenture Trustee may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Engine which
shall be identified by manufacturer's serial number;
(ii) a description of the Replacement
Engine (including the manufacturer's name, model and
serial number) as consideration for the Engine to be
released;
(iii) that on the date of the Lease
Supplement and the Indenture and Trust Supplement
relating to the Replacement Engine, Lessor will be
the legal owner of such Replacement Engine free and
clear of all Liens except Permitted Liens, that such
Replacement Engine will on such date be in good
working order and condition, and that such
Replacement Engine is the same or an improved or
equivalent model as the Engine to be released; and
(iv) if the Trust Indenture has not
theretofore been discharged, that the release of the
Engine so to be released will not impair the
security of the Trust Indenture or be in
contravention of any of the provisions of the Trust
Indenture;
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(f) furnish Lessor with a certificate of a
qualified aircraft engineer (who may be an employee of Lessee)
certifying that such Replacement Engine has a value, remaining
useful life and utility at least equal to, and is in at least
as good operating condition as, the Engine so replaced
assuming such Engine was in the condition and repair required
by the terms hereof immediately prior to the occurrence of
such Event of Loss; and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to the
financing statements filed on or before the Delivery Date) as
Lessor or any Participant may reasonably request to effect
such replacement.
10.2.3 Recordation and Opinions. In the case of any
Replacement Engine conveyed to Lessor under this Section 10.2,
promptly upon the recordation of the Lease Supplement and the
Indenture and Trust Supplement covering such Replacement Engine
pursuant to the Act, Lessee will cause to be delivered to Lessor an
opinion of Daugherty, Fowler & Peregrin or other FAA counsel
satisfactory to Lessor as to the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.2.4 Conveyance; Replacement Engine. Upon compliance by
Lessee with the terms of this Section 10.2, Lessor will comply with
the provisions of the Trust Indenture applicable thereto and, upon
Indenture Trustee's release of the Engine with respect to which such
Event of Loss occurred from the Lien of the Trust Indenture Estate,
Transfer such Engine to Lessee, and Lessee will be subrogated to all
claims of Lessor, if any, against third parties for damage to or loss
of such Engine to the extent of the insured value thereof.
10.2.5 No Reduction of Rent. No Event of Loss with respect
to an Engine under the circumstances contemplated by the terms of this
Section 10.2 shall result in any reduction of Basic Rent or Renewal
Rent.
10.3 Application of Certain Payments. Any payments (other than
insurance proceeds, the application of which is provided for in Section 11)
received at any time by Lessor, Lessee or any Permitted Sublessee from any
governmental authority or other Person with respect to any Event of Loss, will
be applied as follows:
10.3.1 Replacement of Airframe and Engines. If such
payments are received with respect to the Airframe and the Engines (or
engines) installed on the Airframe that have been or are being
replaced by Lessee pursuant to Section 10.1 (other than Section
10.1.3), such payments shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect,
Lessor, and upon completion of such replacement be paid over to
Lessee, provided Lessee shall have fully performed or, concurrently
therewith will fully perform, the terms of Section 10.1 with respect
to the Event of Loss for which such payments are made.
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10.3.2 Replacement of Engine. If such payments are
received with respect to an Engine that has been or is being replaced
by Lessee pursuant to Section 10.2, such payments shall be paid over
to, or retained by, Indenture Trustee or, if the Trust Indenture is no
longer in effect, Lessor, and upon completion of such replacement be
paid over to Lessee, provided Lessee shall have fully performed or,
concurrently therewith will fully perform, the terms of Section 10.2
with respect to the Event of Loss for which such payments are made.
10.3.3 Nonreplacement. If such payments are received with
respect to the Airframe or the Airframe and the Engines or engines
installed on the Airframe that has not or have not been and will not
be replaced pursuant to Section 10.1 or 10.2, so much of such payments
remaining after reimbursement of Lessor, Indenture Trustee and each
Participant for costs and expenses as shall not exceed the Stipulated
Loss Value and other amounts required to be paid by Lessee hereunder
shall be applied in reduction of Lessee's obligation to pay such
Stipulated Loss Value and other amounts required to be paid by Lessee
hereunder, if not already paid by Lessee, or, if already paid by
Lessee, shall be applied to reimburse Lessee for its payment of such
Stipulated Loss Value and other amounts. The balance, if any, of such
payment remaining thereafter shall be divided between Lessor and
Lessee in proportion to their relative interests in the Aircraft.
10.4 Requisition of Aircraft for Use by Governmental Authorities.
In the event of the requisition for use of the Airframe and the Engines or
engines installed on such Airframe during the Term by any governmental
authority, Lessee shall notify Lessor promptly of such requisition, and all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred. All
payments received by Lessor or Lessee from such governmental authority for the
use of such Airframe and Engines or engines prior to the time such requisition
becomes an Event of Loss shall be paid over to, or retained by, Lessee (or, if
directed by Lessee, any Permitted Sublessee); and all payments received by
Lessor or Lessee from such governmental authority for the use of such Airframe
and Engines or engines after such time shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect, Lessor,
and upon the performance by Lessee of the terms of Section 10.1 with respect to
such Event of Loss, shall be paid over to Lessee.
10.5 Requisition of an Engine for Use by Governmental Authorities.
In the event of the requisition for use by any governmental authority (other
than in circumstances contemplated by Section 10.4) of any Engine but not the
Airframe, Lessee will replace such Engine hereunder by complying with the terms
of Section 10.2 to the same extent as if an Event of Loss had occurred with
respect to such Engine, and any payments received from such governmental
authority with respect to such requisition shall be paid over to, or retained
by, Indenture Trustee, or if the Trust Indenture is no longer in effect,
Lessor, and upon the performance by Lessee of the terms of Section 10.2 to the
same extent as if an Event of Loss had occurred with respect to such
requisitioned Engine, shall be paid over to Lessee.
10.6 Application of Payments During Existence of Default. Any
amount referred to in this Section 10 which is payable or creditable to or
retainable by Lessee shall not be paid or credited to
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or retained by Lessee if, at the time of such payment, credit or retention, a
Lease Event of Default or Lease Default shall have occurred and be continuing
hereunder but shall be paid to and held by Indenture Trustee and applied by it
as provided in the Trust Indenture, or, if the Trust Indenture is no longer in
effect, held by Lessor as security for the obligations of Lessee under this
Lease and applied against Lessee's obligations hereunder as and when due; at
such time as there shall not be continuing any such Lease Event of Default or
Lease Default, or at such earlier time as Lessee shall have paid in full all
Rent and other amounts due and payable hereunder and under the other Operative
Agreements by Lessee, any remaining balance of such amount shall be paid to
Lessee to the extent not previously applied in accordance with the preceding
clause of this sentence.
Section 11. Insurance.
11.1 Public Liability and Property Damage Insurance. Lessee shall
at all times maintain, or cause to be maintained, at its or any Permitted
Sublessee's expense, public liability (including without limitation contractual
liability, passenger legal liability and property damage, but excluding
manufacturer's product liability coverage) insurance which shall:
11.1.1 Type, Form and Amount. Be of a type and form
carried by similarly situated United States commercial air carriers
generally, and carried in amounts not less than that carried by Lessee
on similar equipment owned or leased by Lessee and not less than the
minimum amount of $350,000,000 (per occurrence) combined single limit
(or such greater amount as Lessee may carry from time to time on other
737-300 series aircraft in its fleet);
11.1.2 Coverage. Include, but not be limited to, public
liability insurance, contractual liability insurance, passenger
liability insurance and property damage liability insurance (including
cargo and baggage liability insurance); and
11.1.3 Additional Insureds. Name as additional insureds
Lessor (in its individual and trust capacities), Indenture Trustee,
each Participant and each other Indemnified Party, as their interests
may appear.
11.2 Insurance Against Loss of or Damage to Aircraft and Engines.
Lessee shall at all times maintain, or cause to be maintained, at its or any
Permitted Sublessee's expense, insurance against loss of or damage to the
Aircraft, Airframe and Engines as follows:
11.2.1 Type, Form and Amount. "All-risk" ground and flight
aircraft hull insurance on the Aircraft and "all-risk" coverage on
each Engine and on Parts while removed from the Aircraft or Engines,
which is of the type and form, and in an amount not less than that,
carried by Lessee on similar equipment owned or leased by Lessee and
in an amount not less than that usually carried by similarly situated
United States commercial air carriers generally; and, to the extent so
usually carried, at all times that the Aircraft or any Engine is not
covered by the insurance described in Section 11.2.2, coverage against
the perils of (i) strikes, riots, civil commotions or labor
disturbances, (ii) any malicious act or act of sabotage, and (iii)
hijacking, or any unlawful seizure or wrongful exercise of control of
the
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Aircraft or crew in flight (including any attempt at such seizure or
control) made by any person or persons on board the Aircraft acting
without the consent of the insured other than hijacking committed by
persons engaged in a program of irregular warfare for terrorist
purposes. Such insurance shall at all times be for an amount not less
than the Stipulated Loss Value of the Aircraft.
11.2.2 War-Risk Insurance. If at any time (a) war-risk
insurance is maintained by Lessee or any Permitted Sublessee
subleasing the Aircraft or any Engine with respect to other aircraft
operated by Lessee or such Permitted Sublessee on the same or similar
routes, (b) the Aircraft is operated on routes where the custom in the
United States commercial airline industry is to carry war-risk
insurance, (c) the Aircraft is operated by a Permitted Foreign Air
Carrier as a Permitted Sublessee in any recognized or threatened area
of hostilities, or (d) the Aircraft is operated on any route where no
other aircraft is regularly operated by a United States commercial
airline and such route is within any such area of hostilities, then
war-risk and allied perils insurance of the type carried by similarly
situated United States commercial air carriers operating the same or
comparable models of aircraft on the same or similar routes shall be
maintained on the Aircraft in an amount not less than that specified
in Section 11.2.l.
11.2.3 Certain Requirements. The insurance policies
required by this Section 11.2 shall:
11.2.3.1 Additional Insureds. Be endorsed to name
Lessor (in its individual and trust capacities), each
Participant, the Indenture Trustee and each other Indemnified
Party as additional insureds, as their interests may appear.
11.2.3.2 Payment of Proceeds. Provide that
proceeds thereunder shall be paid directly to Indenture
Trustee, so long as the Trust Indenture shall be in effect,
and thereafter to Lessor, in either case, as exclusive loss
payee; provided, however, that any proceeds payable as a
result of any property damage to the Airframe or any Engine,
which property damage does not exceed $4,000,000 and does not
constitute an Event of Loss with respect to the Aircraft or
such Engine, shall be paid to Lessee unless Lessor or
Indenture Trustee, prior to such payment, shall have notified
the insurer making such payment that a Lease Default (of the
type described in Section 14.1 or 14.5) or Lease Event of
Default has occurred and is continuing.
11.2.3.3 Waiver of Subrogation. Provide that the
insurers shall waive any rights of subrogation against Lessor,
Indenture Trustee, each Participant and each other Indemnified
Party except for claims arising out of gross negligence or
willful misconduct of such Person; provided, that the exercise
by insurers of rights of subrogation, if any, permitted by
this Section 11.2 shall not, in any way, delay payment of any
claim that would otherwise be payable by such insurers but for
the existence of such rights of subrogation or entitle such
insurers to exercise or to assert any
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setoff, recoupment, counterclaim or any other deduction in
respect of any amounts payable under such policies.
11.2.4 Deductibles. The insurance required by this Section
11.2 may, subject to Section 11.8, provide for standard deductibles
which are from time to time in effect in the aviation insurance
industry generally and which are customarily maintained by similarly
situated United States commercial air carriers generally; provided,
however, such deductibles shall not be more than the deductibles
generally maintained by Lessee (and which Lessee is under no
compulsion to maintain pursuant to any indenture, mortgage, lease or
other agreement) with respect to its fleet of Boeing Model 737-300
series aircraft and CFM International Model CFM56-3 engines generally.
11.2.5 Government Indemnity. In the case of a contract
with the Government in respect of the Aircraft or Engines, a valid
agreement by the Government to indemnify Lessee, Lessor, each
Participant, Indenture Trustee and each other Indemnified Party
against the same risks which are required hereunder to be insured
against in amounts at least equal to the amounts required hereunder
from time to time (such indemnity to be backed by the full faith and
credit of the United States of America), shall be considered adequate
insurance with respect to the Aircraft, Airframe and any Engine
subject to such contract to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
11.3 General Policy Provisions. Each insurance policy to be
procured and maintained hereunder shall:
11.3.1 Primary Insurance. Be primary and without right of
contribution from other insurance which may provide coverage to
Lessor, Indenture Trustee, or any Participant or any other Indemnified
Party with respect to its interest in the Aircraft, Airframe or any
Engine or its liabilities with respect to or arising out of the
transactions contemplated by the Operative Agreements;
11.3.2 Coverage for Each Insured. Expressly provide that
all the provisions thereof, except the agreed values and the limits of
the liability of the insurer under such policy, shall operate in the
same manner as if there were a separate policy covering each insured;
11.3.3 Waiver of Certain Rights. Waive any right of the
insurers to any setoff, recoupment, counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
liability of Lessee, Lessor, Indenture Trustee, any Participant or any
other Indemnified Party;
11.3.4 Breach of Warranty. Provide that, in respect of
Lessor, Indenture Trustee, each Participant and each other Indemnified
Party, such insurance shall not be invalidated by any action or
inaction by Lessee, any Indemnified Party or other Person and shall
insure the interests of Lessor, Indenture Trustee, each Participant
and each other Indemnified Party
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regardless of any breach or violation by Lessee, any Indemnified Party
or other Person of any representation, warranty, declaration or
condition contained in such policy;
11.3.5 Notice of Termination or Changes. Provide for not
less than 30 days' prior written notice to be received by Lessor,
Indenture Trustee and each Participant before any lapse, alteration,
termination or cancellation of the insurance evidenced thereby shall
be effective as to Lessor, Indenture Trustee, each Participant and
each other Indemnified Party, except that war-risk and allied perils
policies may provide for not less than seven days' prior written
notice or such lesser or greater notice as shall at the time be
customary in the aviation insurance industry generally, and which are
customarily in effect with respect to major United States commercial
air carriers generally from time to time;
11.3.6 Nonliability for Premiums. Provide that neither
Lessor, Indenture Trustee, any Participant nor any other Indemnified
Party shall be liable for any insurance premium;
11.3.7 Identity of Insurers. Be with insurance companies,
underwriters or funds of recognized responsibility; and
11.3.8 Fifty-fifty Clause. Contain a fifty-fifty clause
per AVS 103 or its equivalent, but only in the event that such clause
is customarily included in such policies maintained by similarly
situated United States commercial air carriers generally.
11.4 Application of Insurance Proceeds. As between Lessor and
Lessee, all insurance proceeds received under policies required to be
maintained (or to be caused to be maintained) by Lessee pursuant to Section
11.2 as a result of the occurrence of an Event of Loss with respect to the
Aircraft, Airframe or any Engine will be applied in accordance with Section
10.3.1, 10.3.2 or 10.3.3, as the case may be (except that the balance referred
to in Section 10.3.3 shall be paid over to, or retained by, Lessee). All
insurance proceeds received under such policies in respect of any property
damage loss not constituting an Event of Loss with respect to the Airframe or
an Engine will be applied in payment for repairs or for replacement property in
accordance with the terms of Section 8, if not already paid for by Lessee, and
any balance remaining after compliance with such Section with respect to such
loss shall be paid to Lessee. In the case of a loss with respect to an engine
(other than an Engine) installed on the Airframe, Lessor shall hold any payment
to it of any insurance proceeds in respect of such loss for the account of
Lessee or any other third party that is entitled to receive such proceeds. The
provisions of Section 10.6 shall apply to amounts referred to in this Section
11.4.
11.5 Certificates; Reports, Etc. With respect to any policy
required hereunder, Lessee shall cause to be furnished to Lessor, Indenture
Trustee and each Participant on or prior to the Delivery Date of the Aircraft
and on or prior to expiration of such policy, certificates of the insurer or
insurers (or their authorized representatives) providing insurance pursuant to
the requirements of this Section 11. On or before the Delivery Date of the
Aircraft, and annually thereafter on or before the renewal date of such policy,
Lessee shall cause to be furnished to Lessor, Indenture Trustee, the Original
Loan Participant and Owner Participant a report signed by Willis Corroon
Aerospace (or
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any other firm of independent aircraft insurance brokers, appointed by Lessee,
reasonably satisfactory to the Original Loan Participant and Owner Participant)
describing in reasonable detail the insurance then carried and maintained with
respect to the Aircraft and stating the opinion of such firm that the insurance
then carried and maintained on the Aircraft complies with the terms hereof.
Lessee agrees that it will cause such firm to advise Lessor, Indenture Trustee,
the Original Loan Participant and Owner Participant in writing promptly of any
default in the payment of any premium or any other act or omission on the part
of Lessee or any Permitted Sublessee of which they have knowledge and which
might invalidate or render unenforceable, in whole or in part, the insurance on
the Aircraft. To the extent such agreement is reasonably obtainable, Lessee
further agrees to cause such firm to advise Lessor, Indenture Trustee and each
Participant in writing at least 30 days (seven days in the case of war-risk and
allied perils coverage or such lesser or greater notice as is customary in the
aviation industry generally) prior to any expiration, lapse, alteration,
cancellation or termination date of any insurance carried and maintained on the
Aircraft pursuant to this Section 11.
11.6 Lessor's Right to Maintain Insurance. In the event that
Lessee shall fail to maintain or cause to be maintained insurance as herein
provided, Lessor, Indenture Trustee or any Participant may at its option (but
shall not be obligated to) provide such insurance and in such event, Lessee
shall, upon demand, reimburse such Person, as Supplemental Rent, for the cost
thereof. No such payment, performance or compliance shall be deemed to cure
any Lease Default hereunder or otherwise relieve Lessee of its obligations with
respect thereto.
11.7 Insurance for Own Account. Nothing in Section 11 shall limit
or prohibit Owner Participant (directly or through Lessor) from obtaining
insurance for its own account, and any proceeds payable thereunder shall be
payable as provided in the insurance policy relating thereto; provided,
however, that no such insurance may be obtained which would limit or otherwise
adversely affect the availability or coverage or cost of any insurance required
to be obtained or maintained pursuant to this Section 11. Nothing in this
Section 11 shall limit or prohibit Lessor, Indenture Trustee or any Holder from
obtaining insurance for its own account, and any proceeds payable thereunder
shall be payable as provided in the insurance policy relating thereto;
provided, however, that no such insurance may be obtained which would limit or
otherwise adversely affect the availability or coverage or cost of any
insurance required to be obtained or maintained pursuant to this Section 11 or
obtained by Owner Participant pursuant to the preceding sentence.
11.8 Self-Insurance. Notwithstanding the foregoing provisions of
this Section 11, Lessee may, from time to time so long as no Lease Event of
Default has occurred and is continuing, self-insure with respect to the
Aircraft to the same extent as it does with respect to, or maintain policies
with deductibles or premium adjustment provisions consistent with similar
provisions applicable to, other comparable aircraft operated by Lessee;
provided, however, that in the case of public liability insurance, such
self-insurance shall in no event exceed $50,000,000; and provided, further,
that if at any time Lessee's unsecured senior long-term debt securities are not
rated Investment Grade, such self-insurance (inclusive of any such public
liability insurance and without derogation from the preceding proviso) shall in
no case be in amounts greater than 4% of Lessee's tangible net worth. As used
in this Agreement, the term "Investment Grade" means a rating of
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"Baa3" or higher from Moody's Investors Service or a rating from any other
nationally recognized bond rating service equivalent to or better than such a
rating.
Section 12. Inspection. At all reasonable times, and upon
reasonable notice, Lessor, Indenture Trustee or any Participant or its
authorized representatives may inspect the Aircraft and inspect and copy
(subject to any confidentiality agreements, copyright restrictions and the
like) the books and records of Lessee relative thereto. Any such inspection of
the Aircraft shall be without out-of-pocket expense or risk to Lessee and shall
be a visual, walk-around inspection and may not include opening any panels,
bays or the like; provided, that no exercise of such inspection right shall
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee (or any Permitted Sublessee). Subject to the proviso in
the preceding sentence, upon receipt by Lessee of a written request from the
Owner Participant or the Indenture Trustee specifying that the Owner
Participant or the Indenture Trustee desires to have an authorized
representative observe the major overhaul to be performed on the Aircraft next
following receipt of any such request, Lessee shall permit such authorized
representative to observe such overhaul. Neither Lessor, Indenture Trustee nor
any Participant shall have any duty to make any such inspection or shall incur
any liability or obligation by reason of not making any such inspection.
Section 13. Assignment.
13.1 In General. Except as otherwise expressly permitted in
Section 7.2 or Section 11(f) of the Participation Agreement, or as required in
the case of any requisition by the Government referred to in Section 7.1,
Lessee will not, without the prior or written consent of Lessor, assign or
transfer any of its rights or obligations under this Lease or any other
Operative Agreement. Lessor may assign or convey any of its right, title and
interest in and to this Lease, any of the other Operative Agreements or the
Aircraft in accordance with the Participation Agreement, the Trust Agreement or
the express provisions of this Lease. The terms and provisions of the Lease
shall be binding upon and inure to the benefit of Lessor and Lessee and their
respective permitted successors and assigns.
13.2 Security for Lessor's Obligations. In order to secure the
indebtedness evidenced by the Certificates, the Trust Indenture provides, among
other things, for the assignment by Lessor to Indenture Trustee of its right,
title and interest in, to and under this Lease and any Permitted Sublease, to
the extent set forth in the Trust Indenture, and for the creation of a first
mortgage lien on and perfected security interest in the Aircraft in favor of
Indenture Trustee. Lessee hereby consents to such assignment and to the
creation of such mortgage and security interest and acknowledges receipt of
copies of the Trust Agreement and the Trust Indenture, it being understood that
such consent shall not affect any requirement or the absence of any requirement
for any consent under any other circumstances. So long as the Trust Indenture
shall be in effect, Lessee will furnish to Indenture Trustee counterparts of
all writings of any kind required to be delivered hereunder by Lessee to
Lessor. Until the Lien of the Trust Indenture has been released, (a) Lessee
shall make all payments of Basic Rent, Stipulated Loss Value and Termination
Value and all other amounts payable hereunder (other than Excluded Payments as
defined in the Trust Indenture) to Indenture Trustee at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001, Attention:
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Corporate Trust Administration, and the right of Indenture Trustee to receive
such payments shall not be subject to any defense, counterclaim, setoff or
other right or claim of any kind which Lessee may be able to assert against
Lessor (in its individual or trust capacity), Indenture Trustee (in its
individual or trust capacity), any Participant or any other Person in an action
brought by any thereof on this Lease and (b) as provided in the Trust
Indenture, certain rights of Lessor with respect to this Lease, the Aircraft,
the Airframe or any Engine (or any Part thereof) or any other part of the Trust
Indenture Estate are exercisable by Indenture Trustee.
Section 14. Events of Default. The following events shall
constitute Lease Events of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body), and each such
Lease Event of Default shall continue so long as, but only so long as, it shall
not have been remedied or waived:
14.1 Failure to Pay Rent. Lessee shall fail to make any payment of
Interim Rent or Basic Rent within seven Business Days from the due date
thereof; or Lessee shall fail to make any other payments required to be made by
it under the Operative Agreements within ten Business Days after the receipt of
written demand therefor delivered to Lessee by Lessor after such payments were
required to have been made (provided, that any failure to pay any amount owed
by Lessee under the Tax Indemnity Agreement or any failure of Lessee to pay to
Lessor or the Owner Participant when due any Excluded Payments shall not
constitute a Lease Event of Default unless written notice is given by the Owner
Participant to Lessee and the Indenture Trustee that such failure shall
constitute a Lease Event of Default); or
14.2 Specific Defaults. Lessee shall fail to carry and maintain
(or cause to be carried and maintained) insurance on or with respect to the
Aircraft in accordance with the provisions of Section 11; provided, that any
such failure shall not constitute a Lease Event of Default so long as such
failure is for a period of not more than 30 days, Lessee shall not operate the
Aircraft at a time when such insurance is not in effect and the Aircraft
continues to be covered by such insurance as is required when the Aircraft is
on the ground, or Lessee shall fail to comply with Section 7.1.1; or
14.3 General Default. Lessee shall fail to perform or observe any
other covenant, condition or agreement to be performed or observed by it
hereunder or under any other Operative Agreement (except the Tax Indemnity
Agreement), and such failure shall continue unremedied for a period of 30 days
after written notice thereof to Lessee, unless Lessee shall be diligently
proceeding to correct such failure and such failure is cured within 180 days
after such notice or by the end of the Term, whichever first occurs; or
14.4 Misrepresentation and Breach of Warranty. Any representation
or warranty made by Lessee herein or in the Participation Agreement or in any
other Operative Agreement (other than the Tax Indemnity Agreement) or in any
document or certificate furnished by Lessee in connection with any thereof,
shall prove to have been incorrect in any material respect at the time made,
shall remain
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material at the time of discovery and shall, if curable, remain incorrect in
any material respect after 30 days after written notice thereof to Lessee;
14.5 Bankruptcy, Etc. Lessee shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official or agency in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to authorize
any of the foregoing; or an involuntary case or other proceeding shall be
commenced against Lessee seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official or agency of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 90 days.
Section 15. Remedies.
15.1 Default; Remedies. Upon the occurrence of a Lease Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, so long as any such Lease Event of Default shall be
continuing, exercise one or more of the following remedies as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect
which have not been effectively waived by Lessee:
15.1.1 Return; Repossession. Lessor may cause Lessee, upon
written demand by Lessor and at Lessee's expense, to return promptly,
and Lessee shall return promptly, all or any part of the Aircraft,
Airframe or Engines as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with
all the provisions of, Section 5 as if the Aircraft, Airframe or
Engines were being returned at the end of the Term; or Lessor, at its
option, may enter upon the premises where the Aircraft, Airframe or
any Engine, or part thereof is located and take immediate possession
of and remove the same by summary proceedings or otherwise, all
subject to receipt of notice delivered pursuant to Section 7.2.3 (if
applicable) and without liability accruing to Lessor for or by reason
of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise, and Lessee
expressly waives any right it may have under applicable law to a
hearing prior to repossession of the Aircraft, Airframe or any Engine
or part thereof; or
15.1.2 Sale; Use Etc. Lessor may sell all or any part of
the Aircraft, Airframe or any Engine, at public or private sale, at
such times and places, to such Persons (including Lessor, Indenture
Trustee or any Participant) as Lessor may determine, or otherwise
dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, Airframe or any Engine or
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part thereof, as Lessor, in its sole discretion, may determine, all
free and clear of any rights of Lessee except as hereinafter set forth
in this Section 15 and without any duty to account to Lessee with
respect to such action or inaction or for any proceeds with respect
thereto; or
15.1.3 Certain Liquidated Damages.
15.1.3.1 Liquidated Damages--Fair Market Rental
Value. Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under
Section 15.1.1 or 15.1.2 with respect to the Aircraft,
Airframe or any Engine or part thereof, Lessor, by written
notice to Lessee specifying a payment date (which shall be an
SLV Determination Date) not earlier than ten days from the
date of such notice, may cause Lessee to pay to Lessor, and
Lessee shall pay to Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Interim Rent, Basic Rent or
Renewal Rent, as the case may be, due after the date specified
for payment in such notice), any unpaid Interim Rent, Basic
Rent or Renewal Rent, as the case may be, due on or prior to
such SLV Determination Date (it being understood and agreed
that Lessee shall not be required to pay the portion, if any,
of such Interim Rent or Basic Rent designated in Exhibit C
hereto as payable in advance on such SLV Determination Date)
plus an amount equal to the excess, if any, of the Stipulated
Loss Value for the Aircraft, computed as of such SLV
Determination Date, over the fair market rental value
(determined as hereafter provided in this Section 15) of the
Aircraft for the remainder of the Term, after discounting such
fair market rental value semiannually (effective on each Rent
Payment Date) by a rate equal to the higher of the Certificate
Rate or the rate specified in clause (ii) of the definition of
Overdue Rate to present worth as of the date specified for
payment in such notice, together with interest, if any, on
such amount and unpaid Interim Rent, Basic Rent or Renewal
Rent, as the case may be, at the Overdue Rate from the date
specified for payment in such notice to the date of payment in
full; or
15.1.3.2 Liquidated Damages--Fair Market Sales
Value. If Lessor shall not have sold the Aircraft, Lessor, by
written notice to Lessee specifying a payment date (which
shall be an SLV Determination Date) not earlier than ten days
from the date of such notice, may cause Lessee to pay to
Lessor, and Lessee shall pay to Lessor, on the payment date
specified in such notice, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Interim Rent,
Basic Rent or Renewal Rent, as the case may be, due after the
date specified for payment in such notice), any unpaid Interim
Rent, Basic Rent or Renewal Rent, as the case may be, due on
or prior to such SLV Determination Date (it being understood
and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated
in Exhibit C hereto as payable in advance on such SLV
Determination Date) plus an amount equal to the excess, if
any, of the Stipulated Loss Value for the Aircraft, computed
as of such SLV Determination Date, over the fair market sales
value of the Aircraft (determined as hereafter provided in
this Section 15 as of the
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date specified for payment in such notice), together with
interest, if any, on such amount and unpaid Interim Rent,
Basic Rent or Renewal Rent, as the case may be, at the Overdue
Rate from the date specified for payment in such notice to the
date of payment in full; or
15.1.4 Liquidated Damages upon Sale. If Lessor,
pursuant to Section 15.1.2 or applicable law, shall have sold
the Aircraft, Lessor, in lieu of exercising its rights under
Section 15.1.3 with respect to the Aircraft, may, if Lessor
shall so elect, upon giving written notice to Lessee, cause
Lessee to pay Lessor, and Lessee shall pay to Lessor, on the
date of such sale, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Interim Rent, Basic Rent
or Renewal Rent, as the case may be, due after the date of
such sale), any unpaid Basic Rent or Renewal Rent, as the case
may be, due on or prior to the SLV Determination Date (it
being understood and agreed that Lessee shall not be required
to pay the portion, if any, of such Interim Rent or Basic Rent
designated in Exhibit C hereto as payable in advance on such
SLV Determination Date) on or immediately preceding such date
of sale plus the amount of any deficiency between the net
proceeds of such sale or (if such sale is a private sale and
is made to Lessor, Indenture Trustee, a Participant or any
Affiliate thereof) between the fair market sales value of the
Aircraft, determined as of the date of such sale as
hereinafter provided in this Section 15, and the Stipulated
Loss Value of the Aircraft, computed as of the date of such
sale, together with interest, if any, on such amount and such
unpaid Interim Rent, Basic Rent or Renewal Rent at the Overdue
Rate from the date of such sale, to the date of payment in
full; or
15.1.5 Rescission and Other Remedies. Lessor may
rescind and terminate this Lease, or may exercise any other
right or remedy which may be available to it under applicable
law or proceed by appropriate court action to enforce the
terms hereof or to recover damages for the breach hereof,
including without limitation Lessee's agreement to lease the
Aircraft for the Term and to pay Rent.
In addition to the foregoing remedies, Lessee shall be liable (except
as otherwise provided above and without duplication of amounts otherwise
payable hereunder) for any and all unpaid Rent due hereunder before, during or
after the exercise of any of the foregoing remedies and for all legal fees and
other costs and expenses (including the fees and expenses of all appraisers
required by this Section 15) of Lessor, Indenture Trustee and Participants,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all insurance and
storage costs and all costs and expenses incurred in connection with the return
of the Aircraft, Airframe or any Engine or part thereof, in accordance with the
terms of Section 5 or in placing the Aircraft, Airframe or any Engine or part
thereof, in the condition and airworthiness required by Section 5.
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Lessor agrees to give Lessee at least 15 days' prior written notice of
the date fixed for any public sale of the Aircraft, the Airframe or any Engine
or part thereof, and of the date on or after which will occur the execution of
any contract providing for any private sale.
15.2 Determination of Fair Market Rental Value and Fair Market
Sales Value. For the purpose of this Section 15, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession, as the case may
be, and in each case shall be determined on an "as is, where is" basis pursuant
to an appraisal by a recognized independent aircraft appraiser chosen by Lessor
and approved by Lessee, which approval shall not be unreasonably withheld or
delayed and shall be deemed granted if such choice is not rejected within 10
days after Lessee's receipt of notice of Lessor's choice.
15.3 No Waiver, Etc. No remedy referred to in this Section 15 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. No express or implied waiver by
Lessor of any Lease Event of Default shall in any way be, or be construed to
be, a waiver of any earlier or subsequent Lease Event of Default. To the
extent permitted by applicable law, Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use the Aircraft, Airframe or any Engine, or part thereof,
in mitigation of Lessor's damages as set forth in this Section 15 or which may
otherwise limit or modify any of Lessor's rights or remedies under this Section
15.
Section 16. Notices. All notices required under the terms and
provisions hereof shall be in writing and shall be given by certified mail,
telecopy or any other customary means of written communication, addressed:
If to Lessee, at 2702 Love Field Drive, P.O. Box 36611, Dallas, Texas
75235-1611 (telecopy no. 214/904-4022), Attention: Treasurer, or at such other
address as Lessee shall from time to time designate in writing;
If to Lessor, at 777 Main Street, Hartford, Connecticut 06115
(telecopy no. 203/240-7920), Attention: Corporate Trust Administration, or at
such other address as Lessor shall from time to time designate in writing;
If to any Participant or Indenture Trustee, at the applicable address
set forth in the signature pages of the Participation Agreement or Schedule I
thereto, or at such other address as any such Participant or Indenture Trustee,
as the case may be, shall from time to time designate in writing.
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The effective date of any such notice shall be, if sent by mail, five
days (ten days, if international) after mailing or, if sent by telex or
telecopy, the date when such notice is sent or dispatched, and otherwise the
date on which it is received by the addressee. Lessee shall furnish to Lessor
for transmission to Indenture Trustee and Participants a sufficient number of
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished hereunder, except in any case where
Lessee shall have transmitted the same directly to any such person.
Section 17. Net Lease; Lessee's Obligations; No Setoff,
Counterclaim, Etc. This is a net lease and it is hereby recognized that Lessor
is the owner of the Aircraft (except that Owner Participant will be the owner
for income tax purposes) and Lessee is the lessee thereof. It is the intent of
the parties hereto that this Lease be a "true lease". Lessee's obligation to
pay all Rent payable hereunder as and when due and to the Person entitled
thereto shall, subject to Section 3.8, be absolute and unconditional and shall
not be affected by any circumstance, including without limitation: (a) any
setoff, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor (in its individual or trust capacity), Indenture Trustee (in its
individual or trust capacity), any Participant, Manufacturer, any Indemnified
Party or any other Person for any reason whatsoever; (b) any defect in the
title, airworthiness, condition, design, operation or fitness for use of, or
any damage to or loss, theft, taking, requisition, condemnation, confiscation
or destruction of, the Aircraft, Airframe or any Engine, or any interruption
or cessation in the use or possession thereof by Lessee, any sublessee or any
other Person for any reason whatsoever; (c) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee or any other Person;
(d) any restriction, prevention or curtailment of or interference with any use
of the Aircraft or part thereof; (e) any invalidity or unenforceability or
disaffirmance of this Lease or any provision hereof or any of the other
Operative Agreements or any provision thereof, in each case whether against or
by Lessee or otherwise; or (f) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided, that
nothing in this sentence shall be construed to modify or limit in any way
Lessee's rights under Section 3.8.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees, subject to Section 3.8, to pay an amount
equal to each Interim Rent, Basic Rent, Renewal Rent and Supplemental Rent
payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part. All Rent payable by Lessee shall be paid without notice or demand
(except as otherwise expressly provided) and, subject to Section 3.8, without
abatement, suspension, deferment, deduction, diminution or proration by reason
of any circumstance or occurrence whatsoever. Lessee hereby waives, to the
extent permitted by applicable law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease or any part hereof, or to
any abatement, suppression, deferment, diminution, reduction or proration of
Rent except in accordance with the express terms hereof. Each payment of Rent
made by Lessee shall, subject to Section 3.8, be final as to Lessor and Lessee.
Lessee will not, subject to Section 3.8, seek to recover all or any part of any
such payment of Rent for any reason whatsoever. Lessee covenants that it will
remain obligated under this Lease in accordance with its
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terms and will take no action to terminate, rescind or avoid this Lease solely
as a result of the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding-up or other similar proceeding
affecting Lessor or Owner Participant or any other action with respect to this
Lease which may be taken in any such proceeding by any trustee or receiver of
Lessor or Owner Participant or by any court (it being understood that nothing
in this sentence shall prevent Lessee from taking any action to which it would
have been entitled had such bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
similar proceeding not occurred).
Section 18. Renewal and Purchase Options.
18.1 Renewal Options. At the end of the Base Lease Term and any
Renewal Term (other than the third Floating Rate Renewal Term or any prior
Floating Rate Renewal Term ending four years after the end of the Base Lease
Term), so long as no Lease Event of Default or Lease Default (of the type
described in Section 14.1 or 14.5) has occurred and is continuing, Lessee shall
have the option to renew this Lease for a Renewal Term. In order to exercise
the option to renew, Lessee shall notify Lessor thereof in writing not more
than nine months nor less than six months prior to the commencement of the
applicable Renewal Term (which notice shall be irrevocable and shall specify
the length of such Renewal Term). Renewal Rent shall be payable in arrears for
each Lease Period occurring during any Renewal Term. The Renewal Rent payable
for the Fixed Rate Renewal Term hereunder shall be the lesser of (i) 50% of the
average Basic Rent and (ii) the fair market rental value of the Aircraft (as
defined below) calculated as of the commencement of such Renewal Term; the
Renewal Rent payable for any Floating Rate Renewal Term hereunder shall be the
fair market rental value of the Aircraft (as defined below) calculated as of
the commencement of such Renewal Term. Such fair market rental value shall be
determined not later than three months prior to the commencement of such
Renewal Term by mutual consent of Owner Participant and Lessee or, if they
shall be unable so to agree, by three recognized independent aircraft
appraisers, one chosen and paid for by Owner Participant, one chosen and paid
for by Lessee and the third appraiser chosen by the mutual consent of the first
two appraisers and paid for equally by Owner Participant and Lessee, the
appraisals of which three appraisers shall be averaged and such average shall
be deemed to be the fair market rental value of the Aircraft for all purposes
hereof; provided, however, that if the appraisal of one appraiser is more
disparate from the average of all three appraisals than each of the other two
appraisals, then the appraisal of such appraiser shall be excluded, the
remaining appraisals shall be averaged and such average shall be deemed to be
the fair market rental value of the Aircraft for all purposes hereof. If
either Owner Participant or Lessee shall fail to appoint an appraiser by the
date which is two months prior to the commencement of such Renewal Term or if
such two appraisers cannot agree on the amount of such appraisal and fail to
appoint a third appraiser by the date which is one month before the
commencement of such Renewal Term, then either Owner Participant or Lessee may
apply to any court having jurisdiction (including, without limitation, the
courts referred to in Section 13(b) of the Participation Agreement) to make
such appointment. For purposes of this Section 18.1, fair market rental value
shall be the cash rental obtainable in an arm's-length lease between an
informed and willing lessee (under no compulsion to lease) and an informed and
willing lessor (under no compulsion to lease) and shall be determined on the
assumptions that the Aircraft is in the United States of America, available for
use by Lessee,
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unencumbered by any renewal or purchase option contained in this Lease, in the
return condition required by Section 5 of this Lease and otherwise in
compliance with and subject to the terms and requirements of this Lease.
Stipulated Loss Value amounts that are payable during any such Renewal Term
shall be calculated as of the date of commencement of such Renewal Term and
shall be determined in the same manner referred to above based on the fair
market sales value of the Aircraft on such date determined in accordance with
Section 18.2(a); provided, that the Stipulated Loss Value payable during any
Fixed Rate Renewal Term shall not be less than 20% of Lessor's Cost.
18.2 Purchase Options. (a) Lessee shall have the option to
purchase the Aircraft at the end of the Base Lease Term and each Renewal Term,
so long as no Lease Default (of the type described in Section 14.1 or 14.5) or
Lease Event of Default shall have occurred and be continuing on the date of
notice of exercise of such option. In order to exercise such option, Lessee
shall notify Lessor thereof in writing not more than nine months nor less than
six months prior to the end of the Base Lease Term or such Renewal Term, as
applicable (which notice shall be irrevocable). In such case, Lessee shall
purchase the Aircraft on the last Business Day of the Base Lease Term or such
Renewal Term, as applicable, at a purchase price equal to the fair market sales
value thereof as of such last Business Day. Such fair market sales value shall
be determined not later than three months prior to such last Business Day by
mutual consent of Owner Participant and Lessee or, if they shall be unable so
to agree, by three recognized independent aircraft appraisers, one chosen and
paid for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market sales value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two appraisals, then the appraisal
of such appraiser shall be excluded, the remaining appraisals shall be averaged
and such average shall be deemed to be the fair market sales value of the
Aircraft for all purposes hereof. If either Owner Participant or Lessee shall
fail to appoint an appraiser by the date which is two months prior to such last
Business Day or if such two appraisers cannot agree on the amount of such
appraisal and fail to appoint a third appraiser by the date which is one month
before such last Business Day, then either Owner Participant or Lessee may
apply to any court having jurisdiction to make such appointment. For purposes
of this Section 18.2, fair market sales value shall be the cash price
obtainable in an arm's-length sale between an informed and willing buyer (under
no compulsion to buy) and an informed and willing seller (under no compulsion
to sell) and shall be determined on the assumptions that the Aircraft is in the
United States of America, available for use by the buyer, unencumbered by any
renewal or purchase option contained in this Lease, in the return condition
required by Section 5 of this Lease and otherwise in compliance with the
requirements of this Lease. At the time of payment to Lessor, in funds of the
type specified in Section 3.6, of the full amount of the purchase price
pursuant to this Section 18.2(a), Lessee shall also pay to Lessor all unpaid
Interim Rent and Basic Rent due on or prior to the last day of the Term and
(without duplication) any other Rent which is due and payable through and
including the date of payment.
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(b) So long as no Lease Default (of the type described in Section
14.1 or 14.5) or Lease Event of Default shall have occurred and be continuing
on the date of notice of exercise of such option, Lessee shall have the option
to purchase the Aircraft on January 1, 2015 or, if such date is not a Business
Day, on the next succeeding Business Day (the "Special Purchase Option Date")
at a purchase price equal to the percentage of Lessor's Cost indicated in Part
II of Schedule C (the "Special Purchase Price"); provided, that if there has
been an adjustment prior to the Special Purchase Option Date pursuant to
Section 3.7, the Special Purchase Price shall be at all times calculated to
preserve the Owner Participant's Special Purchase Price After-Tax Yield, but in
any event subject to Section 3.7.2. Such option to purchase the Aircraft shall
be exercised upon written notice from Lessee to Lessor given not more than nine
months nor less than six months prior to the Special Purchase Option Date.
Such notice shall be irrevocable and shall contain the statement that this
Lease will terminate upon the consummation of such purchase. On the Special
Purchase Option Date, Lessee shall pay to Lessor, in funds of the type
specified in Section 3.6, the full amount of the Special Purchase Price
pursuant to this Section 18.2(b), together with all unpaid Interim Rent and
Basic Rent due on or prior to the Special Purchase Option Date (it being
understood and agreed that Lessee shall not be required to pay the portion, if
any, of such Basic Rent designated in Exhibit C hereto as payable in advance on
such Special Purchase Option Date) and (without duplication) any other Rent
(including Premium, if any, and Break Amount, if any, payable in respect of the
Certificates) which is due and payable through and including the date of
payment.
(c) In connection with any purchase pursuant to Section 18.2(b),
Lessee may, at its option, as part or all, as the case may be, of the
applicable purchase price, assume all of the rights and obligations of Lessor
under the Trust Indenture in respect of the Certificates (including, without
limitation, any scheduled payment of principal of or accrued interest on the
Certificates due and payable on such date of purchase but only to the extent
that any Basic Rent installment payable by Lessee on any such date of purchase
does not cover such scheduled payment of principal or accrued interest on the
Certificates and excluding any obligations or liabilities of Lessor in its
individual capacity incurred on or prior to such date of purchase, which
obligations and liabilities shall remain the sole responsibility of Lessor in
its individual capacity) in accordance with Section 7.03 of the Trust Indenture
and simultaneously shall pay to Lessor, in funds of the type specified in
Section 3.6, an amount equal to (i) the excess, if any, of the applicable
purchase price over an amount equal to the sum of the principal of, and accrued
and unpaid interest on, the Outstanding Certificates on such date of purchase,
after taking into account any payments of principal and interest made in
respect of the Outstanding Certificates on or before such date of purchase,
plus (ii) all unpaid Interim Rent and Basic Rent due and owing by Lessee
hereunder on or prior to such date of purchase and (without duplication) any
other Rent which is due and payable through and including the date of payment
(it being understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Basic Rent designated in Exhibit C hereto as payable
in advance on such date of purchase).
(d) Upon payment of the applicable purchase price for the Aircraft
as set forth in this Section 18.2, together with the other amounts specified
above to be paid by Lessee concurrently with such purchase, Lessor will
Transfer to Lessee all of the Lessor's right, title and interest in and to the
Aircraft, this Lease will terminate and, if Lessee shall not have assumed the
rights and obligations of the Owner Trustee under the Trust Indenture in
respect of the Certificates as provided
SALE AND LEASE AGREEMENT [N603SW]
-56-
<PAGE> 63
for above, Lessor will request the Indenture Trustee to execute and deliver to
Lessee an appropriate instrument releasing the Airframe and Engines with
respect to which title is transferred from the lien of the Trust Indenture and
releasing the Purchase Agreement, the Purchase Agreement Assignment, the Engine
Purchase Agreement and the Engine Purchase Agreement Assignment from the
assignment and pledge, if any, thereunder.
Section 19. Successor Owner Trustee. Lessee agrees that in the
case of the appointment of any successor Owner Trustee pursuant to the terms of
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft for all purposes hereof without the necessity of any consent or
approval by Lessee (but such successor Owner Trustee shall qualify under the
terms of Section 8(b) of the Participation Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Trust Agreement, and such right may be exercised repeatedly as
long as this Lease shall be in effect.
Section 20. Right to Perform for Lessee. If Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor (subject
to the terms of the Trust Indenture) or Indenture Trustee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or
Indenture Trustee incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
Section 21. Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred, and be continuing, during the Term, Lessor will
not, through its own actions or inactions, interfere in the quiet enjoyment of
the Aircraft by Lessee or any Permitted Sublessee.
Section 22. Investment of Security Funds; Miscellaneous;
Amendment.
22.1 Investment of Security Funds. Subject always to the terms of
the Trust Indenture for so long as the Trust Indenture shall remain in effect,
any moneys required to be paid to or retained by Lessor which are not required
to be paid to Lessee pursuant to Section 10.6 or 11.4 solely because a Lease
Event of Default or Lease Default shall have occurred and be continuing, or
which are held by Lessor pending payment to Lessee pursuant to Section 11.4 or
which are required to be paid to Lessee pursuant to Section 10.3 or 11.4 after
completion of a replacement to be made pursuant to Section 10.1 or 10.2, shall,
until paid to Lessee as provided in Section 10 or 11 or applied as provided
herein or in the Trust Indenture or Trust Agreement, be invested by Lessor from
time to time as directed in writing by Lessee and at the expense and risk of
Lessee in the following securities (which shall mature within 91 days of the
date of purchase thereof): (a) direct obligations of the Government; (b)
obligations fully guaranteed by the Government; (c) open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any State
SALE AND LEASE AGREEMENT [N603SW]
-57-
<PAGE> 64
thereof rated P-1 or its equivalent by Moody's Investors Service and A-l or its
equivalent by Standard & Poor's Rating Group, a division of McGraw-Hill, Inc.;
or (d) certificates of deposit issued by, or bankers' acceptances of, or time
deposits or a deposit account with (i) the Owner Trustee or Indenture Trustee
(in their individual capacities) or (ii) any bank, trust company or national
banking association incorporated or doing business under the laws of the United
States of America or any state thereof having a combined capital and surplus of
at least $100,000,000. There shall be promptly remitted to Lessee or its order
any gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred
in connection with such investment) unless a Lease Event of Default or a Lease
Default (of the type described in Section 14.1 or 14.5) shall have occurred and
be continuing. Lessee will promptly pay to Lessor, on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other expenses, including Taxes, if any, incurred in connection
with such investment), such amount to be disposed of in accordance with the
terms of the Trust Indenture or the Trust Agreement.
22.2 Miscellaneous; Amendment. Lessee shall do, execute,
acknowledge and deliver, or shall cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances and assurances as Owner Trustee,
Indenture Trustee or any Participant shall reasonably require for accomplishing
the purposes of this Agreement and the other Operative Agreements. Any
provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. This Lease shall constitute an
agreement of lease, and nothing herein shall be construed as conveying to
Lessee any right, title or interest in or to the Aircraft, Airframe or Engines
except as a lessee only. The section and paragraph headings in this Lease and
the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN, AND EACH LEASE SUPPLEMENT AND
AMENDMENT HERETO IS INTENDED TO BE, DELIVERED IN THE STATE OF NEW YORK AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY
RESIDENTS THEREOF AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease and each Lease
Supplement and amendment hereto may be executed in several counterparts, each
of which shall be deemed an original, and all such counterparts shall
constitute one and the same instrument; provided, that no security interest in
Lessor's right, title and interest in and to this Agreement may be created
through the transfer or possession of any counterpart other than the
counterpart identified, for purposes of perfection of a
SALE AND LEASE AGREEMENT [N603SW]
-58-
<PAGE> 65
security interest in chattel paper (as such term is defined in the UCC), as the
original counterpart on the cover hereof.
Section 23. Permitted Foreign Air Carriers. Lessor may, in the
exercise of its reasonable business judgment, by written notice to Lessee,
remove any foreign air carrier from Exhibit D and Lessee may, by written notice
to Lessor, request that any foreign air carrier be added to Exhibit D, subject
to Lessor's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no deletion of an airline from the
list of Permitted Foreign Air Carriers pursuant hereto shall (i) affect any
existing sublease or other agreement providing for transfer of possession of
the Aircraft, Airframe, any Engine or Part which was permitted hereunder at the
time entered into, or (ii) preclude any subsequent renewal or extension of such
sublease or other agreement to which the Permitted Foreign Air Carrier under a
sublease is entitled by the terms thereof as originally in effect.
SALE AND LEASE AGREEMENT [N603SW]
-59-
<PAGE> 66
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed and delivered as of the day and year first above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity except as expressly stated
herein, and otherwise solely as Owner Trustee
under the Trust Agreement
By: /s/ Pablo de la Canal
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By: /s/ John D. Owen
Treasurer
SALE AND LEASE AGREEMENT [N603SW]
<PAGE> 67
EXHIBIT A TO
LEASE AGREEMENT
SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____
THIS SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____, dated
______________, _____ between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner Trustee under that certain
Trust Agreement, dated as of July 1, 1995 (the "Trust Agreement"), between the
Owner Participant named therein and such Bank ("Lessor"), and SOUTHWEST
AIRLINES CO., a Texas corporation ("Lessee"),
RECITALS.
A. On ________________ an AC Form 8050-2 Bill of Sale from
Manufacturer (as defined in the Sale and Lease Agreement hereinbelow referred
to) in favor of Lessee covering the Aircraft hereinbelow described was recorded
by the Federal Aviation Administration as Conveyance Number ________;
B. Lessor and Lessee have heretofore entered into that certain
Sale and Lease Agreement dated as of July 1, 1995, as supplemented and amended
from time to time (herein called the "Lease Agreement" and the defined terms
therein being herein used with the same meaning), which Lease Agreement
provides in Section 2 for the execution of a Lease Supplement substantially in
the form hereof for the purpose of Lessee's selling to Lessor, and Lessor's
leasing back to Lessee, the Aircraft under the Lease Agreement as and when
delivered by Lessor to Lessee in accordance with the terms thereof; and
C. The Lease Agreement relates to the airframe and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation with the FAA on the date hereof as
one document.
______________________
All of the right, title and interest of Lessor in and to this Sale and
Lease Agreement Supplement has been assigned to and is subject to a security
interest in favor of Wilmington Trust Company, as Indenture Trustee. This Sale
and Lease Agreement Supplement has been executed in several counterparts. No
security interest in Lessor's right, title and interest in and to this Sale and
Lease Agreement Supplement may be created through the transfer or possession of
any counterpart other than the counterpart identified, for purposes of
perfection of a security interest in chattel paper (as such term is defined in
the UCC), as the original counterpart. [This is not the original counterpart.]
A-1
<PAGE> 68
In consideration of the premises and other good and sufficient
consideration, and pursuant to Section 2 of the Lease Agreement, Lessor and
Lessee hereby agree as follows:
1. Lessee hereby delivers and sells to Lessor and Lessor hereby
accepts and purchases from Lessee and in turn delivers and leases back to
Lessee, and Lessee hereby accepts and leases back from Lessor, under the Lease
Agreement, as herein supplemented, the following-described Boeing Model 737-3H4
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date
hereof consists of the following:
Airframe: U.S Registration Number N603SW and Manufacturer's Serial
No. 27954; and
Engines: Two CFM International Model CFM56-3-B1 Engines installed
thereon bearing Engine Manufacturer's Serial Numbers as follows: 858185 and
858186.
Each of the Engines described above has 750 or more rated takeoff
horsepower or the equivalent of such horsepower.
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms to Lessor that the Delivered Aircraft
has been or will be duly marked in accordance with the terms of Section 7.l.2
of the Lease and that Lessee has accepted the Delivered Aircraft for all
purposes hereof and of the Lease Agreement, including its being airworthy, in
accordance with specifications, in good working order and repair and without
defect or inherent vice in title, condition, design, operation or fitness for
use, whether or not discoverable by Lessee as of the date hereof, and free and
clear of all Liens except Permitted Liens; provided, however, that this Section
3 is without prejudice to the rights of Lessee or Lessor against Manufacturer
or any supplier of the Aircraft, Engines or any Part.
4. Lessor's Cost for the Delivered Aircraft is $32,000,000.
5. All the provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement, on and as of the date of
this Lease Supplement, to the same extent as if fully set forth herein.
6. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW
YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
A-2
<PAGE> 69
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered as of the date and year first
above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By
----------------------------------------
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By
----------------------------------------
Treasurer
A-3
<PAGE> 70
EXHIBIT B-1 TO
LEASE AGREEMENT
STIPULATED LOSS VALUE SCHEDULE
<TABLE>
<CAPTION>
SLV
Determination Stipulated Loss Value
Date (% of Lessor's Cost)
------------------ ---------------------
<S> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
_________________________
* NOTE: If the event giving rise to an obligation to pay any Stipulated
Loss Value occurs and the actual date of the loss of tax benefits
resulting from such event shall be earlier or later than the date
assumed in calculating the Federal income tax consequences reflected
in the applicable Stipulated Loss Value, such Stipulated Loss Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-1-1
<PAGE> 71
EXHIBIT B-2 TO
LEASE AGREEMENT
TERMINATION VALUE SCHEDULE
<TABLE>
<CAPTION>
TV
Determination Termination Value
Date (% of Lessor's Cost)
-------------- --------------------
<S> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
_________________________
* NOTE: If the event giving rise to an obligation to pay any
Termination Value occurs and the actual date of the loss of tax
benefits resulting from such event shall be earlier or later than the
date assumed in calculating the Federal income tax consequences
reflected in the applicable Termination Value, such Termination Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-2-1
<PAGE> 72
EXHIBIT C TO
LEASE AGREEMENT
PART I
RENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Percentage of
Lessor's Cost
----------------------------------------------------------------------------
Rent Payment
Date Total Advance Arrears
-------------- ----- ------- -------
<S> <C> <C> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
C-1
<PAGE> 73
EXHIBIT C TO
LEASE AGREEMENT
PART II
SPECIAL PURCHASE PRICE
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
C-2
<PAGE> 74
EXHIBIT D TO
LEASE AGREEMENT
PERMITTED FOREIGN AIR CARRIERS
<TABLE>
<S> <C>
Aer Lingus Icelandair
Aerolineas Argentinas Interflug
Air Afrique Japan Air Lines
Aeromexico Japan Air Lines System
Air Canada Japan TransOcean Air
Air Europa JAT
Air France KLM
Air Inter Korean Air
Air Jamaica LAN Chile
Air New Zealand Lauda Air
Air UK Lufthansa
Alitalia Luxair
All Nippon Airways Maersk
ALM Malaysian Airline System
Ansett Airlines of Australia Martinair
Australian Airlines Mexicana
Austrian Airlines Monarch Airlines
AVENSA Nordair
Bahamasair Olympic Airlines
Braathens S.A.F.E. Philippine Airlines
Britannia QANTAS Airways
British Airways Quebecair
British Midland Ryanair
BWIA Sabena
CAAC SAS
Canadian Airlines International Saudi Arabian Airlines
Cathay Pacific Airways Singapore Airlines
Cayman Airways Swissair
China Airlines TAP
Condor Flugdienst Thai Airways
DanAir Trans Australia Airlines
Egyptair Transavia Holland
El Al Transbrasil
Finnair VARIG
Garuda VIASA
Hopag Lloyd VIVA Air
Iberia
</TABLE>
D-1
<PAGE> 75
EXHIBIT E TO
LEASE AGREEMENT
ASSUMED INTEREST AMOUNTS
<TABLE>
<CAPTION>
Rent Payment Assumed Interest
Date Amount
-------------- ----------------
<S> <C>
[The portion of this Exhibit appearing below this text is intentionally deleted from the FAA filing counterpart
as the parties hereto deem it to contain confidential information.]
</TABLE>
E-1
<PAGE> 76
APPENDIX A TO
LEASE AGREEMENT
CERTAIN RETURN CONDITIONS
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of its return of the Aircraft pursuant to Section 5.3, the
Airframe shall have at least one year remaining until the next scheduled "D"
check (which term, as used in this paragraph, shall refer to a "full D" check
accomplished at ten year intervals, rather than to any "quarter D" or "half D"
check which may be scheduled under the Maintenance Program then used by Lessee
or any Permitted Sublessee, as the case may be).
* * *
APP-1
<PAGE> 1
EXHIBIT 4.33
FIRST AMENDMENT TO
SALE AND LEASE AGREEMENT
dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
_______________________
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N603SW)
All right, title and interest of Lessor in and to the Sale and Lease
Agreement, as amended, and the Aircraft (including the Engines), has been
assigned to and is subject to a security interest in favor of WILMINGTON TRUST
COMPANY, as Indenture Trustee. This First Amendment to Sale and Lease
Agreement has been executed in several counterparts. No security interest in
Lessor's right, title and interest in and to this First Amendment to Sale and
Lease Agreement may be created through the transfer or possession of any
counterpart other than the counterpart identified, for purposes of perfection
of a security interest in chattel paper (as such term is defined in the UCC),
as the original counterpart. This is not the original counterpart.
<PAGE> 2
THIS FIRST AMENDMENT TO SALE AND LEASE AGREEMENT, dated as of October
1, 1995 (this "Amendment"), between SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee under that certain Trust Agreement establishing
Southwest Airlines 1995 Trust N603SW and dated as of July 1, 1995 ("Lessor"),
and SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), amends that certain
related Sale and Lease Agreement dated as of July 1, 1995 (the "Original
Lease") between Lessee and Lessor (the Original Lease, as supplemented by Sale
and Lease Agreement Supplement No. One thereto relating to the Aircraft
referred to below dated July 13, 1995 ("Lease Supplement No. 1") between Lessor
and Lessee, being referred to herein as the "Lease"),
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor, the
Aircraft, which consists of the following components: (i) Airframe: One (1)
Boeing 737-3H4, FAA Registration No. N603SW, Manufacturer's serial no. 27954;
and (ii) Engines: Two (2) CFM International Model CFM56-3-B1 Engines bearing,
respectively, Manufacturer's serial numbers 858185 and 858186; and
WHEREAS, a counterpart of the Original Lease, to which was attached
and made a part thereof a counterpart of Lease Supplement No. 1, was recorded
by the Federal Aviation Administration on August 22, 1995 and assigned
Conveyance No. H86444; and
WHEREAS, in connection with the refinancing of the Certificates
pursuant to Section 18 of the Participation Agreement, the parties wish to
recalculate Interim Rent, Basic Rent, Stipulated Loss Value percentages and
Termination Value percentages and Special Purchase Price; and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to Exhibits B-1, B-2, C and E. Exhibits
B-1, B-2 and C to the Lease are hereby deleted in their entirety and replaced
with Exhibits B-1, B-2 and C, respectively, to this Amendment. Exhibit E to
the Lease is hereby deleted in its entirety.
Section 2. Amendments to Section 1. Section 1 of the Lease is
hereby amended in the following manner:
(a) The following defined terms are hereby added to
Section 1 in alphabetical order:
SALE AND LEASE AMENDMENT [N603SW]
-1-
<PAGE> 3
"`First Amendment to Sale and Lease Agreement' means that certain
First Amendment to Sale and Lease Agreement dated as of October 1, 1995 by and
between Lessee and Lessor relating to the Aircraft."
"`First Amendment to Participation Agreement' means that certain First
Amendment to Participation Agreement dated as of October 1, 1995 by and among
Lessee, Owner Participant, Owner Trustee, Indenture Trustee and Pass Through
Trustee relating to the Aircraft."
"`First Amendment to Trust Indenture' means that certain First
Amendment to Trust Indenture and Security Agreement, dated as of October 1,
1995 between Owner Trustee and Indenture Trustee relating to the Aircraft."
"`Pass Through Certificates' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trust Agreements' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trustee' is defined in Section 1.01(b) of the Trust
Indenture."
"`Pass Through Trust Supplement' means each of the four separate Trust
Supplements Nos. 1995-A1, 1995-A2, 1995- A3 and 1995-A4 dated as of October 1,
1995 between Lessee and Pass Through Trustee."
"`Refinancing Agreement' means that certain Refinancing Agreement
relating to the Aircraft dated as of October 1, 1995 by and among Lessee, Owner
Participant, Original Loan Participant, Owner Trustee, Indenture Trustee and
Pass Through Trustee."
(b) The definition of "Indemnified Parties" is hereby
amended to be and read in its entirety as follows:
"`Indemnified Parties' means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N603SW
Certificate (including without limitation the Pass Through Trustee), (v) the
Estate and the Trust Indenture Estate, (vi) the Original Loan Participant,
(vii) the respective Affiliates, successors and assigns of the foregoing and
(viii) the respective directors, officers, employees, agents, partners and
servants of the foregoing."
(c) The definition of "Lease", "this Lease", "this
Agreement", "hereby", "herein", "hereof", and "hereunder" is hereby amended to
be and read in its entirety as follows:
"`Lease', `this Lease', `this Agreement', `hereby', `herein',
`hereof', `hereunder' or other words mean this Sale and Lease Agreement as
amended by the First Amendment to Sale and Lease Agreement, and as supplemented
by one or more Lease Supplements and as may be further amended from time to
time."
SALE AND LEASE AMENDMENT [N603SW]
-2-
<PAGE> 4
(d) The definition of "Operative Agreements" is hereby
amended to be and read in its entirety as follows:
"`Operative Agreements' means this Lease, each Lease Supplement, the
Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement,
the Manufacturer's Consent and the Refinancing Agreement, including any
consents included in or attached to any thereof."
(e) The definition of "Participant" is hereby amended to
be and read in its entirety as follows:
"`Participant' means Owner Participant and its successors and
permitted assigns."
(f) The definition of "Participation Agreement" is hereby
amended to be and read in its entirety as follows:
"`Participation Agreement' means the Participation Agreement relating
to the Aircraft, dated as of July 1, 1995, among Lessee, Owner Participant,
Original Loan Participant, Lessor and Indenture Trustee as amended by the First
Amendment to Participation Agreement and as may be further amended from time to
time."
(g) The definition of "Special Purchase Price After-Tax
Yield" means the after-tax economic yield, total aggregate after-tax cash flow
and Owner Participant's monthly weighted average return on assets expected by
the Owner Participant with respect to the Aircraft through the Special Purchase
Option Date if the Special Purchase Option were exercised, utilizing the
multiple investment sinking fund method of analysis and the same assumptions as
used by Owner Participant (including the Tax Assumptions set forth in Section 2
of the Tax Indemnity Agreement) in its economic analysis of the transaction as
of the Delivery Date.
(h) The definition of "Stipulated Loss Value" is hereby
amended to be and read in its entirety as follows:
"`Stipulated Loss Value' means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment. Stipulated Loss
Value may be subject to adjustment in accordance with Section 3.7 and Section
18.2(d) of this Agreement."
(i) The definition of "Termination Value" is hereby
amended to be and read in its entirety as follows:
SALE AND LEASE AMENDMENT [N603SW]
-3-
<PAGE> 5
"`Termination Value' means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined. Termination Value may be subject to adjustment in accordance with
Section 3.7 of this Agreement."
(j) The definition of "Trust Indenture" is hereby amended
to be and read in its entirety as follows:
"`Trust Indenture' means the Trust Indenture and Security Agreement,
dated as of July 1, 1995, between Owner Trustee and Indenture Trustee, relating
to the Aircraft, as supplemented by the Trust Agreement and Trust Indenture and
Security Agreement Supplement, dated July 13, 1995, and as amended by the First
Amendment to Trust Indenture and as may be further amended or supplemented from
time to time."
(k) The definitions of "Assumed Interest Rate," "Assumed
Interest Amount" and "Rent Differential Amount" are hereby deleted in their
entirety.
Section 3. Amendments to Section 3. Section 3 of the Lease is
hereby amended in the following manner:
(a) Section 3.3 is hereby amended to be and read in its
entirety as follows:
"3.3 Interim and Basic Rent. No Interim Rent or Basic
Rent shall be paid during the Preliminary Lease Term. Lessee hereby agrees to
pay to Lessor (i) Interim Rent for the Interim Lease Term with respect to the
Aircraft on the first Rent Payment Date set forth in Part I of Exhibit C, and
(ii) Basic Rent for the Base Lease Term with respect to the Aircraft on each
subsequent Rent Payment Date set forth in Part I of Exhibit C, in each case in
an amount equal to the percentage of Lessor's Cost of the Aircraft set forth in
Part I of Exhibit C opposite such Rent Payment Date, subject to the terms of
the next succeeding paragraph of this Section 3.3 and Section 3.7. Each
installment (or portion of an installment) of Interim Rent or Basic Rent under
the heading `Advance' in Part I of Exhibit C payable on a Rent Payment Date
shall relate to the respective Lease Period immediately following such Rent
Payment Date, and each installment (or portion of an installment) of Interim
Rent or Basic Rent under the heading `Arrears' in Part I of Exhibit C payable
on a Rent Payment Date shall relate to the respective Lease Period immediately
preceding such Rent Payment Date.
"Anything contained in the Participation Agreement or this
Lease or any other Operative Agreement to the contrary notwithstanding, (a)
each installment of Basic Rent payable under this Lease, whether or not
adjusted in accordance with the provisions of Section 3.7 hereof, shall be,
under any circumstances and in any event, in an amount at least sufficient to
pay in full, on such Rent Payment Date, any scheduled payments then required to
be made on account of the principal of and interest on the Certificates, and
(b) Stipulated Loss Value, Termination Value and, unless Lessee shall have
assumed the Certificates pursuant to Section 18.2(c) hereof, the Special
Purchase Price, in each case whether or not adjusted in accordance with the
provisions of Section 3.7, as of any date of determination thereof, together
with any amount of Basic Rent required to be paid on such date and all other
amounts payable on such
SALE AND LEASE AMENDMENT [N603SW]
-4-
<PAGE> 6
date, shall equal under any circumstances and in any event, an amount at least
sufficient to pay in full any payments then required to be made on account of
the principal of and interest (including, without limitation any interest on
overdue principal and, to the extent permitted by applicable law, interest),
and Premium, if any, on the Certificates and all amounts which would be payable
prior thereto or on a parity therewith if Section 3.03 of the Trust Indenture
were applicable at the time of such payment."
(b) Section 3.4 of the Lease is hereby amended to be and
read in its entirety as follows:
"3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Premium (if any) payable on the Certificates, amounts due pursuant to
Section 15.05 of the Trust Indenture and each other amount required to be paid
(other than principal and interest on the Certificates) by Lessor as Owner
Trustee under the Trust Indenture, on the same date that such amounts are due
under the Trust Indenture and as provided in Section 3.6."
(c) Section 3.7.1 of the Lease is hereby amended to be
and read in its entirety as follows:
"3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a) of the
Participation Agreement paid by Owner Participant in connection with the
closing of this transaction on the Delivery Date are equal to an amount which
is other than 0.362338% of Lessor's Cost, (b) the Transaction Costs referred to
in Section 16(a) of the Participation Agreement paid by Owner Participant in
connection with the initial refinancing or refunding of the Certificates
pursuant to Section 18 of the Participation Agreement are equal to an amount
which is other than 0.62992% of Lessor's Cost, (c) a refinancing or refunding
of the Certificates pursuant to Section 17 of the Participation Agreement
occurs, or (d) any recalculation of Interim Rent, Basic Rent, Stipulated Loss
Value, Termination Value and the Special Purchase Price is required by the
terms of the Tax Indemnity Agreement, then in each case, the Interim Rent and
Basic Rent percentages set forth in Exhibit C, the Stipulated Loss Value
percentages set forth in Exhibit B-1 and the Termination Value percentages set
forth in Exhibit B-2 shall be recalculated by Owner Participant (i) in the case
of a recalculation pursuant to clause (a) or (b), on or prior to July 13, 1996,
(ii) in the case of a recalculation pursuant to clause (c), prior to the
relevant Refinancing Date or (iii) in the case of a recalculation pursuant to
clause (d), prior to the Rent Payment Date next following the event described
in clause (d), in each case in order to: (A) maintain Net Economic Return and
(B) minimize the Net Present Value of Rents to the extent possible consistent
with clause (A). In addition, in the event of an adjustment pursuant to this
Section 3.7, the Special Purchase Price shall be recalculated in accordance
with the terms of Section 18.2(b)."
(d) The first sentence of Section 3.8 is hereby amended to be
and read in its entirety as follows:
"3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received the
Deferred Equity Amount
SALE AND LEASE AMENDMENT [N603SW]
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<PAGE> 7
on the Deferred Equity Date, then Lessee shall pay to the Indenture
Trustee on behalf of the Owner Participant on the Deferred Equity Date
an amount equal to the amount not so paid by the Owner Participant
(such amount herein referred to as an "Advance")."
Section 4. Amendment to Section 7. Section 7.3.3 of the Lease
is hereby amended to delete all references therein to the Original Loan
Participant.
Section 5. Amendment to Section 10. Section 10.1.3 of the Lease
is hereby amended to be and read in its entirety as follows:
"10.1.3 Payment of Stipulated Loss Value and Rent. On any Business
Day designated by Lessee upon 30 days' irrevocable notice to Lessor and the
Indenture Trustee, but in no event later than the earlier of (i) the 180th day
following the date of the occurrence of such Event of Loss or (ii) the later of
15 days following receipt of insurance proceeds with respect to such occurrence
or the date Lessee shall have made or shall have deemed to have made its
election under Section 10.1.1 to comply with Section 10.1.3, Lessee shall pay
to Lessor in the manner and in funds of the type specified in Section 3.6, (A)
the Stipulated Loss Value for the Aircraft, determined as of the date of
payment (as described in the definition of Stipulated Loss Value), (B) all
unpaid Interim Rent and Basic Rent due on or prior to the SLV Determination
Date with reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the portion, if
any, of such Interim Rent or Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date), and (C) (without
duplication) any other Rent which is due and payable through and including the
date of payment."
Section 6. Amendments to Section 11.
(a) Section 11.5 of the Lease is hereby amended to delete
all references therein to the Original Loan Participant.
(b) Section 11.6 of the Lease is hereby amended to be and
read in its entirety as follows:
"11.6 Lessor's Right to Maintain Insurance. In the event that Lessee
shall fail to maintain or cause to be maintained insurance as herein provided,
Lessor, Indenture Trustee, Owner Participant or, so long as Pass Through
Trustee is a Holder, Pass Through Trustee, may at its option (but shall not be
obligated to) provide such insurance and in such event, Lessee shall, upon
demand, reimburse such Person, as Supplemental Rent, for the cost thereof. No
such payment, performance or compliance shall be deemed to cure any Lease
Default hereunder or otherwise relieve Lessee of its obligations with respect
thereto."
Section 7. Amendment to Section 15. Section 15.1.4 of the Lease
is hereby amended to be and read in its entirety as follows:
"15.1.4 Liquidated Damages upon Sale. If Lessor, pursuant to Section
15.1.2 or applicable law, shall have sold the Aircraft, Lessor, in lieu of
exercising its rights under
SALE AND LEASE AMENDMENT [N603SW]
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<PAGE> 8
Section 15.1.3 with respect to the Aircraft, may, if Lessor shall so elect,
upon giving written notice to Lessee, cause Lessee to pay Lessor, and Lessee
shall pay to Lessor, on the date of such sale, as liquidated damages for loss
of a bargain and not as a penalty (in lieu of the Interim Rent, Basic Rent or
Renewal Rent, as the case may be, due after the date of such sale), any unpaid
Interim Rent, Basic Rent or Renewal Rent, as the case may be, due on or prior
to the SLV Determination Date (it being understood and agreed that Lessee shall
not be required to pay the portion, if any, of such Interim Rent or Basic Rent
designated in Exhibit C hereto as payable in advance on such SLV Determination
Date) on or immediately preceding such date of sale plus the amount of any
deficiency between the net proceeds of such sale or (if such sale is a private
sale and is made to Lessor, Indenture Trustee, a Participant or any Affiliate
thereof) between the fair market sales value of the Aircraft, determined as of
the date of such sale as hereinafter provided in this Section 15, and the
Stipulated Loss Value of the Aircraft, computed as of the date of such sale,
together with interest, if any, on such amount and such unpaid Interim Rent,
Basic Rent or Renewal Rent at the Overdue Rate from the date of such sale, to
the date of payment in full; or"
Section 8. Ratification. Except as amended hereby, the Lease
continues and shall remain in full force and effect in all respects.
Section 9. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same instrument.
SALE AND LEASE AMENDMENT [N603SW]
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<PAGE> 9
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Sale and Lease Agreement to be duly delivered in the State of New
York and executed as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By: /s/ Philip G. Kane, Jr.
Corporate Trust Officer
SOUTHWEST AIRLINES CO., Lessee
By: /s/ John D. Owen
Treasurer
Approved and Consented to:
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Senior Financial Services Officer
SALE AND LEASE AMENDMENT [N603SW]
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<PAGE> 10
EXHIBIT B-1 TO
SALE AND LEASE AGREEMENT
Stipulated Loss Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N603SW]
B-1
<PAGE> 11
EXHIBIT B-2 TO
SALE AND LEASE AGREEMENT
Termination Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N603SW]
B-2
<PAGE> 12
EXHIBIT C TO
SALE AND LEASE AGREEMENT
Part I
Rent Payment Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
Part II
Special Purchase Price
51.37197250% of Lessor's Cost
SALE AND LEASE AMENDMENT [N603SW]
C-1
<PAGE> 1
EXHIBIT 4.34
________________________________________________________________________________
TRUST INDENTURE
AND SECURITY AGREEMENT
dated as of August 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly
set forth herein and otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N604SW
________________________________________________________________________________
Southwest Airlines Co.
Series SWA 1995 Trust N604SW-I and N604SW Certificates
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE 1
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05. Holder Lists; Ownership of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 16
Section 2.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.08. Payment on Certificates; Defaulted Principal and Interest . . . . . . . . . . . . . . . . 17
Section 2.09. Payment from Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.10. Execution, Delivery and Dating of Certificates upon Issuance . . . . . . . . . . . . . . 19
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.02. Payment in Case of Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.03. Application of Rent When No Indenture Event of Default Is Continuing . . . . . . . . . . . 20
Section 3.04. Application of Certain Payments in Case of Requisition or Event of Loss . . . . . . . . . 21
Section 3.05. Payments During Continuance of Indenture Event of Default . . . . . . . . . . . . . . . . 22
Section 3.06. Payments for Which Application Is Provided in Other Documents . . . . . . . . . . . . . . 23
Section 3.07. Payments for Which No Application Is Otherwise Provided . . . . . . . . . . . . . . . . . 23
Section 3.08. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<TABLE>
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ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.02. Covenants of Shawmut Bank Connecticut, National Association . . . . . . . . . . . . . . . 25
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of Property Included in the Indenture Estate
During Continuation of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.02. Certificates in Respect of Replacement Aircraft and Engines . . . . . . . . . . . . . . . 27
ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain Events . . . . . . . . . . . . . . . . . . . . . 27
Section 6.02. Redemption or Purchase of Certificates Upon Certain Indenture Events of Default . . . . . 28
Section 6.03. Notice of Redemption to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.04. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.05. Certificates Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments Held by the Indenture Trustee . . . . . . . . 30
Section 7.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.03. Assumption of Obligations of Owner Trustee by the Company . . . . . . . . . . . . . . . . 30
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.02. Acceleration; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.03. Other Remedies Available to Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.04. Waiver of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.05. Waiver of Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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<TABLE>
<S> <C> <C>
Section 8.06. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.07. Limitation on Suits by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.08. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.09. Indenture Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent; Investments . . . . . . . . . . . 44
Section 9.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.06. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.07. Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.08. Successor Indenture Trustee, Agents by Merger, Etc. . . . . . . . . . . . . . . . . . . . 47
Section 9.09. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.10. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.11. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.12. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.13. Certain Rights of Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . . . 48
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance; Termination of Obligations . . . . . 49
Section 10.02. Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.03. Monies to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.04. Monies to Be Returned to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.05. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent of Holders . . . . . . . . . . . . . . . . . 53
Section 11.02. Amendments to this Agreement with Consent of Holders . . . . . . . . . . . . . . . . . . 54
Section 11.03. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.04. Notation on or Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.05. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.06. Amendments, Waivers, Etc. of Other Operative Agreements . . . . . . . . . . . . . . . . . 55
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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<PAGE> 5
<TABLE>
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Section 11.07. Trust Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.03. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.04. Rules by Indenture Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.05. Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.06. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.07. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.09. Applicability Only to Original Holders . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of Lease . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE] . . . . . . . . . . . . . . . . . . . 61
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N604SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N604SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N604SW-I
CERTIFICATES
Section 15.01. Conditions Precedent to Issuance of Series SWA 1995 Trust N604SW Certificates . . . . . . 61
Section 15.02. Payment upon Issuance of Series SWA 1995 Trust N604SW Certificates . . . . . . . . . . . . 62
Section 15.03. Special Provision Governing Refinancing of the Series SWA 1995 Trust N604SW-I
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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<TABLE>
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Section 15.04. Special Provision for Payments in Respect of the Series SWA 1995 Trust N604SW-I
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 15.05. Increased Costs, Break Amount, Additional Interest, Taxes, Etc . . . . . . . . . . . . . 62
EXHIBITS
Exhibit A - Form of Series SWA 1995 Trust N604SW-I Certificate
Exhibit A-1 - Form of Series SWA 1995 Trust N604SW Installment Certificates
Exhibit A-2 - Form of Series SWA 1995 Trust N604SW Serial Certificates
Exhibit B - Maturity Dates, Principal Amounts and Interest Rates on Series SWA 1995 Trust N604SW
Certificates
Exhibit B-1 - Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 - Issuance of Series SWA 1995 Trust N604SW Certificates
Exhibit C - [FORM OF] Trust Agreement and Trust Indenture and Security Agreement Supplement
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
-v-
<PAGE> 7
TRUST INDENTURE AND SECURITY AGREEMENT
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of
August 1, 1995, is between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association organized under the laws of the United States, in
its individual capacity only as expressly provided herein and otherwise solely
as Owner Trustee under the Trust Agreement (capitalized terms used herein
having the respective meanings specified therefor in Article 1), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as Indenture Trustee hereunder.
W I T N E S S E T H:
WHEREAS, the Owner Participant and the Owner Trustee in its
individual capacity have entered into the Trust Agreement whereby, among other
things, (i) the Owner Trustee has established a certain trust for the use and
benefit of the Owner Participant, subject, however, to the Indenture Estate
created pursuant hereto for the use and benefit of, and with the priority of
payment to, the holders of the Certificates issued hereunder, and (ii) the
Owner Trustee has been authorized and directed to execute and deliver this
Agreement;
WHEREAS, the parties desire by this Agreement, among other
things, (i) to provide for the issuance by the Owner Trustee of the Series SWA
1995 Trust N604SW-I Certificates and for the potential issuance by the Owner
Trustee of the Series SWA 1995 Trust N604SW Certificates in respect of the
refinancing and redemption of the Series SWA 1995 Trust N604SW-I Certificates
and (ii) to provide for the assignment, mortgage and pledge by the Owner
Trustee to the Indenture Trustee, as part of the Indenture Estate hereunder,
among other things, of certain of the Owner Trustee's right, title and interest
in and to the Aircraft and the Operative Agreements and certain payments and
other amounts received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's obligations to
the Indenture Trustee, for the ratable benefit and security of the Holders; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner Trustee and the Indenture
Trustee, for the uses and purposes herein set forth, in accordance with its
terms, have been done and performed and have happened;
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GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND SECURITY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal of, Premium, if
any, and interest on, Break Amount, if any, and all other amounts due with
respect to, all Certificates from time to time Outstanding and all other
amounts due to the Holders hereunder and under the Participation Agreement and
the performance and observance by each of the Company and the Owner Trustee of
all the agreements, covenants and provisions contained herein and in the
Operative Agreements to which it is a party, for the benefit of Indenture
Trustee and the Holders, and for the uses and purposes hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of the sum of $1 paid to the
Owner Trustee by the Indenture Trustee at or before the delivery hereof, the
receipt whereof is hereby acknowledged, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time, a
security interest in and mortgage lien on all estate, right, title and interest
of the Owner Trustee in, to and under the following described property, rights,
interests and privileges, other than Excluded Payments (which collectively,
including all property hereafter specifically subjected to the lien of this
Agreement by any instrument supplemental hereto, but excluding the Excluded
Payments, are herein called the "Indenture Estate"):
(1) the Aircraft (including the Airframe and the
Engines originally installed thereon on the Delivery Date), and all
replacements thereof and substitutions therefor in which the Owner
Trustee shall from time to time acquire an interest in accordance with
the Lease, as more particularly described in the Trust Supplement and
the Lease Supplement executed and delivered with respect to the
Aircraft or any such replacements or substitutions therefor, as
provided in this Agreement, and all Records maintained with respect to
the foregoing property;
(2) the Lease and all Rent thereunder, including,
without limitation, all amounts of Interim Rent, Basic Rent,
Supplemental Rent, payments of any kind required to be made by the
Company thereunder (including the purchase price for the Aircraft
pursuant to Section 18.2 of the Lease) and any sales proceeds of the
Aircraft sold pursuant to Section 9 of the Lease or otherwise; the
Purchase Agreement (to the extent assigned by the Purchase Agreement
Assignment); all subleases of the Airframe and the Engines and all
rent thereunder to the extent assigned to the Owner Trustee by Lessee;
the Purchase Agreement Assignment; the Bills of Sale; the
Participation Agreement; and the Manufacturer's Consent; including,
without limitation, in respect of each of the foregoing documents and
instruments, all rights of the Owner Trustee to receive any payments
or other amounts or to exercise any election or option or to make any
decision or determination or to give or receive any notice, consent,
waiver or approval or to take any other action under or in respect of
any such document or to accept surrender or redelivery of the Aircraft
or any part thereof, as well as all the rights, powers and remedies on
the part of the Owner Trustee, whether acting under any such document
or by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default;
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(3) all rents, issues, profits, revenues and
other income of the property subjected or required to be subjected to
the Lien of this Agreement;
(4) all requisition proceeds with respect to the
Aircraft or any part thereof and all insurance proceeds with respect
to the Aircraft or any part thereof;
(5) all moneys and securities now or hereafter
paid or deposited or required to be paid or deposited to or with the
Indenture Trustee by or for the account of the Owner Trustee pursuant
to any term of any Operative Agreement and held or required to be held
by the Indenture Trustee hereunder; and
(6) all proceeds of the foregoing.
Concurrently with the delivery hereof, the Owner Trustee is
delivering to the Indenture Trustee an executed chattel paper original
counterpart of each of the Lease and the Lease Supplement covering the
Aircraft, together with executed copies of the Trust Agreement and each of the
other Indenture Documents (other than the Purchase Agreement, the Participation
Agreement and the FAA bills of sale). All property referred to in this
Granting Clause, whenever acquired by the Owner Trustee, shall secure all
obligations under and with respect to the Certificates at any time Outstanding.
Any and all properties referred to in this Granting Clause which are hereafter
acquired by the Owner Trustee, shall, without further conveyance, assignment or
act by the Owner Trustee or the Indenture Trustee thereby become and be subject
to the security interest hereby granted as fully and completely as though
specifically described herein.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Indenture Trustee and the Holders from time to
time, without any priority of any one Certificate over any other, and for the
uses and purposes and subject to the terms and provisions set forth in this
Agreement.
The Owner Trustee agrees that this Agreement is intended to
and shall create and grant a security interest in the Aircraft to the Indenture
Trustee, which security interest shall attach on the Delivery Date. The
security interest created by this Agreement and granted to the Indenture
Trustee hereunder in the Indenture Estate other than in the Aircraft shall
attach in the case of each other item of property included in the Indenture
Estate upon the delivery thereof or upon the Owner Trustee's acquiring rights
in such property.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Agreements to which it is a party, to perform all of the
obligations assumed by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Indenture Trustee and the Holders
shall have no obligation or liability under any of the Operative Agreements to
which the Owner Trustee is a party by reason of or arising out of the
assignment hereunder, nor shall the Indenture Trustee or the Holders be
required or obligated in any manner to perform or fulfill any obligations of
the Owner Trustee under any of
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the Operative Agreements to which the Owner Trustee is a party, or, except as
herein expressly provided, to make any payment, or to make any inquiry as to
the nature or sufficiency of any payment received by it, or present or file any
claim, or take any action to collect or enforce the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
The Owner Trustee does hereby constitute the Indenture Trustee
the true and lawful attorney of the Owner Trustee, irrevocably, with full power
(in the name of the Owner Trustee or otherwise) to ask, require, demand,
receive and, to the extent permitted by Article 8 hereof (if an Event of
Default shall have occurred and be continuing), give acquittance for any and
all moneys and claims for moneys due and to become due to the Owner Trustee
(other than Excluded Payments) under or arising out of any Indenture Document
and all other property which now or hereafter constitutes part of the Indenture
Estate, to endorse any checks or other instruments or orders in connection
therewith and, to file any claims or take any action or institute any
proceedings which the Indenture Trustee may deem to be necessary or advisable
in the premises. The Owner Trustee has directed the Company to make all
payments of Rent (other than Excluded Payments) payable to the Owner Trustee by
the Company and all other amounts which are required to be paid to or deposited
with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee
at such address as the Indenture Trustee shall specify, for application as
provided in this Agreement. The Owner Trustee agrees that promptly on receipt
thereof, it will transfer to the Indenture Trustee any and all moneys from time
to time received by it constituting part of the Indenture Estate, for
distribution by the Indenture Trustee pursuant to this Agreement, except that
the Owner Trustee shall accept for distribution pursuant to the Trust Agreement
any amounts distributed to it by the Indenture Trustee as expressly provided in
this Agreement and any Excluded Payments.
The Owner Trustee agrees that at any time and from time to
time, upon the written request of the Indenture Trustee, the Owner Trustee will
promptly and duly execute and deliver or cause to be duly executed and
delivered any and all such further instruments and documents as the Indenture
Trustee may reasonably deem desirable in obtaining the full benefits of the
assignment hereunder and of the rights and powers herein granted.
The Owner Trustee does hereby warrant and represent that it
has not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of its
right, title or interest hereby assigned, to anyone other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement
amending or supplementing any of the Operative Agreements, execute any waiver
or modification of, or consent under the terms of any of the Operative
Agreements, settle or compromise any claim (other than claims in respect of
Excluded Payments) against the Company arising under any of the Operative
Agreements, or submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Operative Agreements,
to arbitration thereunder.
The Owner Trustee does hereby ratify and confirm the Indenture
Documents and does hereby agree that (except as permitted herein) it will not
take or omit to take any action, the taking or omission of which would result
in an alteration or impairment of any of the Indenture Documents or of any of
the rights created by any thereof or the assignment hereunder.
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Notwithstanding the Granting Clause, any of the preceding
paragraphs or any other provision of this Indenture, there are hereby expressly
excluded from the foregoing grant, bargain, sale, assignment, transfer,
conveyance, mortgage, pledge and security interest all Excluded Payments.
Further, nothing in the Granting Clause or any of the preceding paragraphs
shall impair in any respect the rights of the Owner Trustee or the Owner
Participant under Section 9.13 or 11.06.
IT IS HEREBY COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article 1 have the
meanings assigned to them in this Article 1, and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(3) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision; and
(4) unless otherwise specified, all references in
this Agreement to Articles, Sections and Exhibits refer to Articles,
Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Paying Agent or Registrar, as the context
may require.
"Bankruptcy Code" means the United States Bankruptcy Code of
1978, as amended, or any successor statute.
"Basis Point" shall have the meaning specified therefor in
Exhibit A.
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"Break Amount" shall have the meaning specified therefor in
Section 15.05(b).
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in the
City of Dallas, Texas; New York, New York; the city and state in which (i) so
long as any Certificates shall be Outstanding, the Indenture Trustee and (ii)
thereafter, the Owner Trustee, has its principal place of business; and the
city and state in which the Indenture Trustee or the Owner Trustee, as the case
may be, receives and disburses funds; provided, however, that so long as the
Series SWA 1995 Trust N604SW-I Certificates are Outstanding, such day must also
be a day on which dealings are carried on in the applicable offshore dollar
interbank market.
"Certificate" or "Certificates" means any certificate or other
debt instrument issued under this Agreement, including the Series SWA 1995
Trust N604SW-I Certificates and the Series SWA 1995 Trust N604SW Certificates,
if any, issued hereunder.
"Company" means Southwest Airlines Co., a Texas corporation,
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company
executed on its behalf by a Responsible Company Officer of the Company.
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Debt" means any liability for borrowed money, or any
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
"Debt Rate" shall have the meaning specified therefor in
Exhibit A.
"Defaulted Installment" shall have the meaning specified
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
in Section 2.08.
"Defeasance Trustee" shall have the meaning specified therefor
in Section 10.05.
"Deferred Equity Amount" shall have the meaning specified in
Section 8(dd) of the Participation Agreement.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System or
any governmental authority which is the successor thereto, as in effect from
time to time.
"Eurocurrency Reserve Percentage" for any day means the
reserve percentage applicable in respect of such day under Regulation D of the
Board of Governors of the Federal Reserve System (or any governmental authority
which is the successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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marginal reserve requirement) for an Original Holder with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities.
"Excluded Payments" means (i) any right, title or interest of
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective, successors, permitted assigns,
directors, officers, employees, servants and agents to any indemnity payment,
including, but not limited to, any payment which by the terms of Section 7(b),
7(c), 7(f), 16, 17 or 18 of the Participation Agreement, Section 5.03 or 7.01
of the Trust Agreement or any section of the Tax Indemnity Agreement or any
corresponding payment under Section 3.5 of the Lease shall be payable to the
Owner Trustee in its individual capacity or to the Owner Participant, as the
case may be, pursuant to the terms of the Operative Agreements, (ii) any
insurance proceeds payable under insurance maintained by the Owner Trustee in
its individual or trust capacity or the Owner Participant (whether directly or
through the Owner Trustee), or to their respective Affiliates, successors,
permitted assigns, directors, officers, employees, servants and agents, (iii)
any insurance proceeds (or proceeds of governmental indemnities in lieu
thereof) payable to the Owner Trustee in its individual capacity or to the
Owner Participant or to their respective Affiliates, successors, permitted
assigns, directors, officers, employees, servants and agents, under any
liability insurance maintained by the Company pursuant to Section 11 of the
Lease or by any other Person (or proceeds of governmental indemnities in lieu
thereof), (iv) payments to the Owner Participant by the Owner Trustee pursuant
to Section 2 of the Participation Agreement and any funds held by the Owner
Trustee or payable to the Owner Participant pursuant to any funding letter
entered into in lieu of the provisions of Section 2 of the Participation
Agreement, (v) amounts paid or payable to the Owner Trustee from Lessee
pursuant to Section 18.2(c) of the Lease, (vi) Transaction Costs or other
amounts or expenses paid or payable to, or for the benefit of, the Owner
Participant pursuant to the Participation Agreement, (vii) the respective
rights of the Owner Trustee in its individual or trust capacity or the Owner
Participant to the proceeds of the foregoing, and (viii) any right to demand,
collect, sue or otherwise receive and enforce the payment of any amount
described in clauses (i) through (vii) above.
"Federal Aviation Act" means Subtitle VII of Title 49, U.S.C.
as amended.
"Fixed Period" means the period after the Floating Period.
"Floating Period" means the period any Series SWA 1995 Trust
N604SW-I Certificate is Outstanding.
"Government Obligations" shall have the meaning specified
therefor in Section 10.05.
"Holder" or "Certificate Holder" means a Person in whose name
a Certificate is registered on the Register.
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Documents" means each and every document or
instrument referred to in the Granting Clause hereof.
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"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Section 8.01.
"Indenture Trustee" means Wilmington Trust Company, and each
other Person which may from time to time be acting as Indenture Trustee in
accordance with the provisions of this Agreement.
"Independent" when used with respect to an engineer, appraiser
or other expert, means an engineer, appraiser or other expert who (i) is in
fact independent, (ii) does not have any direct financial interest or any
material indirect financial interest in the Company or any Affiliate of the
Company and (iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"Independent Investment Banker" means an Independent
investment banking institution of national standing appointed by the Company on
behalf of the Owner Trustee (and reasonably acceptable to the Owner
Participant, which acceptance shall not be unreasonably withheld after notice
to the Owner Participant); provided, that if the Indenture Trustee shall not
have received written notice of such an appointment at least 10 days prior to
the relevant Redemption Date or if a Lease Event of Default shall have occurred
and be continuing, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
"Installment Certificate" means a Certificate, other than a
Series SWA 1995 Trust N604SW-I Certificate, should any such Certificate be
issued hereunder which shall provide for the payments of principal in
installments.
"Installment Payment Amount" means, with respect to each
Installment Certificate, the amount of the installment payment of principal due
and payable on each Installment Payment Date, which amount shall be equal to
the product of the original principal amount of such Certificate and the
Installment Payment Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an
installment payment of principal is due and payable on the Certificates, as set
forth in Exhibit B-l as completed in accordance with Article 15.
"Installment Payment Percentage" means, with respect to each
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-l as completed in accordance with Article 15.
The term "interest" payable, or to be payable, on any date
during the Floating Period in respect of the Series SWA 1995 Trust N604SW-I
Certificates shall include, without limitation, any and all accrued and unpaid
compounded interest thereon.
"Interest Payment Date" means each July 1 and January 1
commencing on January 1, 1996.
"Interest Period" shall have the meaning specified therefor in
Exhibit A.
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"Lease" means the Sale and Lease Agreement, dated as of the
date hereof, between the Owner Trustee, as lessor, and the Company, as lessee,
relating to the Aircraft as such Sale and Lease Agreement may from time to time
be supplemented, amended or modified in accordance with the terms thereof and
this Agreement. The term "Lease" shall also include each Lease Supplement
entered into pursuant to the terms of the Lease.
"Lease Loss Payment Date" means the date on which Stipulated
Loss Value is payable pursuant to Section 10.1.4 of the Lease in connection
with an Event of Loss in respect of the Aircraft.
"Lease Termination Date" means the date the Lease terminates
pursuant to Section 9 of the Lease.
"Lending Office" of any Holder of a Series SWA 1995 Trust
N604SW-I Certificate means the office through which such Holder makes and/or
books and maintains the loan evidenced by its Certificate.
"Maturity Date" means, with respect to the Series SWA 1995
Trust N604SW Certificates, each of the dates specified in Exhibit B as a
maturity date of such Certificates and shall have, in respect of the Series SWA
1995 Trust N604SW-I Certificates, the meaning specified therefor in Exhibit A.
"Officers' Certificate" means a certificate signed in the case
of the Company, by (i) the Chairman of the Board of Directors, the President,
or any Executive or Senior Vice President of the Company, signing alone, or
(ii) any Vice President signing together with the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer or the Controller of the
Company or, in the case of the Owner Trustee, a Responsible Officer of the
Owner Trustee.
"Offshore Rate" shall have the meaning specified therefor in
Exhibit A.
"Opinion of Counsel" means a written opinion of legal counsel,
who in the case of counsel for the Company may be (i) the senior corporate
attorney employed by the Company, (ii) Vinson & Elkins L.L.P. or (iii) other
counsel designated by the Company and who shall be reasonably satisfactory to
the Indenture Trustee or, in the case of legal counsel for the Owner Trustee,
may be (x) Shipman & Goodwin or (y) other counsel designated by the Owner
Trustee and who shall be reasonably satisfactory to the Indenture Trustee.
"Original Holder" means the Original Loan Participant as such
term is defined in the Lease.
"Outstanding", when used with respect to Certificates, means,
as of the date of determination, all Certificates theretofore executed and
delivered under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation
pursuant to Section 2.07 or otherwise;
(ii) Certificates for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates; provided, that
if such Certificates are to be redeemed, notice of such redemption
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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has been duly given pursuant to this Agreement or provision therefor
satisfactory to the Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant to this
Agreement;
provided, however, that in determining whether the Holders of the requisite
aggregate principal amount of Certificates Outstanding have given any request,
demand, authorization, declaration, direction, notice, consent or waiver
hereunder, Certificates owned by or pledged to the Company or any Affiliate of
the Company or the Owner Trustee or the Owner Participant or any Affiliate
thereof, shall (unless all Certificates are then owned thereby) be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, declaration, direction, notice, consent or waiver, only
Certificates which the Indenture Trustee knows to be so owned or so pledged
shall be disregarded. Certificates owned by the Company, or the Owner Trustee
or the Owner Participant, which have been pledged in good faith may be regarded
as Outstanding if the Company, or the Owner Trustee or the Owner Participant,
as the case may be, establishes to the satisfaction of the Indenture Trustee
the pledgee's right to act with respect to such Certificates and that the
pledgee is not the Company, or the Owner Trustee or the Owner Participant or
any Affiliate thereof.
"Owner Trustee" means Shawmut Bank Connecticut, National
Association, not in its individual capacity, except as expressly provided
herein, but solely as trustee under the Trust Agreement, and each other Person
which may from time to time be acting as Owner Trustee in accordance with the
provisions of the Operative Agreements.
"Past Due Rate" means, in respect of any Certificate, the rate
of interest applicable pursuant to the provisions of such Certificate to any
amount of principal or interest payable thereunder not paid when due.
"Paying Agent" means any person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means any Installment Payment Date, Interest
Payment Date or Maturity Date.
"Permitted Investment" means any of the investments permitted
by Section 22.1 of the Lease.
"Premium" means, with respect to each Series SWA 1995 Trust
N604SW Certificate to be redeemed, purchased or otherwise prepaid pursuant to
Article 6, an amount determined as of the Business Day next preceding the
applicable Redemption Date which an Independent Investment Banker determines to
be equal to an excess, if any, of (i) the present values of all remaining
scheduled payments of such principal amount or portion thereof and interest
thereon (excluding interest accrued from the immediately preceding Interest
Payment Date to such Redemption Date) to the Maturity Date of such Certificate
in accordance with generally accepted financial practices assuming a 360-day
year consisting of twelve 30-day months at a discount rate equal to the
Treasury Yield, all as determined by the Independent Investment Banker over
(ii) the unpaid principal amount of such Certificate. Premium shall never be
below zero.
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"Premium Termination Date" means, with respect to each Series
SWA 1995 Trust N604SW Certificate, the date set forth as the "Premium
Termination Date" in Exhibit B hereto completed in accordance with Article 15
for Certificates of the Maturity Date of such Certificate.
"Principal Payment Date" shall have the meaning specified
therefor in Exhibit A.
"Record Date" for the interest or Installment Payment Amount
payable on any Interest Payment Date or Installment Payment Date (other than
the Maturity Date of the Certificates), as the case may be, means the calendar
day (whether or not a Business Day) which is 15 calendar days prior to the
related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are
to be redeemed or purchased pursuant to Section 6.01 or 6.02.
"Redemption Price" means the price at which any or all of the
Certificates (as the context may require) are to be redeemed or purchased,
determined as of the applicable Redemption Date, pursuant to Section 6.01, 6.02
or 15.03, as the case may be.
"Refinancing Date" means the date designated by the Company as
the date for a refinancing of the Certificates in accordance with Section 17 of
the Participation Agreement.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Remaining Weighted Average Life" means, for any Installment
Certificate, at the Redemption Date of such Certificate, the number of days
equal to the quotient obtained by dividing (a) the sum of the products obtained
by multiplying (i) the amount of each then remaining scheduled payment of
principal, including the payment due on the Maturity Date of such Certificate,
by (ii) the number of days from and including the Redemption Date to but
excluding the regularly scheduled date of such scheduled payment of principal;
by (b) the then unpaid principal amount of such Certificate.
"Responsible Company Officer" means, with respect to the
Company or Owner Participant, its Chairman of the Board, its President, the
Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (a) working under the direct supervision of such Chairman
of the Board, President, Chief Financial Officer, Vice President or Treasurer
and (b) whose responsibilities include the administration of the transactions
and agreements, including the Lease, contemplated by the Participation
Agreement.
"Responsible Officer", with respect to Shawmut Bank
Connecticut, National Association, the Owner Trustee or the Indenture Trustee,
means any officer in its Corporate Trust Administration Department or any
officer of the Owner Trustee or the Indenture Trustee, as the case may be,
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of his knowledge of and familiarity with a
particular subject, and in each case whose responsibilities include the
administration of the transactions and agreements, including the Lease,
contemplated by the Participation Agreement.
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"SEC" means the Securities and Exchange Commission.
"Section 18 Refinancing Date" means the date specified by the
Company for the refinancing of the Series SWA 1995 Trust N604SW-I Certificates
in accordance with Section 18 of the Participation Agreement.
"Series SWA 1995 Trust N604SW Certificate" means any
certificate of such designation issued by the Owner Trustee under this
Agreement substantially in the form of Exhibit A-1 or A-2, should any of such
certificates be issued hereunder, and any such certificate issued in
replacement or exchange thereof in accordance with the provisions hereof.
"Series SWA 1995 Trust N604SW-I Certificate" means any
certificate issued by the Owner Trustee under this Agreement, substantially in
the form of Exhibit A, and any such certificate issued in replacement or
exchange thereof in accordance with the provisions hereof.
"Treasury Rate" shall have the meaning specified therefor in
Exhibit A.
"Treasury Yield" means (i) In the case of a Certificate having
a Maturity within one year after the Redemption Date the average yield to
maturity on a government bond equivalent basis of the applicable United States
Treasury Bill due the week of Maturity of such Certificate and (ii) in the case
of a Certificate having a Maturity one year or more after the Redemption Date,
the average yield of the most actively traded United States Treasury Notes (as
reported by Cantor Fitzgerald Securities Corp. on page 5 of Telerate Systems,
Inc., a financial news service, or if such report is not available, a source
deemed comparable by the Independent Investment Banker selected to determine
the Premium and reasonably acceptable to the Company and the Owner Participant)
corresponding in maturity (x) for any Certificate issued in serial form, the
Maturity Date or (y) for any Certificate issued in installment form, to the
Average Life Date, in each case, of such Certificate (or, if there is no
corresponding maturity, an interpolation of maturities by the Independent
Investment Banker), in each case determined by the Independent Investment
Banker selected to determine the Premium based on the average of the yields to
stated maturity determined from the bid prices as of 10:00 A.M. and 2:00 P.M.
New York time, on the second Business Day preceding the Redemption Date.
"Average Life Date" means, with respect to the redemption of an Installment
Certificate, the date which follows the Redemption Date by a period equal to
the Remaining Weighted Average Life of such Certificate.
"Trust Estate" shall have the meaning specified therefor in
the Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Security Agreement", "this Indenture" or
"this Agreement" means this Trust Indenture and Security Agreement, as the same
may from time to time be supplemented, amended or modified, including by any
Trust Supplement.
"Trust Office" means the principal corporate trust office of
the Owner Trustee located at 777 Main Street, Hartford, Connecticut 06115,
Attention: Corporate Trust Administration, or at such other office at which the
Owner Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to the Company, the Indenture
Trustee and each Holder.
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"Trust Supplement" means a supplement to the Trust Agreement
and this Agreement substantially in the form of Exhibit C.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
Section 1.02 Other Definitions. For all purposes of this
Agreement, terms defined in the heading and recitals of this Agreement are used
as so defined and capitalized terms used but not defined herein are used as
defined in the Lease.
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. One or more
Series SWA 1995 Trust N604SW-I Certificates in the aggregate face amount equal
to the Original Holder's Commitment under Section 1(b) of the Participation
Agreement shall be issued on the Delivery Date as provided in Section 3(e) of
the Participation Agreement in substantially the form set forth, and shall bear
interest as provided, in Exhibit A. In the event more than one such Certificate
is so issued, all references in this Indenture to a single Series SWA 1995
Trust N604SW-I Certificate shall be deemed to include each other such
Certificate. Each Series SWA 1995 Trust N604SW-I Certificate shall be dated
the Delivery Date and shall be payable in installments on each Principal
Payment Date as set forth in Annex A to the Series SWA 1995 Trust N604SW-I
Certificate.
In connection with a refinancing of the Series SWA 1995 Trust
N604SW-I Certificate in accordance with Section 18 of the Participation
Agreement and Section 15.01 hereof, an additional series of Certificates may be
issued hereunder. Such additional series of Certificates shall be designated as
Series SWA 1995 Trust N604SW Certificates. The Series SWA 1995 Trust N604SW
Certificates shall be substantially in the form set forth in Exhibit A-l or
A-2. The Series SWA 1995 Trust N604SW Certificates shall be dated the Delivery
Date, shall be issued in the maturities and principal amounts, and shall bear
the interest rates per annum (subject to Section 2.10 hereof), in each case as
specified in Exhibit B to be delivered in connection with such refinancing of
the Series SWA 1995 Trust N604SW-I Certificate in accordance with Section 15.01
of this Agreement. The principal of each Certificate, other than Installment
Certificates, shall be payable in full on the Maturity Date for such
Certificate. The principal of each Installment Certificate shall be payable in
installments, on each Installment Payment Date, in amounts equal to the
Installment Payment Amount for such Installment Payment Date.
The Series SWA 1995 Trust N604SW Certificates shall be issued
in denominations of $1,000 and integral multiples thereof, except that one of
such Certificates may be issued in any denomination. The Series SWA 1995 Trust
N604SW-I Certificates may be issued in any denomination.
The Certificates shall be issued in registered form only. The
Certificates are not redeemable prior to maturity except as provided in this
Agreement. Interest accrued on the Certificates shall be calculated on the
basis set forth therein.
The principal of, Break Amount, if any, Premium, if any, and
interest on the Certificates shall be payable at the principal corporate trust
office of the Indenture Trustee or at any
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office or agency maintained for such purpose pursuant to Section 2.03,
provided, that subject to Section 15.04, all such amounts (other than those
payable on the Maturity Date of the Installment Certificates) may be payable at
the option of the Indenture Trustee or the Paying Agent by check mailed on or
before the due date by the Indenture Trustee or the Paying Agent to the address
of the Holder entitled thereto as such address shall appear in the Register.
All payments in respect of the Certificates shall be made in
Dollars. Any payment due on any Certificate on a day that is not a Business
Day shall be made on the next succeeding day which is a Business Day and
(provided such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date.
Section 2.02. Execution and Authentication. (a)
Certificates shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its president, a senior vice president, a vice
president, an assistant vice president, its treasurer, its secretary, an
assistant secretary or an assistant treasurer.
(b) If any officer of the Owner Trustee executing the
Certificates by facsimile signature no longer holds that office at the time the
Certificate is executed on behalf of the Owner Trustee, the Certificate shall
be valid nevertheless.
(c) At any time and from time to time after the execution
of the Certificates, the Owner Trustee may deliver such Certificates to the
Indenture Trustee for authentication and, subject to the provisions of Section
2.10, the Indenture Trustee shall authenticate the Certificates by manual
signature upon written orders of the Owner Trustee. Certificates shall be
authenticated on behalf of the Indenture Trustee by any authorized officer or
signatory of the Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for
any purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner Trustee by the manual or facsimile signature of the officer
of the Owner Trustee specified in the first sentence of Section 2.02(a) and
until authenticated on behalf of the Indenture Trustee by the manual signature
of the officer or signatory of the Indenture Trustee specified in the second
sentence of Section 2.02(c). Such signatures shall be conclusive evidence that
such Certificate has been duly executed, authenticated and issued under this
Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
Trustee shall maintain an office or agency where the Certificates may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where (subject to Sections 2.04 and 2.08) the Certificates may
be presented for payment or for exchange (the "Paying Agent"). The Registrar
shall keep a register (the "Register") with respect to the Certificates and to
their transfer and exchange and the payments of Installment Payment Amounts
thereon, if any. The Indenture Trustee may appoint one or more co-registrars
(the "Co-Registrars") and one or more additional Paying Agents for the
Certificates and the Indenture Trustee may terminate the appointment of any
Co-Registrar or Paying Agent at any time upon written notice. The term
"Registrar" includes any Co-Registrar. The term "Paying Agent" includes any
additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and
Paying Agent.
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Section 2.04. Transfer and Exchange. At the option of the
Holder thereof, Series SWA 1995 Trust N604SW-I Certificates or Series SWA 1995
Trust N604SW Certificates may be exchanged for an equal aggregate initial
principal amount of other Series SWA 1995 Trust N604SW-I Certificates or Series
SWA 1995 Trust N604SW Certificates of the same maturity and type, dated the
Delivery Date, and of any authorized denominations or transferred upon
surrender of the Series SWA 1995 Trust N604SW-I Certificates or Series SWA 1995
Trust N604SW Certificates to be exchanged or transferred at the principal
corporate trust office of the Indenture Trustee, or at any office or agency
maintained for such purpose pursuant to Section 2.03. Whenever any Series SWA
1995 Trust N604SW-I Certificate or Series SWA 1995 Trust N604SW Certificate is
so surrendered for exchange, the Owner Trustee shall execute, and the Indenture
Trustee shall authenticate and deliver, the replacement Series SWA 1995 Trust
N604SW-I Certificate or Series SWA 1995 Trust N604SW Certificate which the
Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Owner Trustee,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Certificates surrendered upon such registration of
transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Holder or any transferee
for any registration of transfer or exchange of Certificates, but the Registrar
may, as a condition to any transfer or exchange hereunder require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of such transfer or exchange of
Certificates.
The Registrar shall not be required to register the transfer
of or to exchange any Certificate called for redemption or purchase pursuant to
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates. (a)
The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semiannually on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders.
(b) Ownership of the Certificates shall be proved by the
Register kept by the Registrar. Prior to due presentment for registration of
transfer of any Certificate, the Owner Trustee, the Owner Participant, the
Company, the Indenture Trustee, the Paying Agent and the Registrar may deem and
treat the Person in whose name any Certificate is registered as the absolute
owner of such Certificate for the purpose of receiving payment of principal
(including, subject to the provisions herein regarding the applicable record
dates, Installment Payment Amounts) of, Premium, if any, and (subject to the
provisions herein regarding the applicable record dates), interest on such
Certificate
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and for all other purposes whatsoever, whether or not such Certificate is
overdue, and none of the Owner Trustee, the Owner Participant, the Company, the
Indenture Trustee, the Paying Agent or the Registrar shall be affected by
notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen
Certificates. If any Certificate shall become mutilated, destroyed, lost or
stolen, the Owner Trustee shall, upon the written request of the Holder of such
Certificate, issue and execute, and the Indenture Trustee shall authenticate
and deliver, in replacement thereof, as applicable, a new Series SWA 1995 Trust
N604SW-I Certificate or a new Series SWA 1995 Trust N604SW Certificate of the
same type and having the same maturity, payable to the same Holder in the same
principal amount and dated the same date as the Certificate so mutilated,
destroyed, lost or stolen. If the Certificate being replaced has become
mutilated, such Certificate shall be surrendered to the Indenture Trustee. If
the Certificate being replaced has been destroyed, lost or stolen, the Holder
of such Certificate shall furnish to the Owner Trustee and the Indenture
Trustee such security or indemnity as may be required by it to save the Owner
Trustee and the Indenture Trustee harmless and evidence satisfactory to the
Owner Trustee and the Indenture Trustee of the destruction, loss or theft of
such Certificate and of the ownership thereof; provided, however, that if the
affected Holder is the Original Holder, the written notice of such destruction,
loss or theft and such ownership and the written undertaking of such Holder
delivered to the Owner Trustee and the Indenture Trustee to hold harmless the
Owner Trustee and the Indenture Trustee in respect of the execution,
authentication and delivery of such new Certificate shall be sufficient
evidence, security and indemnity.
Section 2.07. Cancellation. The Registrar and any Paying
Agent shall forward to the Indenture Trustee all Certificates surrendered to
them for replacement, redemption, registration of transfer, exchange or
payment. The Indenture Trustee shall cancel all Certificates surrendered for
replacement, redemption, registration of transfer, exchange, payment or
cancellation and shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal
and Interest. (a) The Indenture Trustee will arrange directly with any Paying
Agent for the payment, or the Indenture Trustee will make payment, all pursuant
to Section 2.09, of the principal of, the Break Amount, if any, Premium, if
any, and interest on, and any other amounts payable on or in respect of each
Certificate or to the Holder thereof hereunder. Interest, principal and other
amounts payable on or in respect of the Series SWA 1995 Trust N604SW-I
Certificate shall be paid as provided for therein and in Article 15. Payment on
Series SWA 1995 Trust N604SW Certificates in respect of interest and
Installment Payment Amounts, if any, payable on an Interest Payment Date or
Installment Payment Date, respectively (other than the Maturity Date of the
Series SWA 1995 Trust N604SW Certificates) shall be paid in Dollars on each
Interest Payment Date or Installment Payment Date (other than the Maturity Date
of such Series SWA 1995 Trust N604SW Certificates), as the case may be, to the
Holder thereof at the close of business on the relevant Record Date; provided,
however, that the Paying Agent will, at the request of the Indenture Trustee
and may, at its option, pay such interest and Installment Payment Amounts
(other than those payable on the Maturity Date of the Installment Certificate)
by check mailed on or before the due date to such Holder's address as it
appears on the Register. Otherwise, principal of Series SWA 1995 Trust N604SW
Certificates and Premium, if any, with respect thereto, shall be payable only
against presentation and surrender thereof at the principal corporate trust
office of the Indenture Trustee or at the office of the Paying Agent maintained
for such purpose pursuant to Section 2.03.
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A Holder shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal amount of,
Premium, if any, Break Amount, if any, and interest on all Certificates held by
such Holder and all other sums payable to such Holder hereunder, under such
Certificates and under the Participation Agreement shall have been paid in
full.
(b) Any Installment Payment Amount payable on an
Installment Payment Date (other than the Maturity Date with respect to a
Certificate) or any interest payable on an Interest Payment Date on any Series
SWA 1995 Trust N604SW Certificate which is not punctually paid on such
Installment Payment Date or such Interest Payment Date, as the case may be
(herein called, respectively, a "Defaulted Installment" and "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Record Date by virtue of his having been such Holder; and such Defaulted
Installment or Defaulted Interest may be paid by the Indenture Trustee, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Indenture Trustee may elect to make
payment of any Defaulted Installment or Defaulted Interest, as the
case may be, to the Person in whose name any Series SWA 1995 Trust
N604SW Certificate is registered at the close of business on a special
record date for the payment of such Defaulted Installment or Defaulted
Interest, as the case may be, which shall be fixed in the following
manner. The Indenture Trustee shall notify the Paying Agent in writing
of the amount of Defaulted Installment or Defaulted Interest, as the
case may be, proposed to be paid on each such Certificate and the date
of the proposed payment, and at the same time the Indenture Trustee
shall make arrangements to set aside an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Installment or Defaulted Interest, as the case may be, prior to the
date of the proposed payment, to be held in trust for the benefit of
the Persons entitled to such Defaulted Installment or Defaulted
Interest, as the case may be, as this clause provides and shall fix a
special record date for the payment of such Defaulted Installment or
Defaulted Interest, as the case may be, which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment. The Indenture Trustee shall promptly notify the Owner
Trustee, the Company and the Registrar of such special record date and
shall cause notice of the proposed payment of such Defaulted
Installment or Defaulted Interest, as the case may be, and the special
record date therefor to be mailed, first class postage prepaid, to
each Holder of a Series SWA 1995 Trust N604SW Certificate at its
address as it appears in the Register, not less than 10 days prior to
such special record date. Notice of the proposed payment of such
Defaulted Installment or Defaulted Interest, as the case may be, and
the special record date therefor having been mailed, as aforesaid,
such Defaulted Installment or Defaulted Interest, as the case may be,
shall be paid to the Persons in whose names the applicable Series SWA
1995 Trust N604SW Certificates are registered on such special record
date and shall no longer be payable pursuant to the following clause
(2).
(2) The Indenture Trustee may make, or cause to
be made, payment of any Defaulted Installment or Defaulted Interest,
as the case may be, in any other lawful manner not inconsistent with
the requirements of any securities exchange on which Series SWA 1995
Trust N604SW Certificates may be listed, and upon such notice as may
be required by such exchange, if such payment shall be deemed
practicable by the Indenture Trustee.
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Any interest, principal or other amount payable on the Series
SWA 1995 Trust N604SW-I Certificates which is not punctually paid when due
shall be paid as provided in such Certificates.
(c) The Indenture Trustee shall require each Paying Agent
to agree in writing that such Paying Agent will hold in trust, for the benefit
of the Holders and the Indenture Trustee, all money held by such Paying Agent
for the payment of the principal of, Break Amount, if any, Premium, if any, or
interest or any other amounts payable to any Holder hereunder or under the
Participation Agreement and shall give to the Indenture Trustee notice of any
default in the making of any such payment upon the Certificates. The Indenture
Trustee at any time may require a Paying Agent to repay to the Indenture
Trustee all money held by it. Upon so doing the Paying Agent shall have no
further liability for the money so paid.
Section 2.09. Payment from Indenture Estate Only. All
amounts payable by the Indenture Trustee and the Owner Trustee under the
Certificates and this Agreement shall be made only from the income and proceeds
of the Indenture Estate and from the other amounts specified in Section 3.03.
Each Holder of a Certificate, by its acceptance of such Certificate, agrees
that (a) it will look solely to the income and proceeds of the Indenture Estate
and from the other amounts specified in Section 3.03 for the payment of such
amounts, to the extent available for distribution to it as herein provided, and
(b) none of the Owner Trustee, the Owner Participant or the Indenture Trustee
is or shall be personally liable to any Holder of any Certificate for any
amount payable under such Certificate or this Agreement or, except as expressly
provided in this Agreement in the case of the Owner Trustee and the Indenture
Trustee, for any liability thereunder.
Shawmut Bank Connecticut, National Association is entering
into this Agreement solely as Owner Trustee under the Trust Agreement and not
in its individual capacity, and in no case whatsoever shall Shawmut Bank
Connecticut, National Association (or any entity acting as successor trustee
under the Trust Agreement) be personally liable for, or for any loss in respect
of, any statements, representations, warranties, agreements or obligations
hereunder or thereunder; provided, that Shawmut Bank Connecticut, National
Association shall be liable hereunder in its individual capacity, (i) for the
performance of its agreements in its individual capacity hereunder and under
Section 8 of the Participation Agreement, and (ii) for its own willful
misconduct or gross negligence. If a successor Owner Trustee is appointed in
accordance with the terms of the Trust Agreement and the Participation
Agreement, such successor Owner Trustee shall, without any further act, succeed
to all of the rights, duties, immunities and obligations hereunder, and its
predecessor Owner Trustee and Shawmut Bank Connecticut, National Association
shall be released from all further duties and obligations hereunder, without
prejudice to any claims against Shawmut Bank Connecticut, National Association
or such predecessor Owner Trustee for any default by Shawmut Bank Connecticut,
National Association or such predecessor Owner Trustee, respectively, in the
performance of its obligations hereunder prior to such appointment.
Section 2.10. Execution, Delivery and Dating of
Certificates upon Issuance. The Owner Trustee shall issue and execute, and the
Indenture Trustee shall authenticate and deliver, the Certificates for original
issuance upon payment of an amount equal to the aggregate original principal
amount of the Series SWA 1995 Trust N604SW-I Certificates to be issued at such
time in the manner contemplated by Section 2 of the Participation Agreement.
Each Certificate issued hereunder shall be dated the Delivery Date, and the
Indenture Trustee shall note thereon, if issued after the Delivery Date, the
date through which has been paid interest thereon. Interest shall accrue on
the Series SWA
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1995 Trust N604SW Certificates only from the date of issuance of such
Certificate pursuant to Section 17 or 18.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption of
Certificates. (a) Except as otherwise provided in Section 3.05, in the event
the Certificates are redeemed in accordance with the provisions of Section
6.01(a) or (b), the Indenture Trustee will apply on the Redemption Date any
amounts then held by it in the Indenture Estate and received by it from or on
behalf of the Owner Trustee or, as assignee of the Owner Trustee, from the
Company, including, without limitation, pursuant to Section 9, 10, 11 or
(subject to Section 7.03) 18.2 of the Lease in the following order of priority:
first, so much thereof as was received by the Indenture
Trustee with respect to the amounts due to it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Outstanding
Certificates pursuant to Section 6.01(a) or (b), as the case may be,
on the Redemption Date shall be applied to the redemption of the
Certificates on the Redemption Date; and
third, the balance, if any, thereof remaining thereafter shall
be distributed to the Owner Trustee to be held or distributed to the
Owner Participant in accordance with the terms of the Trust Agreement.
(b) In the case of any refinancing or purchase of the
Certificates pursuant to Section 6.01(c) or 6.02, the Indenture Trustee will
apply on the Redemption Date the amounts received by it from or on behalf of
the Owner Trustee, or as assignee of the Owner Trustee, from the Company, to
the payment of the Redemption Price of the Outstanding Certificates pursuant to
Section 6.01(c) or 6.02, as the case may be, on the Redemption Date; it being
understood that any such payment shall be a refinancing or purchase of the
indebtedness represented by the Outstanding Certificates and is not, and shall
not be construed so as to be, a redemption thereof or payment or prepayment
thereon.
Section 3.03. Application of Rent When No Indenture Event
of Default Is Continuing. Except as otherwise provided in Section 3.02, 3.04,
3.05 or 3.06, each amount of Basic Rent or Advance (as defined in Section 3.8
of the Lease) received by the Indenture Trustee from the Owner Trustee or, as
assignee of the Owner Trustee, from the Company, any payment of interest
payable on any Interest Payment Date on overdue installments of Basic Rent, the
amount received from the Owner Participant pursuant to Section 8(dd) of the
Participation Agreement as the Deferred Equity Amount, together with any amount
received by the Indenture Trustee pursuant to Section 8.03(e)(i), shall be
distributed by the Indenture Trustee in the following order of priority:
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first, so much of such aggregate amount as shall be required
to pay in full the interest, principal of, Premium, if any, Break
Amount, if any, and any other amounts then due on, all Outstanding
Certificates shall be distributed to the Persons entitled thereto; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Premium, if any, Break Amount, if any, such other
amounts payable to the Holders, and without any preference or priority
of one Certificate over another, ratably according to the aggregate
amount so due for interest, principal, Premium, if any, Break Amount,
if any, and such other amounts at the date fixed by the Indenture
Trustee for the distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall be
required to pay any amount due the Indenture Trustee pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such
amounts; and
third, the balance, if any, of such aggregate amount remaining
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement; provided, however,
that if an Indenture Default shall have occurred and be continuing,
then such balance shall not be distributed as provided in this clause
"third" but shall be held by the Indenture Trustee as part of the
Indenture Estate until whichever of the following shall first occur:
(i) all Indenture Events of Default shall have been cured, in which
event such balance shall, to the extent not theretofore distributed as
provided herein, be distributed as provided in this clause third", or
(ii) Section 3.04 or Section 3.05 shall be applicable, in which event
such balance shall be distributed in accordance with the provisions of
said Section 3.04 or Section 3.05, as the case may be, or (iii) such
installment or payment shall have been held for a period in excess of
183 days (during which no Indenture Event of Default which is not a
Lease Event of Default shall have occurred and be continuing and
during which period the Indenture Trustee and the Holders shall not
have been stayed or otherwise precluded by operation of law from
taking action to accelerate the Certificates or to exercise remedies
hereunder or under the Lease), in which event such balance shall, to
the extent not theretofore applied as provided herein, be distributed
as provided in this clause third".
Section 3.04. Application of Certain Payments in Case of
Requisition or Event of Loss. Except as otherwise provided in Section 3.05, any
amounts received directly or otherwise pursuant to the Lease from any
governmental authority or other Person pursuant to Section 10 of the Lease with
respect to the Airframe or the Airframe and the Engines or engines then
installed on the Airframe as the result of an Event of Loss, to the extent that
such amounts are not required to be paid to the Company pursuant to said
Section 10, and any amounts of insurance proceeds for damage to the Indenture
Estate received directly or otherwise pursuant to the Lease (and not
constituting Excluded Payments) from any insurer pursuant to Section 11 of the
Lease with respect thereto as the result of an Event of Loss, to the extent
such amounts are not required to be paid to the Company pursuant to said
Section 11, shall, except as otherwise provided in the next sentence, be
applied by the Indenture Trustee on behalf of, and as assignee of, the Owner
Trustee in reduction of the Company's obligations to pay Stipulated Loss Value
and the other amounts payable by the Company pursuant to Section 10 of the
Lease and the remainder, if any, shall, except as provided in the next
sentence, be distributed to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease and the Trust Agreement. Any portion of
any such amount referred to in the preceding sentence which is not required to
be so paid to the Company pursuant to the Lease, solely because
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a Lease Default of the type referred to in Section 14.1 or 14.5 of the Lease or
Lease Event of Default shall have occurred and be continuing, shall, subject to
Section 10.04 hereof, be held by the Indenture Trustee on behalf of the Owner
Trustee as security for the obligations of the Company under the Lease and at
such time as there shall not be continuing any Lease Default of the type
referred to in Section 14.1 or 14.5 of the Lease or Lease Event of Default or
such earlier time as shall be provided for in the Lease, or upon satisfaction
and discharge of this Indenture as provided herein, such portion shall be paid
to the Owner Trustee to be held or distributed in accordance with the terms of
the Lease, unless the Indenture Trustee (as assignee from the Owner Trustee of
the Lease) shall have theretofore commenced to exercise remedies pursuant to
Section 15 thereof, in which event such portion shall be distributed in
accordance with the provisions of Section 3.05 hereof.
Section 3.05. Payments During Continuance of Indenture
Event of Default. All payments (except Excluded Payments) received and amounts
held or realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and so long as such an Indenture Event of Default shall be
continuing, and after the Indenture Trustee shall foreclose or enforce this
Indenture or after the Certificates shall have become due and payable as
provided in Section 8.02 (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as
all payments or amounts then held or thereafter received by the Indenture
Trustee as part of the Indenture Estate while such Indenture Event of Default
shall be continuing, shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such payments or amounts as shall be
required to pay the Indenture Trustee all amounts then due it pursuant
to Section 9.06 shall be applied to pay the Indenture Trustee such
amounts;
second, so much of such payments or amounts remaining as shall
be required to (i) pay the expenses incurred (including unbilled
expenses in respect of property delivered or contracted for or
services rendered or contracted for if the amount of such expenses is
liquidated) in using, operating, storing, leasing, controlling or
managing the Indenture Estate, and of all maintenance, insurance,
repairs, replacements, alterations, additions and improvements of and
to the Indenture Estate and to make all payments which the Indenture
Trustee may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the Indenture
Estate or any part thereof (including the employment of engineers and
accountants to examine and make reports upon the properties, books and
records of the Owner Trustee and, to the extent permitted under the
Lease, the Company), all in accordance with Section 8.03(c), shall be
applied for such purposes and (ii) reimburse the Holders in full for
payments made pursuant to Section 9.01(c) (to the extent not
previously reimbursed) shall be distributed to such Holders, and if
the aggregate amount remaining shall be insufficient to reimburse all
such payments in full, it shall be distributed ratably, without
priority of any Certificate over any other, in the proportion that the
aggregate amount of the unreimbursed payments made by each such Holder
pursuant to Section 9.01(c) bears to the aggregate amount of the
unreimbursed payments made by all Holders pursuant to Section 9.01(c);
third, so much of such payments or amounts remaining as shall
be required to pay the principal of, Break Amount, if any, and accrued
interest on all Certificates Outstanding and all other amounts payable
to the Holders hereunder or under the Participation Agreement and then
due and payable, whether by declaration of acceleration pursuant to
Section 8.02 or
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otherwise, shall be applied to the payment of such interest,
principal, Break Amount, if any, and such other amounts; and in case
such payments or amounts shall be insufficient to pay in full the
whole amount so due and unpaid, then to the payment of such interest,
principal, Break Amount, if any, such other amounts and interest,
without any preference or priority of one Certificate over another,
ratably according to the aggregate amount so due for interest,
principal, Break Amount, if any, and such other amounts at the date
fixed by the Indenture Trustee for the distribution of such payments
or amounts; and
fourth, the balance, if any, of such payments or amounts
remaining thereafter shall be distributed to the Owner Trustee to be
held or distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement.
Section 3.06. Payments for Which Application Is Provided in
Other Documents. Except as otherwise provided in this Agreement, any payment
received by the Indenture Trustee for which provision as to the application
thereof is made in the Lease or the Participation Agreement shall be
distributed to the Person for whose benefit such payments were made in
accordance with, and subject to the terms, thereof and hereof. The Indenture
Trustee shall be obligated to distribute any Excluded Payments received by the
Indenture Trustee promptly upon receipt thereof by the Indenture Trustee to the
Person entitled thereto.
Section 3.07. Payments for Which No Application Is
Otherwise Provided. Except as otherwise provided in Section 3.05:
(a) any payment received by the Indenture Trustee for
which no provision as to the application thereof is made elsewhere in
this Agreement, and
(b) any payment received and amounts realized by the
Indenture Trustee with respect to the Aircraft to the extent received
or realized at any time after the conditions set forth in Article 10
for the satisfaction and discharge of this Agreement or for the
defeasance of the Certificates shall have been duly satisfied, as well
as any other amounts remaining as part of the Indenture Estate after
such satisfaction shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance, if any, of such aggregate amount
remaining thereafter shall be distributed to the Owner Trustee
to be held or distributed in accordance with the terms of the
Trust Agreement.
Section 3.08. Application of Payments. Each payment of
principal and interest or other amounts due hereunder to the Indenture Trustee
or any Holder or in respect of each Certificate shall, except as otherwise
expressly provided herein, be applied, first, to the payment of any amount
(other than the principal of or Premium, Break Amount or interest on such
Certificate) due hereunder or in respect of such Certificate, second, to the
payment of Premium or Break Amount, if any, and interest on such Certificate
(as well as any interest on overdue principal and, to the extent permitted by
law, interest and other amounts payable hereunder and thereunder) due
thereunder, third, to the
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payment of the principal of such Certificate then due and fourth, the balance,
if any, remaining thereafter, to the payment of the principal of such
Certificate remaining unpaid (provided, that such Certificate shall not be
subject to prepayment or purchase without the consent of the affected Holder
except as expressly permitted hereby). The amounts paid pursuant to clause
fourth above shall be applied to the installments of principal of such
Certificate in inverse order of maturity.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner
Trustee hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually
perform its obligations under the Lease and will duly and punctually
pay the principal of, Premium, if any, Break Amount, if any, and
interest on and other amounts due hereunder and under the Certificates
and all other amounts payable by it to the Holders under the
Participation Agreement and the other Operative Agreements;
(ii) the Owner Trustee will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it with respect to any of the properties or assets of
the Indenture Estate and shall, at its own cost and expense, promptly
take such action as may be necessary to discharge duly any such Lessor
Lien, and the Owner Trustee will cause restitution to be made to the
Indenture Estate in the amount of any diminution of the value thereof
as the result of any Lessor Liens attributable to it;
(iii) in the event a Responsible Officer of the
Owner Trustee shall have actual knowledge of an Indenture Event of
Default or Indenture Default or an Event of Loss, the Owner Trustee
will give prompt written notice of such Indenture Event of Default or
Indenture Default or Event of Loss to the Indenture Trustee, the Owner
Participant, the Company and, so long as the Series SWA 1995 Trust
N604SW-I Certificate shall be Outstanding, the Original Holder;
(iv) except as contemplated by the Operative
Agreements, the Owner Trustee will not contract for, create, incur,
assume or permit to exist any Debt, and will not guarantee (directly
or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so
doing, or otherwise), endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the Debt of any
other Person;
(v) the Owner Trustee will not enter into any
activity other than owning the Aircraft, the leasing thereof to the
Company and the carrying out of the transactions contemplated hereby
and by the Participation Agreement, the Trust Agreement and the other
Operative Agreements;
(vi) the Owner Trustee will furnish to the
Indenture Trustee, and the Indenture Trustee will furnish to each
Holder at the time outstanding, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial
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statements and other instruments furnished to the Owner Trustee under
the Lease, including, without limitation, a copy of each report or
notice received pursuant to Section 11 of the Lease, to the extent
that the same shall not have been furnished directly to such Holder or
the Indenture Trustee pursuant to the Lease;
(vii) the Owner Trustee will not (except as
permitted herein) assign or pledge or otherwise dispose of, so long as
this Indenture shall remain in effect and shall not have been
terminated pursuant to Section 10.01, any of its right, title or
interest hereby assigned to anyone other than the Indenture Trustee,
and, with respect to such right, title and interest hereby assigned,
will not, except as provided in this Indenture, (1) accept any payment
that is subjected to the Lien of this Indenture from the Lessee or any
sublessee, enter into any agreement amending or supplementing any of
the Indenture Documents, execute any waiver or modification of, or
consent under, the terms of any of the Indenture Documents, (2)
exercise any rights with respect to the Indenture Estate, (3) settle
or compromise any claim arising under any of the Indenture Documents,
or (4) submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Indenture
Documents to arbitration thereunder; and
(viii) in the event that the Company shall assign
any sublease to the Owner Trustee, the Owner Trustee shall deliver to
the Indenture Trustee a trust supplement confirming the Indenture
Trustee's security interest in such assignment and the sublease
assigned thereby.
Section 4.02. Covenants of Shawmut Bank Connecticut,
National Association. Shawmut Bank Connecticut, National Association, hereby
covenants and agrees that it will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Liens attributable to it with respect to
any of the properties or assets of the Indenture Estate and it shall, at its
own cost and expense, promptly take such action as may be necessary to
discharge duly any such Lessor Lien. Shawmut Bank Connecticut, National
Association, will cause restitution to be made to the Indenture Estate in the
amount of any diminution of the value thereof as the result of any Lessor Liens
thereon attributable to it.
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of
Property Included in the Indenture Estate During Continuation of Lease. So
long as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the lien of this
Agreement and be leased to the Company under the Lease; provided, that
to the extent permitted by and as provided in the Lease, the Company
shall have the right, at any time and from time to time, without any
release from or consent by the Owner Trustee or the Indenture Trustee,
to remove, replace and pool Parts and to make alterations,
improvements and modifications in, and additions to, the Aircraft. The
Indenture Trustee
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agrees that, to the extent permitted by and as provided in the Lease,
title to any such Part shall vest in the Company. The Indenture
Trustee shall from time to time execute an appropriate written
instrument or instruments to confirm the release of the security
interest of the Indenture Trustee in any Part as provided in this
Section 5.01, in each case upon receipt by the Indenture Trustee of a
Company Request stating that said action was duly taken by the Company
in conformity with this Section 5.01 and that the execution of such
written instrument or instruments is appropriate to evidence such
release of a security interest under this Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
Occurring to Airframe or Engines or upon Voluntary Termination of
Lease with Respect to Engines. Upon (i) the occurrence of an Event of
Loss occurring to the Airframe or an Engine, or (ii) a voluntary
termination of the Lease with respect to an Engine, the Company, in
accordance with the Lease, may, in the case of an Event of Loss which
has occurred to the Airframe, or shall, except as provided in Section
10.2 of the Lease, in the case of an Event of Loss which has occurred
to or termination of the Lease with respect to an Engine, substitute
an airframe or engine, as the case may be, in which case, upon due
satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of
its right, interest and lien in and to the Airframe or such Engine in
accordance with the provisions of the following sentence. The
Indenture Trustee shall execute and deliver to the Owner Trustee an
instrument releasing its lien in and to the Airframe or such Engine
and shall execute for recording in public offices, at the expense of
the Owner Trustee (if requested by the Owner Trustee) or the Company
(if requested by the Company), such instruments in writing as the
Owner Trustee or the Company shall reasonably request and as shall be
reasonably acceptable to the Indenture Trustee in order to make clear
upon public records that such lien has been released under the laws of
the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and
all rights existing or that may be acquired to any penalties, forfeit or
damages from or against the Indenture Trustee for failure to execute and
deliver any document in connection with the release of a lien or to file any
certificate in compliance with any law or statute requiring the filing of the
same in connection with the release of a lien, except for failure by the
Indenture Trustee to execute and deliver any document or to file any
certificate as may be specifically requested in writing by the Owner Trustee or
the Company and with respect to which the Owner Trustee or the Company shall be
duly entitled.
Section 5.02. Certificates in Respect of Replacement
Aircraft and Engines. Upon the execution and delivery of a Trust Supplement
covering a Replacement Airframe and/or Replacement Engine, as provided in
Section 5.01(b), each Certificate shall be deemed to have been issued in
connection with such Replacement Airframe and/or Replacement Engine and each
Certificate issued thereafter upon a transfer or exchange of, or as a
replacement for, a Certificate, shall be designated as having been issued in
connection with such Replacement Airframe and/or Replacement Engine, but
without any other change therein.
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ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain
Events. (a) If there shall be an Event of Loss to the Aircraft and the
Aircraft is not replaced pursuant to Section 10.1.2 of the Lease, each
Outstanding Certificate shall be redeemed in whole at a Redemption Price equal
to 100% of the outstanding principal amount of such Certificate plus accrued
and unpaid interest thereon to but excluding the applicable Redemption Date
plus, in the case of the Series SWA 1995 Trust N604SW-I Certificates, Break
Amount, if any, and all other amounts payable to the Holders hereunder or under
the Participation Agreement. The Redemption Date for Certificates to be
redeemed pursuant to this Section 6.01(a) shall be the Lease Loss Payment Date.
No Premium shall be paid in the case of a redemption pursuant to any provision
of this Section 6.01(a).
(b) The Certificates shall be redeemed on the Lease
Termination Date or upon the purchase of the Aircraft by the Company at its
option on the Special Purchase Option Date pursuant to Section 18.2(b) of the
Lease (unless the Company shall have elected to assume the rights and
obligations of the Owner Trustee hereunder to the extent and as provided for in
Section 7.03). In the case of any Series SWA 1995 Trust N604SW-I Certificate,
the Redemption Price therefor shall be equal to the unpaid principal amount of
such Certificate as at such date plus accrued and unpaid interest thereon to
but excluding the Redemption Date, the Break Amount, if any, and all other
amounts payable to the Holder thereof hereunder or under any other Operative
Agreement, but without any other premium or penalty. In the case of any Series
SWA 1995 Trust N604SW Certificate, such Redemption Price therefor shall be
equal to the unpaid principal amount of such Certificate as at such Redemption
Date together with an amount equal to the accrued but unpaid interest thereon
and, in the case of each Certificate redeemed prior to the Premium Termination
Date applicable to such Certificate, the Premium, if any. The Redemption Date
for Certificates to be redeemed shall be (A) in the case of a termination of
the Lease pursuant to Section 9 thereof, on the Lease Termination Date or (B)
in the case of purchase of the Aircraft by the Company pursuant to Section
18.2(b) of the Lease, on the Special Purchase Option Date.
(c) (i) The Series SWA 1995 Trust N604SW-I
Certificates may be refinanced in accordance with the provisions of Article 15
hereof and Sections 17 and 18 of the Participation Agreement and (ii) the
Series SWA 1995 Trust N604SW Certificates may be refinanced if all the
conditions to such refunding or refinancing set forth in Section 17 of the
Participation Agreement shall have been satisfied. In any such event, each
Outstanding Certificate may be so refinanced at a Redemption Price determined
in accordance with the procedures described above in Section 6.01(b); provided,
however, that the applicable Redemption Date for the Series SWA 1995 Trust
N604SW-I Certificates to be refinanced pursuant to clause (i) of this Section
6.01(c) shall be the applicable Refinancing Date under Section 17 of the
Participation Agreement or the Section 18 Refinancing Date under Section 18 of
the Participation Agreement, as the case may be, and the applicable Redemption
Date for Certificates to be redeemed pursuant to clause (ii) of this Section
6.01(c) shall be the applicable Refinancing Date under Section 17 of the
Participation Agreement.
Section 6.02. Redemption or Purchase of Certificates Upon
Certain Indenture Events of Default. If the Owner Trustee shall have given
notice of redemption or purchase to the Indenture Trustee pursuant to Section
8.03(e)(ii) each Outstanding Certificate shall be redeemed or purchased in
whole at a Redemption Price equal to 100% of its principal amount plus accrued
and unpaid
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interest thereon (including, without limitation, interest on overdue interest)
to but excluding the applicable Redemption Date as determined below and all
other amounts payable to the Holders hereunder or under the Participation
Agreement and, in the case of the Series SWA 1995 Trust N604SW-I Certificate,
the Break Amount, if any, and, in the case of the Series SWA 1995 Trust N604SW
Certificates, if to be purchased or redeemed pursuant to Section 8.03(e)(ii)(A)
prior to the 181st day after the first occurrence of the relevant Lease Event
of Default, the Premium, if any. The Redemption Date for Certificates to be
redeemed or purchased pursuant to this Section 6.02 shall be the date specified
in the notice given by the Owner Trustee to the Indenture Trustee pursuant to
Section 8.03(e)(ii) (provided, however, that in the case of the Series SWA 1995
Trust N604SW-I Certificates, if such date is the last day of the then current
Interest Period therefor, no Break Amount shall be payable). If the Owner
Trustee elects to purchase the Certificates under Section 8.03(e)(ii), nothing
herein, including use of the terms "Redemption Date" and "Redemption Price"
shall be deemed to result in a redemption of the Certificates.
Section 6.03. Notice of Redemption to Holders. (a) Notice
of redemption or purchase with respect to the Series SWA 1995 Trust N604SW
Certificates shall be given by first-class mail, postage prepaid, mailed not
less than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of such Certificates to be redeemed or purchased, at such Holder's address
appearing in the Register; provided, that in the case of a redemption pursuant
to Section 6.01(b) related to Lessee's exercise of its option pursuant to
Section 9 of the Lease, such notice shall be revocable and shall be deemed
revoked in the event the Lease does not in fact terminate on the related Lease
Termination Date.
All notices of redemption or purchase shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption
Price,
(3) that on the Redemption Date, the Redemption Price
will become due and payable upon each such Certificate, and that
interest on Certificates shall cease to accrue on and after such
Redemption Date, and
(4) the place or places where such Certificates are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
(b) Notice of redemption of the Series SWA 1995 Trust
N604SW-I Certificate shall be given by the Owner Trustee (or by the Company on
behalf of the Owner Trustee) not less than three Business Days prior to the
Redemption Date, shall be irrevocable and shall be given by telephone, telex,
telecopy, cable or other customary means of communication by the Owner Trustee
or the Company, as the case may be, to the other and to the Indenture Trustee
and to each Original Holder at each such Person's address designated in Section
12.01(a). Notwithstanding any provision to the contrary contained in this
Article 6, the Series SWA 1995 Trust N604SW-I Certificate shall be redeemable
as set forth in this Article 6 and in Article 15 without any premium,
prepayment
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penalty or other cost or expense except for the Break Amount, if any, and the
payment of all other amounts payable to the Holders thereof hereunder and under
the Participation Agreement.
Section 6.04. Deposit of Redemption Price. On or before
the Redemption Date, the Owner Trustee (or any Person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 Noon in immediately available
funds (i) the Redemption Price of the Certificates to be redeemed, refinanced
or purchased, as the case may be, on the Redemption Date and (ii) all other
amounts due and payable hereunder, including any amounts payable to the
Indenture Trustee pursuant to Section 9.06.
Section 6.05. Certificates Payable on Redemption Date.
Notice of redemption, refinancing or purchase having been given as aforesaid
(and not deemed revoked as contemplated in the proviso to Section 6.03(a)), the
Certificates (or the purchase or refinancing price therefor) shall, on the
applicable Redemption Date, become due and payable at the Redemption Price
therefor at the principal corporate trust office of the Indenture Trustee or at
any office or agency maintained for such purposes pursuant to Section 2.03, and
from and after such Redemption Date (unless there shall be a default in the
payment of the Redemption Price) any Certificates then Outstanding shall cease
to bear interest. Unless payment prior to surrender is expressly provided for
herein or in the Participation Agreement, upon surrender of any such
Certificate for redemption or purchase in accordance with said notice such
Certificate shall be paid at the Redemption Price. The Certificates shall not
be subject to prepayment, redemption, refunding or refinancing except as
provided in this Article 6 and in Section 8.02 hereof.
If any Certificate called for redemption or purchase shall not
be so paid upon surrender thereof for redemption or purchase, the principal
amount thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments
Held by the Indenture Trustee. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Premium, if any, or
interest on any Series SWA 1995 Trust N604SW Certificate, including without
limitation any money deposited pursuant to Article 10 and remaining unclaimed
for two years and eleven months after the due date for such payment, shall be
paid to the Owner Trustee; and the Holders of any Outstanding Certificates
shall thereafter, as unsecured general creditors, look only to the Owner
Participant (to the extent the Owner Trustee distributed any such trust money
to the Owner Participant) and to the Company on behalf of the Owner Trustee for
payment thereof, and all liability of the Indenture Trustee or any such Paying
Agent with respect to such trust money shall thereupon cease; provided, that
the Indenture Trustee or such Paying Agent, before being required to make any
such repayment, may at the expense of the Company cause to be mailed to each
such Holder notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
mailing, any unclaimed balance of such money then remaining will be repaid to
the Owner Trustee as provided herein.
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Section 7.02. [Reserved for Potential Future Use]
Section 7.03. Assumption of Obligations of Owner Trustee by
the Company. In the event that the Company shall have elected to assume all of
the rights and obligations of the Owner Trustee under this Agreement in respect
of the Certificates pursuant to Section 8(r) of the Participation Agreement in
connection with the purchase by the Company of the Aircraft, and if on or prior
to the Special Purchase Option Date (the "Assumption Date") the Indenture
Trustee shall have received:
(a) an instrument of assumption (the "Assumption
Agreement") pursuant to which the Company irrevocably and unconditionally
assumes and undertakes, with full recourse to the Company, the Owner Trustee's
obligations with respect to principal, interest, Break Amount, Premium and all
other amounts payable to the Holders or the Indenture Trustee under the
Certificates then Outstanding, this Agreement, and the Participation Agreement
and which incorporates therein events of default substantially similar in scope
and effect to those set forth in the Lease and covenants substantially similar
to the covenants of the Company under the Lease and the Participation
Agreement;
(b) a supplement to this Agreement and/or such other
instruments and documents (including, without limitation, Uniform Commercial
Code financing statement(s)) covering all of the security interests created by
or pursuant to this Indenture that are not covered by the recording system
established by the Federal Aviation Act as may be necessary (or reasonably
requested by the Indenture Trustee) for the security interest of the Indenture
Trustee in the Aircraft and in the other rights, property and interests
included in the Indenture Estate (other than those rights, property and
interests that depend on the existence of the Trust Estate and the
participation of the Owner Trustee and Owner Participant in the transactions
contemplated by the Participation Agreement and this Indenture) to continue to
be perfected and duly recorded with the Federal Aviation Administration and in
all other places necessary or, in the reasonable opinion of the Indenture
Trustee, advisable under the Uniform Commercial Code;
(c) an insurance report dated the Assumption Date of the
independent insurance broker referred to in Section 11.5 of the Lease and the
certificates of insurance, each in form and substance reasonably satisfactory
to the Indenture Trustee as to the due compliance as of the Assumption Date
with the terms of Section 11 of the Lease (as it relates to the Holders and the
Indenture Trustee) relating to the insurance with respect to the Aircraft;
(d) evidence that as of the Assumption Date, and after
giving effect to the transactions contemplated hereby, the Company has good
title to the Aircraft free and clear of all Liens other than the Lien of, and
the security interest created by, this Indenture and other Permitted Liens
(other than Lessor Liens);
(e) a copy of the application that was filed with the FAA
on the Assumption Date regarding the registration of the Aircraft in the name
of the Company;
(f) a certificate from a Responsible Company Officer of
the Company that no Lease Default of the type referred to in Section 14.1 or
14.5 of the Lease or Lease Event of Default shall have occurred and be
continuing as of the Assumption Date;
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(g) an opinion of the General Counsel of the Company (or
other counsel reasonably satisfactory to the Indenture Trustee) in form and
substance reasonably satisfactory to the Indenture Trustee, addressed to the
Indenture Trustee and dated the Assumption Date, to the effect that (i) the
execution, delivery and performance of the Assumption Agreement and the
supplement to this Indenture referred to in paragraph (b) of this Section 7.03
(and all other instruments and documents the execution of which are necessary
for and directly related to the assumption of the obligations contemplated by
this Section 7.03 or the continued perfection of the security interests
referred to in paragraph (b) of this Section 7.03) have been duly authorized by
the Company by all necessary action; (ii) the Assumption Agreement, such
supplement to this Indenture, all such other documents and instruments referred
to above and the security interests arising therefrom are legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, and except as limited by
applicable laws which may affect the remedies provided for in this Indenture,
which laws, however, do not in the opinion of such counsel make the remedies
provided for in this Indenture inadequate for the practical realization of the
rights and benefits purported to be provided thereby; (iii) the Assumption
Agreement, such supplement and all such other documents and instruments
referred to above do not and will not contravene any provision of the Company's
articles of incorporation or by-laws or any law or regulation applicable to the
Company or any agreement, mortgage or instrument to which the Company is a
party or by which the Company is bound; and (iv) the Indenture Trustee (on
behalf of the Certificate Holders) should continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft
upon and after the assumption of the obligations by the Company, provided, that
the opinion referred to in this clause (iv) need not be delivered to the extent
that the benefits of Section 1110 of the Bankruptcy Code were not, by reason of
a change of law or governmental interpretation thereof, available to the
Indenture Trustee with respect to the Aircraft immediately prior to such
assumption and provided, further, that such opinion may contain qualifications
of the tenor contained in the opinion relating to said Section 1110 delivered
pursuant to Section 4(a)(xi) of the Participation Agreement on the Delivery
Date;
(h) an opinion of Daugherty, Fowler & Peregrin special
counsel in Oklahoma City (or other counsel reasonably acceptable to the
Indenture Trustee) in form and substance reasonably satisfactory to the
Indenture Trustee, addressed to the Indenture Trustee and dated the Assumption
Date, (i) to the effect that all documents executed in connection with the
assumption of the obligations contemplated by this Section 7.03 and required to
be filed with the Federal Aviation Administration are in proper form, and all
steps necessary have been taken, for the Aircraft to be duly registered in the
name of the Company and for the Lien of this Agreement with respect to the
Aircraft and Engines to continue to be duly perfected and of first priority;
and
(i) such other documentation reasonably requested by the
Indenture Trustee (in form and substance reasonably satisfactory to the
Indenture Trustee) to amend the Operative Agreements to give effect to the
foregoing;
then, automatically and without the requirement of further action by any
Person, effective as of the Assumption Date, the Owner Trustee shall be
released from all of its obligations under this Agreement in respect of the
Certificates or otherwise (other than any obligations or liabilities of the
Owner Trustee in its individual capacity incurred on or prior to the Assumption
Date or arising out of or based upon events occurring on or prior to the
Assumption Date, which obligations and
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liabilities shall remain the sole responsibility of the Owner Trustee in its
individual capacity as aforesaid). Promptly upon the filing and recording of
the documents referred to in the opinion of counsel specified in Section (h)
above with the FAA, the Company shall cause such counsel to deliver to the
Indenture Trustee an opinion addressed to the Indenture Trustee, in form and
substance reasonably satisfactory to the Indenture Trustee, as to due recording
of said documents with the FAA.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following
events shall constitute "Indenture Events of Default" under this Agreement
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Indenture Event of Default
shall be deemed to exist so long as, but only so long as, it shall not be
remedied:
(a) the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any payment of principal
of or Premium or Break Amount, if any, or interest on any Certificate
and such failure shall have continued unremedied for seven Business
Days, or the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any other amount due and
payable hereunder, or under any Certificate, and such failure shall
have continued unremedied for 10 Business Days after notice thereof to
the Owner Trustee; or
(b) any Lessor Lien required to be discharged by Shawmut
Bank Connecticut, National Association, pursuant to Section 4.02 or
required to be discharged by the Owner Trustee pursuant to Section
4.01(ii) or required to be discharged or bonded (in a manner
reasonably satisfactory to the Indenture Trustee) by the Owner
Participant pursuant to Section 8(g) of the Participation Agreement
shall remain undischarged for a period of 30 calendar days after a
Responsible Officer or Responsible Company Officer, as the case may
be, of Shawmut Bank Connecticut, National Association, the Owner
Trustee or the Owner Participant, as the case may be, shall have
actual knowledge of such Lessor Lien; or
(c) any representation or warranty made by the Owner
Trustee or the Owner Participant herein or in the Participation
Agreement, or made by any Person guaranteeing or supporting the
obligations of the Owner Participant under the Operative Agreements in
its guarantee or support agreement, shall prove to have been false or
incorrect when made in any material respect to the Certificate
Holders, is material at the time of discovery and, if curable, is not
cured within 30 days of notice thereof to the Owner Participant and
the Owner Trustee from the Indenture Trustee; or
(d) [Intentionally omitted]
(e) any failure by the Owner Trustee to observe or perform
any other covenant or obligation of the Owner Trustee contained in
this Indenture or in the Participation Agreement or any failure by the
Owner Participant to observe or perform any other covenant or
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obligation of the Owner Participant contained in the Participation
Agreement or any failure by any Person guaranteeing or supporting the
obligations of the Owner Participant under the Operative Agreements to
perform any covenant or obligation of such Person under its guarantee
or support agreement which, in any case, is not remedied within a
period of 30 calendar days after notice thereof has been given to the
Owner Trustee and the Owner Participant or such Person, as the case
may be; or
(f) there shall be a Lease Event of Default other than,
without the consent of the Owner Trustee in its sole discretion, a
Lease Event of Default arising by reason of nonpayment when due of any
Excluded Payments; or
(g) either the Trust Estate or the Owner Trustee with
respect thereto (and not in its individual capacity) or the Owner
Participant or any Person guaranteeing or supporting the obligations
of the Owner Participant under the Operative Agreements shall (i)
file, or consent by answer or otherwise to the filing against it of a
petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (ii) make an
assignment for the benefit of its creditors, or (iii) consent to the
appointment of a custodian, receiver, trustee or other officer with
similar powers of itself or any substantial part of its property;
provided, that an event referred to in this Section 8.01(g) with
respect to the Owner Participant shall not constitute an Indenture
Event of Default if (A) an order, judgment or decree shall be entered
in a proceeding by a court or a trustee, custodian, receiver or
liquidator which is either final and non-appealable or has not been
stayed pending any appeal, or (B) an opinion of counsel satisfactory
to the Indenture Trustee shall be provided by the Owner Participant,
in each case to the effect that no part of the Trust Estate created by
the Trust Agreement (except for the Owner Participant's beneficial
interest in such Trust Estate) and no right, title or interest under
the Indenture Estate shall be included in, or be subject to, any
declaration or adjudication of, or proceedings with respect to, the
bankruptcy, insolvency or liquidation of the Owner Participant
referred to in this Section 8.01(g); or
(h) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Trust Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant or any Person
guaranteeing or supporting the obligations of the Owner Participant
under the Operative Agreements, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Trust Estate or the
Owner Trustee with respect thereto (and not in its individual
capacity) or the Owner Participant or any Person guaranteeing or
supporting the obligations of the Owner Participant under the
Operative Agreements and any such order or petition is not dismissed
or stayed within 90 days after the earlier of the entering of any such
order or the approval of any such petition; provided, that an event
referred to in this Section 8.01(h) with respect to the Owner
Participant shall not constitute an Event of Default if (A) an order,
judgment or decree shall be entered in a proceeding by a court or a
trustee, custodian, receiver or liquidator which is either final and
non-appealable or has not been stayed pending any appeal, or (B) an
opinion of counsel satisfactory to the Indenture Trustee shall be
provided by the Owner Participant, in each case
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to the effect that no part of the Trust Estate created by the Trust
Agreement (except for the Owner Participant's beneficial interest in
such Trust Estate) and no right, title or interest under the Indenture
Estate shall be included in, or be subject to, any declaration or
adjudication of, or proceedings with respect to, the bankruptcy,
insolvency or liquidation of the Owner Participant referred to in this
Section 8.01(h).
Section 8.02. Acceleration; Rescission and Annulment. If an
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee and the Owner Trustee may declare the
principal of all the Certificates to be due and payable, whereupon the same
shall be accelerated and be and become due and payable; provided, that if an
Indenture Event of Default referred to in clause (g) or (h) of Section 8.01
shall have occurred or a Lease Event of Default of the type referred to in
clause (g) or (h) of said Section 8.01 shall have occurred with respect to the
Company, then and in every such case the unpaid principal of all Certificates
then Outstanding shall, unless the Indenture Trustee acting upon instructions
of at least 25% in aggregate principal amount of Outstanding Certificates shall
otherwise direct, immediately and without further act become due and payable,
without presentment, demand, protest or notice, all of which are hereby waived.
Upon such declaration (or automatic acceleration, as the case may be), the
principal of all Certificates together with accrued interest thereon from the
date in respect of which interest was last paid hereunder to the date payment
of such principal has been made or duly provided for, plus, in the case of the
Series SWA 1995 Trust N604SW-I Certificates, the Break Amount, if any, and all
other amounts payable to the Holders hereunder as at such date of payment shall
be immediately due and payable (but not including any Premium). At any time
after such declaration and prior to the sale or disposition of the Indenture
Estate, the Holders of a majority in aggregate principal amount of all of the
Outstanding Certificates, by notice to the Indenture Trustee, the Company and
the Owner Trustee, may rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal of, and, in the
case of the Series SWA 1995 Trust N604SW-I Certificates, the Break Amount, if
any, on any Certificates which have become due otherwise than by such
declaration and any interest thereon and interest due or past due, if any, and
all sums due and payable to the Indenture Trustee have been deposited with the
Indenture Trustee, (ii) the rescission would not conflict with any judgment or
decree and (iii) all existing Indenture Defaults and Indenture Events of
Default under this Agreement have been cured or waived except nonpayment of
principal of, or interest on, the Certificates that has become due solely
because of such acceleration.
Section 8.03. Other Remedies Available to Indenture
Trustee. (a) After an Indenture Event of Default shall have occurred and so
long as such Indenture Event of Default shall be continuing, then and in every
such case the Indenture Trustee, as trustee of an express trust and as assignee
hereunder of the Lease or as holder of a security interest in the Aircraft or
Engines or otherwise, may, and when required pursuant to the provisions of
Article 9 shall, exercise, subject to Sections 8.03(b) and 8.03(e), any or all
of the rights and powers and pursue any and all of the remedies accorded to the
Owner Trustee pursuant to Section 15 of the Lease and this Article 8, may
recover judgment in its own name as Indenture Trustee against the Indenture
Estate and may take possession of all or any part of the Indenture Estate and
may exclude the Owner Trustee and the Owner Participant and all Persons
claiming under any of them wholly or partly therefrom. The Indenture Trustee
shall have and may exercise all of the rights and remedies of a secured party
under the Uniform Commercial Code as in effect in any applicable jurisdiction.
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(b) After an Indenture Event of Default, subject to
Section 8.03(e), the Indenture Trustee may, if at the time such action may be
lawful and always subject to compliance with any mandatory legal requirements,
either with or without taking possession, and either before or after taking
possession, and without instituting any legal proceedings whatsoever, and
having first given notice of such sale to the Owner Trustee, the Owner
Participant and the Company at least 10 days prior to the date of such sale,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public or private auction, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as the Indenture
Trustee may determine, and at any place (whether or not it be the location of
the Indenture Estate or any part thereof) and time designated in the notice
above referred to; provided, however, that notwithstanding any provision herein
to the contrary, the Indenture Trustee may not provide the notice provided for
above of its intention to sell any of the Indenture Estate or exercise other
remedies against the Indenture Estate seeking to deprive the Owner Trustee or
the Owner Participant of its rights therein unless a declaration of
acceleration has been made pursuant to Section 8.02 or the Certificates have
otherwise become due and payable through redemption or otherwise. Any such sale
or sales may be adjourned from time to time by announcement at the time and
place appointed for such sale or sales, or for any such adjourned sale or
sales, without further notice, and the Indenture Trustee and the Holder or
Holders of any Certificates, or any interest therein, may bid and become the
purchaser at any such sale, and each Holder shall be entitled, at any such
sale, to credit against the purchase price bid thereby all or any part of the
unpaid obligations owing to such Holder and secured by the Lien of this
Agreement. The Indenture Trustee may exercise such right without possession or
production of the Certificates or proof of ownership thereof, and as
representative of the Holders may exercise such right without notice to the
Holders or including the Holders as parties to any suit or proceeding relating
to foreclosure of any property in the Indenture Estate. The Owner Trustee
hereby irrevocably constitutes the Indenture Trustee the true and lawful
attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee or
otherwise) for the purpose of effectuating any sale, assignment, transfer or
delivery for enforcement of the Lien created under this Agreement, whether
pursuant to foreclosure or power of sale or otherwise, to execute and deliver
all such bills of sale, assignments and other instruments as the Indenture
Trustee may consider necessary or appropriate, with full power of substitution,
the Owner Trustee hereby ratifying and confirming all that such attorney or any
substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by
the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and
confirm any such sale, assignment, transfer or delivery, by executing and
delivering to the Indenture Trustee or such purchaser all bills of sale,
assignments, releases and other proper instruments to effect such ratification
and confirmation as may be designated in any such request.
(c) Subject to Sections 8.03(b) and 8.03(e), if an
Indenture Event of Default has occurred and is continuing, the Owner Trustee
shall, at the request of the Indenture Trustee, promptly execute and deliver to
the Indenture Trustee such instruments of title or other documents as the
Indenture Trustee may deem necessary or advisable to enable the Indenture
Trustee or an agent or representative designated by the Indenture Trustee, at
such time or times and place or places as the Indenture Trustee may specify, to
obtain possession of all or any part of the Indenture Estate. If the Owner
Trustee shall for any reason fail to execute and deliver such instruments and
documents after such request by the Indenture Trustee, the Indenture Trustee
shall be entitled to a judgment for specific performance of the covenants
contained in the foregoing sentence, conferring upon the Indenture Trustee the
right to immediate possession and requiring the Owner Trustee to execute and
deliver such instruments and documents to the Indenture Trustee. The Indenture
Trustee shall also be entitled to pursue all or any part of the Indenture
Estate wherever it may be found and may enter
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any of the premises of the Owner Trustee or any other Person wherever the
Indenture Estate may be or be supposed to be and search for the Indenture
Estate and take possession of any item of the Indenture Estate pursuant to this
Section 8.03(c). The Indenture Trustee may, from time to time, at the expense
of the Indenture Estate, make all such expenditures for maintenance, insurance,
repairs, replacements, alterations, additions and improvements to and of the
Indenture Estate, as it may deem proper. In each such case, the Indenture
Trustee shall have the right to use, operate, store, lease, control or manage
the Indenture Estate, and to exercise all rights and powers of the Owner
Trustee relating to the Indenture Estate as the Indenture Trustee shall deem
appropriate, including the right to enter into any and all such agreements with
respect to the use, operation, storage, leasing, control or management of the
Indenture Estate or any part thereof; and the Indenture Trustee shall be
entitled to collect and receive directly all tolls, rents (including Rent),
issues, profits, products, revenues and other income of the Indenture Estate
and every part thereof, without prejudice, however, to the right of the
Indenture Trustee under any provision of this Agreement to collect and receive
all cash held by, or required to be deposited with, the Indenture Trustee
hereunder. In accordance with the terms of this Section 8.03(c), such tolls,
rents (including Rent), issues, profits, products, revenues and other income
shall be applied to pay the expenses of using, operating, storing, leasing,
controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect
to make, if any, for taxes, assessments, insurance or other proper charges upon
the Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine, inspect and make reports upon the properties and
books and records of the Owner Trustee and, to the extent permitted by the
Lease, the Company), and all other payments which the Indenture Trustee may be
required or authorized to make under any provision of this Agreement, including
this Section 8.03(c), as well as just and reasonable compensation for the
services of the Indenture Trustee, and of all persons properly engaged and
employed by the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and
the Indenture Trustee shall have obtained possession of or title to the
Aircraft, the Indenture Trustee shall not be obligated to use or operate the
Aircraft or cause the Aircraft to be used or operated directly or indirectly by
itself or through agents or other representatives or to lease, license or
otherwise permit or provide for the use or operation of the Aircraft by any
other Person unless (i) the Indenture Trustee shall have been able to obtain
insurance in kinds, at rates and in amounts satisfactory to it in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all liability for loss or damage to
the Aircraft and for public liability and property damage resulting from use or
operation of the Aircraft and (ii) funds are available in the Indenture Estate
to pay for all such insurance or, in lieu of such insurance, the Indenture
Trustee is furnished with indemnification from the Holders or any other Person
upon terms and in amounts satisfactory to the Indenture Trustee in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all such liabilities.
(d) Subject to Sections 8.03(b) and 8.03(e), the
Indenture Trustee may proceed to protect and enforce this Agreement and the
Certificates by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Indenture Estate or any part thereof, or for the recovery of judgment
for the indebtedness secured by the Lien created under this Agreement or for
the enforcement of any other power, legal or equitable remedy available under
applicable law.
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(e) (i) If the Company shall fail to make any payment
of Basic Rent under the Lease and such failure shall have become a Lease Event
of Default then as long as no other Indenture Event of Default shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the expiration of
a period of ten Business Days (the "10-Day Period") after such failure shall
have become a Lease Event of Default (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee) exercise any of the rights, powers or remedies pursuant to
Section 15 of the Lease or this Article 8), an amount equal to the full amount
of such payment of Basic Rent, together with any interest due thereon under the
Lease on account of the delayed payment thereof to the date of such payment,
and such payment by the Owner Participant or the Owner Trustee shall be deemed
to cure any Indenture Event of Default which arose from such failure of the
Company as of such date of payment (but such cure shall not relieve the Company
of any of its obligations). If the Company shall fail to perform or observe any
covenant, condition or agreement to be performed or observed by it under the
Lease (other than its obligation to pay Basic Rent), and if (but only if) the
performance or observance thereof can be effected by the payment of money alone
(it being understood that actions such as the obtaining of insurance and the
procurement of maintenance services can be so effected), then as long as no
other Indenture Event of Default (other than those arising from a Lease Event
of Default) shall have occurred and be continuing, the Owner Participant or the
Owner Trustee may (but need not) pay to the Indenture Trustee (or to such other
Person as may be entitled to receive the same), at any time prior to the
expiration of a period of ten Business Days after the expiration of the grace
period, if any, provided with respect to such failure on the part of the
Company in Section 14 of the Lease (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee) exercise any of the rights, powers or remedies pursuant to
Section 15 of the Lease or this Article 8), all sums necessary to effect the
performance or observance of such covenant or agreement of the Company,
together with any interest due thereon under the Lease on account of the
delayed payment thereof to the date of such payment, and such payment by the
Owner Participant or the Owner Trustee shall be deemed to cure any Indenture
Event of Default which arose from such failure of the Company as of such date
of payment (but such cure shall not relieve the Company of any of its
obligations). If, on the basis specified in the preceding sentences, any Lease
Events of Default shall have been remedied, then any declaration pursuant to
this Indenture that the Certificates are due and payable or that an Indenture
Event of Default exists hereunder, based solely upon such Lease Events of
Default, shall be deemed to be rescinded, and, in the case of the first and
second sentences of this Section 8.03(e)(i), the Owner Participant or the Owner
Trustee shall (to the extent of any such payments made by it) be subrogated to
the rights of the Holders of the Certificates under Section 3.03, to receive
from the Indenture Trustee such payment of overdue Basic Rent or other amount
(and the payment of interest on account of such Basic Rent or other amount
being overdue) and shall be entitled, so long as no other Indenture Event of
Default or Indenture Default shall have occurred and be continuing or would
result therefrom, to receive, subject to the provisions of this Indenture, such
payment upon receipt thereof by the Indenture Trustee; provided, that the Owner
Participant shall not otherwise attempt to recover any such amount paid by it
on behalf of the Company pursuant to this Section 8.03(e)(i) except by
demanding of payment of such amount or by commencing an action at law against
the Company for the payment of such amount; and provided, further, that:
(x) this Section 8.03(e)(i) shall not apply with respect
to any default in the payment of Basic Rent due under the Lease if the
Lessee itself shall have theretofore failed to pay Basic Rent in the
manner required under the Lease (after giving effect to any
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applicable grace period) (i) due on each of the two Rent Payment Dates
immediately preceding the date of such default, or (ii) due on a total
of four Rent Payment Dates; and
(y) neither the Owner Trustee nor the Owner Participant
shall have the right to cure any Lease Event of Default except as
specified in this Section 8.03(e)(i).
(ii) In the event that (A) at any time one or more
Lease Events of Default shall have occurred and be continuing or (B) the
Certificates shall have been accelerated pursuant to Section 8.02, the Owner
Trustee or the Owner Participant may, at its option, give at least 30 days'
prior irrevocable notice to the Indenture Trustee that the Owner Trustee or the
Owner Participant will redeem (except subsequent to the establishment of the
Redemption Date in respect of the Certificates) or purchase all Certificates
then Outstanding on a date determined consistently with the applicable
provisions of Article 6 and, concurrently with such notice, the Owner Trustee
or the Owner Participant will deposit with the Indenture Trustee an amount
sufficient to redeem (except subsequent to the establishment of the Redemption
Date in respect of the Certificates) or purchase at the applicable Redemption
Price determined in accordance with Article 6 all Certificates then Outstanding
(including, when applicable, an estimate of the Premium to be paid on the
Redemption Date computed using the Treasury Yield determined as if the
Redemption Date were the date of such notice) and to pay the Indenture Trustee
all amounts then due it hereunder, which funds shall be held by the Indenture
Trustee as provided in Section 9.04. Subject to the subsequent satisfaction by
the Owner Trustee of its obligations pursuant to the next following sentence,
upon the giving of such notice and the receipt by the Indenture Trustee of such
deposit, the Indenture Trustee shall deem all instructions received from the
Owner Trustee as having been given by the Holders of 100% of the Outstanding
principal amount of Certificates for all purposes of this Indenture. If such
notice is given, the Owner Trustee further agrees that it will deposit or cause
to be deposited with the Indenture Trustee, on or prior to the applicable
Redemption Date, whether or not an Indenture Event of Default is then
continuing, funds sufficient, when added to the funds already held by the
Indenture Trustee for such purpose, to redeem or purchase at the applicable
Redemption Price (including the Break Amount or Premium (if the Redemption
Price includes Premium) actually payable in respect thereof, if any, and all
other amounts payable to the Holders hereunder or under any other Operative
Agreement on such Redemption Date) all Certificates then Outstanding and to pay
the Indenture Trustee all amounts then due it hereunder.
(iii) Anything in this Agreement to the contrary
notwithstanding, the Indenture Trustee shall not be entitled to exercise any
remedy hereunder as a result of an Indenture Event of Default which arises
solely by reason of one or more events or circumstances which constitute a
Lease Event of Default unless the Indenture Trustee as security assignee of the
Owner Trustee shall have exercised or concurrently be exercising one or more of
the remedies provided for in Section 15 of the Lease with respect to the
Aircraft, provided, that the requirement to exercise such remedies under the
Lease shall not apply in circumstances where the Indenture Trustee is
involuntarily stayed or otherwise prohibited by applicable law or court order
from exercising such remedies under the Lease after the Section 1110 Period.
The "Section 1110 Period" shall mean the period commencing on the date of such
stay or prohibition and ending on the earlier of (x) the 60th day thereafter
(or such longer period (A) as may be specified in Section 1110(a)(1) of the
Bankruptcy Code, (B) equal to the period of an extension with the consent of
the Indenture Trustee of the 60-day period specified therein pursuant to
Section 1110(b) of the Bankruptcy Code, or (C) resulting from the Indenture
Trustee's own failure to give any requisite notice to any Person) and (y) the
date of
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repossession of the Aircraft. References in this sentence to particular
sections of the Bankruptcy Code as in effect on the date hereof shall include
any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to
the contrary, including, without limitation, Sections 8.03(b), 8.03(c) and
8.03(d), as long as no Lease Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee shall take any
action in violation of the Company's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Company's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given
to the Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the
Indenture Trustee in the exercise of any right, remedy or power or in pursuing
any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of the Owner Trustee or the Company or to be
an acquiescence therein.
Section 8.04. Waiver of Owner Trustee. To the extent now
or at any time hereafter enforceable under applicable law, the Owner Trustee
covenants that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Indenture
Estate or any part thereof, prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or prior to any applicable decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute now or hereafter made
or enacted by any state or otherwise to redeem the property so sold or any part
thereof, and hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of the Owner Trustee acquiring any
interest in or title to the Indenture Estate or any part thereof subsequent to
the date of this Agreement, all benefit and advantage of any such law or laws,
and covenants that it will not invoke or utilize any such law or laws, but will
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Nothing in this Section 8.04 shall be deemed to
be a waiver by the Owner Trustee of its rights under Section 8.03(e).
The Indenture Trustee may maintain such a pleading, or in any
manner whatsoever claim or take any benefit or advantage of or from any law now
or hereafter in force even if it does not possess any of the Certificates or
does not produce any of them in the proceeding. A delay or omission by the
Indenture Trustee or any Holder in exercising any right or remedy accruing upon
an Indenture Event of Default under this Agreement shall not impair the right
or remedy or constitute a waiver of or acquiescence in such Indenture Event of
Default.
Section 8.05. Waiver of Existing Defaults. The Holders of
a majority in aggregate principal amount of the Outstanding Certificates by
notice to the Indenture Trustee may waive on behalf of the Holders an existing
Indenture Default or Indenture Event of Default and its consequences except (i)
an Indenture Default or Indenture Event of Default in the payment of the
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principal of or interest on any Certificate or (ii) in respect of a covenant or
provision hereof which pursuant to Section 11.02 cannot be amended or modified
without the consent of the Holder affected.
Section 8.06. Control by Majority. The Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee or exercising any trust or power conferred
on it by this Agreement. However, the Indenture Trustee may refuse to follow
any direction that conflicts with law or this Agreement, that is unduly
prejudicial to the rights of the Holders so affected, or that would, without
satisfactory indemnity from the Holders, subject the Indenture Trustee to
personal liability.
Section 8.07. Limitation on Suits by Holders. A Holder of
a Certificate may pursue a remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written
notice of a continuing Indenture Event of Default under this
Agreement;
(2) the Holders of at least 25% in aggregate principal
amount of the Outstanding Certificates make a written request to the
Indenture Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss,
liability or expense to be, or which may be, incurred by the Indenture
Trustee in pursuing the remedy;
(4) the Indenture Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a majority
in aggregate principal amount of the Outstanding Certificates do not
give the Indenture Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Agreement the right of any Holder
to receive payment of principal of, Premium or Break Amount, if any, and
interest on such Certificate on or after the respective due dates expressed in
such Certificate, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
Section 8.09. Indenture Trustee May File Proofs of Claim.
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Holders allowed in any judicial proceedings
relating to any obligor on the Certificates, its creditors, or its property.
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ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee.
(a) The Indenture Trustee will furnish to each
Certificate Holder promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and
other instruments furnished to the Indenture Trustee under any Operative
Agreement or received from the Owner Trustee pursuant to Section 4.01(vi) to
the extent the same shall not have been otherwise directly distributed to the
Holders pursuant to the express provision of any other Operative Agreement.
(b) Subject to the terms of Sections 8.02, 8.03(e), 8.05,
8.06, 9.01(c), 11.02 and 11.06, upon the written instructions at any time and
from time to time of Holders of a majority in aggregate principal amount of the
Outstanding Certificates, the Indenture Trustee shall take such of the
following actions as may be specified in such instructions: (i) exercise such
election or option, or make such decision or determination, or give such
notice, consent, waiver or approval or exercise such right, remedy or power or
take such other action hereunder or under any other Operative Agreement or in
respect of any part or all of the Indenture Estate as shall be specified in
such instructions; (ii) take such action with respect to, or to preserve or
protect, the Indenture Estate (including the discharge of Liens) as shall be
specified in such instructions and as are consistent with this Indenture; and
(iii) take such other action in respect of the subject matter of this Indenture
as is consistent with the terms hereof and the other Indenture Documents. The
Indenture Trustee will execute and the Owner Trustee will file or cause to be
filed such continuation statements with respect to financing statements
relating to the security interest created hereunder in the Indenture Estate as
may be specified from time to time in written instructions of Holders of a
majority in aggregate principal amount of the Outstanding Certificates (which
instructions may, by their terms, be operative only at a future date and which
shall be accompanied by the execution form of such continuation statement so to
be filed).
(c) The Indenture Trustee shall not be required to take
any action or refrain from taking any action under Sections 8.06 or 9.01(b)
unless the Indenture Trustee shall have been indemnified by the Holders against
any liability, cost or expense (including counsel fees) which may be incurred
in connection therewith. The Indenture Trustee shall not be under any
obligation to take any action under this Agreement and nothing in this
Agreement contained shall require the Indenture Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. The Indenture Trustee shall not be required to take any action under
Section 8.06 or 9.01(b), nor shall any other provision of this Indenture be
deemed to impose a duty on the Indenture Trustee to take any action, if the
Indenture Trustee shall have been advised by counsel that such action is
contrary to the terms hereof or is otherwise contrary to law.
(d) The Indenture Trustee shall not have any duty or
obligation to use, operate, store, lease, control, manage, sell, dispose of or
otherwise deal with the Aircraft or any other part of the Indenture Estate, or
to otherwise take or refrain from taking any action under, or in connection
with, this Indenture or any part of the Indenture Estate, except as expressly
provided by the terms of
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this Indenture or as expressly provided in written instructions from Holders as
provided in this Indenture; and no implied duties or obligations shall be read
into this Indenture against the Indenture Trustee.
(e) The Owner Trustee and the Indenture Trustee agree
that they will not use, operate, store, lease, control, manage, sell, dispose
of or otherwise deal with the Aircraft or any other part of the Indenture
Estate except (i) in accordance with the terms of the Lease or the
Participation Agreement, or (ii) in accordance with the powers granted or
reserved to, or the authority conferred upon, the Owner Trustee and the
Indenture Trustee pursuant to this Indenture and in accordance with the express
terms hereof.
(f) Subject to the provisions of Section 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Agreement. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to be
extent required by law.
Section 9.02. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may consult with counsel or require an Officer's Certificate or an
Opinion of Counsel from the Company or the Owner Trustee after which it will
take such action or refrain from acting as it deems appropriate. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith and in accordance herewith in reliance on a resolution of the Board of
Directors of the Company, the written advice of counsel reasonably acceptable
to the Owner Trustee, the Company and the Indenture Trustee, officer's
certificates or opinions of counsel provided by the Company or the Owner
Trustee.
(c) The Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care; provided, that so long as no Indenture Event of
Default shall have occurred and be continuing no such agents shall be appointed
by the Indenture Trustee without the consent of the Company and the Owner
Trustee, which consent shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) If an Indenture Event of Default under this Agreement
has occurred and is continuing, the Indenture Trustee shall exercise its rights
and powers under this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
Section 9.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates and may otherwise deal with the Owner Trustee, the
Company or an Affiliate of the Owner Trustee or the Company or a subsidiary of
the Owner Trustee or the Company with the same rights it would have if it were
not the Indenture Trustee. Any Agent may do the same with like rights.
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Section 9.04. Funds May Be Held by Indenture Trustee or
Paying Agent; Investments. Any monies (including without limitation for
purposes of this Section 9.04 Permitted Investments constituting the proceeds
of the maturity, sale or other disposition of any Permitted Investment) held by
the Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its account
with any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
States thereof having combined capital and surplus and retained earnings of at
least $100,000,000, and neither the Indenture Trustee nor the Paying Agent
shall have any liability for interest upon any such monies except as otherwise
agreed in writing or (ii) at any time and from time to time, so long as no
Lease Default (of the type described in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, at the request
(given directly by the Company to the Indenture Trustee) of the Company acting
as the agent of the Owner Trustee, shall be invested and reinvested in
Permitted Investments as specified in such request (if such investments are
reasonably available for purchase) and sold, in any case at such prices,
including accrued interest or its equivalent, as are set forth in such request,
and such Permitted Investments shall be held by the Indenture Trustee in trust
as part of the Indenture Estate until so sold; provided, that the Company, on
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity,
sale or other disposition of any such Permitted Investment and, so long as no
Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, be entitled to
receive from the Indenture Trustee, and the Indenture Trustee on behalf of the
Owner Trustee, shall promptly pay to the Company pursuant to Section 22.1 of
the Lease, any profit, income, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment. If any Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing, any net income, profit,
interest, dividend or gain realized upon maturity, sale or other disposition of
any Permitted Investment shall be held as part of the Indenture Estate and
shall be applied by the Indenture Trustee at the same time, on the same
conditions and in the same manner as the amounts in respect of which such
income, profit, interest, dividend or gain was realized are required to be
distributed in accordance with the provisions hereof or of the Lease pursuant
to which such amounts were required to be held. The Indenture Trustee shall not
be responsible for any losses on any investments or sales of Permitted
Investments made pursuant to the procedure specified in this Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event of
Default under this Agreement occurs and is continuing and the Indenture Trustee
has actual knowledge of same, the Indenture Trustee shall (i) promptly send
written notice thereof to the Company, the Owner Trustee and the Owner
Participant and, so long as the Series SWA 1995 Trust N604SW-I Certificates
shall be Outstanding, the Holders thereof and (ii) within 90 days after it
occurs, mail to each other Holder notice of all uncured Indenture Events of
Default under this Agreement. Except in the case of a default in the payment of
the principal of, Premium, if any, or interest on any Certificates or during
any period when the Series SWA 1995 Trust N604SW-I Certificate shall be
Outstanding, Break Amount, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii) above if and so long as the
executive committee or trust committee of directors of the Indenture Trustee
and/or Responsible Officers thereof in good faith determines that withholding
such notice is in the interest of the Holders. In addition, if an Indenture
Default under this Agreement occurs and is continuing and if the Indenture
Trustee has actual knowledge of same, the Indenture Trustee shall
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promptly send written notice thereof to the Company, the Owner Trustee and the
Owner Participant and, so long as the Series SWA 1995 Trust N604SW-I
Certificates shall be Outstanding, the Holders thereof.
Section 9.06. Compensation and Indemnity. (a) The Owner
Trustee shall pay to the Indenture Trustee from time to time (i) reasonable
compensation for its services, which compensation shall not be limited by any
law on compensation of a trustee of an express trust, (ii) reimbursement for
all reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the reasonable compensation and expenses of the Indenture Trustee's counsel and
any agent appointed in accordance with Section 9.02(c)), and (iii)
indemnification against any loss or liability incurred by it arising out of or
in connection with its acceptance or administration of the trust or trusts
hereunder except (A) as such expenses or loss or liability might result from
the gross negligence or willful misconduct of the Indenture Trustee or the
inaccuracy of any representation or warranty of the Indenture Trustee in its
individual capacity in Section 8 of the Participation Agreement or failure by
the Indenture Trustee to perform its payment and investment obligations
hereunder, (B) as otherwise provided in Section 9.10 and (C) as otherwise
excluded by the terms of Sections 7(b) and 7(c) of the Participation Agreement
from the Company's indemnities under said Sections; provided, that the
Indenture Trustee shall not make any claim under this Section 9.06(a) for any
claim or expense indemnified against by the Company under the Participation
Agreement without first making demand on, and pursuing such demand on a
reasonable basis for a reasonable length of time, the Company for payment of
such claim or expense. The Indenture Trustee shall notify the Owner Trustee and
the Company promptly of any claim for which it is entitled to be indemnified
hereunder. Subject to the conditions and procedures equivalent to those set
forth in Sections 7(b) and 7(c) of the Participation Agreement, the Owner
Trustee shall defend the claim and the Indenture Trustee shall cooperate in the
defense. The Indenture Trustee may have separate counsel and the Owner Trustee
shall pay the reasonable fees and expenses of such counsel. The Owner Trustee
need not pay for any settlement made without its and the Company's consent.
(b) To secure the payment obligations of the Owner
Trustee pursuant to this Section 9.06, the Indenture Trustee shall have a lien
prior to that of the Holders of the Certificates on all money or property
constituting a part of the Indenture Estate held or collected by the Indenture
Trustee, except that held in trust to pay the principal of, and interest on,
the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least
30 days' prior written notice to the Company, the Owner Trustee and the Holders
of a majority in aggregate principal amount of the Outstanding Certificates.
The Holders of a majority in aggregate principal amount of the Outstanding
Certificates may remove the Indenture Trustee by giving at least 30 days' prior
written notice to the Indenture Trustee, the Owner Trustee and the Company and
may appoint a successor Indenture Trustee with the Owner Trustee's and the
Company's consent, which will not be unreasonably withheld. At such time as
Series SWA 1995 Trust N604SW Certificates are Outstanding, the Owner Trustee
may remove the Indenture Trustee if:
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(1) the Indenture Trustee fails to comply with
Section 9.09, fails to perform its payment obligations hereunder or
otherwise fails to perform any of its material obligations hereunder;
(2) the Indenture Trustee is adjudged a bankrupt
or an insolvent;
(3) a receiver or public officer takes charge of
the Indenture Trustee or its property; or
(4) the Indenture Trustee becomes incapable of
acting.
(c) If the Indenture Trustee resigns or is removed, or if
a vacancy exists in the office of Indenture Trustee for any reason, Holders of
a majority in aggregate principal amount of the Certificates or, at such time
as Series SWA 1995 Trust N604SW Certificates are Outstanding, the Owner
Trustee, shall promptly appoint a successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Company, the Owner Trustee or the Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Holder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Company
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the lien provided for in Section 9.06. The Company shall
give notice of each appointment of a successor Indenture Trustee if there are
Certificates Outstanding, by mailing written notice of such event by
first-class mail to the Holders.
(g) All provisions of this Section 9.07 except
subparagraphs (b)(l) and (e) and the words "subject to the lien provided for in
Section 9.06" in subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by
Merger, Etc. If the Indenture Trustee or any Agent consolidates with, merges
or converts into, or transfers all or substantially all of its corporate trust
business assets to, another corporation, the successor corporation, without any
further act, shall be the successor Indenture Trustee or Agent, as the case may
be.
Section 9.09. Eligibility; Disqualification. This
Agreement shall at all times have an Indenture Trustee which shall have a
combined capital and surplus of at least $100,000,000 and
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shall be a "citizen of the United States" as defined in Section 101(16) of the
Federal Aviation Act. If such corporation publishes reports of conditions at
least annually, pursuant to law or to the requirements of Federal, State,
Territorial, or District of Columbia supervising or examining authority, then
for the purposes of this Section 9.09, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of conditions so published.
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in
its individual capacity agrees that it will at its own cost and expense
promptly take such action as may be necessary to duly discharge and satisfy in
full all Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Agreements, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting.
Without limitation of subsections 15.05(d) and 15.05(e), the Indenture Trustee
shall exclude and withhold from each distribution of principal, Premium, if
any, Break Amount, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect to the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders, that
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to
each Holder appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such Holders may reasonably
request from time to time. The Indenture Trustee agrees to file any other
information reports as it may be required to file under United States law. Such
withholding by the Indenture Trustee shall in no event give rise to an
Indenture Event of Default.
Section 9.12. [Reserved for Potential Future Use]
Section 9.13. Certain Rights of Owner Trustee and Owner
Participant. Notwithstanding any other provisions of this Indenture, including
the Granting Clause, the following rights shall be reserved to the Owner
Trustee or the Owner Participant, as the case may be (as separate and
independent rights) to the extent described herein:
(a) at all times the Owner Trustee and the Owner
Participant shall have the right, together with the Indenture Trustee,
to receive from the Lessee all notices, certificates, reports,
filings, opinions of counsel and other documents and all information
which the Company is permitted or required to give or furnish to the
Owner Trustee or the Lessor pursuant to any Indenture Document;
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(b) at all times (unless otherwise specified) the Owner
Trustee shall have the right (1) to the exclusion of the Indenture
Trustee but subject to and without affecting the provisions of Section
11.06, (i) to exercise the rights, elections and options of the Lessor
to make any decision or determination and to give any notice, consent,
waiver or approval with respect to any adjustments under Section 3.7
of the Lease and Sections 17 and 18 of the Participation Agreement,
(ii) to exercise the rights, elections and options of the Lessor with
respect to the termination of the Lease and solicitations of bids and
appraisals pursuant to Section 9 of the Lease, or with respect to
renewals or purchase options and terminations to take effect upon or
after the payment in full (or assumption by the Company) of the
obligations secured hereby, (iii) subject to the terms of Section
8.03(e)(i), to effect cures pursuant to Section 20 of the Lease, and
(iv) to maintain and exercise all rights regarding separate insurance
with respect to the Aircraft for its own account pursuant to Section
11.7 of the Lease (provided, that no such insurance impairs or reduces
coverage under any insurance required to be maintained by the Company
under Section 11 of the Lease) and (2) so long as no Indenture Event
of Default shall have occurred and be continuing, (x) during the
Floating Period, together with the Indenture Trustee (agreement of
both being required) and (y) during the Fixed Period, to the exclusion
of the Indenture Trustee (i) to approve as satisfactory any other
accountants, inspectors, engineers or counsel to render services for
or issue opinions to the Owner Trustee, together with the form of
address and contents of any certificates and opinions to be delivered
by such Persons, in each case pursuant to express provisions of the
Operative Agreements and (ii) to grant such consents, approvals and
waivers as may be requested under the Indenture Documents and (3)
together with the Indenture Trustee (each acting separately), to
request all certificates and documents of Lessee, to request the
assignment of any sublease of the Aircraft and to exercise inspection
rights pursuant to Section 12 of the Lease;
(c) at all times, the Owner Trustee shall have the
non-exclusive right, as Lessor, upon notice to the Indenture Trustee,
to seek specific performance of the covenants of the Company under the
Lease relating to the protection, insurance, maintenance, possession
and use of the Aircraft and to obtain performance by Lessee under
Sections 11(a) and (b) of the Participation Agreement; and
(d) at all times each of the Owner Trustee (as Owner
Trustee, individually and as Lessor) and the Owner Participant shall
have the right, to the exclusion of the Indenture Trustee, to demand,
collect, sue for or receive the payment of, and waive, modify or
otherwise deal with Excluded Payments due and payable to it, and, in
the case of the Owner Participant, to give the written notice referred
to in the proviso to Section 14.1 of the Lease.
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement;
Defeasance; Termination of Obligations. Subject to Section 10.02, this
Agreement shall cease to be of further effect, and the Owner Trustee and the
Indenture Trustee shall, except as herein provided, be deemed to have been
discharged from their respective obligations with respect to the Certificates
(and the Indenture Trustee,
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on demand and at the expense of the Owner Trustee, shall execute proper
instruments acknowledging satisfaction and discharge of this Agreement in
respect of the Certificates), when
(a) (i) all Certificates theretofore executed and
delivered (other than (A) Certificates which have been mutilated, destroyed,
lost or stolen and which have been replaced or exchanged as provided in Section
2.06 and (B) Certificates for the payment of which money held in trust
hereunder has been paid and discharged from such trust, as provided in Section
7.01) have been delivered to the Indenture Trustee for cancellation; or
(ii) all Certificates not theretofore delivered to
the Indenture Trustee for cancellation have become due and payable (whether
upon stated maturity or as a result of redemption or upon acceleration), or
will become due and payable (including as a result of redemption in respect of
which irrevocable notice has been given to the Indenture Trustee on or prior to
the date of such deposit) at maturity within one year, and there has been
deposited with the Indenture Trustee in trust for the purpose of paying and
discharging the entire indebtedness on the Certificates not theretofore
canceled by the Indenture Trustee or delivered to the Indenture Trustee for
cancellation, an amount sufficient to discharge such indebtedness, including
the principal of, Premium, if any, and interest on the Certificates to the date
of such deposit (in the case of Certificates which have become due and
payable), or to the maturity thereof, as the case may be and, in the case of
the Series SWA 1995 Trust N604SW-I Certificate, Break Amount, if any, and all
other amounts payable to the Original Holders hereunder and under any other
Operative Agreement; or
(iii) the Certificates shall have been defeased as
provided in Section 10.05; and provided, however, that upon the making of the
deposit referred to in subsection A of Section 10.05, the right of the Owner
Trustee or the Company to cause the redemption of Certificates (except a
redemption in respect of which irrevocable notice has theretofore been given)
shall terminate;
(b) all other amounts then due and payable hereunder have
been paid; and
(c) the Company on behalf of the Owner Trustee has
delivered to the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for or relating to
the satisfaction and discharge of this Agreement contemplated by this Section
10.01 have been complied with.
Section 10.02. Survival of Certain Obligations.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, 2.10, Section 7.01,
Section 9.11, Section 10.03 and Section 10.04, and the rights, duties,
immunities and privileges hereunder of the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All moneys and
Government Obligations deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment in the case
of the Series SWA 1995 Trust N604SW-I Certificates, as provided for in Section
15.04 or, in the case of the Series SWA 1995 Trust N604SW Certificates, either
directly or through any Paying Agent as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, Premium,
if any, interest, and, in the case of the Series SWA 1995 Trust N604SW-I
Certificates, Break Amount, if any, and all other amounts payable to the
Holders
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hereunder or under any other Operative Agreement, but such money need not be
segregated from other funds except to the extent required by law.
Section 10.04. Monies to Be Returned to Owner Trustee. The
Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or Government
Obligations held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Certificates for which
money or Government Obligations have been deposited pursuant to Section 10.01.
Section 10.05. Defeasance. The Owner Trustee may, at any
time, defease the interest of the Indenture Trustee in the Indenture Estate in
whole, but not in part, through the deposit with the Defeasance Trustee, in
accordance with the provisions of this Section 10.05, of cash and/or Government
Obligations; provided, however, that such defeasance shall not be applicable in
respect of the Series SWA 1995 Trust N604SW-I Certificates. Such deposit shall
be made pursuant to a declaration or other appropriate instrument of trust
satisfactory in form and substance to the Defeasance Trustee and the Indenture
Trustee; such deposit shall be absolute and irrevocable and the instrument of
trust shall expressly provide that the Owner Trustee shall have no further
title to or interest in or power to direct the use or application of the cash
and/or Government Obligations so deposited or any of the proceeds arising
therefrom; such instrument shall state that the trust created thereby and the
cash and/or Government Obligations deposited pursuant thereto are for the sole
and exclusive benefit of the Holders and shall expressly provide that the
Defeasance Trustee shall apply such cash and payments of principal and/or
interest on such Government Obligations to, and only to, the punctual payment
of the principal and interest on the Certificates as and when such payments
become due (such declaration or instrument to contain appropriate provisions
for the recording of transfers of Certificates and the names and addresses of
the Holders); and the Owner Trustee shall agree to pay, as the same shall
become due and payable, all fees, costs and charges of the Defeasance Trustee
under such instrument of trust, including those which may become payable after
the date the conditions hereinbelow specified have been met. Upon compliance
with the following conditions, and provided, that no Indenture Event of Default
or Indenture Default shall have occurred and be continuing on a date 91 days
after the date of the deposit of Government Obligations and/or cash with the
Defeasance Trustee as provided in Subsection A below, the Owner Trustee's
obligations with respect to the Certificates will be discharged and this
Indenture shall terminate as provided in Section 10.01:
A. the Owner Trustee shall have deposited with the
Defeasance Trustee absolutely and irrevocably (irrespective of whether
the conditions in Subsections B, C, D and E of this Section 10.05 have
been satisfied) (1) cash and/or (2) Government Obligations which
through the payment of principal and interest in respect thereof in
accordance with their terms, without any reinvestment or further
investment of the principal of or interest earned on such Government
Obligations, will absolutely and unconditionally provide in any and
all circumstances not later than one day before each Payment Date an
amount sufficient to pay and discharge the payment of principal and
interest to be due and payable on such Payment Date;
B. no Indenture Event of Default or Indenture Default
shall have occurred and be continuing on the date of the deposit of
cash and/or Government Obligations as contemplated hereby;
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C. the Owner Trustee shall have delivered to the
Defeasance Trustee and to the Certificate Holders written confirmation
by a nationally recognized firm of independent public accountants
(other than the accounting firm then serving as Shawmut Bank
Connecticut, National Association's or the Owner Participant's regular
auditors) selected by the Owner Trustee, the form and substance of
which confirmation and the identity of such accounting firm shall be
satisfactory to the Indenture Trustee, that the Government Obligations
deposited for payment of the Certificates, together with any cash
deposited by the Owner Trustee, are sufficient to satisfy the
requirements of Subsection A hereof;
D. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate Holders
an opinion of counsel in form and substance satisfactory to the
Indenture Trustee to the effect that (1) the trust declaration or
other instrument, as the case may be, is legal, valid, binding and
enforceable in accordance with its terms for the sole benefit and use
of the Holders, is irrevocable and the Government Obligations and/or
cash deposited thereunder and the proceeds thereof and therefrom are
held by the Defeasance Trustee thereunder in trust solely for the
benefit of the Holders and will not be subject to any valid interest,
lien, claim or encumbrance of any other Person, including the Owner
Trustee or the Owner Participant or any Person claiming by, through,
under or in the name or on behalf of the Owner Trustee or the Owner
Participant or any creditor or beneficiary of the Owner Trustee or the
Owner Participant, or by any court or trustee in bankruptcy and (2)
such deposit will not constitute a preferential transfer or a
fraudulent conveyance under any bankruptcy or other similar law and
shall cover such other matters as the Indenture Trustee may reasonably
require in connection with such final deposit and matters relating
thereto;
E. the Owner Trustee shall have delivered to the Defeasance
Trustee, the Indenture Trustee and the Certificate Holders an
Officers' Certificate and an Opinion of Counsel to the effect that
there has been published by the Internal Revenue Service a ruling to
the effect that Holders will not recognize income, gain or loss for
Federal income tax purposes as a result of the exercise by the Owner
Trustee of its option under Section 10.01(a)(iii) and will be subject
to Federal income tax on the same amount and in the same manner and at
the same times, as would have been the case if such option had not
been exercised; and
F. the Owner Trustee shall have (1) taken such further action
and executed such further documents as may be reasonably required by
any Holder, the Indenture Trustee or the Defeasance Trustee and (2)
delivered to the Defeasance Trustee, the Indenture Trustee and to the
Holders a certificate of a Responsible Officer of the Owner Trustee
stating that all conditions precedent herein to the defeasance of the
Certificates contemplated by this Section 10.05 have been satisfied.
The Owner Participant will pay all expenses (including,
without limitation, reasonable legal fees) incident to the implementation of
the transactions contemplated by this Section 10.05.
For the purpose of this Article 10, the following terms have
the following definitions:
"Defeasance Trustee" shall mean an institution authorized to
transact in the State of New York the business of a trust company
selected by the Owner Trustee and approved by the Indenture Trustee;
provided, that at the time of the delivery of cash and/or Government
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Obligations pursuant to Section 10.05, the institution selected shall
have a combined capital and surplus of at least $500,000,000 and shall
not be an Affiliate of the Company, the Owner Participant or Shawmut
Bank Connecticut, National Association.
"Government Obligations" shall mean direct U.S. Dollar
obligations of the United States of America which are not callable,
redeemable or prepayable, directly or indirectly, by any Person.
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent
of Holders. The Owner Trustee and the Indenture Trustee may enter into one or
more agreements supplemental hereto without the consent of any Holder for any
of the following purposes:
(1) to correct any mistake or cure any ambiguity,
defect or inconsistency herein or in the Certificates or to make any
change not inconsistent with the provisions hereof; provided, that
such change does not adversely affect the interests of any Holder;
(2) to evidence the succession of another party
as the Owner Trustee in accordance with the terms of the Trust
Agreement or to evidence (in accordance with Article 9) the succession
of a new trustee hereunder, the removal of the trustee hereunder or
the appointment of any co-trustee or co-trustees or any separate or
additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee or to make any
other provisions with respect to matters or questions arising
hereunder so long as such action shall not adversely affect the
interests of the Holders;
(4) to correct or amplify the description of any
property at any time subject to the Lien of this Agreement or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subject to the Lien of this Agreement or to
subject to the Lien of this Agreement the Airframe or Engines or
airframe or engines substituted for the Airframe or Engines in
accordance herewith or with the Lease; provided, that Trust
Supplements entered into for the purpose of subjecting to the Lien of
this Agreement the Airframe or Engines (or the Replacement Airframe or
any Replacement Engines) in accordance with the Lease need only be
executed by the Owner Trustee;
(5) to add to the covenants of the Owner Trustee,
for the benefit of the Holders, or to surrender any rights or power
herein conferred upon the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
(7) to provide for the assumption by the Company
of the obligations of the Owner Trustee hereunder in accordance with
the terms and conditions applicable thereto specified in Section 7.03;
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(8) to provide for the redemption of the Series
SWA 1995 Trust N604SW-I Certificate and the issuance of the Series SWA
1995 Trust N604SW Certificates in accordance with the terms and
conditions applicable thereto specified in Article 15; or
(9) to include on the Certificates any legend as
may be required by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
Holders. (a) With the written consent of the Holders of a majority of the
aggregate principal amount of the Outstanding Certificates, the Owner Trustee
and the Indenture Trustee may enter into such supplemental agreements to add
any provisions to or to change or eliminate any provisions of this Agreement or
of any such supplemental agreements or to modify the rights of the Holders;
provided, however, that without the consent of each Holder affected thereby, an
amendment under this Section 11.02 may not:
(1) reduce the principal amount of, Premium or
Break Amount, if any, or any installment of interest on, any
Certificate; or
(2) change the date on which any principal amount
of, any Installment Payment Amount payable with respect to, Premium or
Break Amount, if any, or interest on any Certificate, is due or
payable; or
(3) create any Lien on the Indenture Estate prior to
orpari passu with the Lien thereon under this Agreement except such as
are permitted by this Agreement, or deprive any Holder of the benefit
of the Lien on the Indenture Estate created by this Agreement; or
(4) reduce the percentage in principal amount of
the Outstanding Certificates, the consent of whose holders is required
for any such supplemental agreement, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of
this Agreement or of certain defaults hereunder or their consequences)
provided for in this Agreement; or
(5) make any change in Section 8.05, 8.08, or
(but only for so long as the Series SWA 1995 Trust N604SW-I
Certificates shall be Outstanding) Article 15, or this Section
11.02(a).
(b) It is not necessary under this Section 11.02 for the
Holders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and
the Indenture Trustee of any supplemental agreement pursuant to the provisions
of this Section 11.02, the Indenture Trustee shall transmit by first-class mail
a notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of such Holders appear on
the Register. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental agreement.
Section 11.03. Revocation and Effect of Consents. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every
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subsequent Holder, even if notation of the consent is not made on any
Certificate. However, any such Holder or subsequent Holder may revoke the
consent as to his Certificate if the Indenture Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Holder affected by
such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates. The
Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Certificate thereafter executed. The Indenture Trustee in
exchange for such Certificates may execute new Certificates that reflect the
amendment or waiver.
Section 11.05. Indenture Trustee Protected. The Indenture
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, Etc. of Other Operative
Agreements. (a) Subject to Section 11.01, without the consent of the Holders
of a majority in principal amount of Outstanding Certificates, the respective
parties to the Participation Agreement, the Lease and the Trust Agreement may
not modify, amend or supplement any of said agreements, or give any consent,
waiver, authorization or approval thereunder, for any purpose, including adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or modifying in any manner the rights of the respective
parties thereunder; provided, however, that the actions specified in subsection
(b) of this Section 11.06 may be taken without the consent of the Indenture
Trustee or any Holder.
(b) Subject to the provisions of subsection (c) of this
Section 11.06, the respective parties to the Participation Agreement, the Lease
and the Trust Agreement, at any time and from time to time without the consent
of the Indenture Trustee or of any Holder may:
(1) so long as no Indenture Event of Default
shall have occurred and be continuing, modify, amend or supplement the
Lease, or give any consent, waiver, authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 (except as specifically provided below) the parties
to the Lease shall not modify, amend or supplement, or give any
consent, waiver, authorization or approval for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the
respective parties thereunder, with respect to the following
provisions of the Lease as originally executed: Sections 2, 3.1, 3.2
(if the result thereof would be to shorten the Term of the Lease to a
period shorter than the period ending with the final Principal Payment
Date, Installment Date or Maturity Date of the Certificates), 3.3,
3.4, 3.5 (except to the extent such Section relates to Excluded
Payments and amounts payable to the Indenture Trustee in its
individual capacity), 3.6 (except insofar as it relates to the address
or account information of the Owner Trustee or the Indenture Trustee),
the first sentence of Section 3.8 or any proviso in said Section, 4, 5
(but only insofar as it relates to return condition upon termination
of the Lease pursuant to Section 15), 6, 7 (except that further
restrictions may be imposed on the Company), 9, 10 (except that
additional requirements may be imposed on the Company), 11 (except for
Section 11.6 insofar as such Section relates to the Owner Participant
and the Lessor and except that additional insurance requirements may
be imposed on the Company), 12 (except in order to increase the
Company's liabilities or enhance the Lessor's rights thereunder), 13
(except in the case of an assignment by the Lessor in circumstances
where the
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Aircraft shall remain registrable under the Federal Aviation Act), 14
(except to impose additional or more stringent Lease Events of
Default), 15 (except to impose additional remedies), 16, 17, 18.2(b)
(except to impose additional requirements on the Company), 19, 20, 21
and 22, and (i) any definition of terms used in the Lease, to the
extent that any modification of such definition would result in a
modification of the Lease not permitted pursuant to this subsection
(b) and (ii) any other provision of the Lease not hereinabove referred
to if the modification, amendment or supplement thereto, or consent,
waiver, authorization or approval in respect thereof would adversely
affect the Indenture Trustee's interest in the Trust Estate, reduce
Lessee's obligations in respect of maintaining the Aircraft or
otherwise impair the value of the Trust Estate; provided, that in the
event an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as Lessor under the Lease to modify, amend or supplement the
Lease or give any consent, waiver, authorization or approval
thereunder, for any purpose, including, adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or
of modifying in any manner the rights of the Lessor thereunder;
provided, further, that without the prior consent of the Owner
Trustee, and whether or not an Indenture Event of Default shall have
occurred and be continuing, no such action shall be taken with respect
to any of the provisions of Sections 1 (to the extent any modification
of a definition contained therein would result in a modification of
the Lease not permitted by this proviso), 3.7, 3.8, 4, 5 (to the
extent not related to return upon termination of the Lease pursuant to
Section 15 of the Lease), 6 (to the extent such action would reduce
the Company's obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16
(insofar as it relates to the Lessor), 18, 19, 20, 21 and 22 of the
Lease, or any other Section of the Lease to the extent such action
shall affect the amount or timing of any amounts payable by the
Company under the Lease as originally executed (or as subsequently
modified with the consent of the Owner Trustee) which, absent the
occurrence and continuance of an Indenture Event of Default, will be
distributable to the Owner Trustee under Article 3; and provided,
further, that the parties to the Lease may take any such action
without the consent of the Indenture Trustee or any Holder to the
extent such action relates to the payment of amounts constituting, or
the Owner Trustee's, the Owner Participant's or the Company's rights
or obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, in each case only to the extent any such action shall
not adversely affect the interests of the Holders;
(3) modify, amend or supplement the Participation
Agreement, or give any consent, waiver authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 the parties to the Participation Agreement shall
not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to the following provisions of the
Participation Agreement as originally executed: Sections 1(b), 7
(insofar as such Section 7 relates to the Indenture Trustee and the
Holders), 8, 11, 13, 15(f), 15(g), 15(h), 17, 18 and 19 and (i) any
definition of terms used in the Participation Agreement, to the extent
that any modification of such definition would result in a
modification of the Participation Agreement not permitted pursuant to
this subsection (b) and (ii) any other provision of the Participation
Agreement not
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hereinabove referred to if the modification, amendment or supplement
thereto, or consent, authorization or approval in respect thereof
would adversely affect the Indenture Trustee's interest in the Trust
Estate or otherwise impair the value of the Trust Estate or adversely
affect the interests of the Holders; and
(4) modify, amend or supplement any of said
agreements in order to cure any ambiguity, to correct or supplement
any provisions thereof which may be defective or inconsistent with any
other provision thereof or of any provision of this Indenture, or to
make any other provision with respect to matters or questions arising
thereunder or under this Agreement which shall not be inconsistent
with the provisions of this Agreement, provided the making of any such
other provision shall not adversely affect the interests of the
Holders.
(c) No modification, amendment, supplement, consent,
waiver, authorization or approval with respect to the Lease or the
Participation Agreement, whether effected pursuant to subsection (a) or
pursuant to subsection (b) of this Section 11.06 and anything in such
subsections or elsewhere in this Agreement to the contrary notwithstanding,
shall, without the consent of the holder of each Outstanding Certificate
affected thereby,
(1) modify, amend or supplement the Lease in such
a way as to extend the time of, or the manner of making any, payment
of any Advance or Basic Rent, or Stipulated Loss Value or any other
amounts payable to the Indenture Trustee for its own account or for
the account of the Holders (subject in any event to the last paragraph
of Section 3.3 of the Lease) upon the occurrence of an Event of Loss
or Termination Value and any other amounts payable to the Indenture
Trustee for its own account or for the account of the Holders (subject
in any event to the last paragraph of Section 3.3 of the Lease upon
termination of the Lease with respect to the Aircraft, payable under,
or as provided in, the Lease as originally executed, or reduce the
amount of any installment of any Advance or Basic Rent or Supplemental
Rent so that the same is less than the payment of principal of,
Premium, if any, Break Amount, if any, and interest on the
Certificates, as the case may be, to be made from such installment of
any Advance or Basic Rent or Supplemental Rent, or reduce the
aggregate amount of Stipulated Loss Value, or any other amounts
payable under, or as provided in, the Lease as originally executed
upon the occurrence of an Event of Loss so that the same is less than
the accrued interest on and the principal as of the Lease Loss Payment
Date, and Break Amount, if any, of the Certificates at the time
Outstanding or reduce the amount of Termination Value or Special
Purchase Price and any other amounts payable under, or as provided in,
the Lease as originally executed upon termination of the Lease so that
the same is less than the accrued interest on and principal as of the
date of any such termination and Premium, if any, and Break Amount, if
any of Certificates at the time Outstanding, or
(2) modify, amend or supplement the Lease in such
a way as to, or consent to any assignment of the Lease or give any
consent, waiver, authorization or approval which would, release the
Company from its obligations in respect of payment of Basic Rent or
Supplemental Rent, or Stipulated Loss Value and any other amounts
payable to the Indenture Trustee for its own account or the account of
the Holders (subject in any event to the last paragraph of Section 3.3
of the Lease) upon the occurrence of any Event of Loss, or Termination
Value or Special Purchase Price and any other amounts payable to the
Indenture Trustee for its own account or the account of the Holders
(subject in any event to the last paragraph of Section 3.3 of the
Lease), payable under, or as provided in, the Lease as
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originally executed, except for any such assignment pursuant to
Section 8(s) of the Participation Agreement, and except as provided in
the Lease as originally executed.
Section 11.07. Trust Supplement. The Owner Trustee and the
Indenture Trustee hereby confirm and agree that upon execution and delivery of
any Trust Supplement covering the Aircraft by the Owner Trustee substantially
in the form attached hereto as Exhibit C or any trust supplement covering a
sublease of the Aircraft, this Agreement shall be supplemented by such Trust
Supplement or such trust supplement without further action by the Owner Trustee
or Indenture Trustee.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically
provided herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by courier service, telegram, telex, telemessage, telecopy, telefax, cable or
facsimile (confirmed by telephone or in writing in the case of notice by
telegram, telex, telemessage, telecopy, telefax, cable or facsimile) or any
other customary means of written communication, and any such notice shall be
effective when delivered,
if to the Indenture Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telex: 835437 WILM TR
Facsimile: (302) 651-8882
Telephone: (302) 651-1000
if to the Owner Trustee, to:
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telex: 221086 CTNB-HFD
Facsimile: (203) 240-7920
Telephone: (203) 722-9079
or if to any other Person, addressed to such Person as provided in the
Participation Agreement.
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(b) The Company, the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Original Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Holders of the Series
SWA 1995 Trust N604SW Certificates shall be mailed by first-class mail to the
addresses for Holders shown on the Register kept by the Registrar and to
addresses filed with the Indenture Trustee for other Holders. Failure so to
mail a notice or communication or any defect in such notice or communication
shall not affect its sufficiency with respect to other Holders of such
Certificates of that or any other series entitled to receive notice.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) Notwithstanding the foregoing, all communications or
notices to the Indenture Trustee shall be deemed to be given only when received
by a Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. [Reserved for Potential Future Use]
Section 12.04. Rules by Indenture Trustee and Agents. The
Indenture Trustee may make reasonable rules for action by or a meeting of the
Holders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
Section 12.05. Non-Business Days. With respect to the
Series SWA 1995 Trust N604SW Certificates only, if a payment date is not a
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for
the intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
Section 12.07. No Recourse Against Others. No director,
officer, employee or stockholder, as such, of the Company, the Owner Trustee or
the Owner Participant, as the case may be, shall have any liability for any
obligations of the Company, the Owner Trustee or the Owner Participant, as the
case may be, under this Agreement or for any claim based on, in respect of or
by reason of such obligations or their creation. Each Holder by accepting a
Certificate waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute but one instrument.
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Section 12.09. Applicability Only to Original Holder.
Notwithstanding any provision to the contrary herein, Sections 15.03 through
15.05 shall only be applicable to the Holder of Series SWA Trust N604SW-I
Certificate.
Section 12.10. Severability. Any provision of this
Indenture which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of
Lease. Upon any of:
(a) the voluntary termination of the Lease by the Company
pursuant to Section 9 thereof on the Lease Termination Date, and upon payment
to the Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its
option pursuant to Section 18.2 of the Lease on the Special Purchase Option
Date (unless the Company shall have elected to assume all of the rights and
obligations of the Owner Trustee hereunder as provided for in Section 8(r) of
the Participation Agreement), and upon payment to the Indenture Trustee of an
amount equal to the Redemption Price as at the applicable Redemption Date of
all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss
Payment Date, following an Event of Loss suffered by the Airframe under
circumstances where the Company does not exercise its option to substitute a
Replacement Airframe therefor pursuant to Section 10.1.2 of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price as
at the Redemption Date of all Outstanding Certificates, or
(d) the satisfaction, discharge, defeasance and
termination of obligations under this Agreement in accordance with Section
10.01,
the Lien of this Agreement on the Indenture Estate shall terminate (except for
the Lien on funds held by the Indenture Trustee to pay the Certificates and the
Lien on amounts due from the Company under the Lease necessary to pay the
Certificates or the Indenture Trustee) and the Indenture Trustee shall execute
such instruments as may be requested by the Company or the Owner Trustee to
evidence such termination (at the Company's or the Owner Trustee's expense).
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE]
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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<PAGE> 64
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N604SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N604SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N604SW-I
CERTIFICATES
Section 15.01. Conditions Precedent to Issuance of Series
SWA 1995 Trust N604SW Certificates. The issuance of the Series SWA 1995 Trust
N604SW Certificates pursuant to Section 18 of the Participation Agreement is
subject to all conditions specified in such section.
Simultaneously with the satisfaction of such conditions, the
Owner Trustee shall deliver to the Indenture Trustee a completed version of
Exhibits B, B-l and B-2 with respect to the Series SWA 1995 Trust N604SW
Certificates, which completed Exhibits B, B-l and B-2 shall specify the
maturities and principal amounts of the Series SWA 1995 Trust N604SW
Certificates and the applicable interest rates, together with the reference
dates for purposes of determining the Owner Trustee's rights to redeem such
Certificates as provided for in the Operative Agreements. Such completed
Exhibits B, B-l and B-2 shall be deemed upon such delivery automatically to
have been incorporated herein without further action of the parties hereto.
Section 15.02. Payment upon Issuance of Series SWA 1995
Trust N604SW Certificates. Simultaneously with the receipt of the proceeds of
the issuance of the Series SWA 1995 Trust N604SW Certificates, the Indenture
Trustee, on behalf of the Owner Trustee, shall apply an amount equal to the
Redemption Price of the Series SWA 1995 Trust N604SW-I Certificates to the
redemption of the Series SWA 1995 Trust N604SW-I Certificates in accordance
with Section 15.03.
Section 15.03. Special Provision Governing Refinancing of
the Series SWA 1995 Trust N604SW-I Certificate. Notwithstanding any other
provision of this Agreement, as long as any Series SWA 1995 Trust N604SW-I
Certificate is Outstanding, if a refinancing shall be effected pursuant to
Section 17 or 18 of the Participation Agreement and if all the conditions to
such refinancing set forth herein and in such Section 17 or 18 shall have been
satisfied, the Series SWA 1995 Trust N604SW-I Certificates may be refinanced in
whole at a Redemption Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to, but excluding, the applicable
Redemption Date plus the Break Amount, if any, and any other amounts payable to
the Holders thereof hereunder or under the Participation Agreement, but without
any other premium or penalty; provided, however, that the applicable Redemption
Date for the redemption of the Series SWA 1995 Trust N604SW-I Certificates
pursuant to this Section 15.03 shall be the applicable Refinancing Date or
Section 18 Refinancing Date, as the case may be.
Section 15.04. Special Provision for Payments in Respect of
the Series SWA 1995 Trust N604SW-I Certificate. Notwithstanding any other
provision of this Agreement, all amounts payable in respect of each Series SWA
1995 Trust N604SW-I Certificate shall be paid by the Indenture Trustee to the
Holder of such Certificate to its account indicated in Schedule I to the
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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<PAGE> 65
Participation Agreement, or to such other account maintained by such Holder
with any bank located in the United States and designated by such Holder to the
Indenture Trustee, in any case without presentment or surrender of any
Certificate, except that in the case of any final payment with respect to any
Series SWA 1995 Trust N604SW-I Certificate, such Certificate shall be
surrendered promptly thereafter to the Indenture Trustee by the Holder thereof
for cancellation. Such payment shall be made by the Indenture Trustee, in the
case of any such designated account in New York, New York, prior to 2:00 P.M.,
New York time, on the due date thereof if such payment is received by the
Indenture Trustee by 1:00 P.M., New York time, or by 12:00 Noon, New York time
on the next succeeding Business Day if such payment is received after 1:00
P.M., New York time. In the event the Indenture Trustee shall fail to make any
such payment as provided in the immediately foregoing sentence after its
receipt of funds at the place and prior to the time specified above, the
Indenture Trustee, in its individual capacity and not as trustee, agrees to
compensate the Certificate Holders for loss of use of funds in a commercially
reasonable manner.
Section 15.05. Increased Costs, Break Amount, Additional
Interest, Taxes, Etc. (a) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements which are provided for in subsection (c), below) after the
Delivery Date in any law or regulation or in the interpretation thereof by any
government or central bank or other governmental department, agency, board,
service or governmental body charged with responsibility for the administration
or interpretation thereof or (ii) the compliance with any guideline or request
made after the Delivery Date by any government or central bank or other
governmental department, agency, board, service or other governmental body
(whether or not having the force of law), there shall be any increase in the
cost to, or any reduction of the rate of return on assets or equity of, any
Holder (or any of its Affiliates) of the Series SWA 1995 Trust N604SW-I
Certificate of agreeing to make or making, funding or maintaining the loan
evidenced by its Series SWA 1995 Trust N604SW-I Certificate in respect of (x)
any period as to which the applicable Debt Rate is determined by reference to
the Offshore Rate and (y) capital adequacy requirements, then the Owner Trustee
shall from time to time pay to such Holder such amount as shall be necessary to
reimburse such Holder for such increase in cost within 10 Business Days after
delivery to the Owner Trustee, the Indenture Trustee and the Company of a
certificate of an officer of such Holder setting forth in reasonable detail the
event by reason of which it claims such increase in cost and the basis for the
determination of the amount of such increase in cost; provided, however, that
the Original Holder shall not be entitled to assert any claim under this
subsection 15.05(a) in respect of taxes (including Taxes (as defined in the
Participation Agreement) and the taxes referred to in subsections (d) and (e)
of this Section 15.05). Such certificate shall, in the absence of manifest
error, be binding and conclusive. Such Holder shall notify the Owner Trustee,
the Indenture Trustee and the Company as soon as possible of the occurrence of
any event by reason of which it is entitled to make a claim as described in
this subsection (a), but the failure to give such notice shall not affect the
obligations of the Owner Trustee hereunder.
(b) In the event that any Holder of the Series SWA 1995
Trust N604SW-I Certificate incurs any Break Amount (as defined below) in
connection with any payment, prepayment, acceleration, redemption, refinancing
or purchase, in whole or in part, of the principal of its Series SWA 1995 Trust
N604SW-I Certificate in accordance with the provisions of this Agreement or
otherwise on a date other than the last day of an Interest Period, then the
Owner Trustee shall pay to such Holder such Break Amount on the date of such
payment, prepayment, acceleration, redemption, refinancing or purchase, as the
case may be.
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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<PAGE> 66
For the purposes hereof, "Break Amount" means an amount equal
to the net funding loss or additional expense which any Holder of a Series SWA
1995 Trust N604SW-I Certificate sustains or incurs or will sustain or incur as
a result of any payment, prepayment, acceleration, redemption, refinancing or
purchase (whether by mandatory or voluntary prepayment, optional purchase,
acceleration or otherwise) of any principal of its Series SWA 1995 Trust
N604SW-I Certificate on a date other than the last day of an Interest Period,
as reasonably determined by such Holder and set forth in a certificate of such
Holder which includes in reasonable detail the basis or the calculations of the
amount being claimed.
(c) The Owner Trustee agrees to pay to any Holder of a
Series SWA 1995 Trust N604SW-I Certificate, to the extent that such Holder
shall require, due to either (i) the introduction of or any change after the
Delivery Date in any law or regulation or in the interpretation thereof by the
Federal Reserve Board (or any governmental authority succeeding thereto) or
(ii) compliance with any guideline or request made after the Delivery Date by
the Federal Reserve Board (whether or not having the force of law), to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
the loan evidenced by its Series SWA 1995 Trust N604SW-I Certificate, in
respect of any period to which such reserve maintenance requirement is so
applicable and the applicable Debt Rate is determined by reference to the
Offshore Rate, in an amount as to any such period equal to the amount obtained
by applying to the outstanding principal amount of such loan during such period
an interest rate equal at all times to the remainder obtained by subtracting
(A) the applicable Offshore Rate from (B) the rate obtained by dividing such
Offshore Rate by a percentage equal to 100% minus the Eurocurrency Reserve
Percentage, if any, applicable from time to time to such Holder. Such
additional interest shall be paid by the Owner Trustee to any Holder of a
Series SWA 1995 Trust N604SW-I Certificate from time to time as and when
interest is payable under such Holder's Certificate, subject to receipt of
notice of the amount of such additional interest for such Holder.
(d) Should any Holder of a Series SWA 1995 Trust N604SW-I
Certificate fail to qualify for a complete exemption from withholding of United
States Federal income tax because of a change in the provisions of the Code or
other relevant laws from those in effect on the Delivery Date, and the
Indenture Trustee is required by law to deduct or withhold United States
Federal income tax from amounts paid to such Holder, the amounts payable
hereunder and under its Series SWA 1995 Trust N604SW-I Certificate shall be
increased as may be necessary so that, after all required deductions and
withholdings for United States Federal income tax resulting from any such
change in the Code, such Holder receives an amount equal to the excess of (i)
the amount it would have received had no such deduction or withholding been
made over (ii) the additional amount of United States Federal income tax that
would have been payable by it under Section 882 of the Code in the absence of
such change in the Code.
(e) Each Holder of a Series SWA 1995 Trust N604SW-I
Certificate by its acceptance of such Series SWA 1995 Trust N604SW-I
Certificate, agrees that it will, promptly after it becomes aware of any event
or the existence of a condition that would give rise to reimbursement or
payment pursuant to subsection 15.05(a), 15.05(c) or 15.05(d) or to increased
payment hereunder and under the Series SWA 1995 Trust N604SW-I Certificate
pursuant to subsection 15.05(d), to the extent not inconsistent with such
Holder's internal policies, use reasonable efforts to make, fund or maintain
the loan evidenced by the Series SWA 1995 Trust N604SW-I Certificate through a
different Lending Office if, as a result thereof, the amount of such
reimbursement or payment or increased payment, as the case may be, which would
otherwise be required to be made would be materially
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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<PAGE> 67
reduced and if, as determined by such Holder in its reasonable discretion the
making, funding or maintaining of such loan through such different Lending
Office would not otherwise adversely affect such loan or such Holder. Each
Holder agrees that it will consult with the Owner Trustee in connection with
any relocation of its Lending Office. The Owner Trustee hereby agrees to pay
all reasonable expenses incurred by each such Holder in considering or taking
action pursuant to this subsection (e).
(f) Amounts payable to the Holder of any Series SWA 1995
Trust N604SW-I Certificate pursuant to this Article 15 that are not paid when
due shall bear interest from the due date thereof to, but excluding the date
paid, at the Past Due Rate.
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
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<PAGE> 68
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly provided herein and otherwise
solely as Owner Trustee
By: /s/ Michelle K. Blezard
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as otherwise expressly provided herein,
but solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services
Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
<PAGE> 69
Exhibit A
to Trust Indenture
and Security Agreement
Form of Series SWA 1995 Trust N604SW-I Certificate
THIS CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS CERTIFICATE MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
$________________ No. ________________
SERIES SWA 1995 TRUST N604SW-I CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but solely as Owner Trustee under a
Trust Agreement
Dated as of August 1, 1995
Issued in Connection with Aircraft N604SW
Leased to
SOUTHWEST AIRLINES CO.
Date: ______________, 1995 New York, New York
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement, dated as of August 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (such agreement as the same
may be modified, amended or supplemented being referred to herein as the "Trust
Agreement"), for value received hereby promises to pay to TEXAS COMMERCE BANK
NATIONAL ASSOCIATION (the "Original Loan Participant"), the principal sum of
________________ Dollars on or before ________________ (the "Maturity Date"),
together with interest on such principal amount remaining unpaid from time to
time from the date hereof until such principal amount is paid in full, all as
provided below. The principal amount of this Certificate shall be payable in
installments on the several dates (each a "Principal Payment Date") set forth
in Annex A hereto equal, in each case, to the corresponding percentage of the
original principal amount of this Certificate set forth with respect to each
such date in Annex A hereto. Interest on the principal amount remaining unpaid
from time to time from the date hereof until such principal amount is paid in
full shall be due and payable on each Interest Payment Date.
<PAGE> 70
Notwithstanding the foregoing, the final payment made on this
Certificate shall be in an amount sufficient to discharge in full the unpaid
principal amount and all accrued and unpaid interest on, and any other amounts
due under this Certificate or as provided for in the Trust Indenture and
Security Agreement, dated as of August 1, 1995 relating to the Aircraft (such
agreement as the same may be modified, amended or supplemented being referred
to herein as the "Indenture"; the defined terms used therein and not otherwise
defined herein being used herein with the same meanings), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder.
Interest on the principal amount of this Certificate shall
accrue at the applicable Debt Rate (as defined below). The "Debt Rate"
applicable in respect of any day in any Interest Period (as defined below)
selected by the Owner Trustee or Southwest Airlines Co. (the "Company") (acting
on behalf of the Owner Trustee) as provided for below, shall be the Offshore
Rate (as defined below) applicable to such Interest Period as selected by the
Owner Trustee or the Company (acting on behalf of the Owner Trustee) as
provided for below, plus in each case the margin applicable from time to time
determined pursuant to the following table:
<TABLE>
<CAPTION>
Interest Period:
---------------------------------------------------
Ending on Margin in Basis
Commencing On: And Including: Points Per Annum:
------------- ------------- ----------------
<S> <C> <C>
Delivery Date First anniversary 35
of the Delivery Date
First day subsequent to 18-month anniversary 50
first anniversary of the of the Delivery Date
Delivery Date
First day subsequent Second anniversary 75
to the 18-month anniversary of the Delivery Date
of the Delivery Date
First day subsequent to the Third anniversary of the 500
second anniversary of the Delivery Date
Delivery Date
First day subsequent to the Fourth anniversary of the 600
third anniversary of the Delivery Date
Delivery Date
First day subsequent to the Any date subsequent to the 700
fourth anniversary of the fourth anniversary of the
Delivery Date Delivery Date
</TABLE>
provided, however, for any Interest Period beginning after the second
anniversary of the issuance date, the Debt Rate shall never be less than the
Treasury Rate applicable to such Interest Period, plus in each case the margin
applicable from time to time determined pursuant to the foregoing table;
A-2
<PAGE> 71
provided, further, there shall not be more than one Interest Period applicable
at any time to this Certificate and all other Outstanding Certificates.
Interest accrued and unpaid on any Interest Payment Date shall
be paid on such Interest Payment Date; provided, however, that all interest
accrued and unpaid on this Certificate on the date this Certificate shall be
paid in full shall be paid on such date; provided, however, that if any
Interest Period Date (as defined below) is not also an Interest Payment Date,
all interest accrued during the Interest Period relevant thereto and unpaid as
at such Interest Period Date shall be added to the principal amount of this
Certificate until the next succeeding Interest Payment Date and bear interest
at the Debt Rate applicable to such principal from time to time hereunder
during the period from such Interest Period Date to the next succeeding
Interest Payment Date and all such interest so added to principal and the
interest thereon shall be due and payable on such next succeeding Interest
Payment Date; provided, finally, that any amount of principal or interest
payable hereunder which is not paid when due shall, to the maximum extent
permitted by law, bear interest, payable on demand, from the due date therefor
until the date of payment at an interest rate equal to the Debt Rate plus 2%
per annum. All computations of interest shall be made by the Agent on the basis
of a year of 360 days for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable.
Notwithstanding any provision hereof to the contrary, this
Certificate shall not constitute an obligation to pay nor shall the Original
Loan Participant be entitled hereunder to collect any amount of interest to the
extent not permitted by applicable law.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
For purposes of this Certificate, the following capitalized
terms used herein shall have the following meanings:
"Basis Point" means 1/100 of 1%.
"Interest Payment Date" shall mean each July 1 and January 1
commencing January 1, 1996.
"Interest Period" shall mean, with reference to the Offshore
Rate, a period of up to 30 consecutive days, as available, or one,
two, three or six months, as selected by the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) as provided for below,
and shall mean, with reference to the Treasury Rate, a period of 30,
60, 90 or 180 days, corresponding to the one, two, three or six month
Interest Period, as the case may be, which shall have been so selected
with reference to the Offshore Rate; provided, however, that (i) the
initial Interest Period shall commence with the Delivery Date; (ii)
each Interest Period immediately succeeding an Interest Period shall
commence on the last day of the preceding Interest Period; (iii) if
any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day; and (iv) notwithstanding anything to the contrary
contained herein, no Interest Period shall extend beyond a date which
is a Principal Payment Date.
A-3
<PAGE> 72
"Interest Period Date" shall mean each Business Day on which
an Interest Period expires.
"Offshore Rate" shall mean, as to any Interest Period, the
rate (rounded to the nearest 1/100 of 1% or, if there is no nearest
1/100 of 1%, the next higher 1/100 of 1%) at which deposits in United
States dollars approximately equal in principal amount to the sum of
the aggregate principal amount of all Certificates Outstanding on the
first day of such Interest Period plus all accrued and unpaid interest
which will be outstanding during such Interest Period are offered in
immediately available funds to the principal office of the Agent in
London, England (or if the Agent does not at the time any such
determination is made maintain an office in London, England, the
principal office of any Affiliate of the Agent in London, England) by
leading banks in the London Interbank Market for Eurodollars at
approximately 11:00 a.m. (London, England time) two Business Days
prior to the commencement of such Interest Period.
"Treasury Rate" shall mean, as to any Interest Period, the
yield to maturity (rounded to the nearest 1/100 of 1% or, if there is
no nearest 1/100 of 1%, to the next higher 1/100 of 1%) of the most
recently auctioned United States Treasury securities having maturities
most closely corresponding (linearly interpolating between the next
preceding and next succeeding maturities) to the Maturity Date, as
determined at 11 a.m. (New York City time) on the first day of such
Interest Period by reference to the Telerate Trading Assistant or, if
such Telerate Trading Assistant is not available to provide such data,
the average (rounded upwards to the nearest 1/100 of 1% or, if there
is no nearest 1/100 of 1%, to the next higher 1/100 of 1%), as
determined by the Agent, of quotes furnished at (or as proximately
thereto as is reasonably practicable) such time by two reputable
dealers in United States Treasury securities, which shall be selected
by the Agent.
The selection of the Offshore Rate and the duration of the
Interest Period related thereto shall be made by telephonic notice (followed by
telex, telecopy or other written confirmation) from the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) to the Original Loan
Participant by not later than 11:00 A.M. (New York City time) on the second
Business Day preceding the first day of the relevant Interest Period, which
notice shall, in addition to specifying the Interest Period, also specify the
principal amount of the Certificates to be Outstanding during such Interest
Period indicating with specificity any amount of such principal representing
accrued and unpaid interest to be added to the then principal amount of the
Certificates and outstanding during such Interest Period; provided, however,
that the selection of the Offshore Rate for the initial Interest Period, which
shall be from and including the Delivery Date to but excluding the second
Business Day succeeding the Delivery Date, shall be made by telephonic notice
(followed by telex, telecopy or other written confirmation) from the Owner
Trustee or the Company (acting on behalf of the Owner Trustee) to the Original
Loan Participant by not later than 11:00 A.M. (New York City time) on the
Delivery Date, and that the Offshore Rate for such initial Interest Period
shall be determined as if such Interest Period were seven days in length
(without giving rise to any Break Amount for which the Owner Trustee or the
Company shall be responsible in connection therewith); provided, further, that
if a Lease Default shall have occurred or be continuing or no such notice shall
have been given, the Debt Rate will be deemed, effective upon the last day of
the then current Interest Period, to be determined by reference to the Offshore
Rate for an Interest Period of one month.
A-4
<PAGE> 73
Without in any way limiting the obligation of the Owner
Trustee or the Company (acting on behalf of the Owner Trustee) to confirm in
writing any telephonic notice, the Original Loan Participant may act without
liability upon the basis of a telephonic notice believed in good faith by the
Original Loan Participant to be from the Owner Trustee or the Company (acting
on behalf of the Owner Trustee). In each such case, the Owner Trustee waives
and the Company (acting on behalf of the Owner Trustee) shall be deemed to have
waived the right to dispute the Original Loan Participant's records of the
terms of such telephonic notice. The Original Loan Participant shall promptly
give the Indenture Trustee and the Original Loan Participant telephonic notice
(followed by telex, telecopy or other written notice) or written notice of the
contents of each notice received by the Original Loan Participant from the
Owner Trustee or the Company (acting on behalf of the Owner Trustee) and, not
later than the first Business Day of each Interest Period, the duration of and
the Offshore Rate to be applicable during such Interest Period.
All payments of principal, interest and other amounts, if any,
to be made by the Owner Trustee hereunder and under the Indenture shall be made
only from the income and proceeds from the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture and only to the extent
that the Indenture Trustee shall have sufficient income or proceeds from the
Indenture Estate and such other amounts to make such payments in accordance
with the terms of the Indenture, and the Original Loan Participant, by its
acceptance of this Certificate, agrees that it will look solely to the income
and proceeds from the Indenture Estate and the other amounts referred to in
Section 3.03 of the Indenture to the extent available for distribution to the
Holder hereof as above provided and that none of the Owner Participant, the
Owner Trustee or the Indenture Trustee is personally liable or liable in any
manner extending to any assets, other than the Indenture Estate, to the
Original Loan Participant for any amounts payable under this Certificate or the
Indenture or, except as provided in the Indenture, for any liability under the
Indenture; provided, however, that nothing herein contained shall limit,
restrict or impair the right of the Indenture Trustee, subject always to the
terms and provisions of the Indenture, to accelerate the maturity of this
Certificate upon an Indenture Event of Default, to bring suit and obtain a
judgment against the Owner Trustee on this Certificate for purposes of
realizing upon the Indenture Estate and to exercise all rights and remedies
provided under the Indenture or otherwise realized upon the Indenture Estate.
Both the original amount of principal due hereunder, any
amount of accrued and unpaid interest from time to time added thereto, and
interest and other amounts due hereunder shall be payable in United States
currency in immediately available funds pursuant to Section 15.04 of the
Indenture. Each such payment shall be made on the date such payment is due and
without any presentment or surrender of this Certificate, except that in the
case of any final payment with respect to this Certificate, the Certificate
shall be surrendered promptly thereafter to the Indenture Trustee by the
Original Loan Participant for cancellation.
The Original Loan Participant, by its acceptance of this
Certificate, agrees that each payment received by it hereunder shall be applied
in the manner provided in Section 3.08 of the Indenture.
This Certificate is one of the Series SWA 1995 Trust N604SW-I
Certificates referred to in the Indenture which has been or is to be issued by
the Owner Trustee pursuant to the terms of the Trust Agreement and the
Indenture. The Indenture Estate is held by the Indenture Trustee as security
for the Certificates. The rights of the Owner Trustee under the Indenture, as
well as the beneficial interest of the Owner Participant in and to the
properties of the Owner Trustee assigned,
A-5
<PAGE> 74
pledged or mortgaged as part of the Indenture Estate, are subject and
subordinate to the rights of the Holders of the Certificates to the extent
provided for in the Indenture. Reference is hereby made to the Indenture for a
statement of the rights of the Original Loan Participant in respect of, and the
nature and extent of the security for, this Certificate, and the rights of the
Owner Trustee, as well as for a statement of the terms and conditions of the
trusts created by the Indenture, to all of which terms and conditions in the
Indenture the Original Loan Participant agrees by its acceptance of this
Certificate.
Any Holder of this Certificate shall be deemed to have made
the following representation by its acquisition of this Certificate: either
that (a) no part of the funds used by it to acquire this Certificate
constitutes "plan assets" of any "employee benefit plan" within the meaning of
ERISA or any "plan" within the meaning of Section 4975(e)(1) of the Code, or
(b) its purchase or acquisition of this Certificate will not result in a
non-exempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA.
This Certificate is subject to redemption or purchase and to
acceleration as provided in Articles 6 and 15 of the Indenture.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant, the Original Loan
Participant nor the Company shall be affected by notice to the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK.
A-6
<PAGE> 75
IN WITNESS WHEREOF, the Owner Trustee has caused this
Certificate to be executed in its corporate name by its officer thereunto duly
authorized on the date hereof.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:
<PAGE> 76
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: _________________________________
Title:
<PAGE> 77
Annex A to
Certificate
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
---------------------- ----------------------
<S> <C>
</TABLE>
A-9
<PAGE> 78
Exhibit A-1 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N604SW Installment Certificates
$________________ No. ________________
Dated as of ______________ __, 199_
SERIES SWA 1995 TRUST N604SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1995
Issued in connection with Aircraft N604SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- ------------- -------------
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars in
installments on each Installment Payment Date as set forth herein with the
final installment due and payable on the Maturity Date specified above and to
pay interest on the principal amount remaining unpaid from time to time at the
rate per annum specified above from ________________, 1995 or from the most
recent date to which interest has been paid or duly provided for, semiannually,
on _____________ and _______ in each year, commencing ____________________,
1995, until the principal hereof is paid or made available for payment in full.
All amounts payable by the Owner Trustee hereunder and under the Trust
Indenture and Security Agreement dated as of August 1, 1995, as supplemented
(as amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and the other amounts referred to in Section
3.03 of the Indenture for payment of such amounts, to the extent available for
distribution to the Holder hereof as provided in the Indenture and (b) neither
<PAGE> 79
the Owner Trustee, the Owner Participant nor the Indenture Trustee is or shall
be personally liable to the Holder hereof for any amount payable hereunder or
under the Indenture or, except as provided in the Indenture, for any liability
under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payments Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more
A-1-2
<PAGE> 80
complete statement of the terms and provisions thereof, including a statement
of the properties thereby conveyed, pledged and assigned, the nature and extent
of the security, the respective rights thereunder of the Owner Trustee, the
Indenture Trustee and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, the terms upon which
the Certificates may be redeemed, as well as for a statement of the terms and
conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein.
<TABLE>
<CAPTION>
Installment Installment
Payment Payment
Date Percentage
----------- -----------
<S> <C>
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
</TABLE>
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Certificates may be
declared due and payable in the manner and with the effect provided in the
Indenture. If, and only if, such an Indenture Event of Default constitutes a
Lease Event of Default by the Company under the Lease, the Indenture Trustee
may, to the exclusion of the Owner Trustee, exercise one or more of the
remedies of the Owner Trustee provided in the Lease. Such remedies include (but
are not limited to) the right to repossess and use or operate the Aircraft, to
sell or relet the Aircraft free and clear of the Company's rights and retain
the proceeds and to require the Company to pay as liquidated damages (i) any
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
Value of the Aircraft over the aggregate fair market rental value thereof for
the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under
A-1-3
<PAGE> 81
the Lease, provided, that such failure of the Company is not the third
consecutive such failure, or the fifth or subsequent cumulative such failure.
The Owner Trustee or the Owner Participant may (but need not) cure any other
default by the Company in the performance of its obligations under the Lease
which can be cured by the payment of money, by making such payment on behalf of
the Company, subject, however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the
A-1-4
<PAGE> 82
Owner Trustee, the Indenture Trustee, the Paying Agent, the Registrar, the
Owner Participant nor the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-1-5
<PAGE> 83
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:
Issue Date:
A-1-6
<PAGE> 84
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: __________________________________
Authorized officer or signatory
A-1-7
<PAGE> 85
Exhibit A-2 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N604SW Serial Certificates
$________________ No. ________________
Dated as of __________________ __, 199_
SERIES SWA 1995 TRUST N604SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1995
Issued in connection with Aircraft N604SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- ------------- -------------
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars on the
Maturity Date specified above and to pay interest thereon at the rate per annum
specified above from ________________, 1995 or from the most recent date to
which interest has been paid or duly provided for, semiannually, on
_______________________ and ___________________ in each year, commencing
______________________, 1995, until the principal hereof is paid or made
available for payment. All amounts payable by the Owner Trustee hereunder and
under the Trust Indenture and Security Agreement dated as of August 1, 1995, as
supplemented (as amended or supplemented from time to time referred to herein
as the "Indenture", the defined terms therein not otherwise defined herein
being used herein with the same meanings), by and among the Owner Trustee and
Wilmington Trust Company, as Indenture Trustee thereunder, shall be made only
from the income and proceeds of the Indenture Estate and the other amounts
referred to in Section 3.03 of the Indenture. Each Holder hereof, by its
acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for any amount
payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
<PAGE> 86
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, the terms upon which the Certificates may be
redeemed, as well as for a statement of the terms and conditions of the trust
created by the Indenture, to all of which terms and conditions in the Indenture
each Holder hereof agrees by its acceptance of this Certificate.
A-2-2
<PAGE> 87
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the right
to repossess and use or operate the Aircraft, to sell or relet the Aircraft
free and clear of the Company's rights and retain the proceeds and to require
the Company to pay as liquidated damages (i) any unpaid Basic Rent plus an
amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
A-2-3
<PAGE> 88
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
CertifiCate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-2-4
<PAGE> 89
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: __________________________________
Title:
Issue Date:
A-2-5
<PAGE> 90
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: ___________________________________
Authorized officer or signatory
A-2-6
<PAGE> 91
Exhibit B to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts and
Interest Rates of Series SWA 1995 Trust N604SW Certificates
<TABLE>
<CAPTION>
Premium
Principal Termination
Maturity Date Amount Interest Rate Date
- ------------- -------- ------------- ------------
<S> <C> <C> <C>
</TABLE>
[To be completed at time of issuance of Series SWA 1995 Trust N604SW
Certificates, if any shall be issued hereunder.]
<PAGE> 92
Exhibit B-1 to
Trust Indenture and
Security Agreement
Installment Payment Dates and Installment Payment Percentages
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N604SW Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
Installment Certificate No. 2 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N604SW
Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
<PAGE> 93
Exhibit B-2 to
Trust Indenture and
Security Agreement
Issuance of Series SWA 1995 Trust N604SW Certificates
The Series SWA 1995 Trust N604SW Certificates issued hereunder
shall be issued to and shall be payable to _________ under the __________ with
respect to the [grantor trusts created thereby], in each case as set forth
below:
<PAGE> 94
Exhibit C to
Trust Indenture and
Security Agreement
[FORM OF]
TRUST AGREEMENT AND TRUST INDENTURE AND
SECURITY AGREEMENT SUPPLEMENT
This TRUST AGREEMENT AND TRUST INDENTURE AND SECURITY
AGREEMENT SUPPLEMENT, is dated ______ __, 1995 (herein called the "Supplement")
of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee (herein called the "Owner Trustee"),
under the Trust Agreement, dated as of August 1, 1995 (herein called the "Trust
Agreement"), between the Owner Trustee and the Owner Participant named therein,
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and
delivery of one or more supplements thereto substantially in the form hereof,
which shall particularly describe the Aircraft (such term and other terms
defined in the Trust Indenture referred to below, or in the Lease therein
referred to, being used herein as therein defined) included in the property
covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Security Agreement, dated as
of August 1, 1995 (herein called the "Trust Indenture"), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee (herein called the
"Indenture Trustee"), provides for the execution and delivery of a supplement
thereto substantially in the form hereof, which shall particularly describe the
Aircraft, and shall specifically mortgage such Aircraft to the Indenture
Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture
relates to the Airframe and Engines described below, and a counterpart of the
Trust Indenture is attached hereto and made a part hereof and this Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, This Supplement Witnesseth, that, to secure
the prompt payment of the principal of, Break Amount, if any, Premium, if any,
and interest on, and all other amounts due with respect to, all Certificates
from time to time Outstanding and all other amounts due to the Holders under
the Trust Indenture and the Participation Agreement and the performance and
observance by each of the Company and the Owner Trustee of all the agreements,
covenants and provisions in the Trust Indenture and in the other Operative
Agreements for the benefit of the Indenture Trustee and the Holders of the
Certificates and in the Certificates contained, and the prompt payment of all
amounts from time to time owing under the Operative Agreements to the Holders
of the Certificates, and for the uses and purposes of the Trust Indenture, and
in consideration of the premises and of the covenants contained in the Trust
Indenture, and of the acceptance of the Certificates by the Holders thereof,
and of the sum of $1.00 paid to the Owner Trustee by the Indenture Trustee at
or before the delivery hereof, the receipt whereof is hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm unto the Indenture Trustee, its
successors and assigns, for the security and benefit of the
<PAGE> 95
Holders from time to time of the Certificates, upon the trusts created by the
Trust Indenture, all right, title and interest of the Owner Trustee in, to and
under the following described property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ ---------------
<S> <C> <C> <C>
The Boeing Company 737-3H4 N604SW 27955
</TABLE>
together with all Parts relating to such airframe.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, whether or not such
engines shall be installed in or attached to the Airframe or any other
airframe, identified as follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ ----- ---------------
<S> <C> <C>
CFM International CFM56-3-B1 859176
CFM International CFM56-3-B1 858187
</TABLE>
together with all Parts relating to such engines.
Together with all substitutions or replacements of and
additions, improvements, accessories and accumulations to the property above
described for which title vests in the Owner Trustee under the Operative
Agreements and all property which shall hereafter become physically attached to
or incorporated in the property above described, whether the same are now owned
by the Owner Trustee or shall hereafter be acquired by it for which title vests
in the Owner Trustee under the Operative Agreements.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, in the trust created by the Trust Indenture, all of the right,
title and interest of the Owner Trustee in, to and under the Lease Supplement
of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment
shall constitute security for any of the aforementioned obligations.
C-2
<PAGE> 96
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Holders from time to time of the Certificates for
the uses and purposes and subject to the terms and provisions set forth in the
Trust Indenture.
This Supplement shall be construed as supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
AND, FURTHER, the Owner Trustee hereby acknowledges that the
Aircraft referred to in this Supplement and the aforesaid Lease Supplement has
been delivered to the Owner Trustee and is included in the property of the
Owner Trustee covered by all the terms and conditions of the Trust Agreement,
subject to the pledge and mortgage thereof under the Trust Indenture.
THIS SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
C-3
<PAGE> 97
IN WITNESS WHEREOF, the Owner Trustee has caused this
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT SUPPLEMENT [604SW]
<PAGE> 1
EXHIBIT 4.35
________________________________________________________________________________
FIRST AMENDMENT
TO
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly set forth herein and
otherwise solely as Owner Trustee
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
One Boeing 737-3H4 Aircraft N604SW
Southwest Airlines Co.
Series 1995 Trust N604SW Certificates
(Southwest Airlines 1995 Trust N604SW)
________________________________________________________________________________
<PAGE> 2
FIRST AMENDMENT TO
TRUST INDENTURE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO TRUST INDENTURE AND SECURITY AGREEMENT dated
as of October 1, 1995 (this "Amendment") between SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual capacity only as expressly set forth
herein and otherwise solely as Owner Trustee under that certain Trust Agreement
establishing the Southwest Airlines 1995 Trust N604SW and dated as of August 1,
1995 (in such capacity, the "Owner Trustee") and WILMINGTON TRUST COMPANY, as
Indenture Trustee (the "Indenture Trustee"), amends that certain related Trust
Indenture and Security Agreement dated as of August 1, 1995 (the "Original
Indenture") between the Owner Trustee and the Indenture Trustee (the Original
Indenture, as supplemented by Trust Agreement and Trust Indenture and Security
Agreement Supplement dated August 25, 1995 by the Owner Trustee, relating to
the aircraft having U.S. registration number N604SW, being referred to herein
as the "Indenture"),
W I T N E S S E T H :
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Indenture;
WHEREAS, a counterpart to the Indenture was recorded by the Federal
Aviation Administration on September 15, 1995 and assigned Conveyance No.
Z96923;
WHEREAS, the Owner Trustee has agreed to refinance the Series SWA 1995
Trust N604SW-I Certificates with Series 1995 Trust N604SW Certificates; and
WHEREAS, in order to effect such refinancing, the Owner Trustee and
the Indenture Trustee have agreed to amend the Indenture as provided for below;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to the Indenture. The Indenture is, effective
as of the date hereof, hereby amended as follows:
(a) The definitions of "Business Day" and "Holder" in
Section 1.01(b) of the Indenture are amended in their entirety to read
as follows:
"Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or
authorized to close in the City of Dallas, Texas; New York,
New York; or the city and state in which (i) so long as any
Certificates shall be Outstanding, each of the Indenture
Trustee and the Pass Through Trustee and (ii) thereafter, the
Owner Trustee, has its principal place of business; or the
city and state in which the Indenture
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
-1-
<PAGE> 3
Trustee, the Pass Through Trustee or the Owner Trustee, as the
case may be, receives and disburses funds.
"Holder" or "Certificate Holder" means a Person in
whose name a Certificate is registered on the Register
including, so long as it holds a Series SWA 1995 Trust N604SW
Certificate, the Pass Through Trustee.
(b) The following new definitions are inserted in Section
1.01(b) of the Indenture after the definition of "Owner Trustee":
"Pass Through Certificates" means any of the Pass
Through Certificates issued pursuant to the Pass Through Trust
Agreements.
"Pass Through Trust" means each pass through trust
created pursuant to the Pass Through Trust Agreements.
"Pass Through Trust Agreements" means the Pass
Through Trust Agreement dated as of February 1, 1993, between
the Company and the Pass Through Trustee, as supplemented by
the two Trust Supplements Nos. 1995-A3 and 1995-A4 each dated
as of October 1, 1995, as the same may from time to time be
further amended, supplemented or otherwise modified.
"Pass Through Trustee" means Wilmington Trust Company
in its capacity as trustee under each Pass Through Trust
Agreement, and such other Person that may from time to time be
acting as successor trustee under any such Pass Through Trust
Agreement.
(c) The first sentence of Section 6.02 of the Indenture
is amended by adding at the end thereof ", in respect of any
Certificate, if such purchase or redemption is effected prior to the
Premium Termination Date in respect of such Certificate".
(d) The first sentence of Section 9.09 of the Indenture
is amended by substituting the reference "49 U.S.C. Section
40102(a)(15)(C)" for the words "Section 101(16) of the Federal
Aviation Act" at the end of such sentence.
(e) Subparagraph (ii) of Section 10.01(a) of the
Indenture is amended by inserting the words "of cash and/or Government
Obligations" between the words "an amount" and "sufficient to
discharge such indebtedness" therein.
(f) Subparagraph E of Section 10.05 of the Indenture is
amended in its entirety to read as follows:
"E. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate
Holders an Officers' Certificate and an Opinion of Counsel (1)
to the effect that there has been published by the
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
-2-
<PAGE> 4
Internal Revenue Service a ruling, or (2) since the date of
this Agreement that there has been a change in or
clarification of the applicable Federal income tax law, in
either case to the effect that Holders will not recognize
income, gain or loss for Federal income tax purposes as a
result of the exercise by the Owner Trustee of its option
under Section 10.01(a)(iii) and will be subject to Federal
income tax on the same amount and in the same manner and at
the same times, as would have been the case if such option had
not been exercised; and".
(g) Subparagraph (3) of Section 11.06(b) is amended by
deleting therefrom the reference to "15(f), 15(g), 15(h)."
(h) Inasmuch as Break Amount is relevant only with
respect to the Series SWA 1995 Trust N604SW-I Certificates, which are
to be refinanced, the second paragraph of Section 15.05(b) (containing
the definition of Break Amount) is hereby deleted, and all other
references to Break Amount in the Indenture or any other Operative
Agreement shall have no further force or effect.
(i) Exhibits A-1, A-2, B, B-1 and B-2 to the Indenture
are replaced in their entirety by Exhibits A-1, A-2, B, B-1 and B-2
hereto. Said revised Exhibits B, B-1 and B-2 shall, for all purposes,
be deemed to have been, and are, completed in accordance with Article
15 of the Indenture.
Section 2. Lease Amendment. As of the date hereof, the Lessee
and the Owner Trustee are entering into First Amendment to Sale and Lease
Agreement (the "Lease Amendment") to the Sale and Lease Agreement dated as of
August 1, 1995 relating to the Aircraft, which Sale and Lease Agreement
(together with Sale and Lease Agreement Supplement No. One, dated August 25,
1995 thereto) was recorded with the Federal Aviation Administration on
September 15, 1995 and assigned Conveyance No. Z96924. The Lease Amendment is
attached hereto and, without limiting the generality of the Granting Clause of
the Indenture, is covered by the Lien of the Indenture and is made part of the
Indenture Estate.
Section 3. Amendment and Incorporation by Reference. This
Amendment is and shall be construed as an amendment and supplement to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated herein by reference and is hereby ratified, approved and
confirmed.
Section 4. GOVERNING LAW. THIS AMENDMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 5. Execution in Counterparts. This Amendment may be
executed by the Owner Trustee and the Indenture Trustee in separate
counterparts, each of which when so
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
-3-
<PAGE> 5
executed and delivered is an original, but all such counterparts shall together
constitute but one and the same instrument.
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
-4-
<PAGE> 6
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity
only as expressly set forth
herein and otherwise solely as
Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual
capacity, except as otherwise
expressly provided herein,
but solely as Indenture Trustee
By: /s/ DAVID A. VANASKEY, JR.
Senior Fiancial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
-5-
<PAGE> 7
Exhibit A-1 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N604SW Installment Certificates
$______________ No._____________
Dated as of August 25, 1995
SERIES SWA 1995 TRUST N604SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1995
Issued in connection with Aircraft N604SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, _____
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to _______________ or
registered assigns the principal sum of ______________ Dollars in installments
on each Installment Payment Date as set forth herein with the final installment
due and payable on the Maturity Date specified above and to pay interest on the
principal amount remaining unpaid from time to time at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment in full. All amounts payable by the Owner
Trustee hereunder and under the related Trust Indenture and
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-1-1
<PAGE> 8
Security Agreement dated as of August 1, 1995, as supplemented and amended by
Trust Agreement and Trust Indenture and Security Agreement Supplement dated
August 25, 1995 and First Amendment to Trust Indenture and Security Agreement
dated as of October 1, 1995 (as further amended or supplemented from time to
time referred to herein as the "Indenture", the defined terms therein not
otherwise defined herein being used herein with the same meanings), by and
among the Owner Trustee and Wilmington Trust Company, as Indenture Trustee
thereunder, shall be made only from the income and proceeds of the Indenture
Estate and the other amounts referred to in Section 3.03 of the Indenture.
Each Holder hereof, by its acceptance of this Certificate, agrees that (a) it
will look solely to the income and proceeds of the Indenture Estate and the
other amounts referred to in Section 3.03 of the Indenture for payment of such
amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) neither the Owner Trustee, the Owner
Participant nor the Indenture Trustee is or shall be personally liable to the
Holder hereof for any amount payable hereunder or under the Indenture or,
except as provided in the Indenture, for any liability under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-1-2
<PAGE> 9
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payment Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of any authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein, all as shown on Exhibit A hereto.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-1-3
<PAGE> 10
Company's rights and retain the proceeds and to require the Company to pay as
liquidated damages (i) any unpaid Interim Rent or Basic Rent plus an amount
equal to the excess of the Stipulated Loss Value of the Aircraft over the
aggregate fair market rental value thereof for the remainder of the term for
the Aircraft, (ii) any unpaid Interim Rent or Basic Rent plus the excess of the
Stipulated Loss Value of the Aircraft over the fair market sales value thereof
or (iii) if the Aircraft has been sold, any unpaid Interim Rent or Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Interim Rent or Basic Rent under the Lease, provided
that such failure of the Company is not the third consecutive such failure, or
the fifth or subsequent cumulative such failure. The Owner Trustee or the
Owner Participant may (but need not) cure any other default by the Company in
the performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company, subject,
however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-1-4
<PAGE> 11
of authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration or
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-1-5
<PAGE> 12
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-1-6
<PAGE> 13
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: __________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-1-7
<PAGE> 14
Exhibit A-2 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N604SW Serial Certificates
$___________________ No._______________
Dated as of August 25, 1995
SERIES SWA 1995 TRUST N604SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1995
Issued in connection with Aircraft N604SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, ______
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ___________ or
registered assigns the principal sum of ___________ Dollars on the Maturity
Date specified above and to pay interest thereon at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment. All amounts payable by the Owner Trustee
hereunder and under the related Trust Indenture and Security Agreement dated as
of August 1, 1995, as supplemented and amended by Trust Agreement and Trust
Indenture and Security Agreement Supplement dated August 25, 1995 and First
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-2-1
<PAGE> 15
Amendment to Trust Indenture and Security Agreement dated as of October 1, 1995
(as further amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and other amounts referred to in Section 3.03
of the Indenture for payment of such amounts, to the extent available for
distribution to the Holder hereof as provided in the Indenture and (b) neither
the Owner Trustee, the Owner Participant nor the Indenture Trustee is or shall
be personally liable to the Holder hereof for any amount payable hereunder or
under the Indenture or, except as provided in the Indenture, for any liability
under the Indenture.
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-2-2
<PAGE> 16
date to the address of the Holder entitled thereto as such address shall appear
on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Interim Rent or
Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of
the Aircraft over the aggregate fair market rental value thereof for the
remainder of the term for the Aircraft, (ii) any unpaid Interim Rent or Basic
Rent plus the excess of the Stipulated Loss Value of the Aircraft over the fair
market sales value thereof or (iii) if the Aircraft has been sold, any unpaid
Interim Rent or Basic Rent plus the excess of the Stipulated Loss Value thereof
over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Interim Rent or Basic Rent under the Lease, provided
that such failure of the Company is not the third consecutive such failure, or
the fifth or subsequent cumulative such failure.
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-2-3
<PAGE> 17
The Owner Trustee or the Owner Participant may (but need not) cure any other
default by the Company in the performance of its obligations under the Lease
which can be cured by the payment of money, by making such payment on behalf of
the Company, subject, however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-2-4
<PAGE> 18
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-2-5
<PAGE> 19
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-2-6
<PAGE> 20
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: ___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
A-2-7
<PAGE> 21
Exhibit B to
First Amendment to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N604SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A3 July 1, 2013 $14,678,997.00 7.22% October 4, 2007 Installment
1995-A4 January 1, 2018 $ 9,697,581.00 7.64% January 4, 2016 Installment
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
B-1
<PAGE> 22
Exhibit B-1 to
First Amendment to
Trust Indenture and
Security Agreement
INSTALLMENT PAYMENT DATES AND INSTALLMENT PAYMENT PERCENTAGES AND AMOUNTS
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
B-1-1
<PAGE> 23
Exhibit B-2 to
First Amendment to
Trust Indenture and
Security Agreement
ISSUANCE OF SERIES SWA 1995 TRUST N604SW CERTIFICATES
The Series SWA 1995 Trust N604SW Certificates issued hereunder
shall be issued to and shall be payable to the Pass Through Trustee under each
Pass Through Trust Agreement with respect to the grantor trust created thereby,
in each case as set forth below:
1995-A3 Trust:
7.22% Certificate due July 1, 2013
1995-A4 Trust:
7.64% Certificate due January 1, 2018
TRUST INDENTURE AND SECURITY AGREEMENT [N604SW]
B-2-1
<PAGE> 1
EXHIBIT 4.37
________________________________________________________________________________
PARTICIPATION AGREEMENT
dated as of August 1, 1995
among
SOUTHWEST AIRLINES CO.,
Lessee,
AMSOUTH LEASING CORPORATION,
Owner Participant,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Original Loan Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N604SW
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Certain Definitions; Participations in Lessor's Cost of the Aircraft . . . . . . . . . . . . 2
SECTION 2. Lessee's Notice of Delivery Date; Closing Procedures . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee . . . . . . . . . . . . . . . . . . . 5
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the
Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(i) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ii) No Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(iii) Original Loan Participant's Commitment . . . . . . . . . . . . . . . . . . . 6
(iv) Owner Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Authorization, Execution and Delivery of Documents . . . . . . . . . . . . . 7
(vi) UCC-1's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(vii) Proof of Corporate Action, Etc . . . . . . . . . . . . . . . . . . . . . . . 8
(viii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . 9
(x) Representations and Warranties Accurate; No Event of
Default; No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xi) Opinions of Lessee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 10
(xii) [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xiii) Opinion of Owner Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . 10
(xiv) Opinions of Owner Participant's Counsel . . . . . . . . . . . . . . . . . . . 10
(xv) Opinion of Oklahoma City Counsel . . . . . . . . . . . . . . . . . . . . . . 10
(xvi) Opinion of Indenture Trustee's Counsel . . . . . . . . . . . . . . . . . . . 10
(xvii) Opinion of Original Loan Participant's Counsel . . . . . . . . . . . . . . . 11
(xviii) Lessee's Bringdown Certificate . . . . . . . . . . . . . . . . . . . . . . . 11
(xix) Guarantor's Financial Statements . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) No Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiii) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiv) Bringdown of Other Parties' Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxv) Opinion of Owner Participant's Tax Counsel . . . . . . . . . . . . . . . . . 12
(xxvi) No Tax Law Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxvii) Lender Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
PARTICIPATION AGREEMENT [N604SW]
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
(xxviii) Withholding Tax Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Conditions Precedent to the Obligations of Lessee . . . . . . . . . . . . . . . . . . 13
SECTION 5. Confidentiality of Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6. Extent of Interest of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . 14
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 15
(iii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(iv) Valid Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(v) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vi) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vii) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(viii) Registration and Recordation . . . . . . . . . . . . . . . . . . . . . . . . 16
(ix) Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(x) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xi) No Misstatement or Omission . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xii) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiv) Effective Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xv) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xvii) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xviii) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xix) No Federal Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xx) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(iii) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(iv) Notice and Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(v) Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iii) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iv) Right to Defend; Subrogation; Fees and Expenses of
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Owner Participant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(g) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
PARTICIPATION AGREEMENT [N604SW]
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 8. Other Representations, Warranties, Covenants and Indemnities . . . . . . . . . . . . . . . . 28
(a) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Chief Executive Office of SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Owner Participant's Representations and Warranties . . . . . . . . . . . . . . . . . . 29
(g) Lessor Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(h) Indenture Trustee Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(i) Termination Instructions to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . 31
(j) Excess Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(k) Representations and Warranties of Indenture Trustee in Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(l) Transfers of Equity Interests; Rights of Owner Participant and
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(m) Obligations of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(n) Compliance with Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(o) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(p) SBC's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 34
(q) Owner Participant's Lease Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(r) Lessee's Assumption of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(s) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(t) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(u) Lease Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(v) Revocation of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(w) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(x) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(y) Discharge of Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(z) Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(aa) Special Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(cc) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(dd) Deferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(ee) Lessee as Pricing Agent for Certificate . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9. Payments to Lessee of Trust Indenture Monies . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10. Other Documents; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 11. Certain Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) FAA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(e) Engine Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
PARTICIPATION AGREEMENT [N604SW]
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
(f) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(h) Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(i) No Certificate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 12. Ownership of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 13. Notices; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 14. Change of Situs of Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) Consents under Lease and Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Counterparts; Waivers; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) No Recourse Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Duties Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Binding on Parties and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) Enforceability Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 16. Transaction Costs; Invoices and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 47
SECTION 17. Optional Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 18. Interim Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 19. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
EXHIBIT A
Form of Guaranty
</TABLE>
PARTICIPATION AGREEMENT [N604SW]
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of August 1, 1995 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) AMSOUTH LEASING CORPORATION, an Alabama corporation (the
"Owner Participant"), (iii) TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association (the "Original Loan Participant"), (iv) SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, in its
individual capacity, only as expressly provided herein (in such capacity,
"SBC") and otherwise, solely as Owner Trustee under the Trust Agreement (in
such capacity, the "Owner Trustee"), and (v) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, in its individual capacity and as Indenture
Trustee under the Trust Indenture (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, one of which having U.S. Registration No. N604SW and Manufacturer's
serial number 27955 has been recently purchased by Lessee and is the subject of
this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
(i) Lessee and the Owner Trustee are
entering into the Purchase Agreement Assignment whereby Lessee agrees
to assign to the Owner Trustee certain rights and interests of Lessee
under the Purchase Agreement with respect to the Aircraft; and
(ii) the Manufacturer has executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and
WHEREAS, the Indenture Trustee and the Owner Trustee
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 7
WHEREAS, as described in Section 2 hereof, the Owner Trustee
and Lessee are entering into the Lease whereby, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to purchase the Aircraft
from Lessee and to lease the same back to Lessee, and Lessee agrees to sell the
Aircraft to the Owner Trustee and to lease the same back from the Owner
Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "Owner Trustee" and "Indenture Trustee" shall have
the further meanings attributed thereto in the Sale and Lease Agreement dated
as of the date hereof (the "Lease") between the Owner Trustee and Lessee
relating to the Aircraft referred to in the first recital herein, and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease or the Trust Indenture.
The term "Trust Supplement" has the meaning attributed to the term "Indenture
and Trust Supplement" in the Lease and to the term "Trust Supplement" in the
Trust Indenture. The terms "Indenture Estate," "Outstanding," "Permitted
Investments," "Register" and "Trust Office" shall have the meanings set forth
in the Trust Indenture, and the term "Trust Estate" shall have the meaning set
forth in the Trust Agreement. Unless the context otherwise requires, any
reference herein to any of the Operative Agreements refers to such document as
it may be amended from time to time in accordance with its terms and the terms
of each other agreement restricting the amendment thereof.
(b) Subject to the terms and conditions of this
Agreement, (i) the Original Loan Participant agrees to finance, in part, the
Owner Trustee's payment of Lessor's Cost for the Aircraft by making a secured
loan to the Owner Trustee (herein called the "Loan") on a date to be designated
pursuant to Section 2 hereof, but in no event later than September 30, 1995, in
the amount in Dollars equal to the percentage of Lessor's Cost set forth
opposite its name on Schedule II hereto and (ii) the Owner Participant hereby
agrees, in connection with its equity investment in the beneficial ownership of
the Aircraft and the sale of the Aircraft by Lessee to the Owner Trustee
pursuant to the Lessee FAA Bill of Sale and Lessee Warranty Bill of Sale, as
contemplated hereby, to make its equity investment in the beneficial ownership
of the Aircraft on a date to be designated pursuant to Section 2 hereof, but in
no event later than September 30, 1995, in an amount in Dollars equal to the
percentage of Lessor's Cost set forth opposite its name on Schedule II hereto.
In the case of the Owner Participant, the amount of its participation to be
made as provided above in the payment of Lessor's Cost and, in the case of the
Original Loan Participant, the aggregate principal amount of the Series SWA
1995 Trust N604SW-I Certificate to be simultaneously issued to it, is
hereinafter called such Participant's "Commitment" for the Aircraft. In case
either Participant shall default in its obligation to make the amount of its
Commitment available pursuant to Section 2 hereof in respect of the Aircraft,
the other Participant shall have no obligation to make any portion of such
Commitment available or to increase the amount of its Commitment and the
obligation of the nondefaulting Participant shall remain subject to the terms
and conditions set forth in this Agreement.
(c) In the event that either Participant shall for any
reason fail or refuse to make the full amount of its Commitment available to
the Owner Trustee in accordance with the terms of paragraph (b) of this Section
1 (such Participant, for the purpose of this Agreement, being called a
"Defaulting Participant"), the Owner Trustee shall give, at the earliest
practicable time (which may
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 8
be the next Business Day), each party hereto telephonic notice (to be confirmed
promptly in writing) of such failure or refusal and the funds received by the
Owner Trustee in connection with the Aircraft will be held in accordance with
the terms of, and for the period provided in, paragraph (b) of Section 2. In
such event the Defaulting Participant will have no further right to participate
in, or make a loan for, as the case may be, the payment of Lessor's Cost for
the Aircraft. Lessee shall have the right to designate a financial institution
(which term, as used in this paragraph (c), shall mean any banking or financial
institution, institutional investor or fund which is not affiliated with Lessee
or with Owner Participant) to be substituted for the Defaulting Participant;
provided, however, that (i) such substituted financial institution shall sign
and deliver an amendment to this Agreement, in form and substance satisfactory
to the Owner Trustee, the Indenture Trustee and the remaining Participant,
whereby such financial institution agrees to be a party to this Agreement, to
be bound by all the terms hereof and to undertake all the obligations of the
Defaulting Participant contained herein, other than obligations, if any,
arising from the aforesaid failure or refusal by such Defaulting Participant,
(ii) if the Defaulting Participant is Owner Participant (A) such substituted
financial institution shall have been approved by the Original Loan
Participant, (B) each such substituted financial institution shall be domiciled
in the United States and shall be a citizen of the United States within the
meaning of the Act and shall have the requisite power and authority to enter
into and carry out the transactions contemplated by this Agreement and the
Trust Agreement, (C) such substituted financial institution shall enter into
amendments to the Trust Agreement, in form and substance satisfactory to the
Owner Trustee, the Indenture Trustee and the Original Loan Participant, whereby
such substituted financial institution agrees to be a party to the Trust
Agreement, to be bound by all the terms thereof and to undertake all the
obligations of the Defaulting Participant contained therein, and (D) the
substitution of such substituted financial institution as above provided shall
not violate any provisions of the Act or the regulations promulgated
thereunder, or create a relationship which would be in violation thereof and
such substituted financial institution shall so represent in writing to each
other party hereto, and (iii) if the Defaulting Participant is the Original
Loan Participant, such substituted financial institution shall be approved in
writing by Owner Participant. No action by Lessee in finding a financial
institution to be substituted as above provided shall be deemed to constitute a
waiver or release of any right which Lessee may have against the Defaulting
Participant. Each financial institution substituted for the Original Loan
Participant pursuant to this paragraph (c) shall be deemed the Original Loan
Participant for all purposes of this Agreement; and each financial institution
substituted for the Owner Participant pursuant to this paragraph (c) shall
(collectively, if more than one) be deemed the Owner Participant for all
purposes of this Agreement.
SECTION 2. Lessee's Notice of Delivery Date;
Closing Procedures. (a) Lessee agrees to give the Owner Participant, the Owner
Trustee, the Original Loan Participant and the Indenture Trustee at least three
(3) Business Days' written notice of the Delivery Date for the Aircraft, which
Delivery Date shall be a Business Day not later than September 30, 1995, which
notice shall specify (i) the amount of Lessor's Cost, (ii) the amount of each
Participant's Commitment for the Aircraft, and (iii) the model and FAA
registration number of the Aircraft and the manufacturer's serial numbers of
the Airframe and each Engine. As to each Participant, the making of its
Commitment for such Aircraft available in the manner required by this Section 2
shall constitute a waiver of such notice. The Owner Trustee and the Indenture
Trustee shall be deemed to have waived such notice if the Owner Trustee shall
have received from the Owner Participant funds in the full amount of the Owner
Participant's Commitment and the proceeds of the sale of the Series SWA 1995
Trust N604SW-I Certificate in the full amount of the Original Loan
Participant's Commitment.
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 9
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue and the Indenture Trustee shall
authenticate the Series SWA 1995 Trust N604SW-I Certificates which shall be
delivered simultaneously to the Original Loan Participant. On the Delivery
Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. 98120109 at Bank One, Dallas, N.A., ABA No. 111000614,
1717 Main Street, Dallas, Texas.
The Original Loan Participant and the Owner Participant each
agree to make its Commitment available to Shawmut Bank Connecticut, National
Association, Hartford, Connecticut, Account No. 0067548290, ABA No.
011-900-445, Reference: Southwest Airlines 1995 Trust N604SW, at or before
10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's notice
referred to in the first paragraph of this Section 2 (such specified Delivery
Date being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than September 30, 1995. In the event that
no Delayed Delivery Date is designated or, if designated, such closing does not
occur on the Delayed Delivery Date, or if any Participant shall so request,
such funds of each Participant shall be promptly returned to it by the Owner
Trustee or the Indenture Trustee, as the case may be.
If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
for the period from and including the Scheduled Delivery Date to but excluding
the Delayed Delivery Date, or, as the case may be, to but excluding the
Business Day on which such Participant's funds are returned if such return is
made by 10:00 a.m. (New York City time) or to but excluding the next following
Business Day if such return is not made by such time and, in the case of the
Original Loan Participant, for the Break Amount, if any, applicable to the
Series SWA 1995 Trust N604SW-I Certificate.
"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Original
Loan Participant, the rate per annum borne by the Series SWA 1995 Trust
N604SW-I Certificates in respect of which such Original Loan Participant's
Commitment is made available. "Federal Funds Effective Rate" means, for any
period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 10
federal funds brokers, as published on the succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for the day of such
transactions received by the Owner Participant from three federal funds brokers
of recognized standing selected by it; provided, that the "Federal Funds
Effective Rate" for any non-Business Day shall be the "Federal Funds Effective
Rate" for the previous Business Day.
SBC agrees that in the event it has received telephonic notice
(to be confirmed promptly in writing) from Lessee on the Scheduled Delivery
Date that the closing of the transactions contemplated hereby will not be
consummated on the Scheduled Delivery Date, it will, if instructed in the
notice from Lessee in regard to the funds received by it from the Participants,
use reasonable efforts to invest, at the risk, expense and direction of Lessee,
the funds received by it from the Participants in marketable direct obligations
of the United States of America or obligations of any of its agencies that are
guaranteed as to principal and interest by the United States of America, in any
such case having a stated maturity not later than 91 days from the date of
acquisition. Any such investment may be made through a repurchase agreement in
commercially reasonable form with SBC or a bank or other financial institution
having capital, surplus and undivided profits of at least $100,000,000;
provided, that title to the underlying obligations shall pass to SBC and that
such underlying securities shall be segregated in a custodial or trust account.
Any such obligations purchased by SBC, whether directly or through a repurchase
agreement, shall be so held in trust by SBC (but not as part of the Trust
Estate or Trust Indenture Estate) for the benefit of the respective
Participant. Lessee shall, on the Delayed Delivery Date or the date the funds
furnished by the Participants are required to be returned to the Participants,
as the case may be, reimburse SBC for the benefit of the respective
Participant, for any losses incurred on such investments.
All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the respective accounts of the
Participants (such income and profits to be credited against Lessee's
obligation to reimburse the Participants for the loss of use of funds made
available to SBC) and all other income and profits and all losses on the
investment of such funds shall be for the account of Lessee; and SBC shall not
be liable for failure to invest such funds or for any losses incurred on such
investments except for its own willful misconduct or negligence.
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee. Subject to the terms and conditions of this Agreement, the
Owner Trustee, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with instructions from such Participant or its special
counsel to release such funds to Lessee, shall transfer such funds to Lessee
and the Owner Trustee shall purchase the Aircraft from Lessee and lease the
Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
(a) to pay to Lessee (on behalf of the Owner Trustee) the
Lessor's Cost in the manner set forth in Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 11
(c) to accept from Lessee the Lessee Warranty Bill of
Sale and the Lessee FAA Bill of Sale and the invoice with respect to the
Aircraft;
(d) to execute an aircraft registration application, a
Lease Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow the Loan from the Original Loan Participant
to finance a portion of Lessor's Cost and to issue to the Original Loan
Participant a Series SWA 1995 Trust N604SW-I Certificate in a principal amount
equal to the amount borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be
taken by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. Conditions. (a) Conditions Precedent to
the Participations in the Aircraft. It is agreed that the respective
obligations of the Participants to participate in the payments of Lessor's Cost
are subject to the satisfaction prior to or on the Delivery Date of the
following conditions precedent, except that paragraphs (iii), (xx), (xxiv)
(insofar as it relates to the Original Loan Participant), (xxv) and (xxvi)
shall not be a condition precedent to the obligation of the Original Loan
Participant, and paragraphs (iv), (x) (insofar as it relates to the Owner
Participant), (xiv), (xvii), (xix), (xxiv) (insofar as it relates to the Owner
Participant) and (xxvii) shall not be a condition precedent to the obligation
of the Owner Participant:
(i) Notice. Each Participant shall have
received due notice with respect to such participation pursuant to
Section 2 hereof (or shall have waived such notice either in writing
or as provided in Section 2).
(ii) No Change in Law. No change shall have
occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is a party or (y) the
Original Loan Participant or the Owner Participant to make its
Commitment available or, in the case of the Original Loan Participant,
to acquire the Series SWA 1995 Trust N604SW-I Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
(iii) Original Loan Participant's Commitment.
In the case of the Owner Participant, the Original Loan Participant
shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(iv) Owner Participant's Commitment. In the
case of the Original Loan Participant, the Owner Participant shall
have made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(v) Authorization, Execution and Delivery of
Documents. The following documents shall have been duly authorized,
executed and delivered by the
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 12
respective party or parties thereto, shall each be satisfactory in
form and substance to the Participants and shall be in full force and
effect and executed counterparts shall have been delivered to each
Participant and its respective counsel; provided, that only the
Original Loan Participant shall receive an executed original of the
Series SWA 1995 Trust N604SW-I Certificate, only the Indenture
Trustee, acting on behalf of the Holders, shall receive the original
counterpart of the Lease and the initial Lease Supplement, and only
Lessee and the Owner Participant shall receive copies of the Tax
Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering
the Aircraft and dated the Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering
the Aircraft and dated the Delivery Date;
(6) the Bills of Sale and an
invoice from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement
Assignment;
(8) an acceptance certificate
covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate") duly
completed and executed by the Owner Trustee or its agent,
which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1995 Trust
N604SW-I Certificate;
(11) the Manufacturer's Consent;
and
(12) the Guaranty.
(vi) UCC-1's. Uniform Commercial Code
financing statement or statements covering all of the security
interests created by or pursuant to the Granting Clause of the Trust
Indenture and precautionary Uniform Commercial Code financing
statement or statements with respect to the Lease shall have been
executed and delivered, and all such financing statement or statements
shall have been duly filed in all places necessary or advisable, and
any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Original Loan Participant
shall have been executed and delivered by Lessee, the Indenture
Trustee or the Owner Trustee and duly filed.
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 13
(vii) Proof of Corporate Action, Etc. Each
Participant and the Indenture Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(1) a certified copy of the
Restated Articles of Incorporation and Bylaws of Lessee and a
copy of resolutions of the board of directors of Lessee or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of Lessee, duly authorizing the execution,
delivery and performance by Lessee of this Agreement, the
Lease, the Purchase Agreement Assignment, the Lessee Warranty
Bill of Sale, the Lessee FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with
the provisions hereof and thereof;
(2) such other documents and
evidence with respect to Lessee, the Manufacturer, the Owner
Trustee, the Indenture Trustee and the Participants, as the
Original Loan Participant or the Owner Participant, or their
respective counsel, may reasonably request in order to
establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the
compliance with the conditions herein set forth;
(3) a certificate of Lessee as
to the person or persons authorized to execute and deliver
this Agreement, the other Lessee Documents, and any other
documents to be executed on behalf of Lessee in connection
with the transactions contemplated hereby and as to the
signature of such person or persons;
(4) a copy of the Purchase
Agreement (to the Owner Participant and the Indenture Trustee
only) certified by the Treasurer, the Assistant Treasurer or
an Assistant Secretary of Lessee as being a true and accurate
copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations
or any right in such Agreement assigned by Lessee to the Owner
Trustee pursuant to the Purchase Agreement Assignment; and
(5) a copy of the general
authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of
authorization of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, certified as of the
Delivery Date by the Secretary or an Assistant Secretary of
the Indenture Trustee (in its individual capacity), SBC and
the Owner Participant, respectively, which authorize the
execution, delivery and performance by the Indenture Trustee
(in its individual capacity), SBC and the Owner Participant,
respectively, of all of the Operative Agreements to which it
is a party, together with such other documents and evidence
with respect to the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant as either the
Original Loan Participant (or its counsel) or the Owner
Participant (or its counsel) may reasonably request in order
to establish the consummation of the transactions contemplated
by this Agreement, the taking of all corporate proceedings in
connection therewith and compliance with the conditions herein
set forth; provided, this clause shall not be a
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 14
condition precedent as to any Participant as to documents to
be provided by that Participant.
(viii) Governmental Approvals. All appropriate
action required to have been taken by the Federal Aviation
Administration, or any other governmental or political agency,
subdivision or instrumentality of the United States, prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders, permits, waivers, authorizations, exemptions and approvals
shall be in full force and effect on the Delivery Date.
(ix) Title, Registration, Airworthiness, Etc.
On the Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:
(1) the Owner Trustee has good
and marketable title (subject to filing and recording of the
Lessee FAA Bill of Sale with the Federal Aviation
Administration in accordance with the Act) to the Aircraft,
free and clear of Liens other than the rights of Lessee under
the Lease and Lease Supplement covering the Aircraft, the
mortgage and security interest created by the Trust Indenture,
the rights of the Owner Participant under the Trust Agreement
and the Trust Supplement and Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the
Lease;
(2) application for registration
of the Aircraft in the name of the Owner Trustee (together
with any required affidavits), the FAA Bill of Sale and the
Lessee FAA Bill of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the
Trust Indenture and the Trust Supplement and the Lease and the
Lease Supplement have been duly filed with the FAA for
recordation pursuant to the Act;
(4) each of the Owner Trustee,
as lessor under the Lease, and the Indenture Trustee, as
assignee thereof, is entitled to the protection of Section
1110 of the United States Bankruptcy Code in connection with
its right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor; and
(5) the Aircraft has been duly
certificated by the FAA as to type and airworthiness in
accordance with the terms of the Lease and has a current,
valid U.S. standard certificate of airworthiness issued by the
FAA.
(x) Representations and Warranties Accurate;
No Event of Default; No Adverse Change. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as
though made on and as of such date except to the extent that such
representations and
PARTICIPATION AGREEMENT [N604SW]
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warranties relate solely to an earlier date (in which case such
representations and warranties shall be true and accurate on and as of
such earlier date), (B) no event shall have occurred and be
continuing, or would result from the purchase, sale, lease or mortgage
of the Aircraft, which constitutes (or would, with the passage of time
or the giving of notice or both, constitute) a Lease Event of Default
or an Indenture Event of Default, and (C) no material adverse change
shall have occurred in the consolidated financial condition of Lessee
and its subsidiaries from that shown in the consolidated financial
statements of Lessee and its subsidiaries as of June 30, 1995.
(xi) Opinions of Lessee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee and the Owner Trustee from Deborah Ackerman,
Associate General Counsel for Lessee.
(xii) [Intentionally omitted.]
(xiii) Opinion of Owner Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Shipman &
Goodwin, counsel for the Owner Trustee.
(xiv) Opinions of Owner Participant's Counsel.
The Original Loan Participant shall have received a favorable opinion,
in form and substance satisfactory to it, addressed to the Indenture
Trustee, the Original Loan Participant, the Owner Trustee and Lessee
from (a) Chadbourne & Parke LLP, special counsel to the Owner
Participant, and (b) in-house or other counsel for the Owner
Participant in a position to address the Owner Participant's due
incorporation and due authorization and execution of the Operative
Agreements to which the Owner Participant is a party.
(xv) Opinion of Oklahoma City Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma.
(xvi) Opinion of Indenture Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee and Lessee from Potter Anderson & Corroon, special counsel for
the Indenture Trustee.
(xvii) Opinion of Original Loan Participant's
Counsel. The Original Loan Participant shall have received a
favorable opinion, in form and substance satisfactory to it, addressed
to it from Winstead Sechrest & Minick P.C., special counsel to the
Original Loan Participant.
(xviii) Lessee's Bringdown Certificate. Each
Participant, and the Indenture Trustee shall have received a
certificate signed by the President, any Vice President, the Treasurer
or the Assistant Treasurer of Lessee, dated the Delivery Date,
certifying as to
PARTICIPATION AGREEMENT [N604SW]
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the fulfillment of all conditions in this Section 4(a) insofar as they
relate to Lessee and as to the matters stated in paragraphs (x)
(insofar as it relates to Lessee), (xxii) and (xxiii) (to the
knowledge of Lessee, except in regard to matters relating to the
Participants, the Indenture Trustee or the Owner Trustee, in which
event such representation shall be to the knowledge of Lessee without
any investigation whatsoever) of this Section 4(a).
(xix) Guarantor's Financial Statements.
Lessee, the Original Loan Participant, and the Indenture Trustee shall
have received copies of the June 30, 1995 call report of AmSouth Bank
of Alabama, the parent of the Owner Participant.
(xx) Appraisal. The Owner Participant shall
have received an opinion, in form and substance reasonably
satisfactory to the Owner Participant, from Aero Economics, Inc.,
independent aircraft appraisers, or such other recognized aircraft
appraiser selected by the Owner Participant.
(xxi) Insurance Certificates. Each
Participant, the Owner Trustee and the Indenture Trustee shall have
received an independent insurance broker's report and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of
the Lease relating to insurance with respect to the Aircraft.
(xxii) No Event of Loss. On the Delivery Date,
it shall be true that no Event of Loss (or event which with the
passage of time would become an Event of Loss) with respect to the
Airframe or any Engine has occurred.
(xxiii) No Proceedings. No action or proceeding
shall have been instituted, nor shall action or proceeding be
threatened before any court or governmental agency, nor shall any
order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency at the time of the Delivery Date to
set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) Bringdown of Other Parties'
Representations and Warranties. The respective representations and
warranties of each Participant, the Indenture Trustee and the Owner
Trustee contained in Section 8 hereof shall be true and accurate as of
the Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date) and (a)
each Participant shall, by making its Commitment available as provided
in Section 1(b) of this Agreement, (b) the Indenture Trustee shall, by
authenticating the Series SWA 1995 Trust N604SW-I Certificate issued
on the Delivery Date, and (c) the Owner Trustee shall, by accepting
the Lessee Warranty Bill of Sale and the Lessee FAA Bill of Sale, be
respectively deemed to have reaffirmed as of the Delivery Date the
representations and warranties made by it (individually or in its
trust capacities, as the case may be) in Section 8 of this Agreement.
(xxv) Opinion of Owner Participant's Tax
Counsel. The Owner Participant shall have received from Chadbourne &
Parke LLP, special counsel to the Owner
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 17
Participant, a favorable opinion, in form and substance satisfactory
to the Owner Participant, with respect to income tax aspects of the
transactions contemplated by the Operative Agreements.
(xxvi) No Tax Law Change. In the opinion of
the Owner Participant and its special counsel, no amendment,
modification, addition or change in or to the provisions of the Code
(including for this purpose, any non-Code provisions of legislation
affecting the Code such as transition rules or effective date
provisions), the regulations promulgated under the Code (including
temporary or proposed regulations), Internal Revenue Service Revenue
Procedures or Revenue Rulings, or other administrative
interpretations, applicable judicial precedents or Executive Orders of
the President of the United States shall have been made or proposed
after August 10, 1995 which might adversely affect the accuracy of the
Tax Assumptions set forth in Section 2 of the Tax Indemnity Agreement
or which might otherwise adversely affect the Owner Participant.
(xxvii) Lender Appraisal. The Original Loan
Participant shall have received an opinion from the Appraiser referred
to in paragraph (xx) above (without any tax-sensitive provisions) in
form and substance reasonably satisfactory to the Original Loan
Participant to the effect that the fair market value of the Aircraft
on the Delivery Date is at least equal to Lessor's Cost.
(xxviii) Withholding Tax Forms. If the Original
Loan Participant is required to execute any form or document in order
for payments to it to qualify for exemption from, or reduction of,
withholding tax imposed by the Government, in respect to such
payments, such Original Loan Participant shall have executed such form
or document (including, without limitation, United States Internal
Revenue Forms 1001, W-8 and/or 4224) and delivered it to the Indenture
Trustee in accordance with applicable regulations to qualify for such
exemption or reduction.
Promptly upon the registration of the Aircraft and the
recording of the Lease, the Trust Indenture, the Trust Agreement, the Lease
Supplement and the Trust Supplement covering the Aircraft pursuant to the
Federal Aviation Act, Lessee will request Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, to deliver to the Owner Participant, the
Indenture Trustee, the Original Loan Participant, the Owner Trustee and Lessee
an opinion as to the due and valid registration of the Aircraft in the name of
the Owner Trustee, the due recording of the FAA Bill of Sale, the Lessee FAA
Bill of Sale, the Trust Indenture, the Lease Supplement, the Trust Supplement,
the Lease and the Trust Agreement and the lack of filing of any intervening
documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee.
It is agreed that the obligations of Lessee (A) to sell the Aircraft to the
Owner Trustee, (B) to accept delivery of the Aircraft under the Lease, and (C)
to enter into its other Operative Agreements, are all subject to the
fulfillment to the satisfaction of Lessee prior to or on the Delivery Date of
the following conditions precedent:
PARTICIPATION AGREEMENT [N604SW]
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(i) The conditions specified in Sections
4(a)(iii), 4(a)(iv), 4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and
4(a)(xxviii) hereof shall have been satisfied, unless such
nonsatisfaction is the result of the actions of Lessee.
(ii) Those documents described in Section
4(a)(v) shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Lessee) in the manner
specified in Section 4(a)(v), shall each be satisfactory in form and
substance to Lessee, shall be in full force and effect on the Delivery
Date, and an executed counterpart of each thereof (other than the
Series SWA 1995 Trust N604SW-I Certificate) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of the Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the Indenture
Trustee (in its individual capacity), SBC and the Owner Participant,
respectively, of all the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to the
Indenture Trustee (in its individual capacity), SBC and the Owner
Participant as Lessee or its counsel may reasonably request in order
to establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and compliance with the conditions herein set forth.
(iv) The representations and warranties of
each Participant, the Indenture Trustee and the Owner Trustee
contained in Section 8 hereof shall be true and accurate as of the
Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date).
(v) Lessee shall have received the opinions
set forth in Sections 4(a)(xiii), 4(a)(xiv), 4(a)(xv) and 4(a)(xvi),
in each case addressed to Lessee and dated the Delivery Date.
(vi) No change shall have occurred after the
date of the execution and delivery of this Agreement in applicable law
or regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of Lessee,
would make it a violation of law or regulations for Lessee to execute,
deliver or perform the Operative Agreements to which it is a party.
(vii) In the opinion of Lessee and its
counsel, there shall have been, since August 1, 1995, no amendment,
modification, addition or change in or to the Code (including for this
purpose, any non-Code provisions of legislation affecting the Code
such as transition rules or effective date provisions), the
regulations promulgated under the Code (including temporary or
proposed regulations), Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, applicable
judicial precedents or
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 19
Executive Orders of the President of the United States which might
give rise to an indemnity obligation under any of the Operative
Agreements, or as a result of which any adjustments to the Lease
payments are requested by the Owner Participant which would adversely
affect the accuracy of the Tax Assumptions set forth in Section 2 of
the Tax Indemnity Agreement.
SECTION 5. Confidentiality of Purchase Agreement.
The Owner Trustee, the Participants and the Indenture Trustee shall keep the
Purchase Agreement confidential and shall not disclose the same to any Person,
except (A) to prospective and permitted transferees of the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
interest who agree to hold such information confidential, (B) to the
aforementioned prospective and permitted transferees', the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
counsel or special counsel, independent insurance brokers or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, or as may be necessary or reasonable in connection with matters
involving federal or state banking examiners, tax auditors or taxing
authorities, or (D) as may be necessary or desirable for purposes of protecting
the interest of any such Person or for enforcement of any Operative Agreement
by the Owner Trustee, the Original Loan Participant, the Owner Participant or
the Indenture Trustee; provided, however, that any disclosures of any part of
the Purchase Agreement which are permitted by clause (C) or (D) above shall be
made only to the extent necessary to meet the specific requirements or needs of
the Persons to whom such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Holders. No
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
outstanding principal amount of, Break Amount, if any, Premium, if any, and
interest on all Certificates held by such Holder and all other sums payable to
such Holder hereunder, under the Trust Indenture and under such Certificates
shall have been paid in full. Each Holder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to such Holder as
provided in Section 2.09 of the Trust Indenture and that neither the Owner
Participant nor the Owner Trustee shall be personally liable to any Holder for
any amounts payable under the Certificates, the Trust Indenture, hereunder, or
under any other Operative Agreement (including, without limitation, amounts
payable as Premium or Break Amount), except as expressly provided in this
Agreement or (in the case of the Owner Trustee) in the Trust Indenture.
SECTION 7. Lessee's Representations and Warranties;
Indemnities. (a) In General. Lessee represents warrants, covenants and agrees
that:
(i) Organization, Citizenship, Etc. Lessee
(A) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, (B) is a "citizen of
the United States" (as defined in Section 40102 of Title 49, U.S.C.)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) has the corporate power and authority to carry on
its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Agreement and the other Operative Agreements to which Lessee is or
will be a party, and (D) is duly qualified to do business as a foreign
corporation in good
PARTICIPATION AGREEMENT [N604SW]
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standing in each state in which the nature of its business makes such
qualification necessary or the failure to be so qualified or so to be
in good standing would have a material adverse effect on its business
or operations or would impair its ability to perform its obligations
under the Operative Agreements.
(ii) Corporate Authorization, Etc. The
execution, delivery and performance of this Agreement and the other
Operative Agreements to which Lessee is or will be a party (A) have
been duly authorized by all necessary corporate action on the part of
Lessee, (B) do not require any shareholder approval, or approval or
consent of any trustee or holders of indebtedness or obligations of
Lessee or of any lessor under any lease to Lessee except such as have
been duly obtained, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) Governmental Approvals. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
and 4(a)(ix)(3), and (C) such federal and state securities law
approvals or filings that will be required in connection with the
public offering, if any, of the Certificates.
(iv) Valid Agreements. This Agreement and
the other Operative Agreements to which Lessee is or will be a party,
as and when entered into, do or will, assuming due authorization,
execution and delivery by the party or parties thereto other than
Lessee, constitute legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
(v) No Proceedings. There are no pending
or, to Lessee's knowledge, threatened actions or proceedings before
any court or administrative agency which, having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to materially adversely affect the consolidated financial
condition of Lessee and its subsidiaries, or the ability of Lessee to
perform its obligations under this Agreement and the other Operative
Agreements to which Lessee is or will be a party.
(vi) Taxes. Lessee and its subsidiaries have
filed or caused to be filed all federal, state, local and foreign tax
returns which are required to be filed and have paid
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 21
or caused to be paid all taxes shown to be due and payable on such
returns or on any assessment received by Lessee or any of its
subsidiaries to the extent that such taxes have become due and payable
(except to the extent being contested in good faith and by appropriate
proceedings and for the payment of which adequate provisions have been
made).
(vii) Financial Condition. The audited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Annual Report to Shareholders for the year ended
December 31, 1994 and the unaudited consolidated financial statements
of Lessee and its subsidiaries contained in Lessee's Quarterly Report
on Form 10-Q for the period ended June 30, 1995 (copies of each of
which have been furnished to each Participant) have been prepared in
accordance with generally accepted accounting principles, present
fairly, in all material respects, the consolidated financial position
of Lessee and its subsidiaries as of such dates and the consolidated
results of their operations and their cash flows for the periods then
ended, and since June 30, 1995, there has been no material adverse
change in such consolidated financial position.
(viii) Registration and Recordation. Except
for (A) the registration of the Aircraft with the FAA pursuant to the
Act in the name of Owner Trustee, (B) the filing for recordation of
the instruments referred to in Section 4(a)(ix)(2) and (3) and this
Agreement, if deemed necessary due to the incorporation by reference
in such other instruments of terms defined herein, (C) the filing of
the UCC financing statements referred to in Section 4(a)(vi) and
continuation statements at periodic intervals, (D) the taking of
possession by the Indenture Trustee of the original counterparts of
the Lease and the initial Lease Supplement, and (E) the affixation of
the nameplate referred to in Section 7.1.2 of the Lease, no further
action, including any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the
Uniform Commercial Code of any applicable jurisdiction), is necessary
or advisable in order to establish and perfect the right, title or
interest of Owner Trustee in the property constituting the Trust
Estate, or of Indenture Trustee in the property constituting the Trust
Indenture Estate, in any applicable jurisdiction within the United
States of America.
(ix) Chief Executive Office. The chief
executive office (as such term is defined in Article 9 of the UCC) of
Lessee is 2702 Love Field Drive, Dallas, Texas 75235, and Lessee
agrees to give the Participants, Owner Trustee and Indenture Trustee
10 days' prior written notice of any relocation of said chief
executive office from its present location.
(x) Securities Laws. Neither Lessee nor
anyone acting on behalf of Lessee has directly or indirectly offered
any beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, or any similar interest or
security, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security
to, any Person other than the Participants and not more than 27 other
leasing companies or other institutional investors (in the case of
such beneficial interest or securities), or six other institutional
investors (in the case of the Certificates and other similar interests
and securities) or (assuming the accuracy of the representations in
Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii))
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 22
to any Person in violation of the Securities Act or applicable state
securities laws, or both, and Lessee will take no action which would
constitute or cause such violation.
(xi) No Misstatement or Omission. Neither
the financial statements referred to in Section 7(a)(vii) nor any
other documents furnished by Lessee to Owner Trustee, Indenture
Trustee, or any Participant in connection with the transactions
contemplated by this Agreement or the other Operative Agreements
contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein (in the case
of statements referred to in Section 7(a)(vii), as of the date made)
not misleading; there is no fact known by Lessee which Lessee has not
disclosed to such parties in writing which materially adversely
affects or, so far as Lessee can now reasonably foresee, will
materially adversely affect the ability of Lessee to carry on its
business and perform its obligations under this Agreement or the other
Operative Agreements to which it is a party.
(xii) Investment Company. Neither Lessee nor
any subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) No Event of Default. No Lease Event of
Default or Lease Default has occurred and is continuing under the
Lease.
(xiv) Effective Sale. On the Delivery Date,
the Aircraft will be situated in Texas and the sale of the Aircraft by
Lessee to Owner Trustee shall be complete and effective and not
voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (in reliance upon the
Participants' representations in Section 8(o)) the transactions
contemplated by this Agreement do not constitute a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code for which an exemption is not available by statute,
regulation or class exemption. The execution and delivery of this
Agreement and the other Operative Agreements and the consummation of
the transactions contemplated hereby and thereby will not involve any
non-exempt prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code (such representation being made
solely in reliance upon and subject to the accuracy of the
representations contained in Section 8(o)).
(xvi) Title to Aircraft, etc. Good and
marketable title to the Aircraft will be at the time of delivery to
Owner Trustee vested in Lessee free and clear of all Liens other than
the rights of Lessee under the Lease and the Lease Supplement covering
the Aircraft, the Lien of the Trust Indenture, the beneficial interest
of the Owner Participant in the Aircraft and the Liens permitted by
clause (d) (solely for taxes not yet due) or (e) of Section 6 of the
Lease; and, subject to the filing for recordation of the Lessee FAA
Bill of Sale in accordance with the Act, good and marketable title to
the Aircraft will have been duly conveyed by Lessee to Owner Trustee,
free and clear of all Liens other than the rights of Lessee under the
Lease and the Lease Supplement covering the Aircraft, the Lien of the
Trust
PARTICIPATION AGREEMENT [N604SW]
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Indenture, the beneficial interest of the Owner Participant in the
Aircraft, and the Liens permitted by clause (d) (solely for taxes not
yet due) or (e) of Section 6 of the Lease.
(xvii) Condition of Aircraft. The Aircraft has
been duly certificated by the FAA as to type and airworthiness, is
fully equipped to operate in commercial service and complies with all
material governmental requirements governing such service; the
Aircraft has been continuously operated and maintained by Lessee (in a
manner that would satisfy the provisions of Sections 7.1.3 and 8.1 of
the Lease) since its delivery to Lessee by Manufacturer, Lessee is
unaware of any material mechanical or structural defects in or damage
to the Aircraft since its delivery to Lessee by Manufacturer and there
has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event
of Loss.
(xviii) Use of Proceeds. None of the proceeds
from the issuance of the Certificates or from the acquisition by the
Owner Participant of its beneficial interest in the Trust Estate will
be used directly or indirectly by Lessee so as to result in a
violation of Regulation G or U of the Board of Governors of the
Federal Reserve System.
(xix) No Federal Approvals. No governmental
approval in the United States of any kind is required of the Owner
Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance
under this Agreement or any agreement contemplated hereby solely by
reason of any fact or circumstance peculiar to: (a) Lessee (as
contrasted to other airlines), (b) the nature of the Aircraft, or (c)
Lessee's proposed operations or use of the Aircraft.
(xx) Section 1110. Owner Trustee, as lessor
under the Lease, and the Indenture Trustee, as assignee thereof, are
entitled to the protection of Section 1110 of the United States
Bankruptcy Code in connection with their right to take possession of
the Airframe and Engines in the event of a case under Chapter 11 of
the United States Bankruptcy Code in which Lessee is a debtor. Lessee
acquired the Aircraft new from the Manufacturer after October 22,
1994, and Lessee first placed the Aircraft in service after such date.
(b) General Tax Indemnity.
(i) Indemnity. Lessee hereby agrees to pay,
to indemnify, and, on written demand, reimburse and hold each
Indemnified Party (which, unless otherwise indicated herein, for
purposes of this Section 7(b) shall include any Affiliate of any
Participant, and all entities which are included in a consolidated,
combined or unitary return with such Indemnified Party) harmless from,
any and all license, documentation, recording and registration fees
and any and all taxes (including, without limitation, sales, use,
turnover, value-added, property (tangible and intangible), ad valorem,
consumption, rental, license, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature
whatsoever together with any and all penalties, fines, additions to
tax or interest thereon or computed with reference thereto
(collectively "Taxes"), howsoever imposed by any federal, state or
local government or governmental subdivision or taxing authority in or
of the United States of
PARTICIPATION AGREEMENT [N604SW]
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America (including any possession or territory of the United States of
America), or by any foreign government, taxing authority or
governmental subdivision of a foreign country, upon, against, or with
respect to any Indemnified Party, Lessee, the Aircraft, Airframe, any
Engine, any other engine installed on the Airframe, Part or any other
part thereof or interest therein or upon or with respect to the
purchase, acquisition, acceptance, rejection, mortgaging, financing,
refinancing, manufacture, sale, transfer of title, ownership,
delivery, nondelivery, insuring, inspection, leasing, possession, use,
registration, reregistration, deregistration, operation, repair,
replacement, abandonment, redelivery, modification, rebuilding,
importation, exportation, return or other disposition thereof, or the
imposition of any Lien (or the occurrence of any liability to refund
or pay over any amount as a result of any Lien) thereon, or upon or
with respect to the rentals, receipts or earnings arising therefrom,
or upon or with respect to this Agreement, the Trust Agreement, the
Trust Indenture, the Lease, a Lease Supplement, the Purchase
Agreement, the Purchase Agreement Assignment, the Certificates or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture, or the
beneficial interest in the Trust Estate or the creation thereof, or
any payment made pursuant to any such agreement or instrument or upon
or with respect to the property, held by Owner Participant or by the
Trust Estate or by Indenture Trustee under the Trust Indenture, or
otherwise with respect to or in connection with the transactions
contemplated by the Operative Agreements.
(ii) Exceptions. The indemnity set forth in
Section 7(b)(i) shall not extend in the case of any Indemnified Party
to Taxes (1) on, based on, or measured by, the receipts, gross or net
income, capital or net worth of such Indemnified Party (whether
denominated as franchise, excess profits, conduct of business, capital
gains, minimum and/or alternative minimum taxes) or accumulated
earnings, personal holding company, succession taxes and estate or
franchise taxes (other than taxes which are in the nature of sales or
use taxes, value-added taxes, rental taxes, license taxes, consumption
taxes, ad valorem taxes or property taxes) imposed by (A) the federal
government of the United States (including without limitation any
taxes collected by withholding) (but specifically excluding any excise
taxes imposed in connection with the occurrence of a "prohibited
transaction," within the meaning of Section 406 of ERISA or Section
4975 of the Code, for which an exemption is not available by statute,
regulation or class exemption) or (B) any state or local government or
governmental subdivision or state or local taxing authority in the
United States of America other than in the case of (B) any such tax
which is a Covered Income Tax, as defined below; (2) on, based on, or
measured by, any fees or compensation received by Owner Trustee or
Indenture Trustee in its individual capacity for services rendered in
connection with the transactions contemplated hereby; (3) relating to
the Aircraft for any period after the later of (A) the expiration or
early termination of the Lease and the return of the Aircraft in
connection therewith in accordance with the terms thereof and (B)
payment in full of Stipulated Loss Value or Termination Value, as the
case may be, and all Rent due and owing in accordance with the Lease;
(4) arising out of or caused by the wilful misconduct or gross
negligence of such Indemnified Party (other then willful misconduct or
gross negligence imputed to such Indemnified Party solely by reason of
its interest in the Aircraft) or the inaccuracy or breach of any
representation, warranty or covenant of such Indemnified Party
contained in any Operative Agreement; (5) imposed on the income of
such Indemnified Party by a foreign government or taxing authority or
a possession or territory of the United States or any tax authority
therein, except to the extent such Taxes are imposed by reason of the
location, operation, registration, use or rental of the Aircraft or
any Part thereof in such
PARTICIPATION AGREEMENT [N604SW]
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jurisdiction or the presence, incorporation or other organization of
Lessee or Sublessee or other user or an Affiliate of any thereof in
such jurisdiction or the making of payments from such jurisdiction;
(6) which may become payable in connection with the occurrence of a
"prohibited transaction," within the meaning of Section 406(b) of
ERISA or Section 4975(c)(1)(E) or (F) of the Code, involving the
assets of any "employee benefit plan" within the meaning of Section
3(3) of ERISA, or of any "plan" within the meaning of Section
4975(e)(1) of the Code, with respect to which the Owner Participant is
the "plan sponsor" within the meaning of Section 3(16)(B) of ERISA;
and (7) which become payable as a result of any involuntary
disposition attributable to the bankruptcy of the Owner Participant or
Owner Trustee or any voluntary sale, transfer, mortgaging, pledging or
financing by such Indemnified Party of all or a portion of its
interest in the Aircraft, the Trust Estate, the Trust Indenture
Estate, the Lease, or any other Operative Agreement in a transaction
not contemplated by the Operative Agreements. As used in clause
(1)(B) of this Section 7(b)(ii), the term "Covered Income Tax" means a
Tax described in said clause (1)(B) imposed on an Indemnified Party by
any taxing authority (A) in whose jurisdiction such Indemnified Party
(including for this purpose all entities with which it is combined,
integrated or consolidated in such taxing authority's jurisdiction)
did not engage in business, did not maintain an office or other place
of business and was not otherwise located, if such Tax resulted from
the operation of the Aircraft or any Engine in such jurisdiction or
the transactions contemplated by the Operative Agreements, or (B) in
whose jurisdiction such Indemnified Party in fact is doing business,
maintaining an office or other place of business or is otherwise
located, if such circumstance was no factor in the imposition of such
Tax.
(iii) Calculation. Lessee agrees that, with
respect to any payment or indemnity pursuant to Section 7(b)(i)
hereof, such payment or indemnity shall include an amount payable to
the Indemnified Party sufficient to hold such Indemnified Party
harmless on an after-tax basis from all Taxes required to be paid by
such Indemnified Party with respect to such payment or indemnity under
the laws of any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America,
including any possession or territory of the United States, or under
the laws of any foreign government, taxing authority or governmental
subdivision of a foreign country; provided, that if any Indemnified
Party realizes a reduction in Taxes not subject to indemnification
hereunder (a "tax benefit") by reason of such payment or indemnity
(whether such tax benefit shall be by means of investment tax credit,
foreign tax credit, depreciation deduction or otherwise), such
Indemnified Party shall, so long as no Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred or be continuing, pay Lessee (but not
before Lessee shall have made all payments or indemnities to such
Indemnified Party then due under the Operative Agreements) an amount
equal to the sum of such tax benefit plus any other tax benefit
realized by such Indemnified Party as the result of any payment made
pursuant to this proviso; provided, however, that such payment by an
Indemnified Party shall not exceed the aggregate payments by Lessee to
such Indemnified Party under Section 7(b)(i) hereof (but any such
excess shall be carried forward and shall reduce Lessee's obligation
to make any subsequent payments to such Indemnified Party pursuant to
Section 7(b) or 7(c) hereof). Each such Indemnified Party shall in
good faith use reasonable efforts in filing its tax returns and in
dealing with taxing authorities to seek and claim any such tax benefit
of which it is actually aware or of which it has been given notice.
Any Taxes that are imposed on any Indemnified Party as a result of the
PARTICIPATION AGREEMENT [N604SW]
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disallowance or reduction of such tax benefit referred to in the next
preceding sentence in a taxable year subsequent to the year of
allowance and utilization by such Indemnified Party (including the
expiration of any tax credit carryovers or carrybacks of such
Indemnified Party that would not otherwise have expired) shall be
indemnifiable pursuant to the provisions of Section 7(b)(i) without
regard to Section 7(b)(ii). In determining the amount of any net
reduction in Taxes which is attributable to more than one transaction,
an Indemnified Party shall be deemed to have utilized its deductions
and credits attributable first, to all transactions other than
leveraged equipment leasing transactions and then to this transaction
and to all such other leveraged equipment leasing transactions on a
pari passu basis.
If as a result of any Advance (as hereinafter
defined) to an Indemnified Party the aggregate taxes paid or accrued
by such Indemnified Party for any taxable year shall be more than the
amount of such taxes which would have been payable by the Indemnified
Party had no such Advance been made, and if such increase in taxes was
not taken into account in determining the amount of the Advance, then
such increase in taxes will be treated as Taxes for which Lessee must
indemnify the Indemnified Party pursuant to this Section 7(b). Upon
the final determination of any contest pursuant to Section 7(b)(iv)
hereof in respect of any Taxes for which Lessee has made an Advance,
the amount of Lessee's obligation shall be determined under this
Section 7(b)(iii) as if such Advance had not been made. Any
obligation of Lessee under this Section 7(b) and the Indemnified
Party's obligation to repay the Advance will be satisfied first by set
off against each other and any difference owing by either party will
be paid within 10 days of such final determination.
(iv) Notice and Contest. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 15 days after its receipt; provided, that failure to provide
such notice within 15 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of Vinson & Elkins L.L.P. or other independent counsel selected by
Lessee and reasonably satisfactory to Indemnified Party to the effect
that a reasonable basis in law and fact exists under ABA opinion
85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or permit Lessee, if desired by Lessee, to contest in
the name of Lessee) if permissible under applicable laws, the
validity, applicability or amount of such Taxes by (i) resisting
payment thereof if practicable, (ii) not paying the same except under
protest, if protest shall be necessary and proper, (iii) if payment
shall be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative or judicial proceedings, and (iv) taking
such other action as is reasonably requested by Lessee from time to
time. The Indemnified Party shall determine the method of any contest
and (in good faith consultation with Lessee) control the conduct
thereof. Notwithstanding anything contained
PARTICIPATION AGREEMENT [N604SW]
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in this Section 7(b)(iv), an Indemnified Party will not be required to
contest, or to continue to contest, the validity, applicability or
amount of any Tax (or portion thereof) (w) unless Lessee shall have
acknowledged in writing its obligation to indemnify the Indemnified
Party hereunder in the event the Indemnified Party does not prevail in
such contest, (x) if such contest would result in any material risk of
criminal penalties or any material risk of sale, forfeiture or loss
(or loss of use) of the Aircraft, the Airframe or any Engine or any
Part or any interest therein, (y) if a Lease Event of Default has
occurred and is continuing or (z) if the claim (when aggregated with
related or correlative adjustments with respect to such Indemnified
Party) will not exceed $10,000. The Owner Participant shall not be
required to appeal, or seek leave to appeal, an adverse judicial
determination with respect to such Taxes to the United States Supreme
Court. If an Indemnified Party contests a Tax by making a payment and
seeking a refund thereof, then Lessee shall advance to such
Indemnified Party, on an interest-free basis, an amount equal to the
Taxes and any penalties, additions to tax, fines and interest thereon
(which shall collectively be known, only for the purpose of this
Section 7(b), as an "Advance") that are paid by such Indemnified Party
in connection with such contest. Such Advance shall be repayable to
Lessee at the time and in the manner specified in the last paragraph
of Section 7(b)(iii). If any Indemnified Party shall obtain a refund
of all or any part of such Taxes for which an indemnity was paid by
Lessee, such Indemnified Party shall pay Lessee the amount of such
refund as is attributable to the Taxes for which such indemnity was
paid; provided, however, that such amount shall not be payable before
such time as Lessee shall have made all payments or indemnities to
such Indemnified Party then due under this Section 7(b) and under the
Lease. If in addition to such refund such Indemnified Party shall
receive an amount representing interest on the amount of such refund,
Lessee shall be paid that proportion of such interest which is fairly
attributable to Taxes paid with an indemnity payment or Advance by
Lessee prior to the receipt of such refund, reduced by taxes imposed
on such Indemnified Party on receipt of such refund or interest and
increased by any taxes saved by reason of the deductibility of such
payment by the Indemnified Party. Any subsequent determination that
such Indemnified Party was not entitled to all or any portion of any
refund paid to Lessee shall be treated as a Tax indemnifiable under
Section 7(b)(i) without regard to Section 7(b)(ii). Lessee shall not
be deemed to be in default under any of the indemnification provisions
under this Section 7(b) so long as it or any Indemnified Party shall
diligently prosecute such contest; provided, that Lessee shall
nonetheless be required to pay all Advances and expenses required
hereunder. In case any report or return is required to be made with
respect to any obligation of Lessee under this Section 7(b) or arising
out of this Section 7(b), Lessee will either timely make such report
or return in such manner as will show the ownership of the Aircraft in
Owner Trustee, and send a copy of such report or return to Owner
Trustee (except for any report or return that an Indemnified Party has
notified Lessee that the Indemnified Party intends to file or that the
Indemnified Party is required by law to file), or will notify Owner
Trustee of such requirement and prepare and deliver such report or
return to the Indemnified Party in such manner as shall be
satisfactory to such Indemnified Party and Owner Trustee.
Notwithstanding the above provisions of this Section
7(b), any Indemnified Party in its sole discretion (by written notice
to Lessee) may unconditionally waive its rights to the indemnities
provided for in this Section 7(b) with respect to any Taxes, and
refrain from contesting, or continuing the contest of such Taxes, in
which event Lessee shall have no liability to such Indemnified Party
hereunder with respect to such Taxes. In addition, if
PARTICIPATION AGREEMENT [N604SW]
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an Indemnified Party shall agree to a settlement of any contest under
this Section 7(b) without the prior written consent of Lessee, then
the Indemnified Party shall be deemed to have waived its rights to the
indemnities provided in this Section 7(b) with respect to the subject
matter of such settlement. Lessee agrees to consider in good faith
any settlement proposal made with respect to any contest under this
Section 7(b).
(v) Withholdings. Notwithstanding the
exceptions in Section 7(b)(ii), Lessee agrees that each payment of
Rent and any amount payable on the Certificates shall be free of all
withholdings (other than a U.S. withholding tax, except to the extent
described in Section 15.05(d) of the Trust Indenture) of any nature
whatsoever except to the extent otherwise required by law, and in the
event that any such withholding is so required, Lessee shall pay an
additional amount of Rent such that after the deduction of all amounts
required to be withheld, the net amount actually received by each
Indemnified Party will equal the amount that would be due absent such
withholding. In the event additional Rent is paid by Lessee to
provide for withholdings pursuant to the preceding sentence in respect
of Taxes that are excepted from indemnification hereunder pursuant to
Section 7(b)(ii)(2)-(7), the Indemnified Party on whom the Tax is
imposed by way of withholding on payments to such person shall,
promptly upon receipt of notice from Lessee, reimburse Lessee for such
additional Rent. As used in this Section 7(b)(v), a "U.S. withholding
tax" shall mean any withholding tax imposed by the United States of
America (A) with respect to any Certificate pursuant to treaty or
federal law imposing withholding tax generally on payments to Persons
not organized or resident in the United States or (B) in the nature of
backup withholding under section 3406 of the Code and the regulations
thereunder, or any successor or similar provision of the Code, federal
tax law or regulations thereunder. All U.S. withholding taxes with
respect to any Certificate shall be borne by the Holder of the
relevant Certificate and none of Lessee, Owner Participant, Indenture
Trustee or Owner Trustee shall be responsible for any U.S. withholding
tax with respect to such Certificate, except that Lessee shall be
responsible to pay any such withholding taxes, at no after-tax cost to
Owner Participant, Lessor or the Estate, to the extent described in
Section 15.05(d) of the Trust Indenture. Owner Trustee may (or, if
Lessee is making any payment directly to the Holder of any Certificate
or to the Indenture Trustee, Lessee shall) or Indenture Trustee shall
withhold any applicable U.S. withholding tax from the amount then due
and pay (and, if Lessee is making any payment to the Holder or the
Indenture Trustee, Lessee shall pay) any amount withheld to the
appropriate federal taxing authority; provided, that Lessee shall
indemnify and hold the Owner Trustee and the Owner Participant
harmless on an after-tax basis from and against any and all liability
arising from any failure by any Person to withhold any U.S.
withholding taxes with respect to payments required to be made with
respect to the Certificates, and Lessee shall timely prepare and file,
or, if required by applicable law, present to the Owner Trustee for
filing, all information returns required to be prepared with respect
to any such withholding tax payments or otherwise with respect to
payments under the Certificates.
(c) General Indemnity.
(i) Indemnity. Lessee hereby agrees,
whether or not any of the transactions contemplated hereby shall be
consummated, to pay, assume liability for and indemnify, protect,
defend, save and keep harmless each Indemnified Party from and
against, on a net after-tax basis as provided in Section 7(b)(iii),
any and all liabilities, obligations,
PARTICIPATION AGREEMENT [N604SW]
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losses, damages, settlements, claims, actions, suits, penalties,
costs, expenses and disbursements (including but not limited to
reasonable legal and investigative fees and expenses and Transaction
Costs to the extent not required to be paid by Owner Participant
pursuant to Section 16 hereof, and all costs and expenses relating to
amendments, supplements, waivers and consents to and under the
Operative Agreements, but excluding internal overhead costs and
expenses such as salaries) of whatsoever kind and nature, including
but not limited to negligence, liability of an owner, strict or
absolute liability, liability without fault and liability in tort (any
of the foregoing being called a "Loss") which may from time to time be
imposed on, incurred by or asserted against any Indemnified Party or
the Aircraft, Airframe, any Engine or any Part or any portion of the
Trust Estate or the Trust Indenture Estate (whether or not any such
Loss is also indemnified or insured against by any other Person or
such Indemnified Party has also indemnified any other Person against
such Loss) in any way relating to or arising out of (a) any Operative
Agreement, the enforcement thereof or any of the transactions
contemplated thereby (including, without limitation, the performance
or observance of all obligations and conditions of Lessee thereunder,
or the falsity of any representations or warranties of Lessee therein
or thereunder or in any document or certificate delivered pursuant
thereto), (b) the purchase, acceptance or rejection of the Aircraft,
(c) the Aircraft, the Airframe, any Engine, any engine or any Part,
any data or any other thing delivered or to be delivered under an
Operative Agreement, including without limitation, the ownership,
financing, refinancing, delivery, nondelivery, lease, sublease,
assignment, registration, reregistration, deregistration, possession,
use, non-use, presence, operation, condition, storage, preparation,
installation, testing, manufacture, design, fitness for use,
merchantability, modification, replacement, substitution, alteration,
maintenance, repair, re-lease, sale, return, transportation, transfer,
abandonment or other disposition thereof or any portion thereof
(including, without limitation, latent and other defects, whether or
not discoverable, and any claim for patent, trademark or copyright
infringement, or arising under environmental control, noise or
pollution laws or regulations, and loss of or damage to any property
or the environment or death or injury to any person), or (d) the
offer, sale or delivery of the Certificates, whether before or after
the Delivery Date (the indemnity in this clause (d) to extend also to
any Person who controls an Indemnified Party, its successors, assigns,
employees, servants and agents within the meaning of Section 15 of the
Securities Act).
(ii) Exceptions. The indemnity set forth in
Section 7(c)(i) shall not extend to any Loss with respect to such
Indemnified Party (A) to the extent that such Loss is caused by acts,
omissions or events which occur after full and final compliance by
Lessee with all the terms of the Operative Agreements, (B) to the
extent such Loss is caused by acts, omissions or events which occur
following the earlier of: (I) acceptance of possession of the Airframe
or any Engine or Part by Lessor or its designee pursuant to the terms
of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long
as Lessor shall be entitled to exercise remedies under such Section
15), (II) the termination of the Term in accordance with Section 9 of
the Lease, or (III) the transfer of title to the Aircraft to Lessee
(or its designee) pursuant to Section 10.1.4 or Section 18.2 of the
Lease, (C) to the extent that such Loss is a Tax or a loss of tax
benefits, whether or not Lessee is required to indemnify therefor
pursuant to Section 7(b) hereof, (D) to the extent that such Loss is
caused by the willful misconduct or gross negligence of such
Indemnified Party (other than willful misconduct or gross negligence
PARTICIPATION AGREEMENT [N604SW]
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imputed to such Indemnified Party solely by reason of its interest in
the Aircraft) or any material misrepresentation or violation or breach
of any obligations of such Indemnified Party contained in the
Operative Agreements then in force unless such misrepresentation,
violation or breach is a result of Lessee's failure to comply with the
terms of any Operative Agreement to which it is a party, or (E) to the
extent such Loss is associated with a sale, assignment or transfer by
such Indemnified Party of its respective interest in the Aircraft, the
Certificates or the transactions contemplated hereby (other than (1)
as required by the Operative Agreements and (2) during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of
the Lease) or a Lease Event of Default or the exercise of remedies
under the Lease). This Section 7(c) does not constitute a guarantee
of the useful life or residual value of the Aircraft or a guarantee
that the Certificates will be paid.
(iii) Notice. If any Indemnified Party or
Lessee has knowledge of any Loss for which Lessee is obligated to
indemnify under this Section 7(c), it shall give prompt written notice
thereof to Lessee or such Indemnified Party, as the case may be, but
failure to give such notice shall not relieve Lessee of its
obligations hereunder or from any other obligation that Lessee may
have to such Indemnified Party at law or in equity, and no payment by
Lessee to an Indemnified Party pursuant to this Section 7(c) shall be
deemed to constitute a waiver or release of any right or remedy which
Lessee may have against such Indemnified Party for any actual damages
as a result of the failure by such Indemnified Party to give Lessee
such notice.
(iv) Right to Defend; Subrogation; Fees and
Expenses of Trustees. Lessee shall be entitled (and, at the
Indemnified Party's election, shall be obligated), at its sole cost
and expense, acting through counsel selected by Lessee reasonably
acceptable to the respective Indemnified Party, (A) in any judicial or
administrative proceeding that involves solely a claim for which
payment or indemnity is sought under this Section 7(c), to assume
responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for which payment or
indemnity is sought under this Section 7(c), and other claims related
or unrelated to the transactions contemplated by the Operative
Agreements, to assume responsibility for and the control of such claim
for which payment or indemnity is sought under this Section 7(c) to
the extent that the same may be and is severed from such other claims
(and such Indemnified Party shall use its reasonable best efforts to
obtain such severance), and (C) in any other case, to be consulted by
such Indemnified Party with respect to judicial proceedings subject to
the control of such Indemnified Party. Notwithstanding any of the
foregoing to the contrary, Lessee shall not be entitled to assume
responsibility for and control of any such judicial or administrative
proceedings (1) while any Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or Lease Event of Default shall
have occurred and be continuing, (2) if such proceedings will involve
a material risk of the sale, forfeiture or loss of, or the creation of
any Lien (other than a Permitted Lien) on, the Aircraft or the Trust
Estate or the Trust Indenture Estate or any part thereof or the loss
or impairment of the Lien of the Trust Indenture on all or any part of
the Trust Indenture Estate, (3) if such proceedings could, in the good
faith opinion of the Indemnified Party, entail any risk of material
criminal liability or material civil penalty or (4) if in the written
opinion of counsel to such Indemnified Party an actual or potential
material conflict of interest exists making it advisable for such
Indemnified Party to be represented by separate counsel. The
Indemnified
PARTICIPATION AGREEMENT [N604SW]
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Party may participate at its own expense and with its own counsel in
any judicial proceeding controlled by Lessee pursuant to the preceding
provisions.
The Indemnified Party shall supply Lessee, at Lessee's
expense, with such information within its possession reasonably requested by
Lessee as is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c). Such Indemnified
Party shall not enter into a settlement or other compromise with respect to any
Loss without the prior written consent of Lessee (except during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default when such consent shall not be required if such
Indemnified Party gives 10 days' prior written notice to Lessee describing the
proposed settlement or other compromise), which consent shall not be
unreasonably withheld or delayed, unless such Indemnified Party waives its
right to be indemnified with respect to such Loss under this Section 7(c).
Lessee shall supply the Indemnified Party with such
information reasonably requested by the Indemnified Party as is necessary or
advisable for the Indemnified Party to control or participate in any proceeding
to the extent permitted by this Section 7(c).
Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.
In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person seeking indemnification from Lessee pursuant to any provision of
this Agreement may proceed directly against Lessee without first seeking to
enforce any other right of indemnification.
Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 9.02(c) of
the Trust Indenture) and, as provided in Section 6.07 of the Trust Agreement,
the Owner Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel), without cost, on a net after-tax basis, to the Owner
Participant, for acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay the
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reasonable fees and expenses of any separate owner trustee or co-trustee
appointed pursuant to Section 9.02 of the Trust Agreement as a result of any
requirement of law or if otherwise required by any Operative Agreement or if
requested, or consented to, by the Lessee.
(d) Owner Participant's Indemnity. Owner Participant
covenants and agrees that if (i) Lessee has elected pursuant to Section 9.1 of
the Lease to terminate the Lease by causing the Aircraft to be sold pursuant to
Section 9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of
the Lease, given to Lessee written notice of Lessor's election to retain title
to the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
on or before the proposed termination date over the price for which the
Aircraft may subsequently be sold (but disregarding any portion of such bid or
such price in excess of the applicable Termination Value), any additional Rent
paid by Lessee (less an amount representing the fair value to Lessee of its use
of the Aircraft for the period of time in respect of which such Rent was paid)
and any reasonable fees and expenses of lawyers, appraisers, brokers or
accountants) incurred as a consequence of such failure by Owner Trustee.
(e) Payments. Any payments made pursuant to this Section
7 shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.
(f) Interest on Overdue Amounts. If any amount payable
by Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.
(g) Survival. All indemnities, obligations, adjustments
and payments provided for in this Section 7 shall survive, and remain in full
force and effect, notwithstanding the expiration or other termination of this
Agreement, the Lease or any other Operative Agreement. The obligations of
Lessee in respect of all such indemnities, obligations, adjustments and
payments are expressly made for the benefit of, and shall be enforceable by,
each Indemnified Party or other indemnitee entitled thereto, without taking any
action under the Lease.
SECTION 8. Other Representations, Warranties,
Covenants and Indemnities. (a) Securities Laws. The Owner Participant
represents that it is acquiring its interest in the Trust Estate for investment
purposes only and not with a present intent as to any resale or distribution
thereof (subject nonetheless to any requirement of law that the disposition of
its properties shall at all times be and remain within its control) and that
neither it nor anyone acting on its behalf has directly or indirectly offered
any interest in the Trust Estate or any Certificates or any similar securities
for sale to, or solicited any offer to acquire any of the same from, anyone in
a manner
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which would result in a violation of the Securities Act or the securities laws,
rules and regulations of any state.
(b) Citizenship. Each of the Owner Participant and SBC,
in its individual capacity, represents and warrants to the other parties to
this Agreement that it is a "citizen of the United States" as defined in 49
U.S.C. Section 40102(a)(15)(C). The Owner Participant agrees, solely for the
benefit of Lessee, each Sublessee, the Indenture Trustee and the Holders, that
if at any time (i) it shall not be a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) and (ii) the Aircraft shall be, or
would therefore become, ineligible for registration in the name of the Owner
Trustee under the Act and regulations then applicable thereunder (it being
understood that the effect of any such status shall be determined without
giving consideration to any provision of the Act (or any superseding statute)
which permits United States registration of an aircraft based on conditions
which impose restrictions on the location and use of such aircraft or otherwise
restrict the ability of an air carrier to operate an aircraft in the ordinary
course of its business), then the Owner Participant shall (at its own expense
and without any reimbursement or indemnification from Lessee) as soon as is
reasonably practicable but in any event within 30 days after obtaining actual
knowledge of such loss of citizenship (A) effect voting trust or other similar
arrangements or take any other action as may be necessary to prevent any
deregistration or to maintain the United States registration of the Aircraft
and (to the extent such recordation is dependent on the U.S. registration of
the Aircraft) the recordation with the FAA of the Trust Indenture and the
Lease, or (B) transfer its beneficial interest in the Trust Estate in
accordance with Section 8(l) hereof. It is understood that: (1) the Owner
Participant shall be liable to any of the other parties hereto for any damages
suffered by any such other party as the result of the representation and
warranty of the Owner Participant in the first sentence of this Section 8(b)
proving to be untrue as of the Delivery Date; and (2) the Owner Participant
shall be liable to Lessee, any Sublessee and any Holder for any damages which
may be incurred by Lessee, any Sublessee or such Holder as a result of such
loss of citizenship by the Owner Participant and the inability to register (or
maintain the registration of) the Aircraft in the name of the Owner Trustee
under the Act and regulations then applicable thereunder as a result of such
loss of citizenship. Each of Lessee (as provided in Section 11(b)), the
Original Loan Participant, the Owner Trustee and the Indenture Trustee agrees,
upon the request and at the sole expense of the Owner Participant, to take all
reasonable acts requested by the Owner Participant in complying with its
obligations under clause (A) or (B) of the second sentence of this Section
8(b). SBC, in its individual capacity, agrees that if at any time a
responsible officer of SBC shall obtain actual knowledge that SBC has ceased to
be a "citizen of the United States" within the meaning of Section 101(16) of
the Act, it will promptly resign as Owner Trustee (if and so long as such
citizenship is necessary under the Act as in effect at such time or, if it is
not necessary, if and so long as the Owner Trustee's citizenship would have any
adverse effect on a Holder, Lessee, a Sublessee or the Owner Participant),
effective upon the appointment of a successor Owner Trustee in accordance with
Section 9.01 of the Trust Agreement.
(c) Chief Executive Office of SBC. SBC in its individual
capacity represents and warrants that both the principal place of business of
the Owner Trustee and the place where its records concerning the Aircraft and
all of its interest in, to and under the Operative Agreements to which it is a
party are or will be kept is Hartford, Connecticut (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture)
and has its chief executive office (as such term is used in Article 9 of the
Uniform Commercial Code) in Hartford, Connecticut. SBC in its individual
capacity agrees that it will not change the location of such office to a
location outside
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of Hartford, Connecticut, without 10 days' prior written notice to Lessee,
Indenture Trustee and the Owner Participant.
(d) Securities Laws. The Original Loan Participant
represents and warrants that the Series SWA 1995 Trust N604SW-I Certificate to
be issued to it pursuant to the Trust Indenture is being acquired by it with no
present intent to make any resale or distribution thereof which would require
registration under the Securities Act and it will not offer or sell any
Certificate in violation of the Securities Act; provided, that the disposition
of its property shall at all times be and remain within its control, and that
neither it nor anyone acting on its behalf has offered any Certificates or any
similar securities relating to the Aircraft for sale to, or solicited any offer
to buy any Certificates or any similar securities relating to the Aircraft
from, any person or entity other than in a manner required by the Securities
Act and the rules and regulations thereunder and the securities laws, rules and
regulations of any state.
(e) [Intentionally Reserved].
(f) Owner Participant's Representations and Warranties.
The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation
duly organized and validly existing in good standing under the laws of
the State of Alabama, and has the corporate power and authority to
carry on its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under the
Owner Participant Agreements;
(ii) the Owner Participant Agreements have
been duly authorized by all necessary corporate action on the part of
the Owner Participant, do not require any approval not already
obtained of stockholders of the Owner Participant or any approval or
consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been
duly executed and delivered by the Owner Participant, and, subject to
and in reliance upon the representations made by the Original Loan
Participant and Lessee in Sections 8(o) and 7(a)(xv), respectively,
and compliance with the covenants of Section 8(d), neither the
execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions contemplated thereby by the Owner
Participant, nor compliance by the Owner Participant with any of the
terms and provisions thereof will contravene any United States federal
or state law, judgment, governmental rule, regulation or order
applicable to or binding on the Owner Participant (it being understood
that no representation or warranty is made with respect to laws, rules
or regulations relating to aviation or to the nature of the equipment
owned by the Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of the Owner Participant
under applicable aviation law) or contravene or result in any breach
of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a)
of the definition thereof) upon the Trust Estate under, any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement, corporate charter, by-law or other
agreement or instrument to which the Owner Participant is a party or
by which it or its properties may be bound or affected;
PARTICIPATION AGREEMENT [N604SW]
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(iii) assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, each
of the Owner Participant Agreements constitutes a legal, valid and
binding obligation of the Owner Participant enforceable against the
Owner Participant in accordance with the terms thereof;
(iv) there are no pending or, to the
knowledge of the Owner Participant, threatened actions or proceedings
against the Owner Participant before any court or administrative
agency which, if determined adversely to the Owner Participant, would
materially adversely affect the financial condition of the Owner
Participant or the ability of the Owner Participant to perform its
obligations under the Owner Participant Agreements; and
(v) on the Delivery Date, there will be no
Lessor Liens attributable to the Owner Participant.
(g) Lessor Liens. Each of SBC in its individual capacity
and the Owner Participant severally covenants and agrees (i) that it shall not
cause or permit to exist a Lessor Lien attributable to it with respect to the
Aircraft or any other portion of the Trust Estate, (ii) that it will promptly,
at its own expense, take such action as may be necessary duly to discharge such
Lessor Lien attributable to it, and (iii) that it will make restitution to the
Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it.
(h) Indenture Trustee Liens. Wilmington Trust Company in
its individual capacity covenants and agrees that it shall not cause or permit
to exist any Lien, arising as a result of (i) claims against the Indenture
Trustee not related to its interest in the Aircraft or the administration of
the Trust Estate pursuant to the Trust Indenture, (ii) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to take any
action required by, the Operative Agreements to the extent such acts arise or
such failure arises from or constitutes gross negligence or willful misconduct,
(iii) claims against the Indenture Trustee relating to Taxes or Losses which
are excluded from the indemnification provided by Section 7 hereof pursuant to
said Section 7, or (iv) claims against the Indenture Trustee arising out of the
transfer by the Indenture Trustee of all or any portion of its interest in the
Aircraft, the Trust Estate, the Trust Indenture Estate or the Operative
Agreements other than (A) a transfer of the Aircraft pursuant to Section 9, 10
or 18 of the Lease or Article 5 or 8 of the Trust Indenture, (B) any borrowing
pursuant to Section 17 hereof, or (C) a transfer of the Aircraft pursuant to
Section 15 of the Lease while a Lease Event of Default is continuing and prior
to the time that the Indenture Trustee has received all amounts due pursuant to
the Trust Indenture.
(i) Termination Instructions to Owner Trustee. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.
(j) Excess Payment. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly (other than the recourse liability of
the Owner Participant under this Agreement), to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and
PARTICIPATION AGREEMENT [N604SW]
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(iii) any such Holder or the Indenture Trustee actually receives any Excess
Payment (as hereinafter defined) which reflects any payment by the Owner
Trustee (in its individual capacity) or the Owner Participant on account of
clause (ii) above, then such Holder or the Indenture Trustee shall promptly
refund to the Owner Trustee or the Owner Participant (whichever shall have made
such payment) such Excess Payment. For purposes of this Section 8(j), "Excess
Payment" means the amount by which such payment exceeds the amount which would
have been received by such Holder or the Indenture Trustee if the Owner Trustee
(in its individual capacity) or the Owner Participant had not become subject to
the recourse liability referred to in clause (ii) above. Nothing contained in
this Section 8(j) shall prevent such Holder or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant
under this Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) Representations and Warranties of Indenture Trustee
in Individual Capacity. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States"
as defined in 49 U.S.C. Section 40102(a)(15)(C) that it will notify
promptly all parties to this Agreement if in its reasonable opinion
its status as a "citizen of the United States" is likely to change and
that it will resign as Indenture Trustee as provided in Section 9.07
of the Trust Indenture if it should cease to be a "citizen of the
United States";
(ii) it is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and
the authentication of the Certificates have been duly authorized by
all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation governing its banking or trust powers or any judgment or
order binding on it or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it or its properties may be bound or affected;
(iv) each of the Indenture Trustee Agreements
has been duly executed and delivered by it and, assuming that each
such agreement is the legal, valid and binding obligation of each
other party thereto, is the legal, valid and binding obligation of the
Indenture Trustee, enforceable against it in accordance with its
terms;
(v) neither the execution and delivery by
it, in its individual capacity or as Indenture Trustee, as the case
may be, of this Agreement or the Trust Indenture nor the consummation
of any of the transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, or the registration
with, any governmental authority or agency pursuant to any law of the
State of Delaware or the United States governing the banking or trust
powers of the Indenture Trustee; and
PARTICIPATION AGREEMENT [N604SW]
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(vi) neither it nor anyone authorized to act
on its behalf has directly or indirectly offered any beneficial
interest or security relating to the ownership of the Aircraft or the
Lease or any interest in the Trust Estate or the Trust Indenture
Estate, or any of the Certificates or any other interest in or
security under the Trust Indenture, for sale to, or solicited any
offer to acquire any such interest or security from, or has sold any
interest or security to, any Person, and it will not directly or
indirectly make any such offer, solicitation or sale.
(l) Transfers of Equity Interests; Rights of Owner
Participant and Owner Trustee. So long as the Aircraft shall be leased to
Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion (in
form, scope and substance reasonably satisfactory to the Indenture Trustee and
Lessee) of counsel reasonably satisfactory to the Indenture Trustee and Lessee
to the effect that the agreement referred to in clause (O) below and any
guaranty required by clause (B) or (C) below, are the legal, valid, binding and
enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital, surplus and undivided profits of
at least $75,000,000 or a limited partnership or corporation whose net worth is
at least $75,000,000, (B) any subsidiary of such a bank, financial institution,
limited partnership or corporation; provided, that such bank, financial
institution, limited partnership or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty in the form attached as Exhibit A
hereto with respect to the Owner Participant's obligations, in the case of the
Owner Trustee, under the Trust Agreement and, in the case of the Indenture
Trustee and Lessee, the Owner Participant's obligations hereunder, or (C) any
other corporation or limited partnership, provided such obligations are
guaranteed by the transferor Owner Participant; provided, however, that unless
otherwise consented to by Lessee any Transferee shall not be an air carrier, an
air freight forwarder or other similar Person or a corporation controlling,
controlled by or under common control with such an air carrier, an air freight
forwarder or other similar Person. Each such transfer to a Transferee shall be
subject to the conditions that (M) upon giving effect to such transfer, the
Transferee is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) or the Transferee, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), shall
have entered into a voting trust or similar arrangement which permits the
registration of the Aircraft under the Act in the name of the Owner Trustee
without any restriction on the operation of the Aircraft, (N) the Transferee
has the full power and authority to enter into and carry out the transactions
contemplated hereby, (O) the Transferee enters into an agreement or agreements,
in form and substance reasonably satisfactory to the Owner Trustee, Lessee and
the Indenture Trustee, whereby the Transferee confirms that it shall be deemed
a party to this Agreement and a party to the Trust Agreement and agrees to be
bound by all of the terms of, and to undertake all of the obligations of the
transferor Owner Participant contained in the Owner Participant Agreements and
makes representations of the scope provided for as to the Owner Participant in
each of the Operative Agreements, (P) such transfer does not result in a
nonexempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA with respect to such Holders about which the Owner Participant shall
have received such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Original Loan Participant and the Indenture Trustee shall cooperate
in providing such information as
PARTICIPATION AGREEMENT [N604SW]
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may be available), (Q) such transfer does not violate any applicable law
including, without limitation, the Act, or any rules or regulations promulgated
thereunder, the Securities Act or the Trust Indenture Act of 1939, (R) after
giving effect to such transfer, there shall be no more than one Owner
Participant of record at that time, and (S) such transfer will not give rise to
an Indenture Default or Indenture Event of Default; and Lessee or the Indenture
Trustee may request such Transferee to provide an opinion of counsel (who shall
be reasonably satisfactory to Lessee and the Indenture Trustee) in form, scope
and substance reasonably satisfactory to Lessee and the Indenture Trustee as to
any matter set forth in clause (Q) and as to such other matters as Lessee or
the Indenture Trustee may reasonably request. Upon any such transfer by the
Owner Participant as above provided, the Transferee shall be deemed the Owner
Participant for all purposes hereof and of the other Operative Agreements and
each reference herein to the transferor Owner Participant shall be deemed for
all purposes, with respect to circumstances existing and requirements arising
thereafter, to be to the Transferee and the transferor Owner Participant shall
be relieved of all obligations of the transferring Owner Participant under the
Owner Participant Agreements arising after the date of such transfer except to
the extent fairly attributable to acts or events occurring prior thereto and
not assumed by the transferee Owner Participant. If the Owner Participant
intends to transfer its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than ten (10) Business
Days prior thereto, to the Indenture Trustee, the Owner Trustee and Lessee,
specifying the name and address of the proposed Transferee and the facts
necessary to determine whether or not the requirements for a Transferee, as set
forth herein, are satisfied. The Owner Participant shall pay, or shall cause
the transferee Owner Participant to pay, all of the reasonable costs and
expenses (including, without limitation, legal fees and expenses) of the
Original Loan Participant and the other parties hereto (except the costs and
expenses of Lessee if such transfer is effected during the continuance of a
Lease Default (of the type described in Section 14.1 or 14.5 of the Lease) or a
Lease Event of Default or in connection with the exercise of remedies under the
Lease), on a net after-tax basis, of any such transfer. For purposes of this
Agreement, "net worth" shall mean the excess of total tangible assets over
total liabilities, each to be determined in accordance with generally accepted
accounting principles consistently applied.
(m) Obligations of Trustees. The Indenture Trustee shall
be responsible for the payment, performance and discharge of, and shall fully
and completely pay, perform and discharge, all of its obligations under the
Trust Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Trust Agreement, the Owner Trustee shall be responsible for
the payment, performance and discharge of, and shall fully and completely pay,
perform and discharge, all of its obligations under the Lease in accordance
with the terms thereof.
(n) Compliance with Trust Indenture. SBC and Wilmington
Trust Company, each in its individual capacity, agrees for the benefit of
Lessee to comply with the terms of the Trust Indenture which it is required to
comply with in its individual capacity.
(o) ERISA. The Owner Participant represents and warrants
that no part of the funds used by it to acquire its interest in the Trust
Estate constitutes "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4975(e)(1) of
the Code, as interpreted by the Department of Labor. The Original Loan
Participant represents and warrants that no part of the funds used by it to
acquire the Certificates or any interest therein (including any participation
in such Certificates) constitutes "plan assets" of any "employee benefit
PARTICIPATION AGREEMENT [N604SW]
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plan" within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code.
(p) SBC's Representations and Warranties. SBC, in its
individual capacity, represents, warrants and covenants that:
(i) each of the Owner Trustee Documents has
been duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such instruments on behalf of the
Owner Trustee or SBC, as the case may be;
(ii) the Trust Estate is free and clear of
Lessor Liens attributable to SBC in its individual capacity, and there
are no Liens affecting the title of the Owner Trustee to the Aircraft
or resulting from any act or claim against SBC in its individual
capacity arising out of any event or condition not related to the
ownership, leasing, use or operation of the Aircraft or to any other
transaction contemplated by this Agreement or any of the other
Operative Agreements, including any Lien resulting from the nonpayment
by SBC in its individual capacity of any Taxes imposed or measured by
its net income;
(iii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to SBC in its
individual capacity and which is presently continuing;
(iv) it is a national banking association
duly organized, validly existing and in good standing under the laws
of the United States and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has the
corporate power and authority to enter into and perform its
obligations under the Trust Agreement and this Agreement (in its
individual capacity), and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has full
right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the
other Owner Trustee Documents;
(v) each of the Trust Agreement and this
Agreement (in its individual capacity) and the Owner Trustee Documents
(in its trust capacity) has been duly authorized by all necessary
corporate action on its part, and neither the execution and delivery
thereof nor its performance of any of the terms and provisions thereof
will violate any federal or Connecticut law or regulation relating to
its banking or trust powers or contravene or result in any breach of,
or constitute any default under, its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution
and delivery of the Trust Agreement by the Owner Participant, each of
the Owner Trustee Documents has been duly executed and delivered by it
and, each of the Trust Agreement and this Agreement (to the extent
executed by the Owner Trustee in its individual capacity) is a legal,
valid and binding obligation of SBC in its individual capacity and as
Owner Trustee, as the case may be, enforceable against such party in
accordance with the terms thereof;
PARTICIPATION AGREEMENT [N604SW]
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(vii) on the Delivery Date, the Owner Trustee
shall have received whatever title to the Aircraft as was conveyed to
it by Lessee;
(viii) neither it nor anyone acting on its
behalf has offered any interest in the Trust Estate or any
Certificates or any similar securities for sale to, or solicited any
offer to acquire the same from, anyone, and no responsible officer or
responsible employee of SBC has knowledge of any such offer or
solicitation, except as set forth in Section 7(a)(x) hereof;
(ix) assuming due authorization, execution
and delivery of each of the Owner Trustee Documents by each of the
parties thereto (other than the Owner Trustee), each of the Owner
Trustee Documents is a legal, valid and binding obligation of the
Owner Trustee, enforceable against the Owner Trustee in accordance
with its respective terms;
(x) there are no proceedings pending or, to
the best knowledge of SBC, threatened, against SBC in any court or
before any governmental authority or arbitration board or tribunal
which, if adversely determined, would materially and adversely affect
the right, power and authority of SBC to enter into or perform its
obligations under the Owner Trustee Documents;
(xi) neither the due execution and delivery
of the Owner Trustee Documents by SBC, in its individual capacity or
as Owner Trustee under the Trust Agreement, as the case may be, nor
the consummation by it of any of the transactions contemplated thereby
require the consent or approval of, the giving of notice to, or the
registration with, any federal or Connecticut governmental authority
or agency pursuant to any federal or Connecticut law governing the
banking or trust powers of SBC; and
(xii) no later than sixty (60) days after
Lessee shall so request in writing, Owner Trustee shall execute and
deliver to Lessee (on a form to be supplied by Lessee) a Texas Sales
and Use Tax Certificate of Resale reflecting Owner Trustee's Texas or
Connecticut sales tax permit number and Owner Trustee's purchase of
the Aircraft pursuant to the Lease for lease to Lessee thereunder,
and, if necessary to permit Owner Trustee to issue such Certificate,
Owner Trustee shall apply for (on a form to be supplied by Lessee) a
Texas sales tax permit.
(q) Owner Participant's Lease Expenses. The Owner
Participant covenants and agrees to pay or cause the Owner Trustee to pay those
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) Lessee's Assumption of Debt. Subject to compliance
by Lessee with all of its obligations under the Operative Agreements and
provided that the Series SWA 1995 Trust N604SW-I Certificates are no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense at no net after-tax
cost to any of such parties (including, without limitation, reasonable
attorneys' fees and expenses of each of such parties), (i) if Lessee elects to
terminate the Lease and to purchase the Aircraft pursuant to Section 18.2(b) of
the Lease, each of such parties will, subject to due compliance by Lessee with
the provisions of said Section 18.2(b), execute and deliver appropriate
documentation to Transfer to
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Lessee the Aircraft, and (ii) Lessee, in connection with such purchase, may (if
no Lease Default (of the type described in Section 14.1 or 14.5) or Lease Event
of Default shall have occurred and be continuing), assume (and, as set forth in
Section 18.2(c) of the Lease, receive a credit in an amount equal to the
principal amount of the debt assumed, against the purchase price payable by
Lessee pursuant to Section 18.2(b) of the Lease) the obligations of the Owner
Trustee pursuant to Section 7.03 of the Trust Indenture and the Certificates
(and the Lease, to the extent that the Owner Trustee's obligations thereunder
are incorporated into the Trust Indenture or the Certificates), and in such
event each of the parties shall execute and deliver appropriate documentation
as contemplated by Section 7.03 of the Trust Indenture.
(s) [Intentionally Reserved].
(t) [Intentionally Reserved].
(u) Lease Adjustments. Section 3.7 of the Lease
contemplates that, under certain circumstances, the Owner Participant will make
certain recalculations and the Owner Participant hereby agrees to promptly take
such actions as may be necessary or desirable to give effect to and to cause
the Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.
(v) Revocation of Trust Agreement. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee and the Holders
that it will not revoke or otherwise terminate the Trust Agreement as long as
the Trust Indenture is in effect, and (ii) solely for the benefit of Lessee
that it will not revoke or otherwise terminate the Trust Agreement during the
Term without the prior written consent of Lessee, except that, notwithstanding
the foregoing clauses (i) and (ii), or any other provision of the Operative
Agreements to the contrary, the Owner Participant shall have the right to
terminate the trusts set forth in the Trust Agreement without the consent of
any other party to the Operative Agreements, at any time, if in connection
therewith the Owner Participant shall simultaneously create a new trust upon
substantially the same terms and conditions as the trusts so terminated and
shall cause the Trust Estate to be vested in the Owner Trustee under the new
trust upon the same terms and conditions so applied to such terminated trust;
provided, however, that in connection with any such termination (A) none of the
creation of such new trust, the termination of the trust set forth in the Trust
Agreement or the transactions consummated in connection therewith will have any
adverse impact on any of Lessee's rights or the Indenture Trustee's rights
under the Operative Agreements (including the first priority lien status of the
Lien of the Trust Indenture), (B) Lessee shall have no responsibility to
indemnify any Indemnified Party under any provision of any Operative Agreement
for any Taxes or other consequences that in either case would not have been
incurred but for such termination and transfer, (C) the Owner Participant shall
indemnify Lessee and the Indenture Trustee for any costs, expenses, taxes or
other consequences that in either case would not have been incurred but for
such termination and transfer, (D) the Owner Participant shall provide Lessee
and the Indenture Trustee with an opinion in form and substance reasonably
satisfactory to them as to the effect of such termination and transfer, and (E)
immediately after such transfer, the beneficiary of the new trust shall be the
same as the beneficiary of the trust set forth in the Trust Agreement. The
Owner Participant further agrees (x) promptly to provide instructions to the
Owner Trustee, upon the request of the Owner Trustee and as otherwise required
or permitted under the Trust Agreement, so as to enable the Owner Trustee to
perform its duties and obligations under the Operative Agreements in accordance
with the terms and provisions thereof and (y) not to
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remove the institution acting as Owner Trustee, and not to replace the
institution acting as Owner Trustee in the event that such institution resigns
as Owner Trustee, unless the Owner Participant shall have consulted in good
faith with Lessee prior to such removal or replacement; provided, that no such
consultation shall be required if a Lease Event of Default shall have occurred
and be continuing.
(w) [Intentionally Reserved].
(x) Withholding Taxes. The Original Loan Participant
represents that it is exempt from United States withholding taxes, and
covenants that, if required to obtain or renew such exemption, it will properly
prepare and promptly furnish to each of the Owner Trustee, the Indenture
Trustee, and Lessee Internal Revenue Service Form 1001, Form 4224 (with respect
to each tax year) or Form W-8, whichever is applicable. The Original Loan
Participant represents, warrants and covenants that it will promptly notify the
Owner Trustee, the Indenture Trustee and Lessee if it transfers any interest in
its Series SWA 1995 Trust N604SW-I Certificate to any Person, other than
pursuant to Section 17 or 18 hereof or Section 8.03(e)(ii) of the Indenture.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee, Lessee and
the Owner Participant against any United States withholding taxes (and related
interest and penalties) which the Indenture Trustee fails to withhold on
payments to it as a result of its failure to provide the required certificate
or form or the invalidity of any certificate or form provided by it pursuant to
this Section 8(x) or as a result of any inaccuracy of the representations set
forth in the immediately preceding paragraph. Any amount payable hereunder
shall be paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor and shall include interest at the Overdue Rate from
the date any withholding tax has been paid by such party until the date
indemnified by the Original Loan Participant.
(y) Discharge of Trust Indenture. The Owner Participant
agrees that, at Lessee's expense (including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses of the Owner Trustee and Owner
Participant), upon request of Lessee, the Owner Participant will negotiate
promptly in good faith with respect to any arrangements pursuant to which the
Trust Indenture may be satisfied and discharged in respect of the Certificates
in accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that it will
not, and the Owner Participant agrees that during such time as a Lease Event of
Default has not occurred it will not cause the Owner Trustee to, take any
action to effect such satisfaction and discharge except upon the request of
Lessee made pursuant to this Section 8(y).
(z) Permitted Investments. The Owner Trustee agrees that
(i) so long as the Trust Indenture has not been duly discharged, any profit,
income, interest, dividend or gain realized upon the maturity, sale or other
disposition of any Permitted Investment made by the Indenture Trustee pursuant
to Section 9.04 of the Trust Indenture, and paid to Lessee on behalf of the
Owner Trustee by the Indenture Trustee in accordance with the terms of such
Section 9.04, shall be entirely for the account of, and the sole property of,
Lessee who, for such purposes, shall not be deemed to be acting as agent of the
Owner Trustee, and Lessee shall have no obligation to pay over such profit,
income, interest, dividend or gain to the Owner Trustee, (ii) any such profit,
income, interest, dividend or gain
PARTICIPATION AGREEMENT [N604SW]
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not theretofore distributed shall, upon discharge of the Trust Indenture, be
paid by the Indenture Trustee to Lessee, unless instructed by the Owner
Participant to distribute such funds to the Owner Participant or the Owner
Trustee to the extent the Owner Participant or the Owner Trustee is owed any
amounts under the Operative Agreements that have not been paid when due, and
(iii) except to the extent the Owner Trustee or Owner Participant is owed any
amounts under the Operative Agreements by Lessee and such amounts are not paid
when due, the Owner Participant may cause the Indenture Trustee to distribute
and apply such profit, income, interest, dividend or gain realized upon the
maturity, sale or other disposition of investment of funds pursuant to Section
22.1 of the Lease, in satisfaction or partial satisfaction of the amounts so
due.
(aa) Special Purchase Option. If Lessee shall have
elected both (i) to assume all of the rights and obligations of Lessor under
the Trust Indenture in accordance with Section 7.03 of the Trust Indenture and
(ii) to pay to Lessor the installments specified in the proviso to Section
18.2(c) of the Lease, then, as further conditions precedent to those specified
in paragraphs (c) and (d) of Section 18.2 of the Lease to such assumption:
(1) the Indenture Trustee shall have received evidence reasonably
satisfactory to it that the Trust Indenture, after giving effect to the
transactions contemplated by Section 18.2(d) of the Lease, constitutes a first
priority and perfected security interest in the Aircraft, which evidence shall
include an opinion of the tenor contemplated by Section 7.03(h) of the Trust
Indenture and the Owner Trustee shall have received evidence reasonably
satisfactory to it that it has a second priority and perfected security
interest in the Aircraft; and (2) the Indenture Trustee and the Owner Trustee
shall execute and deliver an intercreditor agreement that covers the following
matters:
(x) the Owner Trustee shall not, notwithstanding any
Lease Event of Default, exercise any remedy accorded to it pursuant to
Section 15 of the Lease until the Trust Indenture shall have been
discharged pursuant to Section 10.01 of the Trust Indenture;
(y) payment of the Supplemental Rent under the Lease in
respect of the installments specified in Section 18.2(c) of the Lease,
and all other amounts owing to the Owner Trustee (other than Excluded
Payments) (collectively, "Equity Payments"), shall be fully and
unconditionally subordinated to the payment in full in cash of
principal, interest, Break Amount or Premium, if any, and all other
amounts owing to the Holders or the Indenture Trustee under or in
respect of the Certificates or the Trust Indenture (collectively,
"Debt Payments"), all pursuant to such terms of subordination as shall
be effectively and substantively equivalent to the manner in which
Debt Payments are paid or payable in priority to the Equity Payments,
and such other customary terms of subordination as shall be reasonably
required by the Indenture Trustee; and
(z) the Owner Trustee shall have the substantive
equivalent of the cure and buy-out rights specified in clauses (e)(i)
and (e)(ii) of Section 8.03 of the Trust Indenture.
(2) The opinion to be delivered pursuant to Section 7.03(g) of the
Trust Indenture shall be given with the following additional requirements:
(y) it shall be addressed to the Owner Trustee, as well;
PARTICIPATION AGREEMENT [N604SW]
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(z) in the case of the opinion called for by Section
7.03(g)(iv), it shall be given by Vinson & Elkins L.L.P., or such other counsel
reasonably satisfactory to the Owner Trustee; the proviso included in such
Section 7.03(g)(iv) shall not apply; and such opinion shall be delivered to the
Owner Trustee 30 days prior to the Assumption Date.
(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or Section 8.03(e)(ii)
of the Indenture, the Original Loan Participant covenants that it will not (i)
transfer or (ii) grant participations in, its Certificate to any Person unless
such Person represents, warrants and covenants in writing to the Original Loan
Participant and, in the case of a transfer, to the Owner Participant and
Lessee, (A) to the effect set forth in Section 8(x) hereof and (B) further
represents and warrants to the Original Loan Participant and, in the case of a
transfer, to the Owner Participant and Lessee either that (a) no part of the
funds used by it to acquire its Series SWA 1995 Trust N604SW-I Certificate or
participation constitutes "plan assets" of any "employee benefit plan" within
the meaning of ERISA or any "plan" within the meaning of Section 4975(e)(1) of
the Code, or (b) its purchase or acquisition of such Series SWA 1995 Trust
N604SW-I Certificate or participation will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of ERISA. Any such
Person shall require any transferee of its interest to make the
representations, warranties and covenants in the preceding sentence.
(cc) [Intentionally Reserved].
(dd) Deferred Equity. The Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and not with any
other party to this Agreement or the Holders of any Certificates), that, so
long as no Lease Event of Default or Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) shall have occurred and be continuing, it
will pay or cause to be paid to the Indenture Trustee on the Deferred Equity
Date sufficient funds to effect the payment of an amount (the "Deferred Equity
Amount") equal to the amount due on such date in respect of accrued interest on
the Certificates from their date of issuance to and including the Deferred
Equity Date. The Owner Participant and the Owner Trustee hereby direct the
Indenture Trustee, and the Indenture Trustee hereby agrees, to apply the
Deferred Equity Amount to the payment of interest on the Certificates which may
be due and payable pursuant to the provisions of the Trust Indenture on the
Deferred Equity Date. The Owner Participant agrees to make payment of the
Deferred Equity Amount in immediately available funds on or before 11:00 a.m.,
New York City time, on the Deferred Equity Date; provided, that the Owner
Participant agrees to give Lessee notice by 11:00 a.m., New York City time, on
the second Business Day prior to the Deferred Equity Date, if it shall not make
such payment. The Indenture Trustee agrees to give Lessee prompt notice if it
shall not have received such payment by noon, New York City time, on the
Deferred Equity Date. The Owner Participant further agrees to fund the
obligations of the Owner Trustee arising pursuant to clause (5) of Section
18(a). In the event the Owner Participant fails to make any such payment, or
if the Owner Trustee shall fail to make the payment required pursuant to clause
(5) of Section 18(a), and in either case Lessee shall make an Advance as
required by Section 3.8 of the Lease, Lessee may obtain reimbursement in the
manner and to the extent provided in Section 3.8 of the Lease for the Advance,
together with interest on such amount at the rate described below from (and
including) the date of the making of such Advance to (but excluding) the date
of reimbursement by the Owner Participant or the date Lessee deducts such
Advance from other payments to the extent and as provided in Section 3.8 of the
Lease and, without duplication of the foregoing, shall have such remedies as
may be available to it against the Owner Participant at law or in equity in
respect of the
PARTICIPATION AGREEMENT [N604SW]
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recovery of any such Advance. Interest shall accrue on the amount of the
Advance at an annual rate equal to 5% in excess of the Base Rate, unless the
Advance is made when any Lease Event of Default or Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) shall have occurred and be
continuing, in which event interest shall accrue on the amount of the Advance
at the Base Rate, but in each case not to exceed to maximum rate permitted by
applicable law. All amounts paid to Lessee by the Owner Participant in respect
of the Advance or deducted by Lessee pursuant to Section 3.8 of the Lease shall
be applied first to payment to Lessee of interest and then to payment to Lessee
of amounts equal to the Advance.
(ee) Lessee as Pricing Agent for Certificate. The Owner
Trustee hereby appoints Lessee as its agent to select the pricing provisions
and related Interest Periods in respect of the Series SWA 1995 Trust N604SW-I
Certificate, such appointment to be effective so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing.
SECTION 9. Payments to Lessee of Trust Indenture
Monies. The Owner Participant hereby agrees to instruct the Owner Trustee to
promptly distribute any money received by it pursuant to Section 7.01 or 10.04
of the Trust Indenture to Lessee to the extent such amounts were paid by Lessee
or on behalf of Lessee and the Owner Trustee or the Owner Participant is not
owed any amounts under any of the Operative Agreements by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and reinvest all money
so held by it in such Permitted Investments as Lessee deems appropriate.
Lessee will apply such money to the payment of previously unclaimed payments
with respect to the Certificates when and as claims for payment are made by the
Holders of such Certificates. As compensation for its services pursuant to
this Section 9, Lessee shall be entitled to an annual fee from the Owner
Participant in an amount to be agreed to at the time by Lessee and the Owner
Participant but in no event shall such fee exceed at any time the amount of
earnings on the monies so held in trust distributable at such time to the Owner
Participant. Any net losses on such investment shall be for the account of
Lessee. Any net earnings on such investment shall be distributed from time to
time by Lessee to the Owner Participant after deducting therefrom any portion
of such fee then due and unpaid. Upon the date required by applicable law
dealing with unclaimed property, Lessee will distribute to the Owner
Participant any amount held by it pursuant to this Section 9 and not previously
applied to the payment of the Certificates, after deducting therefrom any
portion of such fee then due and unpaid.
SECTION 10. Other Documents; Amendment. Lessee
acknowledges receipt of executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to the execution and delivery of
the Trust Agreement and Trust Indenture and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, to the extent the same purports or
is stated to bind the Owner Participant, the Trust Indenture (each as the same
may hereafter be amended or supplemented from time to time in accordance with
the terms thereof) applicable to it, to the extent such non-compliance would be
adverse to such party; and (B) subject to Section 8(v), agrees with Lessee and
the Indenture Trustee not to amend, supplement or otherwise modify any
provision of the Trust Agreement in a manner adversely affecting such party
PARTICIPATION AGREEMENT [N604SW]
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without the prior written consent of such party. In addition, unless a Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing and so long as the Lease
has not been terminated, the Indenture Trustee and the Owner Trustee hereby
agree for the benefit of Lessee that without the consent of Lessee they will
not (and the Owner Participant agrees that it will not cause the Owner Trustee
to) amend, supplement or otherwise modify any provision of the Trust Indenture
in a manner adversely affecting Lessee. The Indenture Trustee and the Owner
Trustee agree to promptly furnish to Lessee copies of any supplement,
amendment, waiver or modification of any of the Operative Agreements to which
Lessee is not a party. Each Holder agrees that it will not take any action in
respect of the Trust Indenture Estate except through the Indenture Trustee
pursuant to the Trust Indenture or as otherwise permitted by the Trust
Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee
covenants and agrees with the Participants, the Indenture Trustee and the Owner
Trustee, in its capacity as such and in its individual capacity, as follows:
(a) Further Assurances. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in the name
of the Owner Trustee, or shall furnish to the Owner Trustee such information as
may be required to enable the Owner Trustee to make application for such
registration (at the expense of Lessee, including, without limitation,
reasonable attorneys' fees and expenses), and shall promptly furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to timely file any reports required to be filed by it as the lessor under the
Lease or as the owner of the Aircraft with any governmental authority
(including tax authorities), it being understood that Lessee shall not be
required to comply with this covenant to the extent that SBC's or the Owner
Participant's failure to comply with its covenant in Section 8(b) with regard
to its citizenship makes such compliance by Lessee impossible.
(b) Filing and Recording, Etc. Lessee, at its expense,
will, at the request of any party hereto, take, or cause to be taken, such
action with respect to the recording, filing, rerecording and refiling of the
Trust Agreement, the Lease, all Lease Supplements, the Trust Indenture, all
Trust Supplements and any financing statements or other instruments as are
necessary to maintain, so long as the Trust Indenture or the Lease is in
effect, the perfection of the security interests created by the Trust Indenture
and any security interest that may be claimed to have been created by the Lease
and the ownership interest of the Owner Trustee in the Aircraft. Lessee
agrees, upon the request and at the sole expense of the Owner Participant, to
take all reasonable acts requested by the Owner Participant in complying with
its obligations under clause (A) or (B) of the second sentence of Section 8(b).
(c) FAA Filings. Upon the execution and delivery of the
Lessee FAA Bill of Sale, the Lease Supplement and Trust Supplement covering the
Aircraft, the Lease and the Trust Indenture shall be filed for recording with
the FAA in the following order of priority: first, the Lessee FAA Bill of
Sale; second, the FAA registration application; third, the Trust Indenture,
with the Trust Agreement and the Trust Supplement covering the Aircraft
attached; and fourth, the Lease, with the
PARTICIPATION AGREEMENT [N604SW]
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Lease Supplement covering the Aircraft, the Trust Indenture and the Trust
Supplement covering the Aircraft attached. Lessee agrees to furnish the
Participants and the Indenture Trustee with copies of the foregoing documents
with recording data as promptly as practicable following the issuance of same
by the FAA.
(d) Annual Compliance Opinions. Lessee will furnish to
Owner Trustee and Indenture Trustee annually after the execution hereof (but
not later than December 1 of each year), commencing with the year 1996,
opinions of counsel for Lessee selected by Lessee and reasonably satisfactory
to Owner Trustee and Indenture Trustee stating that, in the opinion of such
counsel, either (a) such action has been taken (or specifying any action which
must be taken) with respect to the recording, filing, rerecording and refiling
of (i) the appropriate Operative Agreements and any supplements and amendments
thereto, (ii) UCC financing statements, and (iii) such other filings or
recordings as are necessary to maintain for the 15-month period succeeding the
date of such opinion the perfection of Owner Trustee's and Indenture Trustee's
title to and interest in the Aircraft and the Operative Agreements and the
ownership interest of Owner Trustee in the Aircraft, reciting the details of
such actions, or (b) no such action is necessary to maintain for the 15-month
period succeeding the date of such opinion the perfection of such title and
interest.
(e) Engine Purchase Agreement. Lessee agrees to furnish
the Owner Trustee and the Indenture Trustee, promptly upon demand therefor, an
agreement (the "Engine Purchase Agreement Assignment") assigning the rights of
Lessee under the purchase agreement pursuant to which Lessee originally
acquired the Engines (the "Engine Purchase Agreement") to the Owner Trustee
(which rights are collaterally assigned to the Indenture Trustee),
substantially in the form of the Purchase Agreement Assignment, and to use its
best efforts to obtain from the Engine Manufacturer a consent and agreement in
substantially the form of the Manufacturer's Consent.
(f) Merger. Lessee will not consolidate with or merge
into any other corporation or convey, transfer or lease all or substantially
all of its assets to any Person unless:
(i) the corporation formed by such
consolidation or into which Lessee is merged or the Person which
acquires by conveyance, transfer or lease all or substantially all of
the assets of Lessee as an entirety, as the case may be (the
"Successor") shall be (i) a corporation organized and existing under
the laws of the United States of America or any state thereof or the
District of Columbia, (ii) a "citizen of the United States" as defined
in the Act, and (iii) a United States certificated air carrier;
(ii) the Successor shall execute and deliver
to the Owner Trustee, the Indenture Trustee and the Participants an
agreement in form reasonably satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant containing an assumption by the
Successor of the due and punctual performance and observance of each
covenant and condition of the Operative Agreements to be performed or
observed by Lessee;
(iii) immediately after giving effect to such
transaction and as a result of giving effect to such transaction, no
Lease Default or Lease Event of Default shall have occurred and be
continuing;
PARTICIPATION AGREEMENT [N604SW]
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(iv) Lessee shall have delivered to the Owner
Trustee, the Indenture Trustee and each Participant an Officer's
Certificate and an opinion of counsel to the Successor reasonably
satisfactory to the Owner Trustee, the Indenture Trustee and each
Participant, each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
subparagraph (ii) above comply with this Section 11(f) (except that
such opinion need not refer to subparagraph (iii) above), that the
agreements entered into to effect such consolidation, merger,
conveyance, transfer or lease and such assumption agreement are legal,
valid and binding obligations of the Successor, enforceable against
the Successor in accordance with their respective terms (subject to
applicable bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and to general principles
of equity), and that all conditions precedent herein provided for
relating to such transaction have been complied with; and
(v) the Successor shall make such filings
and recordings with the FAA pursuant to the Act, as shall be necessary
or desirable to evidence such consolidation, merger, conveyance,
transfer or lease with or to such Successor.
Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor corporation or Person which shall theretofore have become such in the
manner prescribed in this Section 11(f) from its liability in respect of any
Operative Agreement to which it is a party. Nothing contained herein shall
permit any lease, sublease or other arrangement for the use, operation or
possession of the Aircraft except in compliance with the applicable provisions
of the Lease (or any assignment by Lessee of its rights under the Lease, except
in connection with a transaction in compliance with the express provisions of
this Section 11(f)).
(g) Corporate Existence. Except as permitted by Section
11(f) hereof, Lessee shall at all times maintain its corporate existence.
Lessee covenants and agrees that it will at all times be a "citizen of the
United States" within the meaning of the Act.
(h) Certificate Schedule. Lessee will provide on behalf
of the Owner Trustee the amortization schedule for the Certificate to be issued
to the Original Loan Participant at least two days before the Delivery Date.
(i) No Certificate Ownership. Lessee agrees that it will
not, at any time, hold any Certificates, or any participation or other interest
therein.
SECTION 12. Ownership of Aircraft. It is hereby
agreed among Lessee, the Owner Participant and the Owner Trustee that for all
purposes the Owner Trustee will be the owner of the Aircraft (except that the
Owner Participant will be the owner for income tax purposes and except under
the circumstances contemplated by the proviso to Section 18.2(d) of the Lease)
and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes and all other
relevant purposes (subject to the election referred to above).
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SECTION 13. Notices; Consent to Jurisdiction. (a)
Except as otherwise provided in this Agreement respecting telephone notices,
all notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be in writing and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, or by prepaid telex, TWX or telegram (with messenger delivery
specified in the case of a telegram), or by telecopier, or by prepaid courier
service, and shall be deemed to be given for purposes of this Agreement on the
day that such writing is delivered or, if given by certified mail, three (3)
Business Days after being deposited in the mails, in accordance with the
provisions of this Section 13(a). Unless otherwise specified in a notice sent
or delivered in accordance with the foregoing provisions of this Section 13(a),
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) as follows:
(A) if to Lessee, the Owner Trustee, the Original Loan Participant, the
Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I hereto (and in the case of Owner Trustee a copy shall be
sent to the Owner Participant) or (B) if to a subsequent Owner Participant,
addressed to such subsequent Owner Participant at such address as such
subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Holder, addressed to such Holder at its
address set forth in the Register maintained pursuant to Section 2.03 of the
Trust Indenture.
(b) Each party to this Agreement (individually a "Party"
and collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises solely out of or relates
solely to the Operative Agreements or any of the transactions contemplated
hereby or thereby or any document referred to herein or therein, may be
instituted in the competent courts of the State of New York in New York County
or the United States District Court for the Southern District of New York and
that they, to the maximum extent permitted by law, hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
parties in the same or different jurisdictions. The agreement set forth in
this Section 13(b) is given solely for the benefit of the Parties, and such
agreement is not intended to and shall not (i) confer exclusive jurisdiction on
any court or (ii) inure to the benefit of any other Person.
SECTION 14. Change of Situs of Owner Trust. The
Owner Participant agrees that if, at any time, the Trust Estate becomes subject
to any Taxes for which it is indemnified pursuant to Section 7(b) hereof and
if, as a consequence thereof, Lessee should request that the situs of the trust
be moved to another state in the United States from the state in which it is
then located, the situs of the trust may be moved and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided, that (A) Lessee shall provide such additional tax
indemnification as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Agreements of the Owner Participant shall
not be adversely altered as a result of the taking of such action, or the Owner
Participant shall be indemnified by Lessee to its reasonable satisfaction for
any such alteration, (C) the lien of the Trust Indenture on the Trust Indenture
Estate shall not be adversely affected by such action, and Lessee shall execute
and deliver such documents as may be requested by the Indenture Trustee to
continue the perfection and priority of the lien on the Trust Indenture Estate,
(D) the Owner Participant shall have received an opinion
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or opinions of counsel (reasonably satisfactory to the Owner Participant) in
scope, form and substance reasonably satisfactory to the Owner Participant to
the effect that (I) the trust, as thus removed, shall remain a validly
established trust and the Trust Agreement and other Operative Agreements shall
remain valid, binding and enforceable in accordance with their terms, (II) any
amendments to the Trust Agreement necessitated by such removal shall have been
duly authorized, executed and delivered by the parties thereto and shall
constitute the legal, valid and binding obligations of such parties,
enforceable in accordance with their terms, (III) such removal will not result
in the imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify the Owner Participant, the Owner Trustee or the Trust
Estate pursuant to Section 7(b) hereof (taking into account any additional
indemnification provided by Lessee pursuant to clause (A) of this sentence),
(IV) such removal will not result in any Loss of MACRS Deductions, Transaction
Expense Deductions, Interest Deductions or an Inclusion (as defined in the Tax
Indemnity Agreement) with respect to which Lessee is not required to indemnify
the Owner Participant pursuant to Section 6 of the Tax Indemnity Agreement
(taking into account any additional indemnification provided by Lessee pursuant
to clause (A) of this sentence), (V) the rights and obligations of the Owner
Participant under the Operative Agreements shall be substantially the same
under the laws of the new situs and (VI) covering such other matters as the
Owner Participant may reasonably request, (E) if such removal involves the
replacement of the Owner Trustee, the Owner Participant shall have received an
opinion of counsel to such successor Owner Trustee in form and substance
reasonably satisfactory to the Owner Participant covering the matters addressed
by the opinion delivered pursuant to Section 4(a)(xiii) hereof, and (F) Lessee
shall indemnify and hold harmless the Owner Participant on a net after-tax
basis against any and all reasonable and actual costs and expenses including
attorneys' fees and disbursements, registration, recording or filing fees
incurred by the Owner Trustee or Owner Participant, in connection with such
change of situs.
SECTION 15. Miscellaneous.
(a) Consents under Lease and Trust Indenture. Each of
the Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.
(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, the Owner Trustee, the Indenture Trustee,
the Owner Participant and the Original Loan Participant provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, the
Original Loan Participant's and the Owner Participant's obligations under any
and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement, except as
otherwise expressly provided herein or therein.
(c) Counterparts; Waivers; Governing Law. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an
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original, but all such counterparts shall together constitute but one and the
same instrument. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the
termination, amendment, supplement, waiver or modification is sought; and no
such termination, amendment, supplement, waiver or modification shall be
effective unless a signed copy thereof shall have been delivered to Lessee, the
Indenture Trustee and the Owner Trustee. The terms of this Agreement shall be
binding upon, and inure to the benefit of and shall be enforceable by, Lessee,
the Participants, the Indenture Trustee and the Owner Trustee. THIS AGREEMENT
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF
NEW YORK.
(d) No Recourse Against Owner Trustee. The parties
hereto agree that all of the statements, representations, covenants and
agreements made by the Owner Trustee (when made in such capacity) contained in
this Agreement and any agreement referred to herein other than the Trust
Agreement, unless expressly otherwise stated, are made and intended only for
the purpose of binding the Trust Estate and establishing the existence of
rights and remedies which can be exercised and enforced against the Trust
Estate. Therefore, anything contained in this Agreement or such other
agreements to the contrary notwithstanding (except for any express provisions
that the Owner Trustee is responsible for or is acting in or making
representations or agreements in its individual capacity), no recourse shall be
had with respect to this Agreement or such other agreements against the Owner
Trustee in its individual capacity or against any institution or person which
becomes a successor trustee or co-trustee or any officer, director, trustee,
servant or direct or indirect parent or controlling person or persons of any of
them; provided, however, that this Section 15(d) shall not be construed to
prohibit any action or proceeding against any party hereto for its own willful
misconduct or grossly negligent conduct; and provided, further, that nothing
contained in this Section 15(d) shall be construed to limit the exercise and
enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement and the other Operative Agreements.
(e) Duties Limited. No Participant shall have any
obligation or duty to Lessee, to any other Participant or to others with
respect to the transactions contemplated hereby except those obligations or
duties of such Participant expressly set forth in this Agreement and the other
Operative Agreements and no Participant shall be liable for performance by any
other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever (except as provided in Section 7(d) hereof) shall the Participant be
liable to Lessee, nor shall any Participant be liable to any other Participant,
for any action or inaction on the part of the Indenture Trustee or the Owner
Trustee in connection with the transactions contemplated herein, whether or not
such action or inaction is caused by the willful misconduct or gross negligence
of the Indenture Trustee or the Owner Trustee.
(f) Binding on Parties and Successors. This Agreement
shall be binding upon and shall inure to the benefit of and shall be
enforceable against, the parties hereto and their respective successors and
permitted assigns including each successive holder of the Owner Participant's
interest and each successive holder of any Certificate issued and delivered
pursuant to this Agreement or the
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Trust Indenture whether or not an express assignment to such holder of rights
and obligations under this Agreement has been made.
(g) Enforceability Representations. Every representation
or warranty contained herein as to the enforceability of any Operative
Agreement shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity.
(h) Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred and be continuing during the Term, none of the
Participants, the Indenture Trustee or the Owner Trustee will, through its own
actions or breaches of any of its obligations under the Operative Agreements,
interfere in the quiet enjoyment of the Aircraft by Lessee or any Permitted
Sublessee.
SECTION 16. Transaction Costs; Invoices and Payment
of Expenses. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the
subsequent placement of the permanent debt pursuant to Section 18 hereof, the
reasonable and actual fees, expenses and disbursements of (1) Potter Anderson &
Corroon, special counsel for the Indenture Trustee, (2) Shipman & Goodwin,
counsel for the Owner Trustee, (3) Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel
for the underwriters in a potential refinancing transaction pursuant to Section
18 hereof, (5) Vinson & Elkins L.L.P., special counsel for Lessee, but only to
the extent of their expenses and disbursements, and (6) Winstead, Sechrest &
Minick, special counsel for the Original Loan Participant, (ii) all fees, taxes
and other charges payable in connection with the recording or filing of
instruments and financing statements, (iii) the initial fee and initial
reasonable and actual disbursements of the Owner Trustee under the Trust
Agreement, (iv) the initial fee and initial reasonable and actual disbursements
of the Indenture Trustee under the Trust Indenture, (v) the fee and expenses of
Aero Economics, Inc. (or of such other appraiser as shall be acceptable to
Lessee and the Owner Participant) with respect to the appraisal of the Aircraft
required on or before the Delivery Date pursuant to Section 4(a) hereof, (vi)
the advisory fees and expenses of Babcock & Brown Financial Corporation, (vii)
the reasonable out-of-pocket disbursements, costs and expenses of the Original
Loan Participant relating to the transactions contemplated hereby, (viii) the
reasonable out-of-pocket expenses of the Owner Participant relating to the
transactions contemplated hereby, excluding the fees and expenses of Owner
Participant's counsel, (ix) the initial fee, if any, of the Original Loan
Participant, (x) the placement or underwriting fees, commissions and expenses,
if any, in placing the permanent debt pursuant to Section 18 hereof and all
costs and expenses associated with a public offering, if any, pursuant thereto,
and (xi) printing and distribution costs.
(b) Each of the Owner Trustee, the Indenture Trustee,
Lessee and the Participants shall promptly submit to the Owner Participant
copies of invoices of the Transaction Costs as they are received. Lessee shall
also be provided with a copy of any bill for legal expenses, with an
opportunity to review and approve it (such approval not to be unreasonably
withheld or delayed). The Owner Participant agrees to pay such amounts
directly or to transfer to the Owner Trustee from time to time promptly upon
receipt of invoices of Transaction Costs such amount as shall be necessary in
order to enable the Owner Trustee to pay such Transaction Costs. To the extent
of funds received by it, the Owner Trustee agrees to pay all invoices of
Transaction Costs that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, Lessee, at its option, may pay directly any
Transaction Costs in excess of (i) .365% of Lessor's Cost incurred in
connection
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with the closing of this transaction on the Delivery Date and (ii) .625% of
Lessor's Cost incurred in connection with the refinancing or refunding of the
Certificates pursuant to Section 18, (y) shall pay the fees of its special
counsel and, (z) in the event that the transactions contemplated hereby shall
not be consummated, Lessee shall pay all Transaction Costs, plus the fees,
expenses and disbursements of Owner Participant's counsel, except that the fees
and expenses referred to in clause (a) (viii) above, and the fees, expenses and
disbursements of the Owner Participant's counsel, shall be borne by the Owner
Participant if such failure to consummate the transactions results from the
failure of the Owner Participant to close after all conditions precedent to the
Owner Participant's funding (other than those conditions within the control of
the Owner Participant) of its Commitment set forth herein have been satisfied.
In any and all events, Lessee agrees to pay on a net after-tax basis the
reasonable out-of-pocket costs and expenses (including counsel fees) of each
Indemnified Party incurred in connection with the entering into or giving or
withholding of any future waiver, modification, supplement, consent, amendment
or other action with respect to any Operative Agreement which (a) is requested
by Lessee, (b) results from any adjustment pursuant to Section 3.7 of the
Lease, or (c) is necessary to effectuate the intent of any Operative Agreement.
In addition, upon such failure to consummate, Lessee shall pay the Original
Loan Participant any applicable Break Amount.
SECTION 17. Optional Redemption of Certificates.
(a) Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of all of
the Outstanding Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith to conclude an agreement with Lessee as to the terms of such
refunding or refinancing transaction (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new debt to be issued and the other aspects of such
refunding or refinancing transaction to be consummated (such date, the
"Refinancing Date", which date shall be determined so as to comply
with Section 6.03(a) of the Trust Indenture) and (ii) the following
information: (A) subject to the limitations set forth in this Section
17, the proposed adjusted ratio of debt evidenced by the Certificates
to the Owner Participant's investment in the beneficial ownership of
the Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date, and (C) the proposed revised debt amortization and schedules of
Interim Rent, Basic Rent, Stipulated Loss Value percentages and
Termination Value percentages and the revised Special Purchase Price
(including any installments thereof). The Refinancing Certificate
shall not provide for a Debt/Equity ratio of more than 4:1. Within
ten (10) Business Days of its receipt of the Refinancing Certificate,
Lessee may demand a verification of the information set forth in the
Refinancing Certificate in the manner described in Section 3.7 of the
Lease. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Refinancing Certificate or the
determination of such information pursuant to such verification
procedures
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(such information, the "Refinancing Information") the appropriate
parties will take the actions specified in subparagraphs (2) through
(6) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities)) with the institution or
institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities in an aggregate principal
amount specified in the Refinancing Information, which amount shall be
at least equal to the aggregate principal amount of all Certificates
Outstanding on the Refinancing Date (such debt securities, the "New
Debt"), (ii) the application of the proceeds of the sale of the New
Debt to the redemption of all such Certificates on the Refinancing
Date and the payment of any other amounts payable to the Holders under
the Operative Agreements on the Refinancing Date, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Interim Rent (if applicable) and Basic
Rent payable in respect of the period from and after the Refinancing
Date shall be as provided in the Refinancing Information (and shall
take into account any variation of either Deferred Equity Amount paid
by or on behalf of the Owner Participant pursuant to Section 8(dd), if
applicable, from the corresponding Assumed Interest Amount with
respect to the Deferred Equity Date or the first Rent Payment Date, as
the case may be), (ii) amounts payable in respect of Stipulated Loss
Value and Termination Value from and after the Refinancing Date shall
be as provided in the Refinancing Information, and (iii) in the event
that the Series SWA 1995 Trust N604SW Certificates shall have been
publicly issued, the early termination notice revocation and payment
provisions shall be modified to comport with the applicable notice and
payment requirements of The Depository Trust Company or any other
depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the New Debt in
like manner as the Certificates and will enter into such amendments
and supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to or required
by the Owner Participant to be paid as a Transaction Cost and whether
or not such refunding or refinancing transaction is consummated,
Lessee shall pay at no net after-tax cost to any other party all of
the reasonable out-of-pocket expenses of all parties to such refunding
or refinancing, including without limitation, the reasonable fees and
expenses of such parties' counsel and any related loan or commitment
fees; and
PARTICIPATION AGREEMENT [N604SW]
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(6) subject to compliance by the Owner
Trustee with all applicable terms and conditions for voluntary
redemption under the Trust Indenture and this Agreement, each Holder
of a Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
interest thereon, Premium, if any, plus in the case of the Series SWA
1995 Trust N604SW-I Certificates, Break Amount, if any, together with
payment in full of all other amounts then payable to such Holder and
the Indenture Trustee hereunder or under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a
public offering of the New Debt, the Owner Participant shall have the right
(but not the obligation) to review and approve (which approval shall not be
unreasonably withheld) any registration statement filed with the SEC to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as required by Lessee, contain any restrictions on the sale to
Holders who may use ERISA funding sources. It is expressly understood that the
Owner Participant shall have no obligation hereunder to consent to such public
refunding or refinancing if, in its good faith judgment, such refunding or
refinancing increases its or any of its Affiliates' exposure to (i) liabilities
under federal or state securities laws, (ii) regulation under state or federal
securities laws, (iii) the need to disclose publicly information that is not
generally available to the public, or (iv) being adversely affected in its
ability to engage in any other financing transaction, in each case to a level
unacceptable to it in its reasonable, good faith judgment. Any trustee of
public debt shall be (i) Wilmington Trust Company or (ii) a bank or trust
company in the United States and having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of trustee upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least
thirty (30) days' irrevocable written notice of the proposed date of the
optional refunding or refinancing.
(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee shall be
required to execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would result in any unreimbursed
increased costs or liability, including any adverse tax consequences or risk
thereof (unless indemnified against to its reasonable satisfaction) or would
result in any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional investment in
connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
(f) Any refunding or refinancing pursuant to this Section
17 shall be of all Certificates then Outstanding and shall be effected in
accordance with Section 6.03(a) of the Trust Indenture.
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(g) When calculating any of the information required to
be set forth in a Refinancing Certificate, the Owner Participant shall make
such calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or
any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) uses the same methodology
and assumptions used by the Owner Participant in determining Interim Rent,
Basic Rent, Stipulated Loss Values, Termination Values and Special Purchase
Price on the Delivery Date (except to the extent such assumptions have been
altered since the Delivery Date in connection with an adjustment to Rent
pursuant to Section 3.7 of the Lease).
(h) No refinancing or refunding pursuant to this Section
17 shall be permitted during the continuance of a Lease Default or a Lease
Event of Default.
SECTION 18. Interim Debt. (a) The parties hereto
acknowledge and agree that the Series SWA 1995 Trust N604SW-I Certificate
originally issued to the Original Loan Participant on the Delivery Date
represents interim debt financing and that it is intended that the Series SWA
1995 Trust N604SW-I Certificate be refinanced by Series SWA 1995 Trust N604SW
Certificates issued to new Holders. In connection therewith, in the event that
Lessee shall have given written notice to the Owner Trustee, the Indenture
Trustee, the Owner Participant and the Original Loan Participant that Lessee is
requesting a voluntary redemption of the Series SWA 1995 Trust N604SW-I
Certificate (in compliance with the provisions of Articles 6 and 15 of the
Trust Indenture) by the Owner Trustee as part of a refunding or refinancing
transaction, the Owner Participant agrees to negotiate promptly in good faith
with Lessee in connection therewith (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Agreements as may be necessary in order to
facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within five (5) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Section 18 Refinancing Certificate") setting forth
(i) the proposed date on which the Outstanding Series SWA 1995 Trust
N604SW-I Certificate will be redeemed, describing the new debt to be
issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, to be determined so as to
comply with Section 6.03(a) or 6.03(b) of the Trust Indenture (as
appropriate), the "Section 18 Refinancing Date") and (ii) the
following information: (A) the principal amount of debt to be issued
by the Owner Trustee on the Section 18 Refinancing Date, (B) and, if
such amount is less than the principal amount of the outstanding
Series SWA 1995 Trust N604SW-I Certificate, then the amount of any
additional contribution to the Trust Estate to be made by the Owner
Participant on the Section 18 Refinancing Date and (C) the proposed
revised debt amortization and schedules of Interim Rent, Basic Rent,
Stipulated Loss Value percentages and Termination Value percentages
and the revised Special Purchase Price (including any installments
thereof). The principal amount of debt to be issued by the Owner
Trustee on the Section 18 Refinancing Date shall not equal more than
80.00% of Lessor's Cost. Within five (5) Business Days of its receipt
of the Section 18 Refinancing Certificate,
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Lessee may demand a verification of the information set forth in the
Section 18 Refinancing Certificate in the manner described in Section
3.7 of the Lease. Upon the acceptance by Lessee of the accuracy of
the information set forth in the Section 18 Refinancing Certificate or
the determination of such information pursuant to such verification
procedures (such information, the "Section 18 Refinancing
Information") the appropriate parties will take the actions specified
in paragraphs (2) through (10) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to Lessee, the Owner Participant and the Owner Trustee
(which, subject to subsection (d) below, may involve an underwriting
agreement in connection with a public offering of such debt or the
purchase of such debt by a publicly funded entity (or entities)) with
the institution or institutions to be named therein (A) providing for
(i) the issuance and sale by the Owner Trustee to such institution or
institutions on the Section 18 Refinancing Date of Series SWA 1995
Trust N604SW Certificates in an aggregate principal amount specified
in the Section 18 Refinancing Information (such debt securities, the
"Section 18 New Debt"), (ii) the application of the proceeds of the
sale of the Section 18 New Debt, plus any additional contribution to
the Trust Estate, to the redemption of the Series SWA 1995 Trust
N604SW-I Certificate Outstanding on the Section 18 Refinancing Date
and the payment of any other amounts payable to the Holders under the
Operative Agreements on the Section 18 Refinancing Date, all in
accordance with Section 6.03(b) of the Trust Indenture, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Interim Rent (if applicable) and Basic
Rent payable in respect of the period from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information (and shall take into account any variation of the sum of
any interest payment made pursuant to paragraph (5) or (5A) of this
Section 18(a) and the Deferred Equity Amount paid by or on behalf of
the Owner Participant pursuant to Section 8(dd), if applicable, from
the Assumed Interest Amount with respect to the Deferred Equity Date),
(ii) amounts payable in respect of Stipulated Loss Value, Termination
Value and Special Purchase Price from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information, and (iii) in the event that the Series SWA 1995 Trust
N604SW Certificates shall have been publicly issued, the early
termination notice revocation and payment provisions shall be modified
to comport with the applicable notice and payment requirements of The
Depository Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the Section 18 New
Debt in like manner as the Series SWA 1995 Trust N604SW-I Certificate
and will enter into such amendments and supplements to the Trust
Indenture (or such new indenture or other security agreement) as may
be necessary to effect such security;
PARTICIPATION AGREEMENT [N604SW]
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(5) if such refunding or refinancing shall
be consummated on or prior to the Deferred Equity Date, the Owner
Trustee shall pay to the Original Loan Participant the Break Amount,
if any (as indemnification for the loss resulting from such refunding
or refinancing), and all accrued and unpaid interest on the
Certificates, subject to Lessee's obligations under Section 3.4 of the
Lease;
(5A) if such refunding or refinancing shall
be consummated after the Deferred Equity Date, Lessee on behalf of the
Owner Trustee shall pay to the Original Loan Participant as
Supplemental Rent the Break Amount, if any (as indemnification for the
loss resulting from such refunding or refinancing), and all accrued
and unpaid interest on the Certificates (in each case, without
duplication of other amounts, if any, payable pursuant to any other
provision of the Operative Agreements);
(6) except as provided in paragraph (5)
above, the Owner Trustee shall pay all of the costs of any such
refunding or refinancing so consummated, such costs shall be
considered as Transaction Costs and paid in accordance with and
subject to the limitations of Section 16 above and such Transaction
Costs shall be appropriately considered in calculating the proposed
revised debt amortization and schedules of Basic Rent, Stipulated Loss
Value percentages and Termination Value percentages;
(7) each Holder of the Series SWA 1995 Trust
N604SW-I Certificates will deliver to the Owner Trustee the Series SWA
1995 Trust N604SW-I Certificate held by it immediately prior to such
refunding or refinancing for cancellation (and the Owner Trustee shall
cancel the same), against simultaneous receipt by such Holder of
payment of the then outstanding principal amount of such Series SWA
1995 Trust N604SW-I Certificate, accrued and unpaid interest thereon
plus Break Amount, if any, together with payment in full of all other
amounts then payable to such Holder hereunder or under the Series SWA
1995 Trust N604SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such
of the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee
shall be required to execute and deliver any such agreement or
instrument or to make any other arrangements which in its opinion
would result in any unreimbursed increased costs or liability,
including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would result in
any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional
investment in connection with any such refinancing (other than the
Deferred Equity Amount, if applicable);
(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel; and
PARTICIPATION AGREEMENT [N604SW]
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(10) the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 if, in
its opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax consequences);
provided, however, that the Owner Participant will be obligated to
proceed with such refinancing if Lessee agrees to indemnify the Owner
Participant for such unindemnified adverse consequences (any such
indemnity to be satisfactory to the Owner Participant).
Notwithstanding the foregoing, the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 unless
(i) the Lessee requires in the case of a private refinancing, each
Holder to represent to the Lessee that it is not using ERISA funding
sources, or that an exemption is available with respect to its
purchase and holding of the debt, or (ii) in the case of a public
refinancing, an exemption with respect to pass through certificates
(such as Prohibited Transaction Exemption 89-89 or 90-24 or any other
comparable exemption) is available.
(b) Only one optional refinancing or refunding pursuant
to this Section 18 shall be permitted during the Term and such refinancing
shall occur on or prior to the second anniversary of the Delivery Date.
(c) Any refinancing or refunding pursuant to this Section
18 shall be of all Series SWA 1995 Trust N604SW-I Certificates then
Outstanding.
(d) Any public refinancing pursuant to this Section 18
shall comply with all the restrictions, limitations and conditions applicable
in the case of a public refinancing pursuant to Section 17(b) hereof.
(e) No refunding or refinancing pursuant to this Section
18 shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to
be set forth in a Section 18 Refinancing Certificate, the Owner Participant
shall make such calculations in a manner which (A) maintains its Net Economic
Return, (B) minimizes the Net Present Value of Rents to the extent possible
consistent with clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev.
Proc. 75-28 (or any successor thereto) and would not cause the Lease to
constitute a "disqualified leaseback or long term agreement" within the meaning
of Section 467 of the Code (or any successor thereto), and (D) uses the same
methodology and assumptions used by the Owner Participant in determining
Interim Rent, Basic Rent, Stipulated Loss Values, Termination Values and
Special Purchase Price on the Delivery Date (except to the extent such
assumptions have been altered since the Delivery Date in connection with an
adjustment to Rent pursuant to Section 3.7 of the Lease).
SECTION 19. Section 1110 Compliance. The
Participants and Lessee agree that the transactions contemplated by this
Agreement and the other Operative Agreements are intended to be, shall be and
should be construed so as to be, entitled to the full benefits of 11 U.S.C.
Section 1110.
PARTICIPATION AGREEMENT [N604SW]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ John D. Owen
Treasurer
AMSOUTH LEASING
CORPORATION,
Owner Participant
By: /s/ Charles F. Kiser
President
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
Original Loan Participant
By: /s/ Mark Denton
Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual
capacity only as expressly provided
herein and otherwise solely as Owner
Trustee
By: /s/ Michelle K. Blezard
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as
otherwise expressly provided herein,
but solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services
Officer
PARTICIPATION AGREEMENT [N604SW]
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SCHEDULE I
Names and Addresses
Lessee:
Southwest Airlines Co.
2702 Love Field Drive
P.O. Box 36611
Dallas, Texas 75235-1611
Attn: Treasurer
Telecopy: (214) 904-4022
Owner Participant:
AmSouth Leasing Corporation
1900 Fifth Avenue North, 8th Floor
Birmingham, AL 34203
Attn: President
Telecopy: (205) 307-4124
Payment Instructions:
AmSouth Bank of Alabama
ABA No. 062000019
For the account of AmSouth
Leasing Corporation
Account No. 00201332
Reference: Southwest Airlines 1995
Notify: AmSouth Leasing Operations: 205/326-5588
Original Loan Participant:
Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
Attn: Sean Obranski
Telecopy: (214) 922-2044
Telephone: (214) 922-2612
Payment Instructions:
Texas Commerce Bank N.A.
ABA No. 113000609
For the account of Texas Commerce Bank
National Association
Account No. 13576
Reference: SWA Interim Debt
Attn: Gale Manning
PARTICIPATION AGREEMENT [N604SW]
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SCHEDULE II
Commitments
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
---------------- ------------- -------------
<S> <C> <C>
Texas Commerce Bank
National Association 73.86842358% $24,376,579.78
Owner Participant:
- -----------------
AmSouth Leasing
Corporation 26.13157642% $ 8,623,420.22
------------ --------------
Total Commitments: 100.00000% $33,000,000.00
================= =========== ==============
</TABLE>
PARTICIPATION AGREEMENT [N604SW]
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<PAGE> 63
EXHIBIT A
FORM OF GUARANTY
GUARANTY
GUARANTY AGREEMENT dated ________________ (this "Guaranty"), from
______________________________________________________ (the "Guarantor"), to
___________________________ (the "Lessee"), _________________________, in its
individual capacity and as Owner Trustee (the "Owner Trustee"), THE ENTITIES
IDENTIFIED AS LOAN PARTICIPANTS IN THE PARTICIPATION AGREEMENT (as defined
below) (the "Loan Participants"), and ____________________, as Indenture Trustee
(the "Indenture Trustee") (the Lessee, the Owner Trustee, the Loan Participants,
and the Indenture Trustee, together with their respective permitted successors,
transferees and assigns, each being herein called a "Beneficiary" and
collectively, the "Beneficiaries").
R E C I T A L S:
WHEREAS, AMSOUTH LEASING CORPORATION (the "Owner Participant") is a
wholly-owned subsidiary of the Guarantor and has entered into (i) the
Participation Agreement dated as of ___________________, among the Owner
Participant, the Lessee, the Loan Participants, the Owner Trustee and the
Indenture Trustee (as such agreement may be amended, modified and supplemented
in accordance with the terms thereof, the "Participation Agreement"), (ii) the
Trust Agreement dated ___________________, between the Owner Participant and
______________________________ (as such agreement may be amended, modified or
supplemented in accordance with the terms thereof, the "Trust Agreement"), and
(iii) the Tax Indemnity Agreement dated ______________________, between the
Owner Participant and the Lessee (as such agreement may be amended, modified
and supplemented in accordance with the terms thereof, the "Tax Indemnity
Agreement") (collectively, the "Owner Participant Agreements"); and
WHEREAS, in order to induce the Beneficiaries to enter into the Owner
Participant Agreements, the Guarantor desires to enter into this Guaranty to
guarantee the Owner Participant's performance and compliance with the
covenants, agreements, obligations, terms and conditions of or applicable to
the Owner Participant under and pursuant to the Owner Participant Agreements.
NOW, THEREFORE, in consideration of the premises set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby covenants and agrees as follows:
SECTION 1. Definitions. Capitalized terms used in this
Guaranty without other definition have the respective meanings specified in the
Participation Agreement.
SECTION 2. The Guaranty. (a) The Guarantor hereby
irrevocably and unconditionally guarantees to each of the Beneficiaries (i) the
due, punctual and full payment of all obligations of the Owner Participant
which are payable by the Owner Participant under or pursuant to any of the
Owner Participant Agreements and in accordance with the terms thereof, by
acceleration or otherwise, without offset or deduction; and (ii) the due and
punctual performance by the Owner Participant of, and compliance by the Owner
Participant with, all of its other obligations, covenants, and undertakings
contained in or arising under or pursuant to each of the Owner Participant
Agreements (the obligations referred to in clauses (i) and (ii) being
collectively hereinafter referred to as the
EXHIBIT A
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"Guaranteed Obligations"); provided, however, the Guaranteed Obligations shall
not include any obligations of the Owner Participant which are non-recourse to
the Owner Participant pursuant to the terms of the Owner Participant
Agreements. Without limitation of the foregoing, in case the Owner Participant
shall for any reason whatsoever fail to pay duly and punctually any payment
required to be made by the Owner Participant under any of the Owner Participant
Agreements when and as the same shall be due and payable in accordance with the
terms of such Owner Participant Agreement, by acceleration or otherwise, the
Guarantor will immediately pay the same to the Person entitled thereto and, in
addition, such further amount, if any, as shall be sufficient to cover the
costs and expenses of collection and in case the Owner Participant shall fail
to perform or comply with any of its other obligations, covenants or
undertakings contained in or arising under or pursuant to any of the Owner
Participant Agreements for any reason whatsoever, the Guarantor will forthwith
perform or comply with such obligation, covenant or undertaking or cause the
same forthwith to be performed or complied with.
(b) Without limitation of the Guarantor's obligations
hereunder, all amounts payable by the Guarantor hereunder shall in any event be
paid immediately upon demand by the respective Beneficiary entitled thereto, in
immediately available funds, as such party may direct and at the place
specified by such Beneficiary.
SECTION 3. Unconditional Nature of Obligations; Waiver.
(a) Unconditional Nature of Obligations. The obligations of the
Guarantor contained in Section 2 above are direct, independent and primary
obligations of the Guarantor and are absolute, present, unconditional and
continuing obligations and are not conditioned in any way upon the institution
of suit or the taking of any other action or any attempt to enforce performance
of or compliance with the obligations, covenants or undertakings (including,
without limitation, any payment obligations) of the Owner Participant and,
without limitation, shall constitute a guaranty of payment and performance and
not of collection, binding upon the Guarantor and its successors and assigns
and irrevocable without regard to the genuineness, validity, legality or
enforceability of any of the Owner Participant Agreements or the lack of power
or authority of the Owner Participant to enter into any of the Owner
Participant Agreements or any substitution, release or exchange of any other
guaranty or any other security for any of the Guaranteed Obligations or any
other circumstance whatsoever (other than payment or performance) that might
otherwise constitute a legal or equitable discharge of a surety or guarantor
and shall not be subject to any right of set-off, recoupment or counterclaim
and are in no way conditioned or contingent upon any attempt to collect from
the Owner Participant or any other entity or to perfect or enforce any security
or upon any other condition or contingency or upon any other action,
occurrence, or circumstance whatsoever. Without limiting the generality of the
foregoing, the Guarantor shall have no right to terminate this Guaranty, or to
be released, relieved or discharged from its obligations hereunder, and such
obligations shall be neither affected or diminished for any reason whatsoever,
including, without limitation, (i) any amendment or supplement to or
modification of any Owner Participant Agreement, any extension or renewal of
the Owner Participant's obligations under any Owner Participant Agreement, or
any subletting, assignment or transfer of any Beneficiary's interest in the
Owner Participant Agreements, (ii) any bankruptcy, insolvency, readjustment,
composition, liquidation or similar proceeding with respect to the Owner
Participant or any other Person, (iii) any furnishing or acceptance of
additional security or any exchange, surrender, substitution or release of any
security, (iv) any waiver, consent or other action or inaction or any exercise
or nonexercise of any right, remedy or power with respect to the Guaranteed
Obligations or any of the Owner Participant Agreements, (v) any merger or
consolidation of the Owner Participant or the Guarantor into or with any other
Person, or any change in the structure of the Owner Participant or in the
ownership of the Owner Participant by the Guarantor, (vi) any default,
misrepresentation, negligence, misconduct or other action or inaction of any
kind by any
EXHIBIT A
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Beneficiary under or in connection with any Operative Document or any other
agreement relating to this Guaranty, except to the extent that any such
default, misrepresentation, negligence, misconduct or other action or inaction
would limit the Guaranteed Obligations, (vii) any defect in the title,
condition, design, operation or fitness of, or any interference with operation,
use or possession of, the Aircraft, (viii) any failure to establish, perfect or
preserve title to or any security interest in or to the Aircraft or any other
collateral security for the Guaranteed Obligations, or (ix) any other
circumstance whatsoever (except the complete payment and performance of the
Guaranteed Obligations).
(b) Waiver. The Guarantor unconditionally waives, to
the fullest extent permitted by law, any right it may have to (i) the notice of
any waiver or extension granted to the Owner Participant, (ii) all notices
which may be required by statute, rule of law or otherwise to preserve any of
the rights of any of the Beneficiaries against the Owner Participant, the
Guarantor or any other Person, (iii) require any of the Beneficiaries to
proceed against the Owner Participant or any other Person or pursue any
collateral or remedy within such Beneficiary's power, (iv) require acceptance
of this Guaranty, diligence, presentment, demand for payment, protest and all
other notices, including notice of the creation, renewal, extension or accrual
of any of the Guaranteed Obligations, (v) require any election of remedies,
(vi) require the marshalling of assets or the resort to any other security or,
(vii) except as otherwise expressly provided herein, claim any other defense,
contingency, circumstance or matter which might constitute a legal or equitable
discharge of a surety or guarantor.
SECTION 4. Term of the Obligations of the Guarantor. The
obligations of the Guarantor under this Guaranty shall be discharged and
released upon the earlier of (a) the payment, performance and satisfaction in
full of the Guaranteed Obligations after the termination of all of the Owner
Participant Agreements, and (b) the transfer by the Owner Participant of its
rights and obligations under the Operative Documents, or any other assignment
or other transfer of the Owner Participant's rights and obligations pursuant to
the Operative Agreements to any Person who is not an Affiliate of the
Guarantor, in either case in accordance with, and as permitted by, the
Participation Agreement; provided, however, that any such transfer shall not
relieve the Guarantor of any of its obligations hereunder arising out of events
occurring prior to such transfer.
SECTION 5. Representations, Warranties and Covenants of the
Guarantor.
(a) Corporate Existence and Power. The Guarantor is a
corporation duly organized, validly existing and in good standing as a
__________________________________ under the laws of _______________________.
The Guarantor has the corporate power and authority (i) to own or lease its
properties and to carry on its present business and operations, and (ii) to
enter into and perform its obligations under this Guaranty. The Owner
Participant is a wholly-owned subsidiary of the Guarantor.
(b) Due Authorization, Etc. The execution and
delivery by the Guarantor of this Guaranty and compliance by the Guarantor with
all of the provisions hereof do not and will not contravene any law,
governmental rule or regulation or any order, writ, injunction or decree of any
court or governmental authority or agency applicable to or binding on the
Guarantor or contravene the provisions of, or constitute a default under, its
charter or by-laws or any indenture, mortgage, contract or any agreement or
instrument to which the Guarantor is a party or by which it or any of its
property may be bound or affected.
(c) Validity; Enforceability. This Guaranty has been
duly authorized, executed and delivered by the Guarantor, constitutes a legal,
valid and binding obligation of the Guarantor and is enforceable against the
Guarantor in accordance with its terms.
EXHIBIT A
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(d) Governmental Consents. No authorization or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery or performance by
the Guarantor of this Guaranty or in connection herewith.
(e) Financial Information. The Guarantor has a
combined capital, surplus and undivided profits equal to at least $75,000,000.
The Guarantor will promptly upon receiving a written request therefor from any
of the Lessee, the Owner Trustee or the Indenture Trustee, provide copies of
the originally-signed cover page and the consolidated balance sheet (Schedule
RC) of the Guarantor's most recently-filed "call report" (that is, the
quarterly consolidated reports of condition and income for a bank with domestic
and foreign offices -- FFIEC), or any successor or other form applicable to the
Guarantor. Since the date of the consolidated balance sheet (Schedule RC) of
the Guarantor dated _______________________, there has been no material adverse
change in the financial condition of the Guarantor.
(f) Litigation. There are no pending or, to the
knowledge of the Guarantor, threatened actions or proceedings before any court
or administrative agency which would adversely affect the ability of the
Guarantor to perform its obligations hereunder.
The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Guaranty, provided that each
such representation and warranty is made only on and as of the date hereof.
SECTION 6. Survival of Guaranty. Notwithstanding anything to
the contrary herein, this Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any of the amounts paid to any
of the Beneficiaries, in whole or in part, is required to be repaid upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Guarantor or the Owner Participant or any other Person, or as a result of the
appointment of a custodian, receiver, trustee, or other officer with similar
powers with respect to the Guarantor or the Owner Participant or any other
Person or any substantial part of the property of the Guarantor or the Owner
Participant or such other Person, all as if such payments had not been made.
SECTION 7. Remedies; Subrogation. (a) In the event the
Guarantor shall fail to pay immediately any amounts due under this Guaranty, or
to comply with any other term of this Guaranty within three Business Days of
the date of demand therefor, each Beneficiary shall be entitled to all rights
and remedies to which it may be entitled hereunder or at law, in equity or by
statute.
(b) Subrogation. The Guarantor will not exercise any
rights that it may acquire by way of subrogation under this Guaranty, by any
payment made hereunder or otherwise, until all the Guaranteed Obligations shall
have been paid in full. If any amount shall be paid to the Guarantor on
account of such subrogation rights at any time when all the Guaranteed
Obligations shall not have been paid in full, such amount shall be held in
trust for the benefit of the Beneficiary to whom such Guaranteed Obligation is
payable and shall forthwith be paid to such Beneficiary to be credited and
applied to such Guaranteed Obligation, whether matured or unmatured, in
accordance with the terms of the Owner Participant Agreement under which such
Guaranteed Obligation arose. If (i) the Guarantor shall make payment to any
Beneficiary of all or any part of the Guaranteed Obligations and (ii) all the
Guaranteed Obligations shall be paid in full, such Beneficiary will at the
Guarantor's request and expense, execute and deliver to the Guarantor
appropriate documents, without recourse and with representation or warranty,
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
EXHIBIT A
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(c) The provisions of this paragraph shall survive the
term of this Guaranty and the payment in full of the Guaranteed Obligations and
the termination of the Operative Documents.
SECTION 8. Limitation. Nothing in this Guaranty shall
expressly or by implication increase or expand the rights or obligations of any
Beneficiary or the Owner Participant under the Operative Documents.
SECTION 9. No Waiver; Amendments. No failure on the part of
any party hereto to exercise, no delay in exercising and no course of dealing
with respect to, any right or remedy hereunder will operate as a waiver
thereof; nor will any single or partial exercise of any right or remedy
hereunder preclude any other further exercise of any other right or remedy.
All remedies of the Beneficiaries against the Owner Participant are cumulative
without duplication. This Guaranty may not be waived, amended, supplemented or
modified except by an instrument in writing executed by the Beneficiaries.
SECTION 10. Assignment and Assumption. This Guaranty may not
be assigned by the Guarantor to, or assumed by, any successor to or assign of
the Guarantor without the prior written consent of the Beneficiaries except in
connection with a sale of all or substantially all of the Guarantor's assets
and pursuant to an assignment and assumption agreement, in form and substance
satisfactory to the Beneficiaries, of the Guarantor's obligations hereunder, or
as otherwise provided in Section 4 hereof, by a Person complying with the
requirements of the Operative Agreements for a transferee of the Owner
Participant.
SECTION 11. Notices. All notices, demands or other
communications required or otherwise provided under this Agreement shall be in
writing and shall be delivered to the Beneficiaries at the address set forth in
Section 14.01 of the Participation Agreement and, if to the Guarantor:
at: ______________________
______________________
______________________
______________________
with a copy to: ______________________
______________________
______________________
______________________
or to such other address as the Guarantor or any Beneficiary may specify by
written notice. All notices shall be deemed duly given if given in any manner
provided for in Section 14.01 of the Participation Agreement.
SECTION 12. Successors and Assigns. This Agreement shall bind
the Guarantor and its successors and permitted assigns and inure to the benefit
of the Beneficiaries and their successors and permitted assigns.
SECTION 13. Severability. The invalidity or unenforceability
of any one or more provisions of this Agreement shall not affect the validity
or enforceability of the remaining portions of this Agreement.
EXHIBIT A
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SECTION 14. Governing Law. THIS GUARANTY SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF _____________________.
IN WITNESS WHEREOF, the party hereto has caused this Guaranty
Agreement to be duly executed on the day and year first above written.
________________________________
By:_____________________________
Title:__________________________
EXHIBIT A
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<PAGE> 1
EXHIBIT 4.38
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO.,
as Lessee
AMSOUTH LEASING CORPORATION,
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
and in its capacity as Pass Through Trustee under
each of the two Pass Through Trust Agreements
and as Holder
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N604SW)
<PAGE> 2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT dated as of October 1,
1995 (this "Amendment") by and among (i) Southwest Airlines Co., a Texas
corporation ("Lessee"), (ii) AmSouth Leasing Corporation, an Alabama
corporation ("Owner Participant"), (iii) Shawmut Bank Connecticut, National
Association, a national banking association, not in its individual capacity,
except as expressly provided herein, but solely as Owner Trustee under the
Trust Agreement ("Owner Trustee"), and (iv) Wilmington Trust Company, a
Delaware banking corporation, in its individual capacity and as Indenture
Trustee under the Trust Indenture (the "Indenture Trustee") and in its capacity
as Pass Through Trustee under each of the two separate Pass Through Trust
Agreements ("Pass Through Trustee") and as Holder, amends that certain
Participation Agreement respecting the aircraft having U.S. registration number
N604SW and dated as of August 1, 1995 (the "Participation Agreement"), by and
among Lessee, Owner Participant, Texas Commerce Bank National Association (the
"Original Loan Participant"), Owner Trustee and Indenture Trustee,
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, the Delivery Date occurred on August 25, 1995; and
WHEREAS, concurrently with the execution of this Amendment, the Series
SWA 1995 Trust N604SW-I Certificate held by the Original Loan Participant is
being refinanced by the issuance of one or more new Certificates issued to Pass
Through Trustee as Holder; and
WHEREAS, as contemplated by Section 18 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
Section 1. Amendment to Schedule I. Schedule I to the
Participation Agreement is hereby deleted in its entirety and replaced with
Schedule I to this Agreement.
Section 2. Amendments to Section 7(b). Section 7(b) of the
Participation Agreement is hereby amended in the following manner:
(i) Section 7(b) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase is
hereby amended to be and read in its entirety as follows:
"Operative Agreement or each Pass Through Trust Agreement" and
"Operative Agreements or each Pass Through Trust Agreement"
PARTICIPATION AMENDMENT [N604SW]
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<PAGE> 3
except in the case of Section 7(b)(iii) where the phrase "Operative
Agreements" is hereby amended to be and read, in its entirety, "Operative
Agreements and the Pass Through Trust Agreements."
(ii) Section 7(b)(i) is hereby amended as follows:
(a) the following language is added immediately after the
words "combined or unitary return with such Indemnified
Party)" and before the words "harmless from, any and all":
"except that for purposes of this Section 7(b)(i) an
Indemnified Party shall not include any Holder other than
Original Loan Participant";
(b) unless as otherwise provided in (c) below, wherever the
term "Certificates" is used, such term is hereby amended to be
and read in its entirety as follows:
"Certificates and each Pass Through Certificate"; and
(c) the language immediately after the phrase "or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture" is
hereby amended to be and read in its entirety as follows:
"and each Pass Through Trust Agreement, or the beneficial
interest in the Trust Estate and each Pass Through Trust
Estate or the creation thereof, or any payments made pursuant
to any such agreement or instrument or upon or with respect to
the property held by Owner Participant or by the Trust Estate
or by Indenture Trustee under the Trust Indenture or the
property held by Pass Through Trustee under the respective
Pass Through Trust Estate, amounts payable with respect to the
Certificates and each Pass Through Certificate, including
withholding Taxes imposed on payments of principal, interest,
Premium or Break Amount on the Certificates or payments of
principal of, interest on or any other amounts payable with
respect to each Pass Through Certificate that are asserted
against the Owner Participant, Owner Trustee or Pass Through
Trustee, as withholding agent, or otherwise with respect to or
in connection with the transactions contemplated by the
Operative Agreements."
Section 3. Amendments to Section 7(c). Section 7(c) of the
Participation Agreement shall be amended in the following manner:
(i) Section 7(c) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase
includes each Pass Through Trust Agreement.
(ii) Clause (d) of Section 7(c)(i) is hereby amended to be
and read in its entirety as follows:
PARTICIPATION AMENDMENT [N604SW]
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<PAGE> 4
"(d) the offer, sale or delivery of the Certificates or the
Pass Through Certificates, whether before or after the
Delivery Date (the indemnity in this clause (d) to extend also
to any Person who controls an Indemnified Party, its
successors, assigns, employees, servants and agents within the
meaning of Section 15 of the Securities Act)."
(iii) The final paragraph of Section 7(c) is hereby amended
to be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of Indenture Trustee (including the reasonable fees
and expenses of its counsel and any agent appointed in
accordance with Section 9.02(c) of the Trust Indenture) and
Pass Through Trustee and, as provided in Section 6.07 of the
Trust Agreement, Owner Trustee (including, but not limited to,
the reasonable fees and expenses of its counsel), without
cost, on a net after-tax basis, to Owner Participant, for
acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay
the reasonable fees and expenses of any separate owner trustee
or co-trustee appointed pursuant to Section 9.02 of the Trust
Agreement as a result of any requirement of law or if
otherwise required by any Operative Agreement or if requested,
or consented to, by the Lessee."
Section 4. Amendments to Section 8. Section 8 of the
Participation Agreement is hereby amended in the following respects:
(i) The last sentence of Section 8(b) is hereby amended
by deleting the words "Section 101(16) of the Act"
therein and substituting therefor the reference "49
U.S.C. Section 40102(a)(15)(C)."
(ii) Section 8(e) is hereby amended to be and read in its
entirety as follows:
"(e) (i) Pass Through Trustee hereby agrees that, except
as otherwise required by applicable law including, without
limitation, any law which requires Pass Through Trustee to act
within its own discretion, it shall not, without the prior
written consent of Owner Trustee, direct Indenture Trustee to
take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization,
direction or consent of, or notice from, the Holders holding a
specified percentage in principal amount of Outstanding (as
defined in the Trust Indenture) Certificates unless Pass
Through Trustee receives a Direction (as defined in the
relevant Pass Through Trust Agreement) to so direct the
Indenture Trustee from Certificateholders (as defined in the
relevant Pass Through Trust Agreement) holding the same
percentage of Certificates (as defined in the relevant Pass
Through Trust Agreement) evidencing Fractional Undivided
Interests (as defined in the relevant Pass Through Trust
Agreement) in the Trust (as defined in the relevant Pass
Through Trust Agreement) holding the Certificates.
PARTICIPATION AMENDMENT [N604SW]
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<PAGE> 5
(ii) Lessee and Pass Through Trustee hereby agree
that Article X of each Pass Through Trust Agreement (to the
extent relating to the Certificates) shall not be amended
without the prior written consent of Owner Participant.
(iii) Pass Through Trustee hereby agrees that,
except as otherwise required by applicable law including,
without limitation, any law which requires Pass Through
Trustee to act within its own discretion, if requested to do
so by Owner Trustee or Owner Participant, Pass Through Trustee
shall request a Direction from the relevant Certificateholders
to establish whether Pass Through Trustee, in its capacity as
a Holder, may direct the Indenture Trustee to take or refrain
from taking any action under the Operative Agreements."
(iii) Section 8(l) is hereby amended by deleting the
references therein to the Original Loan Participant.
(iv) Section 8(bb) is hereby amended to be and read in its
entirety as follows:
"(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or
Section 8.03(e)(ii) of the Indenture, each Holder covenants
that it will not transfer its Certificate to any Person unless
such Person represents and warrants in writing to such Holder,
the Owner Participant and Lessee either that (a) no part of
the funds used by it to acquire its Certificate constitutes
`plan assets' of any `employee benefit plan' within the
meaning of ERISA or any `plan' within the meaning of Section
4975(e)(1) of the Code or (b) its purchase or acquisition of
such Certificate will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of
ERISA. Any such Person shall require any transferee of its
interest to make the representations and warranties in the
preceding sentence."
(v) Section 8(dd) is hereby amended to be and read in its
entirety as follows:
"(dd) Deferred Equity. Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and
not with any other party to this Agreement or the Holders of
any Certificates), that, so long as no Lease Event of Default
or Lease Default (of the type described in Section 14.1 or
14.5 of the Lease) shall have occurred and be continuing, it
will pay or cause to be paid to Indenture Trustee on the
Deferred Equity Date sufficient funds to effect the payment of
an amount (the "Deferred Equity Amount") equal to the amount
due on such date in respect of accrued interest on the
Certificates from the Section 18 Refinancing Date (as defined
in Section 18 hereof) to and including the Deferred Equity
Date. Owner Participant and Owner Trustee hereby direct the
Indenture Trustee, and Indenture Trustee hereby agrees, to
apply the Deferred Equity Amount to the payment of interest on
the Certificates which may be due and payable pursuant to the
provisions of the Trust Indenture on the Deferred Equity Date.
Owner Participant agrees to make payment of the Deferred
Equity Amount in immediately available funds on or before
11:00 a.m., New York City time, on
PARTICIPATION AMENDMENT [N604SW]
-4-
<PAGE> 6
the Deferred Equity Date, provided that the Owner Participant
agrees to give Lessee notice by 11:00 a.m., New York City
time, on the second Business Day prior to the Deferred Equity
Date if it shall not make such payment. Indenture Trustee
agrees to give Lessee prompt notice if it shall not have
received such payment by noon, New York City time, on the
Deferred Equity Date. In the event Owner Participant fails to
make such payment, and Lessee shall make an Advance as
required by Section 3.8 of the Lease, Lessee may obtain
reimbursement in the manner and to the extent provided in
Section 3.8 of the Lease for the Advance, together with
interest on such amount at the rate described below from (and
including) the date of the making of such Advance to (but
excluding) the date of reimbursement by the Owner Participant
or the date Lessee deducts such Advance from other payments to
the extent and as provided in Section 3.8 of the Lease and,
without duplication of the foregoing, shall have such remedies
as may be available to it against the Owner Participant at law
or in equity in respect of the recovery of any such Advance.
Interest shall accrue on the amount of the Advance at an
annual rate equal to 5% in excess of the Base Rate, unless the
Advance is made when any Lease Event of Default or Lease
Default (of the type described in Section 14.1 or 14.5 of the
Lease) shall have occurred and be continuing, in which event
interest shall accrue on the amount of such Advance at the
Base Rate, but in each case not to exceed the maximum rate
permitted by applicable law. All amounts paid to Lessee by
the Owner Participant in respect of any Advance or deducted by
Lessee pursuant to Section 3.8 of the Lease shall be applied
first to payment to Lessee of interest and then to payment to
Lessee of amounts equal to such Advance."
Section 5. Amendments to Section 11(f). Section 11(f) of the
Participation Agreement is hereby amended such that wherever the phrase
"Operative Agreement" or "Operative Agreements" is used, such phrase is hereby
amended to be and read in its entirety as follows:
"Operative Agreement and each Pass Through Trust Agreement"
and "Operative Agreements and each Pass Through Trust
Agreement."
Section 6. Amendments to Section 15. Section 15(b) of the
Participation Agreement is hereby amended to be and read in its entirety as
follows:
"(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, Owner Trustee, Indenture
Trustee, Owner Participant, Pass Through Trustee and any
Holder provided for in this Agreement, and Lessee's, Owner
Trustee's, Indenture Trustee's, Owner Participant's, Pass
Through Trustee's and any Holder's obligations under any and
all thereof, shall survive the making available of the Owner
Participant's Commitment, the delivery or return of the
Aircraft, the transfer of any interest of Owner Participant in
the Trust Estate or the Aircraft or any Engine or the transfer
of any interest by any Holder in any Certificate or the Trust
Indenture Estate and the expiration or other termination of
this Agreement, any other Operative Agreement or the Pass
Through Trust Agreements, except as otherwise expressly
provided herein or therein."
PARTICIPATION AMENDMENT [N604SW]
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<PAGE> 7
Section 7. Amendment to Section 16. Section 16(b) of the
Participation Agreement is hereby amended by changing ".365%" in clause (i)
thereof to read ".386568" and by changing ".625%" in clause (ii) thereof to
read ".623122."
Section 8. Amendment to Section 17. Section 17(a)(3) of the
Participation Agreement is hereby amended by deleting the second parenthetical
contained in clause (i) thereof.
Section 9. Ratification. Except as amended hereby, the
Participation Agreement continues and shall remain in full force and effect in
all respects.
Section 10. Authorization to Execute Amendments. By execution of
this Amendment, Owner Participant hereby authorizes, directs and instructs
Owner Trustee to execute and deliver this Amendment and any and all other
amendments, agreements and certificates as may be necessary as a result of the
refinancing contemplated hereby and by Section 18 of the Participation
Agreement.
Section 11. Pass Through Trustee a Party. Effective as of the
date hereof, Pass Through Trustee shall be a party to the Participation
Agreement and shall have the rights and obligations of the Holders as set forth
in the Participation Agreement, as amended hereby.
Section 12. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 13. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
PARTICIPATION AMENDMENT [N604SW]
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Participation Agreement to be duly delivered in the State of New
York and executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By /s/ JOHN D. OWEN
Treasurer
AMSOUTH LEASING CORPORATION,
Owner Participant
By /s/ CHARLES F. KISER
President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as otherwise expressly
provided herein, but solely as
Indenture Trustee
By /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
PARTICIPATION AMENDMENT [N604SW]
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<PAGE> 9
SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee:
Southwest Airlines Co. Owner Trustee:
2702 Love Field Drive Shawmut Bank Connecticut,
P.O. Box 36611 National Association
Dallas, Texas 75235-1611 777 Main Street
Hartford, Connecticut 06115
Attn: Treasurer
Telecopy: (214) 904-4022 Attn: Corporate Trust
Administration
Telecopy: (203) 240-7920
Owner Participant:
AmSouth Leasing Corporation
1900 Fifth Avenue North, 8th Floor Indenture Trustee and Pass Through Trustee and
Birmingham, Alabama 34203 Holder:
Wilmington Trust Company
Attn: President Rodney Square North
Telecopy: (205)307-4124 1100 North Market Street
Wilmington, Delaware 19890-0001
Payment Instructions:
AmSouth Bank of Alabama Attn: Corporate Trust
ABA No. 062000019 Administration
For the account of AmSouth Telecopy: (302) 651-8882
Leasing Corporation
Account No. 00201332 Payment Instructions:
Reference: Southwest Airlines 1995 Wilmington Trust Company
Notify: AmSouth Leasing Operations: Wilmington, Delaware
(205) 326-5588 ABA No. 031100092
For the account of Southwest
Airlines 1995-1
Account No. 30875-0
Reference: N604SW
Attn: David A. Vanaskey
Corporate Trust Administration
</TABLE>
PARTICIPATION AGREEMENT [N604SW]
I-1
<PAGE> 1
EXHIBIT 4.39
________________________________________________________________________________
SALE AND LEASE AGREEMENT
dated as of August 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N604SW
________________________________________________________________________________
All right, title and interest of Lessor in and to this Sale and Lease
Agreement and the Aircraft (including the Engines) has been assigned to and is
subject to a security interest in favor of WILMINGTON TRUST COMPANY, as
Indenture Trustee. This Sale and Lease Agreement has been executed in several
counterparts. No security interest in Lessor's right, title and interest in
and to this Sale and Lease Agreement may be created through the transfer or
possession of any counterpart other than the counterpart identified, for
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart. [This is not the original
counterpart.]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Sale, Lease and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Interim and Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Variable Amounts on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Adjustment to Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value . . . . . . . . 16
3.7.1 Adjustments upon Payment by Lessor of Transaction Costs, Etc . . . . . . . . . . . . . . 16
3.7.2 Recalculation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Certain Advances; Reimbursement Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain Agreements of Lessee . . . . . . . . . 18
4.1 Lessor's Representations and Warranties; DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 General Condition upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.1 Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.2 Free of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.3 Operating Configuration and Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.4 Cleanliness and Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.5 Parts and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Return of Other Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Return at End of Base Lease Term or Renewal Lease Term . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Manuals; Service Bulletins, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Failure to Return Aircraft or Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 Aid in Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.7 Storage upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7. Registration, Operation, Possession, Subleasing and Records . . . . . . . . . . . . . . . . . . . . 23
7.1 Registration and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
SALE AND LEASE AGREEMENT [N604SW]
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<PAGE> 3
<TABLE>
<S> <C> <C>
7.1.2 Nameplate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.4 Insurance Requirements; Government Requisition; Indemnity . . . . . . . . . . . . . . . . 24
7.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.1 Interchange and Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.2 Testing and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.3 Civil Reserve Air Fleet Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.4 Installation of Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.5 Installation of Engines on Other Airframes . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.6 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.7 Wet Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.8 Sublease to Permitted Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.2 Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations; Modifications and Additions . . . . . . 29
8.1 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.1 Maintenance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.2 Compliance with Government Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.3 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4.1 Mandatory Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4.2 Voluntary Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Right of Termination upon Obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Sale of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Retention by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Termination As to Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10. Loss, Destruction, Requisition, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1 Event of Loss with Respect to Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.1 Lessee's Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.2 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.3 Payment of Stipulated Loss Value and Rent . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.4 Stipulated Loss Value Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.5 Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.6 Conditions to Replacement of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.6.1 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.6.2 Tax Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
SALE AND LEASE AGREEMENT [N604SW]
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
10.1.6.3 Lessee's Obligations with Respect to Replacement Aircraft . . . . . . . . . . . 36
10.1.7 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1.8 Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.2 Conditions; Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.3 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.4 Conveyance; Replacement Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2.5 No Reduction of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3 Application of Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.1 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.2 Replacement of Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.3 Nonreplacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.4 Requisition of Aircraft for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 42
10.5 Requisition of an Engine for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 42
10.6 Application of Payments During Existence of Default . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1.2 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1.3 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Insurance Against Loss of or Damage to Aircraft and Engines . . . . . . . . . . . . . . . . . . . . 43
11.2.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.2 War-Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3 Certain Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.3.1 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.3.2 Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.3.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.4 Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.5 Government Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3 General Policy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.1 Primary Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.2 Coverage for Each Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.3 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.5 Notice of Termination or Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.6 Nonliability for Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.7 Identity of Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.8 Fifty-fifty Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.4 Application of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5 Certificates; Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.6 Lessor's Right to Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
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<TABLE>
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11.7 Insurance for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.8 Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.2 Security for Lessor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.1 Failure To Pay Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.2 Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.3 General Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.4 Misrepresentation and Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.5 Bankruptcy, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1 Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.1 Return; Repossession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.2 Sale; Use Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.3 Certain Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.3.1 Liquidated Damages--Fair Market Rental Value . . . . . . . . . . . . . . . . . 51
15.1.3.2 Liquidated Damages--Fair Market Sales Value . . . . . . . . . . . . . . . . . . 51
15.1.4 Liquidated Damages upon Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.1.5 Rescission and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.2 Determination of Fair Market Rental Value and Fair Market Sales Value . . . . . . . . . . . . . . . 52
15.3 No Waiver, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17. Net Lease; Lessee's Obligations; No Setoff, Counterclaim, Etc . . . . . . . . . . . . . . . . . . . 53
Section 18. Renewal and Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.1 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.2 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 19. Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 20. Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 21. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 22. Investment of Security Funds; Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . 59
22.1 Investment of Security Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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22.2 Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 23. Permitted Foreign Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
EXHIBIT A Form of Sale and Lease Agreement Supplement
EXHIBIT B-1 Stipulated Loss Value Schedule
EXHIBIT B-2 Termination Value Schedule
EXHIBIT C Rent Payment Schedule, EBO Installment Payment Schedule and Special Purchase Price
EXHIBIT D Permitted Foreign Air Carriers
EXHIBIT E Assumed Interest Amounts
APPENDIX A Certain Return Conditions
</TABLE>
SALE AND LEASE AGREEMENT [N604SW]
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THIS SALE AND LEASE AGREEMENT dated as of August 1, 1995, is between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity except as expressly stated herein, and otherwise
solely as Owner Trustee under the Trust Agreement hereinafter referred to
(together with any successor in such capacity and its permitted assigns,
"Lessor"), and SOUTHWEST AIRLINES CO., a Texas corporation (together with its
successors and permitted assigns, "Lessee").
RECITALS
1. On June 5, 1995, an AC Form 8050-2 Bill of Sale dated April
25, 1995, from Manufacturer (as defined below) in favor of Lessee covering the
Aircraft (as defined below) was recorded by the FAA (as defined below) as
Conveyance Number XX004290.
2. The parties hereto desire that Lessor purchase the Aircraft
from and lease it back to Lessee as hereinbelow provided.
In consideration of the premises and the mutual agreements herein
contained, Lessor and Lessee agree as follows:
Section 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease and shall be equally applicable to both the singular and the plural forms
of the terms herein defined. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified (including as the same may be
amended and restated) from time to time, to the extent permitted by, and in
accordance with, the terms thereof. For all purposes of this Lease the
capitalized terms used but not defined herein are used as defined in the Trust
Indenture or, if not defined therein, as defined in the Participation
Agreement.
"Act" means Subtitle VII of Title 49 of the United States Code, as
amended from time to time.
"Advance" is defined in Section 3.8.
"Affiliate" means, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aircraft" means the Airframe, together with the two Engines, whether
or not any of such Engines may from time to time be installed on the Airframe
or may be installed on any other airframe or on any other aircraft.
SALE AND LEASE AGREEMENT [N604SW]
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"Airframe" means (i) the Boeing Model 737-3H4 aircraft (excluding
Engines or engines from time to time installed thereon) specified in the
initial Lease Supplement, manufactured by Manufacturer and sold by Manufacturer
to Lessee pursuant to the Purchase Agreement, sold hereunder by Lessee to
Lessor, and leased back by Lessor to Lessee, all hereunder and under the
initial Lease Supplement, (ii) any Replacement Airframe, (iii) any and all
Parts so long as the same shall be incorporated in such aircraft and title
thereto shall have vested in Lessor pursuant to the terms of Section 8, and any
and all Parts removed from such aircraft so long as title thereto shall remain
vested in Lessor in accordance with the terms of Section 8, and (iv) all
Records at any time maintained with respect to the foregoing property;
provided, however, that at such time as a Replacement Airframe shall be
substituted hereunder and the replaced Airframe shall be released from the Lien
of the Trust Indenture, such replaced Airframe shall cease to be the Airframe
hereunder.
"Assumed Interest Rate" means 7.5% per annum, compounded semi-annually
and computed on the basis of a 360-day year of twelve 30-day months.
"Assumed Interest Amount" means, with respect to the Deferred Equity
Date and each Rent Payment Date, the amount set forth on Exhibit E opposite
such date.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time, or any successor statute.
"Base Lease Term" means the period commencing on the Base Lease Term
Commencement Date and expiring on January 1, 2020.
"Base Lease Term Commencement Date" means July 1, 1996.
"Base Rate" means the interest rate publicly announced in New York
City from time to time by Chemical Bank as its prime or base lending rate.
"Basic Rent" means the rent identified as Basic Rent in and payable
pursuant to Section 3.3.
"Bills of Sale" means the FAA Bill of Sale, the Warranty Bill of Sale,
the Lessee FAA Bill of Sale and the Lessee Warranty Bill of Sale.
"Break Amount" is defined in Section 15.05(b) of the Trust Indenture.
"Business Day" shall have the meaning attributed thereto in the Trust
Indenture, so long as the Trust Indenture shall remain in effect, and otherwise
means a day on which banks are not required or authorized to close in any of
the City of New York, New York, Dallas, Texas, and Hartford, Connecticut, or
such other city as shall be the situs of the principal office of Lessee or
Lessor at the time in question.
"Certificate Holder" is defined in Section 1.01(b) of the Trust
Indenture.
SALE AND LEASE AGREEMENT [N604SW]
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"Certificate Rate" means, as of any date of determination thereof, (i)
in respect of amounts owing or distributable pursuant to the Trust Indenture to
the Holders of Certificates issued prior to the Section 18 Refinancing Date,
the applicable Assumed Interest Rate, (ii) in respect of amounts owing to the
Holders of Certificates issued on or after the Section 18 Refinancing Date, the
interest rate or, if such Certificates shall have been issued with more than
one Maturity Date, the weighted average of the interest rates (which weighting
is to be based on the Outstanding principal amounts of the Certificates of each
Maturity Date), then in effect with respect to the then Outstanding principal
amounts of the Certificates, (iii) in respect of any portion of Stipulated Loss
Value expected to be distributed to the Owner Participant, an interest rate
equal to the yield utilized in calculating the Owner Participant's Net Economic
Return, and (iv) in respect of any other amount owing to the Owner Participant
(and which is not distributed to the Holders pursuant to the Trust Indenture),
1% in excess of the Base Rate, but in no event to exceed the maximum rate
permitted by applicable law.
"Certificates" means the Certificates (as defined in the Trust
Indenture) issued under the Trust Indenture.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Debt Payments" is defined in Section 18.2(e)(1)(b).
"Deferred Equity Amount" is defined in Section 8(dd) of the
Participation Agreement.
"Deferred Equity Date" means January 1, 1996.
"Delivery Date" means the date of the initial Lease Supplement, which
date shall be the date on which the Aircraft is delivered by Lessee to, and
accepted by, Lessor hereunder and in turn leased back by Lessor to Lessee
hereunder, which date shall be a Business Day.
"Dollars" and "$" mean the lawful currency of the United States of
America.
"DOT" means the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"EBO Installment Payment Date" means a date set forth in Part II of
Exhibit C hereto.
"Engine" means (i) each of the CFM International Model CFM56-3-B1
engines identified by manufacturer's serial number in the initial Lease
Supplement subjecting the Aircraft to this Lease and originally installed on
the Airframe covered by such Lease Supplement, whether or not from time to time
thereafter installed on such Airframe or installed on any other airframe or on
any other aircraft, and (ii) any Replacement Engine, whether or not from time
to time thereafter installed on the Airframe or any other airframe or on any
other aircraft, together in each case with any and all Parts incorporated in
such Engine and any and all Parts removed from such Engine, in each case so
long as title thereto shall have been and shall remain vested in Lessor in
accordance with the terms
SALE AND LEASE AGREEMENT [N604SW]
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of Section 8, and all Records at any time maintained with respect to the
foregoing property. Except as otherwise set forth herein, at such time as a
Replacement Engine shall be substituted hereunder and the Engine for which the
substitution is made shall be released from the Lien of the Trust Indenture,
such replaced Engine shall cease to be an Engine hereunder. The term "Engines"
means, as of any date of determination, all Engines then leased hereunder.
"Engine Manufacturer" means CFM International, Inc., a Delaware
corporation, in its capacity as manufacturer of the Engines.
"Equity Payments" is defined in Section 18.2(e)(1)(b).
"Estate" means the Trust Estate as that term is defined in the Trust
Agreement.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such property: (i)
disappearance or theft of such property or the loss of the use thereof for any
reason not covered by any other clause of this definition, including hijacking,
for a period of three consecutive months or for a period continuing through the
last day of the Term, whichever first occurs, or destruction, damage beyond
economic repair or rendition of such property permanently unfit for normal use
for any reason whatsoever; (ii) any damage to such property which results in an
insurance settlement with respect to such property on the basis of a total loss
or a constructive or compromised total loss; (iii) the confiscation,
condemnation or requisition of use of such property by the Government or any
other government or any instrumentality or agency thereof for a period in
excess of six consecutive months or for a period continuing beyond the Term,
whichever first occurs; (iv) as a result of any rule, regulation, order or
other action by the FAA, DOT or other governmental body (including any court)
having jurisdiction, the use of such property in the normal course of
interstate air transportation of persons shall have been prohibited for a
period of more than six consecutive months, unless Lessee, prior to the
expiration of such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit normal use by Lessee, but in any event (a) in any case in which such
prohibition shall apply generally to all similar Boeing Model 737-300 series
aircraft, if such prohibition is continuing on the last day of the Term, or (b)
in all other cases, if such prohibition is continuing on the earlier of the
first anniversary of such prohibition and the last day of the Term; provided,
however, that if such prohibition is continuing on the last day of the Term, no
Event of Loss pursuant to this clause (iv) shall exist if Lessor shall have
delivered to Lessee a written notice not less than two days prior to the end of
the Term that such prohibition on the last day of the Term shall not be deemed
an Event of Loss; (v) the confiscation, condemnation or requisition of title to
such property by the Government or any other government or any instrumentality
or agency thereof; or (vi) respecting any Engine, any divestiture of title
treated as an Event of Loss pursuant to Section 7.2.1 or any other provision of
this Lease. An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if an Event of Loss occurs with respect to the Airframe. An
Event of Loss shall be deemed to occur as of the date of the disappearance,
theft, loss of use, insurance settlement, prohibition, confiscation,
condemnation or requisition of title or of use, as applicable, except that no
Event of Loss shall be deemed to have occurred pursuant to clause (i), (iii) or
(iv) above until the expiration of the applicable period referred to therein.
SALE AND LEASE AGREEMENT [N604SW]
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"FAA" or "Federal Aviation Administration" means the Federal Aviation
Administration or any governmental person, agency or other authority succeeding
to the functions of the Federal Aviation Administration.
"FAA Bill of Sale" means a bill of sale for the Aircraft on AC Form
8050-2 delivered to Lessee on the date of delivery of the Aircraft to Lessee by
Manufacturer under the Purchase Agreement.
"FAA Regulations" means the Federal Aviation Regulations issued
pursuant to the Act from time to time, or any successor regulations thereto.
"Floating Rate Renewal Term" means any of four successive periods of
six months or one, two or three years each, not to exceed three years in the
aggregate, which follow the Base Lease Term and with respect to which Lessee
shall have exercised its option pursuant to Section 18.1 hereof.
"Government" means the federal government of the United States of
America or any instrumentality or agency thereof having the full faith and
credit of the United States of America.
"Guarantor" means AmSouth Bank of Alabama, and its successors and
permitted assigns.
"Guaranty" means the Guaranty, dated as of August 1, 1995, of the
Guarantor in favor of the Persons named therein.
"Holder" is defined in Section 1.01(b) of the Trust Indenture.
The term "incorporated in" means incorporated or installed in or
attached to or otherwise made a part of.
"Indemnified Parties" means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) the Original Loan Participant, (v) the Estate and the
Trust Indenture Estate, (vi) the Guarantor, (vii) the respective Affiliates,
successors and assigns of the foregoing, and (viii) the respective directors,
officers, employees, agents, partners and servants of the foregoing.
"Indenture and Trust Supplement" means a supplement to the Trust
Agreement and the Trust Indenture, substantially in the form of Exhibit C to
the Trust Indenture.
"Indenture Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Indenture Trustee under the Trust Indenture
and any successor, separate or additional Indenture Trustee thereunder.
"Indenture Trustee Agreements" means the Participation Agreement and
the Trust Indenture.
SALE AND LEASE AGREEMENT [N604SW]
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"Interim Lease Term" means the period commencing on the date which is
six months from the Delivery Date and expiring at the end of the day on the day
before the Base Lease Term Commencement Date.
"Interim Rent" means the rent identified as Interim Rent in and
payable pursuant to Section 3.3.
"Investment Grade" is defined in Section 11.8.
"Lease", "this Lease", "this Agreement", "hereby", "herein", "hereof",
"hereunder" or other words mean this Sale and Lease Agreement, including
without limitation supplementation hereof by one or more Lease Supplements.
"Lease Default" means any event or condition which, with notice or
lapse of time or both, would constitute a Lease Event of Default.
"Lease Event of Default" is defined in Section 14.
"Lease Period" means each of the Preliminary Lease Term, the Interim
Lease Term, and each six-month period commencing on a January 1 or July 1, as
the case may be, thereafter during the Term.
"Lease Supplement" means a supplement to this Lease, in the case of
the initial such supplement substantially in the form attached as Exhibit A
hereto, subjecting the Aircraft or other property to this Lease.
"Lessee FAA Bill of Sale" means a bill of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the FAA and delivered to
Lessor on the Delivery Date by Lessee.
"Lessee Warranty Bill of Sale" means a full warranty bill of sale
covering the Aircraft delivered to Lessor on the Delivery Date by Lessee.
"Lessor's Cost" for the Aircraft means the amount identified as such
in the initial Lease Supplement subjecting the Aircraft to this Lease.
"Lessor Liens" means Liens of any Person claiming by, through or under
Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant which arise as a result of (i) claims against Lessor, the
Person serving as Owner Trustee, in its individual capacity, or Owner
Participant, as the case may be, not related to the transactions contemplated
by the Operative Agreements, other than claims being contested in good faith
(and for the payment of which adequate reserves have been provided in
accordance with generally accepted accounting principles) by appropriate
proceedings so long as such proceedings do not involve any material danger of
the sale, forfeiture, loss or loss of use of the Aircraft, or any portion of
the Trust Estate, and so long as such Lien does not affect the priority of the
Lien of the Trust Indenture, (ii) any act or omission of
SALE AND LEASE AGREEMENT [N604SW]
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Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant, as the case may be, which is not related to the transactions
contemplated by the Operative Agreements, or is in violation of any of the
express terms of any of the Operative Agreements, (iii) Taxes or Losses imposed
against or incurred by Lessor, the Person serving as Owner Trustee, in its
individual capacity, or Owner Participant, as the case may be, for which Lessee
is not obligated to indemnify pursuant to the Participation Agreement, other
than Liens for Taxes not yet due or for Taxes or Losses being contested in good
faith (and for the payment of which adequate reserves have been provided in
accordance with generally accepted accounting principles) by appropriate
proceedings so long as such proceedings do not involve any material danger of
the sale, forfeiture, loss or loss of use of the Aircraft, or any other portion
of the Trust Estate, or (iv) claims against Lessor, the Person serving as Owner
Trustee, in its individual capacity, or Owner Participant, as the case may be,
arising out of any transfer by any of such Persons in violation of the express
terms of the Operative Agreements.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest, or any claim or exercise of rights, affecting the title to
or any interest in property.
"Losses" is defined in Section 7(c)(i) of the Participation Agreement.
"Maintenance Program" is defined in Section 8.1.1.
"Manufacturer" means The Boeing Company, a Delaware corporation, or
any Affiliate thereof whose obligations are guaranteed by The Boeing Company,
and their respective successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
Manufacturer dated as of August 1, 1995, attached to the Purchase Agreement
Assignment and, if applicable, the Agreement of Subsidiary by Boeing Domestic
Sales Corporation of even date therewith.
"Net Economic Return" means after-tax economic yield, total aggregate
after-tax cash flow and general pattern of book earnings expected by the
initial Owner Participant with respect to the Aircraft both through the end of
the Base Lease Term and through the Special Purchase Option Date (assuming the
exercise of the Special Purchase Option by Lessee), utilizing the same
assumptions (including tax assumptions and constraints) as were utilized by
Owner Participant in determining Interim Rent, Basic Rent, Stipulated Loss
Value and Termination Value percentages and the Special Purchase Price
(including any installments thereof) as of the Delivery Date, as such
assumptions may be adjusted from time to time to take into account the impact
of any change of the type specified in Section 3.7 which theretofore has
resulted in an adjustment of the percentages of Interim Rent, Basic Rent,
Stipulated Loss Value, Termination Value or the Special Purchase Price
(including any installments thereof).
"Net Present Value of Rents" means, as of any date of determination,
the net present value, as of the Delivery Date, of each of (i) all unpaid
Interim Rent and Basic Rent through the end of the Term and (ii) for any date
of determination prior to the Special Purchase Option Date, all unpaid
SALE AND LEASE AGREEMENT [N604SW]
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Interim Rent and Basic Rent through the Special Purchase Option Date plus the
Special Purchase Price, in each case utilizing a semi-annual discount rate
that, on an annual basis, is equal to 8.05%.
"Officer's Certificate" means a certificate signed by the Chairman,
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Assistant Secretary of the Person providing
such certificate.
"Operative Agreements" means this Agreement, each Lease Supplement,
the Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement,
the Manufacturer's Consent, including any consents included in or attached to
any thereof, and the letter agreement dated August 25, 1995 among the Lessee,
the Owner Participant and the Owner Trustee.
"Original Loan Participant" means Texas Commerce Bank National
Association, a national banking association, and its successors and permitted
assigns as holder from time to time of the Series SWA 1995 Trust N604SW-I
Certificates.
"Overdue Rate" means (i) in respect of that portion of Interim Rent,
Basic Rent, Stipulated Loss Value, Termination Value or Special Purchase Price
(or any installment thereof) expected to be applied to principal of or interest
on the Certificates, the Past Due Rate, or if Certificates shall have been
issued after the Section 18 Refinancing Date with more than one Maturity Date,
the weighted average of the Past Due Rates in respect of the then- outstanding
Certificates of each Maturity Date (which weighting is to be based on the
Outstanding principal amounts of the Certificates of each Maturity Date) and
(ii) in respect of any other portion of Interim Rent, Basic Rent, Stipulated
Loss Value, Termination Value or Special Purchase Price (or any installment
thereof), any Renewal Rent, any Supplemental Rent owing to any Person, or any
amount payable to Lessee (except as otherwise provided), 2% in excess of the
Base Rate, but in no event to exceed the maximum rate permitted by applicable
law. Any interest payable at the Overdue Rate that is determined with
reference to clause (i) of this definition shall be computed on the same basis
as the Past Due Rate, and any interest payable at the Overdue Rate that is
determined with reference to clause (ii) of this definition shall be computed
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed.
"Owner Participant" means AmSouth Leasing Corporation, an Alabama
corporation, and its successors and permitted assigns.
"Owner Participant Agreements" means the Participation Agreement, the
Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means Shawmut Bank Connecticut, National Association,
not in its individual capacity but solely as trustee under the Trust Agreement,
and any successor, separate or additional Owner Trustee thereunder.
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"Owner Trustee Documents" means the Participation Agreement, this
Lease, the Trust Agreement, the Trust Indenture, the Certificates and the
Purchase Agreement Assignment.
"Participant" means Owner Participant and Original Loan Participant
and their respective successors and permitted assigns.
"Participation Agreement" means the Participation Agreement, dated as
of August 1, 1995, among Lessee, Participants, Lessor and Indenture Trustee,
relating to the Aircraft.
"Parts" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(other than (a) complete Engines or engines and (b) any items leased by Lessee
from a third party (other than Lessor)) which may from time to time be
incorporated in the Airframe or any Engine and title to which shall vest in
Lessor (and "Part" means any of the foregoing) or, so long as title thereto
shall remain vested in Lessor in accordance with Section 8.2 hereof, after
removal therefrom.
"Permitted Foreign Air Carrier" means a "foreign air carrier" (as
defined in the Act) named in Exhibit D hereto (as the same may be modified from
time to time in accordance with Section 23) and any successor of any such
carrier.
"Permitted Lien" means any Lien referred to in clauses (a) through (g)
of Section 6.
"Permitted Sublease" means a sublease permitted under Section 7.2.8.
"Permitted Sublessee" means the sublessee under a Permitted Sublease.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Preliminary Lease Term" means the period commencing on the Delivery
Date and expiring at the end of the day on the day before the six month
anniversary of the Delivery Date.
"Purchase Agreement" means the Purchase Agreement between Manufacturer
and Lessee specified in the Purchase Agreement Assignment providing, among
other things, for the manufacture and sale by Manufacturer to Lessee of certain
Boeing Model 737-300 series aircraft (including the Aircraft), as the same has
been or may hereafter (to the extent permitted by the terms of the Purchase
Agreement Assignment) be amended, modified or supplemented and including,
without limitation, as part thereof, the detail specifications referred to
therein and any and all change orders from time to time entered into with
respect thereto (to the extent permitted by the terms of the Purchase Agreement
Assignment), as such Purchase Agreement relates to the Aircraft and has been
assigned pursuant to the Purchase Agreement Assignment.
SALE AND LEASE AGREEMENT [N604SW]
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"Purchase Agreement Assignment" means the Purchase Agreement
Assignment, dated as of August 1, 1995, between Lessee and Lessor, assigning to
Lessor certain of Lessee's rights and interests under the Purchase Agreement
with respect to the Aircraft, which Purchase Agreement Assignment has annexed
thereto the Manufacturer's Consent, executed by Manufacturer.
"Records" is defined in Section 5.4.
"Refinancing Date" is defined in Section 17(a) of the Participation
Agreement.
"Renewal Rent" means the rent payable in respect of a Renewal Term
determined pursuant to Section 18.1.
"Renewal Term" means any Floating Rate Renewal Term.
"Rent" means Interim Rent, Basic Rent, Renewal Rent and Supplemental
Rent.
"Rent Differential Amount" is defined in Section 3.3.
"Rent Payment Date" means each January 1 and July 1 during the Base
Lease Term and any Renewal Term, commencing with July 1, 1996.
"Replacement Aircraft" means any Aircraft of which a Replacement
Airframe is a part.
"Replacement Airframe" means a Boeing Model 737-300 (or an improved
model) aircraft (except Engines or engines from time to time installed thereon)
which shall be leased hereunder pursuant to Section 10.1.2.
"Replacement Engine" means a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer of at least
equivalent utility, remaining useful life and value, in each case suitable for
installation and use on the Airframe and fully compatible with the other Engine
or engine installed thereon) which shall have been substituted for an Engine
leased hereunder pursuant to Section 5.2, 9.4, 10.1 or 10.2.
"Section 18 Refinancing Date" is defined in Section 18(a) of the
Participation Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"SLV Determination Date" means any date set forth in Exhibit B-1
hereto.
"Special Purchase Option Date" is defined in Section 18.2(b).
"Special Purchase Price" is defined in Section 18.2(b).
SALE AND LEASE AGREEMENT [N604SW]
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"Special Purchase Price After-Tax Yield" means the after-tax economic
yield, total aggregate after-tax cash flow and general pattern of book earnings
expected by the Owner Participant with respect to the Aircraft through the
Special Purchase Option Date if the Special Purchase Option were exercised and
the Special Purchase Option Price paid in installments, utilizing the multiple
investment sinking fund method of analysis and the same assumptions as used by
such Owner Participant (including the Tax Assumptions set forth in Section 2 of
the Tax Indemnity Agreement and the assumption that the amount of interest
payable on the Certificates on each Rent Payment Date occurring prior to or
concurrent with the Special Purchase Option Date will be the Assumed Interest
Amount set forth on Exhibit E in respect of such Rent Payment Date) in its
economic analysis of the transaction as of the Delivery Date.
"Stipulated Loss Value" means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment (and, to the
extent that the actual amount of interest paid and to be paid on the
Certificates during the Lease Period in which such SLV Determination Date
occurs up to and including such date is greater or less than the amount
included in calculating the percentage set forth in Exhibit B-1 with respect to
such SLV Determination Date on account of such interest, such percentage shall
be adjusted appropriately to compensate for such differential). Stipulated
Loss Value may be subject to adjustment in accordance with Section 3.7 and
Section 18.2(d) of this Agreement.
"Supplemental Rent" means, without duplication, all amounts,
liabilities and obligations (other than Interim Rent, Basic Rent or Renewal
Rent) which Lessee assumes or agrees to pay to Lessor or any other Person
hereunder, under the Participation Agreement or any of the other Operative
Agreements, including, without limitation (i) Stipulated Loss Value and
Termination Value payments and Special Purchase Price payments, (ii) all
amounts required to be paid by Lessee under the agreements, covenants and
indemnities contained in the Participation Agreement and the Tax Indemnity
Agreement, and (iii) all amounts required to be paid pursuant to Sections 3.4,
3.5 and 3.8 hereof.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement, dated as
of August 1, 1995, between Owner Participant and Lessee, relating to the
Aircraft.
"Taxes" is defined in Section 7(b)(i) of the Participation Agreement.
"Term" means the term for which the Aircraft is leased pursuant to
Section 3 hereof and, unless earlier terminated, shall include the Preliminary
Lease Term, the Interim Lease Term, the Base Lease Term and any Renewal Term
then in force or committed to in accordance with Section 18.1.
"Termination Date" is defined in Section 9.1.
SALE AND LEASE AGREEMENT [N604SW]
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"Termination Value" means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined (and, to the extent that the actual amount of interest paid and to
be paid on the Certificates during the Lease Period in which such TV
Determination Date occurs up to and including such date is greater or less than
the amount included in calculating the percentage set forth in Exhibit B-2 with
respect to such TV Determination Date on account of such interest, such
percentage shall be adjusted appropriately to compensate for such
differential). Termination Value may be subject to adjustment in accordance
with Section 3.7 of this Agreement.
"Transfer" means, with respect to any Person, to transfer, by bill of
sale or otherwise, all such Person's right, title and interest in and to the
Aircraft, Airframe or any Engine, as the case may be, to another Person on an
"as is, where is" basis, free and clear of any Lessor Lien but otherwise
without recourse, representation or warranty, express or implied, and including
an express disclaimer of warranties, representations and guarantees in a manner
comparable to that set forth in Section 4.1.
"Trust Agreement" means the Trust Agreement, dated as of August 1,
1995, between Owner Participant and Shawmut Bank Connecticut, National
Association, in its individual capacity, relating to the Aircraft.
"Trust Indenture" means the Trust Indenture and Security Agreement,
dated as of August 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft.
"Trust Indenture Estate" has the meaning attributed to the term
"Indenture Estate" in the Trust Indenture.
"TV Determination Date" means any date set forth in Exhibit B-2 hereto.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to 49 U.S.C. Section 41102 and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
"Warranty Bill of Sale" means the full warranty bill of sale for the
Aircraft delivered to Lessee on the date of delivery of the Aircraft to Lessee
by the Manufacturer under the Purchase Agreement.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which the Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under the Act for the performance by such employees of
similar functions within the United States of America (it being understood that
cabin attendants need not be
SALE AND LEASE AGREEMENT [N604SW]
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regular employees of Lessee), (ii) shall be maintained by Lessee in accordance
with its Maintenance Program, and (iii) shall be and remain, in the hands of
such third party, subject to all other terms and conditions of this Lease.
Section 2. Sale, Lease and Acceptance.
(a) Lessor, subject to satisfaction or waiver of the conditions
set forth in Section 4 of the Participation Agreement and the concurrent
acceptance hereunder by Lessee of the Aircraft, hereby agrees, to the extent
that the funds received by it pursuant to Section 2 of the Participation
Agreement are adequate for the purpose, to purchase at a purchase price equal
to Lessor's Cost and to accept delivery on the Delivery Date from Lessee
hereunder and to lease back (immediately after extension of the Lien of the
Trust Indenture to the Aircraft) to Lessee hereunder, and Lessee hereby agrees
to sell to Lessor and to lease back (immediately after extension of the Lien of
the Trust Indenture to the Aircraft) from Lessor hereunder on the Delivery
Date, the Aircraft, which shall have been accepted by Lessor and Lessee
hereunder as evidenced by the execution by Lessor and Lessee of the Lease
Supplement conveying to Lessor and leasing to Lessee the Aircraft hereunder;
provided, however, that Lessor and Lessee shall have no further obligation
hereunder with respect to the Aircraft if the Delivery Date shall not have
occurred on or before September 30, 1995. The purchase price of the Aircraft
shall be paid by Lessor to Lessee on the Delivery Date in the manner specified
in Section 2 of the Participation Agreement.
(b) Lessor hereby authorizes each of Gary C. Kelly, John D. Owen
and Laura Wright, all of whom are employees of Lessee, as the authorized
representative or representatives of Lessor to accept delivery of the Aircraft
from Lessee pursuant hereto. Lessee hereby agrees that in the event delivery
of the Aircraft shall be accepted by an employee or employees of Lessee
pursuant to such authorization by Lessor, such acceptance of delivery by such
employee or employees on behalf of Lessor shall, without further act, also
irrevocably constitute (i) acceptance by such employee of such appointment and
(ii) acceptance by Lessee of the Aircraft for all purposes of this Agreement.
Section 3. Term and Rent.
3.1 General. Except as otherwise provided herein, the Term for
the Aircraft shall commence on the Delivery Date specified in the initial Lease
Supplement and shall terminate as herein provided.
3.2 Lease Term. Except as provided herein, the Aircraft shall be
leased hereunder for the Preliminary Lease Term, the Interim Lease Term, the
Base Lease Term and each Renewal Term, if any.
3.3 Interim and Basic Rent. No Interim Rent or Basic Rent shall
be paid during the Preliminary Lease Term. Lessee hereby agrees to pay to
Lessor (i) Interim Rent for the Interim Lease Term with respect to the Aircraft
on the first Rent Payment Date set forth on Exhibit C, and (ii) Basic Rent for
the Base Lease Term with respect to the Aircraft on each subsequent Rent
Payment Date set forth in Exhibit C, in each case in an amount equal to the
percentage of Lessor's
SALE AND LEASE AGREEMENT [N604SW]
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Cost of the Aircraft set forth in Exhibit C opposite such Rent Payment Date,
subject to the terms of the next succeeding paragraphs of this Section 3.3 and
Section 3.7. Each installment (or portion of an installment) of Interim Rent
or Basic Rent under the heading "Advance" in Exhibit C payable on a Rent
Payment Date shall relate to the respective Lease Period immediately following
such Rent Payment Date, and each installment (or portion of an installment) of
Interim Rent or Basic Rent under the heading "Arrears" in Exhibit C payable on
a Rent Payment Date shall relate to the respective Lease Period immediately
preceding such Rent Payment Date.
Although the Interim Rent and Basic Rent amounts set forth in Exhibit
C hereto have been computed on the assumption that the amount of interest
payable on the Certificates on the Rent Payment Dates throughout the Base Lease
Term will be the Assumed Interest Amounts, Lessor and Lessee recognize that the
actual amount of interest payable on the Certificates may, from time to time
during the Interim Lease Term and the Base Lease Term, be different from the
Assumed Interest Amounts. Accordingly, Interim Rent and Basic Rent shall be
increased or decreased (but not below zero), as the case may be, by the Rent
Differential Amount (as defined herein). Any increase in Interim Rent or Basic
Rent shall constitute additional arrears Rent on the date in question, and any
decrease in Interim Rent or Basic Rent shall first decrease arrears Rent before
affecting advance Rent on the date in question. For purposes hereof, "Rent
Differential Amount" shall mean, as of any Rent Payment Date, the absolute
value of the difference between (i) the aggregate amount of interest due and
payable on such Rent Payment Date on the Certificates (or due and payable on
the next following or next preceding Business Day, as the case may be, if such
date shall not constitute a Business Day) and (ii) the Assumed Interest Amount
with respect to such Rent Payment Date. If, as of such Rent Payment Date, the
amount determined in accordance with clause (i) of the immediately preceding
sentence shall be greater than the amount determined in accordance with clause
(ii) of such sentence, the amount of Interim Rent or Basic Rent payable on such
Rent Payment Date shall be increased by the Rent Differential Amount. If, as
of such Rent Payment Date, the amount determined in accordance with such clause
(ii) shall exceed the amount determined in accordance with such clause (i), the
amount of Interim Rent or Basic Rent due on such Rent Payment Date shall be
decreased (but not below zero) by the Rent Differential Amount.
Anything contained in the Participation Agreement or this Lease or any
other Operative Agreement to the contrary notwithstanding, (a) each installment
of Basic Rent payable under this Lease, whether or not adjusted in accordance
with the immediately preceding paragraph or the provisions of Section 3.7,
shall be, under any circumstances and in any event, in an amount at least
sufficient to pay in full, on the Rent Payment Date on which such installment
is due and payable, any scheduled payments then required to be made on account
of the principal of and interest on the Certificates, and (b) Stipulated Loss
Value, Termination Value and, unless Lessee shall have assumed the Certificates
pursuant to Section 18.2(c) hereof, the Special Purchase Price and the initial
installment of the Special Purchase Price if paid in installments, in each case
whether or not adjusted in accordance with the provisions of Section 3.7, as of
the date of determination thereof, together with any amount of Basic Rent
required to be paid on such date and all other amounts payable on such date,
shall equal, under any circumstances and in any event, an amount at least
sufficient to pay in full any scheduled payments then required to be made on
account of the principal of and interest (including, without limitation, any
interest on overdue principal and, to the extent permitted by
SALE AND LEASE AGREEMENT [N604SW]
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applicable law, interest), Premium, if any, and Break Amount, if any, on the
Certificates and all amounts which would be payable prior thereto or on a
parity therewith if Section 3.03 of the Trust Indenture were applicable at the
time of such payment.
3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Break Amount (if any) or the Premium (if any) payable on the Certificates,
amounts due pursuant to Section 15.05 of the Trust Indenture and each other
amount required to be paid (other than principal and interest on the
Certificates) by Lessor as Owner Trustee under the Trust Indenture, on the same
date that such amounts are due under the Trust Indenture, and as provided in
Section 3.6.
3.5 Supplemental Rent. In addition to the amounts payable as
Supplemental Rent pursuant to Section 3.4, Lessee also agrees to pay (or cause
to be paid) to Lessor, or to whomsoever shall be entitled thereto, all
Supplemental Rent with respect to Stipulated Loss Value or Termination Value
when and as the same shall become due and owing and all other amounts of
Supplemental Rent (other than as covered by Section 3.4) within five days after
demand or such other relevant period as may be provided in any Operative
Agreement. Lessee will also pay to Lessor, or to whomsoever shall be entitled
thereto, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Overdue Rate on any part of any installment of Interim Rent,
Basic Rent or Renewal Rent not paid when due for any period from and including
the date on which the same was due to but excluding the date of payment in full
and (to the extent permitted by applicable law) on any payment of Supplemental
Rent not paid when due to Lessor, or to whomsoever shall be entitled thereto,
as the case may be, for the period from the date on which the same was due to
but excluding the date of payment in full. The expiration or other termination
of Lessee's obligation to pay Interim Rent, Basic Rent or Renewal Rent
hereunder shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent.
3.6 Payments. Payments of Rent and any and all other payments
payable to Lessor hereunder shall be paid in funds of the United States of
America which shall be immediately available not later than 11:00 A.M., New
York City time, on the date due at the office of Lessor at 777 Main Street,
Hartford, Connecticut 06115, Attention: Corporate Trust Administration, Re:
Southwest Airlines 1995 Trust N604SW, or as otherwise directed by Lessor in
writing at least five Business Days prior to the date such payment is due;
provided, that so long as the Trust Indenture shall not have been terminated
pursuant to Section 10.01 of the Trust Indenture, Lessor hereby directs and
Lessee agrees, that, unless the Indenture Trustee shall otherwise direct, all
Rent (other than Excluded Payments) shall be paid prior to 11:00 A.M., New York
City time, on the due date thereof directly to Indenture Trustee to its account
set forth in Schedule I to the Participation Agreement. All payments of
Supplemental Rent owing to Indenture Trustee or to any Holder pursuant to the
Participation Agreement shall be made in immediately available funds prior to
11:00 A.M. New York City time, on the due date thereof at the office of
Indenture Trustee or at such other office of such other financial institution
located in the continental United States as the party entitled thereto may so
direct at least five Business Days prior to the due date thereof. All payments
of Supplemental Rent payable to Owner Participant, to the extent that such
amounts constitute Excluded Payments (as defined in the Trust Indenture), shall
be made by wire transfer prior to 11:00 A.M.,
SALE AND LEASE AGREEMENT [N604SW]
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New York City time, on the due date thereof, to its account set forth in
Schedule I to the Participation Agreement, with sufficient information to
identify the source and application of the funds. Except as otherwise
expressly provided herein, whenever any payment of Rent or other payment to be
made hereunder shall be due on a day which is not a Business Day, such payment
shall be made on the next succeeding day which is a Business Day and (provided
such payment is made on such next succeeding Business Day) no interest shall
accrue on the amount of such payment from and after such scheduled date.
3.7 Adjustment to Interim Rent, Basic Rent, Stipulated Loss Value
and Termination Value.
3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a)
of the Participation Agreement paid by Owner Participant in connection
with the closing of this transaction on the Delivery Date are equal to
an amount which is other than .365% of Lessor's Cost, (b) the
Transaction Costs referred to in Section 16(a) of the Participation
Agreement paid by Owner Participant in connection with the initial
refinancing or refunding of the Certificates pursuant to Section 17 or
18 of the Participation Agreement are equal to an amount which is
other than .625% of Lessor's Cost, (c) the Delivery Date is not August
23, 1995, (d) a refinancing or refunding of the Certificates pursuant
to Section 17 or 18 of the Participation Agreement occurs, (e) any
recalculation of Interim Rent, Basic Rent, Stipulated Loss Value and
Termination Value is required by the terms of the Tax Indemnity
Agreement, or (f) the Deferred Equity Amount is not equal to the
Assumed Interest Amount with respect to the Deferred Equity Date, and
there shall not have occurred a refunding or refinancing pursuant to
Section 17 or 18 of the Participation Agreement prior to the first
Rent Payment Date, then in each case, the Interim Rent and Basic Rent
percentages set forth in Exhibit C, the Stipulated Loss Value
percentages set forth in Exhibit B-1 and the Termination Value
percentages set forth in Exhibit B-2 shall be recalculated by Owner
Participant (i) in the case of a recalculation pursuant to clause (a)
or (c), prior to August 23, 1996, (ii) in the case of a recalculation
pursuant to clause (b) on or prior to the second rent payment date
following the relevant Refinancing Date or Section 18 Refinancing
Date, as the case may be, (iii) in the case of a recalculation
pursuant to clause (d), prior to the relevant Refinancing Date or
Section 18 Refinancing Date, as the case may be, (iv) in the case of a
recalculation pursuant to clause (e), prior to the Rent Payment Date
next following the event described in clause (e), or (v) in the case
of a recalculation pursuant to clause (f), prior to the first Rent
Payment Date, in each case in order to: (A) maintain Net Economic
Return and (B) minimize the Net Present Value of Rents to the extent
possible consistent with clause (A). In addition, in the event of an
adjustment pursuant to this Section 3.7, the Special Purchase Price
(including any installments thereof) shall be recalculated in
accordance with the terms of Section 18.2(b).
3.7.2 Recalculation Procedures. Any recalculation of
Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value
percentages and the Special Purchase Price pursuant to this Section
3.7 shall be determined by Owner Participant, and shall be subject to
the verification of Lessee and its advisor. Such recalculated Interim
Rent, Basic Rent,
SALE AND LEASE AGREEMENT [N604SW]
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Stipulated Loss Value and Termination Value percentages and Special
Purchase Price (including installments thereof) shall be set forth in
a Lease Supplement and, in the case of Interim Rent or Basic Rent,
shall become effective as of the next succeeding Rent Payment Date
and, in the case of Stipulated Loss Value, Termination Value and the
Special Purchase Price, shall be retroactive to the inception of this
Lease. Such recalculated Interim Rent or Basic Rent and, if
applicable, the Special Purchase Price shall be determined so as to
conform, in the opinion of Owner Participant's tax counsel, to all
applicable tax constraints and requirements, including the
requirements of Section 467 of the Code and Sections 4.(1)(B), 4.(6)
and 5. of Revenue Procedure 75-21, 75-1 Cum. Bull. 715; provided,
however, that notwithstanding the foregoing, all adjustments provided
for herein shall be based on the same calculation methods and
assumptions (including tax assumptions set forth in Section 2 of the
Tax Indemnity Agreement) as were used initially by the Owner
Participant in determining the Interim Rent, Basic Rent, Stipulated
Loss Values, Termination Values and the Special Purchase Price for the
Aircraft (except and only to the extent such assumptions are required
to be changed by virtue of the event giving rise to the adjustment or
any event giving rise to any prior adjustments pursuant to the terms
of this Lease) and shall take into account the amount and timing of
any contribution made by the Owner Participant to the Estate
subsequent to the Delivery Date. If, upon verification of the
percentages determined by Owner Participant pursuant to this Section
3.7, Lessee does not agree with the determination of Owner
Participant, then an independent accounting firm, to be selected by
Owner Participant and reasonably acceptable to Lessee, shall verify
the computations. Such accounting firm shall be requested to make its
determination within 30 days. Owner Participant shall provide to such
accounting firm such information as it may reasonably require,
including a description of the methodology of the calculations used in
computing such adjustments and such other information as is necessary
to determine whether the computations are mathematically accurate.
The accounting firm shall hold in strict confidence such methodology
and other information. The computations of Owner Participant or the
accounting firm selected as provided above, whichever is applicable,
shall be final, binding and conclusive upon Lessee and Lessor, and
Lessee shall have no right to inspect the books, records, tax returns
or other documents of or relating to Owner Participant to verify such
computations or for any other purpose in connection with such
adjustments. All fees and expenses payable to the accounting firm
selected above under this Section 3.7.2 shall be borne by Lessee,
except that such fees and expenses shall be payable by Owner
Participant if the computations provided by Owner Participant are
higher than those provided by the accounting firm and the computations
of such accounting firm causes the present value of the Interim Rent
and Basic Rent (utilizing a semi-annual discount rate that, on an
annual basis, is equal to 8.05%) as computed by Owner Participant to
decrease by ten basis points or more.
3.8 Certain Advances; Reimbursement Thereof. If and to the extent
that the Indenture Trustee shall not have received (i) the Deferred Equity
Amount on the Deferred Equity Date, or (ii) the payment to be made by the Owner
Trustee pursuant to clause (5) of Section 18(a) of the Participation Agreement
on the Section 18 Refinancing Date, then Lessee shall pay to the Indenture
Trustee on behalf of the Owner Participant or the Owner Trustee, as the case
may be, on the
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Deferred Equity Date or the Section 18 Refinancing Date, as the case may be, an
amount equal to the amount not so paid by the Owner Participant or the Owner
Trustee, as the case may be (such amount herein referred to as an "Advance").
In the event Lessee makes any Advance pursuant to this Section 3.8, then,
notwithstanding any provision to the contrary herein or in any other Operative
Agreement, Lessee shall be entitled to demand immediate repayment of such
Advance from the Owner Participant and, in addition, shall be entitled to
offset and deduct (without duplication) against each succeeding payment (other
than as limited by the provisos to this sentence) due from Lessee to Persons
other than the Holders, the Indenture Trustee and Lessor in its individual
capacity (including, without limitation, Interim Rent, Basic Rent, payments due
under Sections 5, 9, 10, 15 and 18 hereof, and payments due to Persons other
than the Holders, the Indenture Trustee and Lessor in its individual capacity
under Section 7 of the Participation Agreement) the amounts (including interest
at the rates provided therein) due and owing by the Owner Participant to Lessee
under Section 8(dd) of the Participation Agreement until Lessee has been fully
reimbursed for such amounts; provided, that in the case of any payment due from
Lessee which is distributable under the terms of the Trust Indenture, Lessee's
right of offset and deduction shall be limited to amounts distributable to
Lessor or the Owner Participant thereunder (and shall not include any amounts
distributable to the Indenture Trustee or the Holders); and provided, further,
that in no event shall any such offset or aggregate combined effect of separate
offsets reduce the amount of (i) any installment of Basic Rent to an amount
that is insufficient to pay in full the scheduled payments then required to be
made on account of the Certificates then Outstanding or (ii) any payment of
Stipulated Loss Value, Termination Value or Special Purchase Price (or
installment thereof) to an amount that, together with any other amounts then
required to be paid by Lessee hereunder in connection therewith, is
insufficient to pay in full as of the date of payment thereof, the aggregate
unpaid principal of the Outstanding Certificates, together with all unpaid
interest, Premium (if any) and Break Amount (if any) thereon. Notwithstanding
any provision of this Section 3.8 to the contrary, Lessee's obligation to make
any Advance shall terminate at such time as its obligation to pay Basic Rent
terminates under this Lease.
Section 4. Lessor's Representations and Warranties; DISCLAIMER;
Certain Agreements of Lessee.
4.1 Lessor's Representations and Warranties; DISCLAIMER. LESSEE
EXPRESSLY AGREES TO TAKE THE AIRCRAFT "AS IS", AND LESSEE HAS SELECTED THE
AIRCRAFT AND THE MANUFACTURER THEREOF (AND EACH PORTION THEREOF) AND ALL
MAINTENANCE FACILITIES REQUIRED FOR THE AIRCRAFT OR HEREUNDER. NEITHER LESSOR
(INDIVIDUALLY OR AS OWNER TRUSTEE) NOR THE INDENTURE TRUSTEE (INDIVIDUALLY OR
AS INDENTURE TRUSTEE) NOR ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO
HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON
SALE AND LEASE AGREEMENT [N604SW]
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STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except
that Shawmut Bank Connecticut, National Association, in its individual capacity
(i) represents and warrants that on the Delivery Date Lessor shall have
received whatever title thereto as was conveyed to it by the Lessee, (ii)
represents and warrants that on the Delivery Date the Aircraft shall be free of
Lessor Liens attributable to it, (iii) agrees that it will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it on or with respect to the Airframe or any Engine or any
other portion of the Estate, and (iv) represents and warrants that it is a
"citizen of the United States" as defined in the Act. Lessor covenants that
during the Term (so long as no Lease Event of Default shall have occurred and
be continuing) it will not, through its own actions or breaches of any of its
obligations under the Operative Agreements, interfere in the quiet enjoyment of
the Aircraft by Lessee or any Permitted Sublessee.
Nothing in this Section 4.1 shall be deemed to modify or otherwise
affect the respective rights and obligations of Lessee and of Manufacturer
under the Purchase Agreement.
4.2 Certain Agreements of Lessee. All obligations of Lessee in
this Lease shall be done, performed or complied with at Lessee's cost and
expense, whether or not so expressed, unless otherwise expressly stated.
Lessee hereby agrees with Lessor for the benefit of the Participants that it
shall perform the agreements, covenants and indemnities set forth in the
Participation Agreement (including, without limitation, Sections 7(b) and 7(c)
of the Participation Agreement) which are incorporated herein, and hereby
restates Lessee's representations and warranties set forth in the Participation
Agreement and the Tax Indemnity Agreement, as fully and to the same extent and
with the same force and effect as if set forth in full in this Section 4.2.
Section 5. Return of Aircraft.
5.1 General Condition upon Return. Unless purchased by Lessee
pursuant to Section 18.2, and subject to Section 10, upon the expiration or
termination of this Lease, Lessee will return the Aircraft to Lessor by
delivering the same at any location in the continental United States at which
Lessee has maintenance facilities (and Section 5.7 shall apply). Lessee shall
give Lessor not less than 15 days prior notice of the return location. All
costs associated with the return flight, including without limitation, the cost
of preparing the Aircraft for short-term storage (if requested to do so
pursuant to Section 5.7 hereof) and placing the Aircraft in the condition
required hereunder, shall be for the account of Lessee. At the time of such
return, the Airframe and Engines or engines installed thereon:
5.1.1 Airworthiness. Subject to the exception described
in clause (iii) of Section 8.1.1, shall be duly certificated as an
airworthy aircraft by the FAA under Part 121 of the Federal Aviation
Regulations or any successor provision; provided, that Lessee's
ability to satisfy such return condition shall not preclude the
occurrence of an Event of Loss pursuant to clause (iv) of the
definition thereof;
SALE AND LEASE AGREEMENT [N604SW]
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5.1.2 Free of Liens. Shall be free and clear of all Liens
(except Lessor Liens);
5.1.3 Operating Configuration and Condition. Shall be in a
configuration suitable for operation in regularly scheduled commercial
airline passenger service in the United States and shall be in as good
operating condition as when delivered new to Lessee by Manufacturer,
ordinary wear and tear excepted or, in the case of any such engines
owned by Lessee, shall have a value, utility, airworthiness and
remaining useful life at least equal to, and shall be in as good
operating condition as required by the terms hereof with respect to,
Engines constituting part of the Aircraft but not then installed on
the Airframe. All Lessee or Permitted Sublessee exterior markings, as
the case may be, shall have been painted over in matching exterior
colors. In addition, any appliance, part, instrument, appurtenance,
accessory, furnishing or other equipment leased by Lessee from a third
party (other than Lessor) and incorporated in the Aircraft shall be
removed prior to the date of such return without any damage to the
Aircraft and without diminishing or impairing the value, utility,
remaining useful life or condition which the Aircraft would have had
at such time had such equipment not been installed, and Lessee shall
make all repairs which are required as a result of such removal;
5.1.4 Cleanliness and Operability. Shall be clean by
United States commercial airline operating standards with all systems
and components operable; and
5.1.5 Parts and Equipment. Shall have installed thereon
all Engines and Parts installed thereon at the commencement of the
Term therefor or replacements therefor made in accordance with the
terms of this Lease.
5.2 Return of Other Engines. In the event that any engine not
owned by Lessor shall be installed on the Airframe returned in accordance with
Section 5.1, such engine shall be a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer, or an engine
of another manufacturer of at least equivalent utility, value, airworthiness
and remaining useful life in each case suitable for installation and use on the
Airframe and fully compatible with the other Engine or engine installed on the
Airframe). At the time of such replacement, such engine shall have performance
and durability characteristics and a value, condition, utility, airworthiness
and remaining useful life at least equal to the Engine it replaced hereunder,
assuming such Engine was maintained in accordance with the requirements of this
Lease, and at the time the Airframe is returned shall fully comply with all the
requirements of this Lease, including this Section 5, which are applicable to
Engines. Upon return of the Aircraft, Lessee shall duly convey to Lessor good
title to any such replacement engine, free and clear of (i) all rights of third
parties under any arrangement, including pooling, interchange, overhaul, repair
or other similar agreements or arrangements and (ii) Liens other than Lessor
Liens; and, upon such conveyance and as a condition thereto, Lessee will (a)
furnish Lessor with a full warranty (as to title) bill of sale, in form and
substance reasonably satisfactory to Lessor, with respect to each such
replacement engine, together with an opinion of counsel to the effect that such
bill of sale has been duly authorized and delivered and is enforceable in
accordance with its terms and that each such replacement engine is free and
clear of all Liens other than Lessor Liens, and (b) take such other action as
Lessor may
SALE AND LEASE AGREEMENT [N604SW]
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reasonably request in order that title to such replacement engine may be duly
and properly vested in Lessor to the same extent as the Engine replaced
thereby. Upon compliance by Lessee with the foregoing, Lessor will, so long as
no Lease Event of Default has occurred and is continuing, comply with the
applicable provisions of the Trust Indenture and, upon Indenture Trustee's
release of the Engine from the Lien of the Trust Indenture Estate, Transfer to
Lessee any Engine not installed on the Airframe at the time of return.
5.3 Return at End of Base Lease Term or Renewal Lease Term. Upon
return of the Aircraft at the expiration or termination of this Lease, Lessee
shall have caused all FAA Airworthiness Directives applicable to the Aircraft
and all mandatory service bulletins from Manufacturer, Engine Manufacturer or
other manufacturer of an engine then installed on the Airframe (in compliance
with Section 5.2) applicable to the Aircraft to have been complied with (except
for any such FAA Airworthiness Directives and bulletins that permit compliance
after the return date and would not, in the normal course of the Maintenance
Program, be complied with on or prior to the return date). Lessee shall have
treated the Aircraft, including without limitation with respect to maintenance,
additions and modifications (including compliance with FAA Airworthiness
Directives), during the Term similarly to all other Boeing 737-300 aircraft in
its fleet, without in any way discriminating against the Aircraft, whether by
reason of its leased status or otherwise.
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of such return, the Airframe shall have remaining until the
next scheduled "C" check (which term, as used in this paragraph, shall include
a "C" check and any other check equivalent thereto) at least 50% of the
allowable hours between "C" checks permitted under the Maintenance Program then
used by Lessee (or such Permitted Sublessee, as the case may be), and the
condition set forth in Appendix A shall have been satisfied. In the event that
Lessee (or any Permitted Sublessee then in possession of the Aircraft) shall
then be using a continuous or "progressive" maintenance program with respect to
the Airframe, then the Airframe shall be current on such program. If the
conditions set forth in the first sentence of this paragraph shall be
applicable to the Airframe but shall not have been met at the time of such
return, Lessee shall perform (or cause to be performed) all maintenance work
necessary to meet such conditions or, if Lessee shall so elect, Lessee shall
pay or cause to be paid to Lessor an amount computed by multiplying (i) the
current market cost of a "C" check by (ii) a fraction of which (x) the
numerator shall be the excess of 50% of hours of operation allowable between
such "C" checks over the actual number of hours of operation remaining on the
Airframe to the next such "C" check, and (y) the denominator shall be the
number of hours of operation allowable between such "C" check in accordance
with such Maintenance Program.
Lessee further agrees that, whether or not the then-current engine
maintenance program is on-condition, the number of hours or cycles of operation
(whichever shall be applicable under the Maintenance Program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 3,000 allowable hours
or cycles (whichever shall be applicable) in the aggregate for both Engines or
engines; provided, that each life limited Part within each Engine or engine
shall have a minimum of 1,200
SALE AND LEASE AGREEMENT [N604SW]
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allowable hours or cycles (whichever shall be applicable) remaining until its
next required replacement. If, at the time of such return, the Engines or
engines do not meet the aggregate 3,000 hour condition specified in the
previous sentence, Lessee shall perform (or cause to be performed) all
maintenance work necessary to meet such conditions or, if Lessee shall so
elect, Lessee shall pay or cause to be paid to Lessor an amount computed by
multiplying (i) the current market cost of performing for an engine of the same
model as such Engines or engines the scheduled engine refurbishment under the
Maintenance Program then used by Lessee (or such Permitted Sublessee, as the
case may be) for engines of such model by (ii) a fraction of which (x) the
numerator shall be the excess of 3,000 hours or cycles (whichever is
applicable) over the aggregate number of hours or cycles of operation on such
Engines or engines remaining until the next scheduled engine refurbishment, and
(y) the denominator shall be the number of hours or cycles allowable between
such scheduled engine refurbishment. If, at the time of such return, any
life-limited Part within such Engine or engine does not meet the 1,200 hour
condition specified in the first sentence of this paragraph, Lessee shall
perform (or cause to be performed) all maintenance work necessary to meet such
conditions or, if Lessee shall so elect, Lessee shall pay or cause to be paid
to Lessor an amount computed by multiplying (i) the current market cost of
replacing such life- limited Part by (ii) a fraction of which (x) the numerator
shall be the excess of 1,200 hours or cycles (whichever is applicable) over the
number of remaining hours or cycles (whichever is applicable) of operation of
such life-limited Part, and (y) the denominator shall be the total number of
hours or cycles allowable on such life-limited Part.
5.4 Manuals; Service Bulletins, Etc. Upon return of the Aircraft
at the expiration or termination of this Lease, Lessee shall deliver or cause
to be delivered to Lessor all logs, manuals, drawings and data and inspection,
modification and overhaul records in respect of the Aircraft required to be
maintained under applicable rules and regulations of the FAA, updated through
the date of return (collectively, "Records"). All "no-charge" service bulletin
kits received by or on behalf of Lessee from Manufacturer, Engine Manufacturer
or vendors for the Aircraft and Engines or engines and not incorporated therein
shall be returned at no charge to Lessor as cargo on board the Aircraft at the
time of its return. At the time the Aircraft is returned, Lessor shall have
the option to purchase from Lessee, at Lessee's cost therefor, any "charge"
service bulletin kits purchased by Lessee which have not been incorporated in
the Aircraft. All such items shall thereupon become the property of Lessor.
5.5 Failure to Return Aircraft or Engines. If Lessee shall, for
any reason whatsoever, fail to return the Aircraft or any Engine at the time
and in the condition specified herein, the obligations of Lessee as provided in
this Lease (including the obligation to pay Rent on the same basis as that
applicable immediately prior to such failure) shall continue in effect with
respect to the Aircraft or such Engine until the Aircraft or such Engine is
returned to Lessor at the location set forth in Section 5.1; but this Section
5.5 shall not be construed as permitting Lessee to fail to meet its obligation
to return the Aircraft or such Engine in accordance with the requirements of
this Lease or constitute a waiver of a Lease Event of Default.
5.6 Aid in Disposition. Lessee agrees that, unless Lessee shall
have elected to purchase the Aircraft pursuant to Section 18.2, during the last
six months of the Term it will cooperate in all
SALE AND LEASE AGREEMENT [N604SW]
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reasonable respects with any efforts of Lessor to lease or sell the Aircraft,
including without limitation (subject to the provisions of Section 12)
permitting potential lessees or purchasers to inspect the Aircraft and the
records relating thereto.
5.7 Storage upon Return. Upon written request of Lessor or Owner
Participant received by Lessee at least 10 days prior to its return of the
Aircraft at the expiration or termination of this Lease, Lessee will arrange
for short-term storage for the Aircraft for a period not exceeding 60 days
following return thereof by Lessee at the location of return pursuant to
Section 5.1; and Lessor shall bear or reimburse Lessee for Lessee's
out-of-pocket expenses of such storage (including maintenance and insurance
expenses).
Section 6. Liens. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, the Airframe or any Engine, title thereto or any interest therein or
in this Lease except: (a) the respective rights of the parties to the
Operative Agreements; (b) the rights of others under agreements or arrangements
to the extent expressly permitted by the terms of Sections 7.2 and 8.3; (c)
Lessor Liens; (d) Liens for taxes, assessments or other governmental charges
either not yet due or being contested in good faith (and for the payment of
which adequate reserves have been provided in accordance with generally
accepted accounting principles) by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture, loss or
loss of use of the Aircraft, or any other portion of the Trust Estate; (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 due or not overdue for a period of more than 60 days or is being
contested in good faith (and for the payment of which adequate reserves have
been provided in accordance with generally accepted accounting principles) by
appropriate proceedings so long as such Liens do not involve any material
danger of the sale, forfeiture, loss or loss of use of the Aircraft, the
Airframe or any Engine or any interest therein; (f) Liens arising out of any
judgment or award against Lessee, unless the judgment secured shall not, within
45 days after entry thereof, have been discharged or vacated or execution
thereof stayed pending appeal or shall not have been discharged, vacated or
reversed within 45 days after the expiration of such stay; and (g) any other
Lien with respect to which Lessee shall have provided a bond or other security
adequate in the reasonable judgment of Lessor. Lessee will promptly take (or
cause to be taken) such action at its own expense as may be necessary duly to
discharge any such Lien not excepted above if the same shall arise at any time.
Section 7. Registration, Operation, Possession, Subleasing and
Records.
7.1 Registration and Operation.
7.1.1 Registration. Lessee shall forthwith upon the
delivery of the Aircraft hereunder cause the Aircraft to be duly
registered and at all times thereafter to remain duly registered in
the name of Lessor with the FAA pursuant to and as permitted by the
Act (it being understood that Lessee shall not be required to comply
with this covenant to the extent that Shawmut Bank Connecticut,
National Association's or Owner Participant's failure to
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comply with its covenant set forth in Section 8(b) of the
Participation Agreement with regard to its citizenship makes such
compliance by Lessee impossible).
7.1.2 Nameplate. Lessee agrees to affix within 10 days of
the Delivery Date and thereafter to maintain in the cockpit of the
Airframe adjacent to the airworthiness certificate and on each Engine
a nameplate bearing the inscription "OWNED BY AND LEASED FROM SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND
LESSOR" and, so long as the Trust Indenture shall be in effect,
"SUBJECT TO A SECURITY INTEREST IN FAVOR OF WILMINGTON TRUST COMPANY,
AS INDENTURE TRUSTEE" (such nameplate to be replaced, if necessary,
with a nameplate reflecting the name of any successor Lessor or
successor Indenture Trustee). Except as above provided, Lessee will
not allow the name of any person, association or corporation to be
placed on the Airframe or on any Engine as a designation that might be
interpreted as a claim of ownership; provided, that nothing herein
contained shall prohibit Lessee (or any Permitted Sublessee) from
placing its customary colors and insignia on the Airframe or any
Engine or displaying information concerning the registration or
manufacture of the Aircraft, the Airframe, any Engine or Part.
7.1.3 Compliance with Laws. Lessee agrees that it will
not use or operate the Aircraft, the Airframe or any Engine in
violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign) or in violation of any airworthiness certificate, license or
registration relating to the Aircraft, the Airframe or any Engine
issued by any such authority, except to the extent Lessee is
contesting in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor's interest in the Aircraft or
subject the Owner Participant to any danger of criminal liability.
During any period beginning when the Aircraft is registered with the
FAA and Lessee has been notified in writing by the Owner Participant
or Lessor that the Owner Participant, acting through or by Owner
Trustee or otherwise, is not or has failed to qualify as a "citizen of
the United States", within the meaning of the Act, and ending when
Lessee has been notified in writing by either the Owner Participant or
Lessor that the Owner Participant, acting through or by Owner Trustee
or otherwise, is or qualifies as a "citizen of the United States",
Lessee agrees to operate the Aircraft, or cause the Aircraft to be
operated, in compliance with, and to maintain or cause to be
maintained such records as are required by, and to prepare and file
such reports as are required to be filed by, Section 47.9 of the FAA
Regulations, or any analogous part of any superseding regulation or
statute, so as to permit the continued registration of the Aircraft
under the Act (and the FAA Regulations thereunder) or under any
analogous part of any superseding statute or regulations.
7.1.4 Insurance Requirements; Government Requisition;
Indemnity. Lessee agrees not to operate, use or locate the Aircraft,
the Airframe or any Engine, or permit any Permitted Sublessee to
operate, use or locate the Aircraft, the Airframe or any Engine, (i)
in any area excluded from coverage by any insurance required by the
terms of Section 11,
SALE AND LEASE AGREEMENT [N604SW]
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except in the case of a requisition by the Government where Lessee
obtains indemnity (backed by the full faith and credit of the United
States of America) in lieu of such insurance from the Government
against the risks and in the amounts required by Section 11 covering
such area, or (ii) in any area where maintenance of war-risk insurance
is required by Section 11 unless fully covered by war-risk insurance
satisfying the terms of Section 11, or unless the Aircraft, the
Airframe or such Engine is operated or used under contract with the
Government under which contract the Government assumes liability
(backed by the full faith and credit of the United States of America)
in an amount not less than the amount of insurance otherwise required
by Section 11 for any damage, loss, destruction or failure to return
possession of the Aircraft, the Airframe or such Engine at the end of
the term of such contract or for injury to persons or damage to
property of others, or (iii) in any area referred to in subclause
3(iv) immediately following Section 7.2.8.
7.2 Possession. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine or install
any Engine, or permit any Engine to be installed, on any airframe other than
the Airframe; provided, however, that so long as no Lease Default (of the type
described in Section 14.1 or 14.5) or Lease Event of Default shall have
occurred and be continuing, and so long as Lessee shall comply with the
provisions of Section 11, and all FAA approvals required for such purposes have
been obtained, Lessee may, without such prior written consent:
7.2.1 Interchange and Pooling. Subject or permit any
Permitted Sublessee to subject (i) the Aircraft, Airframe or any
Engine to normal interchange agreements customary in the airline
industry and entered into by Lessee or such Permitted Sublessee in the
ordinary course of its business with, in the case of the Airframe, a
U.S. Air Carrier or a Permitted Foreign Air Carrier, in either case
that is not then subject to bankruptcy or similar proceedings, and
(ii) any Engine to pooling agreements or arrangements customary in the
United States domestic commercial airline industry and entered into by
Lessee or such Permitted Sublessee in the ordinary course of its
business; but in either case (A) no transfer of the registration of
the Airframe or any Engine shall be effected in connection therewith
and the terms of this Lease and the Participation Agreement shall be
observed and (B) no such agreement or arrangement shall contemplate or
require the transfer of title to the Aircraft, Airframe or any Engine
and if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect thereto and Lessee shall comply with
Section 10.2 hereof;
7.2.2 Testing and Service. Deliver or permit any
Permitted Sublessee to deliver possession of the Aircraft, Airframe or
any Engine or Part, to the manufacturer thereof for testing or other
similar purposes, or to any organization for service, repair,
maintenance or overhaul work on the Aircraft, Airframe or any Engine
or Part, or for alterations or modifications in or additions to the
Aircraft, Airframe or any Engine to the extent required or permitted
by the terms of Section 8.4;
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7.2.3 Civil Reserve Air Fleet Program. Transfer or permit
any Permitted Sublessee, if required by law to do so, to transfer
possession of the Aircraft, Airframe or any Engine to the Government
pursuant to the Civil Reserve Air Fleet Program or any similar or
substitute programs, so long as such transfer of possession does not
continue beyond the end of the Term and so long as Lessee shall (A)
promptly notify Lessor upon subjecting the Airframe or any Engine to
such program and provide Lessor with the name and address of the
appropriate party to whom notice must be given in connection with any
repossession of the Aircraft under Section 15.1.1, and (B) promptly
notify Lessor upon transferring possession of the Airframe or any
Engine to the Government pursuant to such program;
7.2.4 Installation of Engines. Install or permit any
Permitted Sublessee to install an Engine on an airframe owned by
Lessee or such Permitted Sublessee, as the case may be, free and clear
of all Liens, except (A) Permitted Liens and those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of air carriers under normal interchange
agreements which are customary in the airline industry and do not
contemplate, permit or require the transfer of title to the airframe
or engines installed thereon, and (C) mortgage liens or other security
interests, provided, that (as regards this clause (C)) such mortgage
liens or other security interests effectively provide that such Engine
shall not become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such airframe,
unless and until Lessee shall become the owner of such Engine;
7.2.5 Installation of Engines on Other Airframes. Install
or permit any Permitted Sublessee to install an Engine on an airframe
leased to, or purchased by, Lessee or any Permitted Sublessee subject
to a lease, conditional sale, trust indenture or other security
agreement, but only if (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease, conditional
sale, trust indenture or other security agreement covering such
airframe, or their successors or assigns, and except Liens of the type
permitted by clauses (A) and (B) of Section 7.2.4, and (B) the lease,
conditional sale, trust indenture or other security agreement covering
such airframe effectively provides that such Engine will not become
subject to the Lien thereof at any time while such Engine is subject
to this Lease, notwithstanding the installation thereof on such
airframe;
7.2.6 Pooling of Parts. To the extent permitted by
Section 8.3, subject any Parts owned by Lessor and removed from the
Airframe or any Engine to any pooling arrangement referred to in
Section 8.3;
7.2.7 Wet Lease. Enter into a Wet Lease for the Airframe
and Engines or engines then installed thereon with any third party for
a term not to continue beyond the Term;
7.2.8 Sublease to Permitted Air Carriers. So long as the
proposed sublessee is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the date
the sublease is entered into, enter into a sublease of the
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Aircraft, or the Airframe and Engines or engines then installed on the
Airframe, or any Engine, for use on the sublessee's regularly
scheduled or charter routes, with any U.S. Air Carrier or Permitted
Foreign Air Carrier, in any such case for a term not to continue
beyond the remaining Term.
Provided, further, with respect to this Section 7.2, that:
(1) the rights of any transferee who receives
possession by reason of a transfer permitted by this Section
7.2 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be effectively subject and subordinate
to, and any sublease permitted by this Section 7.2 shall be
made expressly subject and subordinate to, all the terms of
this Lease and the Lien of the Trust Indenture, and to
Lessor's rights, powers and remedies under this Lease and the
Indenture Trustee's rights to possession under the Trust
Indenture and (as Lessor's assignee) hereunder, including the
rights to repossession pursuant to Section 15 and to terminate
and avoid such sublease upon such repossession and to require
such sublessee to forthwith deliver the Aircraft, Airframe and
Engines subject to such sublease upon such repossession;
(2) Lessee shall remain primarily liable
hereunder for the performance of all the terms of this Lease
(including, without limitation, the payment of Supplemental
Rent representing any indemnities payable as a result of acts
or circumstances respecting a sublease or a sublessee's
operation of the Aircraft) to the same extent as if such
sublease, transfer or relinquishment of possession had not
occurred (it being understood that, without limitation of the
foregoing, any standards established under this Lease with
reference to Lessee's practices respecting other aircraft
owned or operated by it shall continue to refer to such
practices of Lessee rather than of any transferee); provided,
that performance of any such terms by any Permitted Sublessee
shall be as effective, for purposes of this Lease, as
performance thereof directly by Lessee;
(3) any such sublease shall (i) be consistent
with the requirements of this Lease and the applicable
requirements of the Participation Agreement, (ii) include
appropriate provisions for the continued maintenance in
accordance with applicable maintenance standards in the
appropriate jurisdiction, operation, insurance (appropriate
certificates as to which shall be furnished to Lessor and
Indenture Trustee prior to Lessee's entry into any such
sublease with any Permitted Foreign Air Carrier or within 10
days thereafter) and return of the subleased property as
required hereunder, (iii) provide that the sublessee may not
assign or further sublease the Aircraft, (iv) provide that the
Aircraft may not be operated into a country with which the
United States does not maintain diplomatic relations or in
which there is open warfare, whether or not declared, (v) not
provide for sublease rentals to be prepaid or assigned to a
third party; provided, however, that (x) up to six months'
rentals may be prepaid to Lessee and (y) this clause (v) shall
not preclude Lessee's
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establishing and holding appropriate reserves for any
obligations arising under such sublease, and (vi) not require
the sublessee to purchase the Aircraft or grant the sublessee
any purchase options, or any options for the renewal of such
sublease for a term beyond the Base Lease Term, in each case on
dates other than, or at amounts less than, corresponding
options granted to Lessee hereunder;
(4) no interchange agreement, transfer,
sublease or other relinquishment of possession permitted
hereunder shall affect the registration of the Aircraft or
shall permit any action not permitted to Lessee in this Lease;
and
(5) no such interchange agreement, sublease,
transfer or other relinquishment of possession of the
Aircraft, Airframe or any Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or
under any other Operative Agreement or constitute a waiver of
Lessor's rights or remedies hereunder or under any other
Operative Agreement.
Lessee shall notify Lessor within 10 days after the commencement of
any sublease permitted hereunder and shall deliver to Lessor within such period
a duly executed copy of any sublease or interchange or pooling agreement
permitted hereunder. Upon request of Lessor, Lessee shall promptly duly
execute and deliver to Lessor an assignment of any such sublease having a term
in excess of 12 months in favor of Lessor in form and substance reasonably
satisfactory to Lessor. Lessor hereby agrees, for the benefit of Lessee (and
any Permitted Sublessee) and for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any airframe or engine leased to
or purchased by Lessee (or any Permitted Sublessee) subject to a lease,
conditional sale, trust indenture or other security agreement, that Lessor will
not acquire or claim, as against such lessor, conditional seller, indenture
trustee or secured party, or any successor or assign thereof, any right, title
or interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
conditional seller or subject to a trust indenture or security interest in
favor of such indenture trustee or secured party; provided, however, that such
agreement of Lessor shall not be for the benefit of any lessor or secured party
of any airframe (other than the Airframe) leased to Lessee (or any Permitted
Sublessee) or purchased by Lessee (or any Permitted Sublessee) subject to a
conditional sale or other security agreement or for the benefit of any
mortgagee of or any other holder of a security interest in an airframe owned by
Lessee (or any Permitted Sublessee), unless such lessor, conditional vendor,
other secured party or mortgagee has expressly agreed (which agreement may be
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as
against Lessor, any right, title or interest in an Engine as a result of such
Engine being installed on such airframe.
A consolidation, merger, conveyance, transfer, or lease permitted by
Section 11(f) of the Participation Agreement shall not be deemed to be a
transaction to which this Section 7.2 shall apply.
7.3 Records and Reports. Lessee shall:
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7.3.1 Records. Maintain or cause to be maintained all
records, logs and other materials required by the FAA or any other
governmental authority having jurisdiction to be maintained in respect
of the Aircraft, the Airframe and each Engine;
7.3.2 Information and Reports. Upon request, promptly
furnish or cause to be furnished to Lessor (in sufficient number) such
information as may be required to enable Lessor or any Participant to
file any reports, including tax returns, required to be filed by
Lessor or such Participant with any governmental authority because of
Lessor's ownership of the Aircraft, Airframe or any Engine or because
of receipt of Rent or because of the interest of any Participant in
the Estate or Trust Indenture Estate; provided, however, that with
respect to any such information (other than with respect to income
taxes) which Lessee deems commercially sensitive or confidential, if
reasonably feasible, Lessor shall afford Lessee a reasonable
opportunity to seek from any such governmental authority a waiver of
Lessor's or such Participant's obligation to file any such information
or consent to the filing of such information directly by Lessee in
lieu of filing by Lessor or such Participant and if any such waiver or
consent is evidenced to the reasonable satisfaction of Lessor, then
Lessee shall not be required to furnish such information to Lessor;
and
7.3.3 Financial Information. Promptly provide Lessor, the
Owner Participant, the Original Loan Participant and Indenture Trustee
with (i) such financial information concerning Lessee as is provided
from time to time to the public shareholders of Lessee, (ii) within 60
days after the end of each of the first three quarterly periods of
each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of such
period, together with the related consolidated statements of income
for such period, (iii) within 120 days after the close of each fiscal
year of Lessee, a consolidated balance sheet of Lessee and its
consolidated subsidiaries as of the close of such fiscal year,
together with the related consolidated statements of income for such
fiscal year, as certified by independent public accountants, (iv)
promptly upon the sending, making available or filing of the same, all
such reports (other than reports on Form 11-K or similar forms) as
Lessee shall file with the Securities and Exchange Commission, and (v)
from time to time such other information as to its financial condition
as Lessor, Indenture Trustee or any Participant may reasonably
request. In addition, Lessee shall promptly notify Lessor, Indenture
Trustee, the Original Loan Participant and the Owner Participant after
a Responsible Company Officer of Lessee shall acquire knowledge of a
Lease Default or Lease Event of Default.
Section 8. Maintenance; Replacement and Pooling of Parts;
Alterations; Modifications and Additions.
8.1 Maintenance.
8.1.1 Maintenance Program. Lessee shall maintain,
service, repair, overhaul, alter, modify, add to and test (or cause to
be maintained, serviced, repaired, overhauled, altered, modified,
added to and tested) the Aircraft, the Airframe and each Engine, and
each
SALE AND LEASE AGREEMENT [N604SW]
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other engine installed from time to time on the Airframe, in
accordance with Lessee's FAA-approved maintenance program for the
Aircraft, Airframe and Engines (the "Maintenance Program"), (i) so as
to keep the Aircraft, the Airframe and each Engine in as good
operating condition as when delivered new to Lessee by the
Manufacturer, ordinary wear and tear excepted, (ii) in the same manner
and with the same care as used by Lessee with similar aircraft owned
or operated by Lessee, without in any way discriminating against the
Aircraft, whether by reason of its leased status or otherwise, and
(iii) so as to keep the Aircraft, the Airframe and each Engine in such
condition as required to enable the FAA certificate of airworthiness
for the Aircraft to be maintained in good standing at all times under
the Act, except when all comparable Boeing Model 737-300 series
aircraft registered in the United States of America have been grounded
by the FAA other than as a result of actions taken or omitted to be
taken by Lessee (or, if a sublease is then in effect, any Permitted
Sublessee) and (iv) eligible for any Manufacturers warranties
contained in the Purchase Agreement and any Engine Manufacturer's
original warranties.
8.1.2 Compliance with Government Requirements. Lessee will
comply with all service, inspection, maintenance, repair and overhaul
regulations, directives and instructions which are made mandatory by
the FAA or other applicable government authority upon operators of
Boeing Model 737-300 series aircraft and CFM International Model
CFM56-3-B1 engines and which require compliance during the Term and
prior to return of the Aircraft under this Lease.
8.2 Replacement of Parts. Lessee, at its own cost and expense,
will promptly replace (or cause to be replaced) all Parts which may from time
to time be incorporated in the Aircraft, Airframe or any Engine and which may
from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever, except as otherwise provided in Section 8.4. In
addition, Lessee may, at its own cost and expense, remove in the ordinary
course of maintenance, service, repair, overhaul or testing any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, however, Lessee, except
as otherwise provided in Section 8.4, at its own cost and expense, will replace
such Parts as promptly as possible. All replacement parts shall be free and
clear of all Liens (except for Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof. All Parts at any
time removed from the Aircraft, Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by parts which have been incorporated in the Aircraft,
Airframe or such Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement part becoming incorporated
in the Aircraft, Airframe or such Engine as above provided, without further
act, (i) unless the replacement property is temporarily installed on an
emergency basis, title to the replaced Part shall thereupon vest in Lessee free
and clear of all rights of Lessor, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement part shall thereupon
vest in Lessor (subject only to Permitted Liens and except in the case of
replacement property
SALE AND LEASE AGREEMENT [N604SW]
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temporarily installed on an emergency basis), and (iii) such replacement part
shall become a Part subject to this Lease and be deemed part of the Aircraft,
Airframe or such Engine for all purposes hereof to the same extent as the Parts
originally incorporated in such Aircraft, Airframe or Engine.
8.3 Pooling of Parts. Any Part removed from the Aircraft,
Airframe or any Engine as provided in Section 8.2 may be subjected by Lessee
(or a Permitted Sublessee) to a normal pooling arrangement customary in the
airline industry entered into in the ordinary course of business of Lessee or
such Permitted Sublessee, so long as a part replacing such removed Part shall
be incorporated in the Aircraft, Airframe or such Engine in accordance with
Section 8.2 as promptly as practicable after the removal of such removed Part.
In addition, any replacement part when incorporated in the Aircraft, Airframe
or any Engine in accordance with Section 8.2 may be owned by any third party
subject to such a normal pooling arrangement, so long as Lessee (or any
Permitted Sublessee), at its own cost and expense, as promptly thereafter as
practicable either (i) causes title to such replacement part to vest in Lessor
in accordance with Section 8.2 by Lessee (or any Permitted Sublessee) acquiring
title thereto for the benefit of, and transferring such title to, Lessor free
and clear of all Liens (except Permitted Liens), or (ii) replaces such
replacement part by incorporating in the Aircraft, Airframe or such Engine a
further replacement part owned by Lessee (or any Permitted Sublessee) free and
clear of all Liens (except Permitted Liens) and by causing title to such
further replacement part to vest in Lessor in accordance with Section 8.2.
8.4 Alterations, Modifications and Additions.
8.4.1 Mandatory Alterations, Etc. Lessee shall make (or
cause to be made) such alterations and modifications in and additions
to the Aircraft, Airframe and each Engine as may be required from time
to time to meet the standards of the FAA or other governmental
authority having jurisdiction and to maintain the FAA certificate of
airworthiness for the Aircraft; provided, however, that Lessee may
contest in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor's interest in the Aircraft or
subject the Owner Participant to any danger of criminal liability.
All alterations and modifications made pursuant to this Section 8.4.1
shall be made at the cost and expense of Lessee.
8.4.2 Voluntary Alterations, Etc. Lessee, at its own cost
and expense, may, from time to time make (or cause to be made),
subject to the standards set forth in Section 8.1.1, such alterations
and modifications in and additions to the Aircraft, Airframe or any
Engine as Lessee may deem desirable in the proper conduct of its
business, including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine; provided, however, that no such
alteration, modification, addition or removal shall diminish the
value, remaining useful life, or utility of the Aircraft, Airframe or
such Engine, or impair the condition or airworthiness thereof, below
the value, remaining useful life, utility, condition and airworthiness
thereof immediately prior to such alteration, modification or addition
assuming the Aircraft, Airframe or such Engine was then of the value
and utility and in the condition and airworthiness required to be
maintained by the terms of this Lease. Title to all parts
incorporated in the
SALE AND LEASE AGREEMENT [N604SW]
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Aircraft, Airframe or such Engine as the result of such alteration,
modification or addition shall remain vested in Lessee and Lessee may,
at any time during the Term, remove any such part if (i) such part is
in addition to, and not in replacement of or substitution for, any
Part originally incorporated in the Aircraft, Airframe or such Engine
at the time of delivery thereof hereunder or any Part in replacement
of or substitution for any such Part, (ii) such part is not required
to be incorporated in the Aircraft, Airframe or such Engine pursuant
to the terms of this Section 8, (iii) such part can be removed from
the Aircraft, Airframe or such Engine without diminishing or impairing
the value, remaining useful life, utility, condition or airworthiness
required to be maintained by the terms of this Lease which the
Aircraft, Airframe or such Engine would have had at such time had such
alteration, modification or addition not occurred, and (iv) no Lease
Event of Default or Lease Default shall have occurred and be
continuing. Title to all other such parts shall, without further act,
vest in Lessor and shall constitute "Parts" for all purposes
hereunder. Upon the removal of any part title to which is retained by
Lessee, Lessee shall promptly repair any damage to the Airframe or
Engine from which it was removed which resulted from such removal and
such part shall no longer be deemed part of the Airframe or such
Engine from which it was removed. Any part not removed by Lessee as
above provided prior to the return of the Aircraft, Airframe or such
Engine to Lessor hereunder shall, without further act, vest in Lessor
and shall constitute a "Part" for all purposes hereunder.
Section 9. Voluntary Termination.
9.1 Right of Termination upon Obsolescence. So long as no Lease
Event of Default or Lease Default shall have occurred and be continuing, Lessee
shall have the right at its option to terminate this Lease with respect to the
Aircraft during the Base Lease Term on the first day of any month (a
"Termination Date") occurring on or after the seventh anniversary of the
Delivery Date on at least three months' prior written notice to Lessor, each
Participant and Indenture Trustee specifying a proposed Termination Date;
provided, that such notice shall also include copies of resolutions of Lessee's
board of directors stating that such board of directors has determined, in good
faith, that the Aircraft either has become economically obsolete or is surplus
to Lessee's requirements. Lessee may revoke any notice of termination referred
to in this Section 9.1 by notice to Lessor, each Participant and the Indenture
Trustee not less than 30 days prior to the proposed Termination Date, if Lessor
shall not have received a bid to purchase the Aircraft for at least the
Termination Value thereof pursuant to Section 9.2 and if Lessor shall not have
furnished to Lessee the notice referred to in Section 9.3, and upon doing so,
shall reimburse Lessor and Owner Participant on an after-tax basis for all
reasonable out-of-pocket expenses incurred by them in contemplation of such
termination; provided, however, that Lessee may so revoke a notice of
termination no more than three times during the Term.
9.2 Sale of Aircraft. Lessee, as agent for Lessor, shall, from
the date of such notice of termination until no more than 30 days' prior to the
proposed Termination Date specified by Lessee, use its reasonable best efforts
to obtain bids (in the worldwide market) for the cash purchase of the Aircraft
and Lessor may, if it desires to do so, seek to obtain such bids and may itself
bid to retain the Aircraft. In the event Lessee receives any bid, Lessee shall
at least 30 days prior to the proposed
SALE AND LEASE AGREEMENT [N604SW]
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Termination Date, certify to Lessor in writing the amount and terms of such
bid, and the name and address of the Person submitting such bid (who shall not
be Lessee, an Affiliate of Lessee or a Person who shall be a party to any
arrangement for the further use of the Aircraft by Lessee or any of its
Affiliates). In the event Lessor receives any bid, Lessor shall, at least five
Business Days prior to the proposed Termination Date, certify to Lessee in
writing the amount and terms of such bid and the name and address of the Person
submitting such bid. Subject to Section 9.3, on the Termination Date, (a)
Lessee shall deliver the Airframe and Engines or engines constituting part of
the Aircraft to the bidder, if any, which shall have submitted the highest cash
bid (net of any brokerage commissions) prior to such date, in the same manner
as if delivery were made to Lessor pursuant to Section 5 and in full compliance
with the terms thereof, and shall duly transfer to Lessor under a full warranty
(as to title) bill of sale title to any such engines not owned by Lessor, all
in accordance with the terms of Section 5, and (b) unless Lessor is the
successful bidder, Lessor shall simultaneously therewith Transfer the Airframe
and Engines or engines to such bidder for cash paid to Lessor in the manner and
in funds of the type specified in Section 3.6. The total sales price realized
at such sale shall be paid to and retained by Indenture Trustee, so long as the
Trust Indenture remains in effect, and otherwise shall be paid to and retained
by Lessor and, in addition, on such Termination Date, and as a condition
precedent to such sale and the delivery of the Aircraft and Engines or engines
to such bidder, Lessee shall pay to Indenture Trustee, so long as the Trust
Indenture remains in effect, and otherwise to Lessor the sum of (i) the excess,
if any, of (A) the Termination Value for the Aircraft, computed as of such
Termination Date, over (B) the sales price of the Airframe and Engines or
engines sold (or if the winning bidder is Lessor, the amount of such bid) after
deducting the reasonable fees and expenses incurred by Lessor, Indenture
Trustee and the Participants, if any, in connection with such termination and
sale, (ii) all unpaid Interim Rent and Basic Rent due on or prior to the TV
Determination Date with reference to which the Termination Value is computed
(it being understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated in Exhibit C
hereto as payable in advance on such TV Determination Date), and (iii) (without
duplication) all other amounts (including, without limitation, Supplemental
Rent in respect of Break Amount, if any, or Premium, if any) owing by Lessee
under this Lease or under any other Operative Agreement. Upon such payment,
Lessor will comply with Section 10.01 of the Trust Indenture and, upon
Indenture Trustee's release of such Engines from the Lien of the Trust
Indenture Estate, Transfer to Lessee any Engines constituting part of the
Aircraft but which were not then installed on the Airframe and sold therewith.
If no sale shall have occurred on or as of the Termination Date specified in
such notice of termination, this Lease shall continue in full force and effect,
Lessee shall pay the reasonable expenses incurred by Lessee, Lessor, each
Participant and Indenture Trustee in connection with the proposed sale, and
Lessee shall have the right at any time to submit another notice of termination
pursuant to, and subject to the terms of, Section 9.1. In the event of any
such sale and receipt by Lessor or Indenture Trustee, as appropriate, of such
sale price and other amounts as provided herein, and upon compliance by Lessee
with the provisions of this Section 9.2, the obligation of Lessee to pay
Interim Rent or Basic Rent due after the TV Determination Date with reference
to which the Termination Value is computed shall cease and the Base Lease Term
shall end effective as of the date of such sale. Lessor shall be under no duty
to solicit bids, to inquire into the efforts of Lessee to obtain bids or
otherwise to take any action in connection with any such sale
SALE AND LEASE AGREEMENT [N604SW]
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other than to Transfer to the purchaser named in the highest bid as referred to
above the Airframe and Engines or engines against receipt of the payments
provided for herein.
9.3 Retention by Lessor. Notwithstanding anything in this Section
9 to the contrary, Lessor may, by irrevocable notice to Lessee at least 45 days
prior to the proposed date of sale referred to in Section 9.1, reject all bids
and retain title to the Aircraft (and take possession thereof); provided, that
Lessor shall pay (and, by delivering such notice, Lessor shall be obligated to
pay) to Indenture Trustee on the proposed Termination Date an amount equal to
the unpaid principal amount of the Certificates, together with all interest due
thereon. Upon receipt of notice of such an election by Lessor, Lessee shall
cease any efforts to obtain bids as provided in Section 9.1 and shall reject
all bids theretofore or thereafter received for the Aircraft. In the event
Lessor elects to retain the Aircraft as provided in this Section 9.3, and upon
its payment to Indenture Trustee of such amount, Lessee shall deliver the
Aircraft and Engines to Lessor on the proposed Termination Date pursuant to
Section 5 and in full compliance with the terms thereof and upon such delivery
and payment in full of the amounts specified in the first sentence hereof and
the next following sentence and shall have no obligation to make any payment of
Termination Value. The foregoing shall in no way affect the obligation of
Lessee to make payment of any Interim Rent or Basic Rent accrued and unpaid on
or before the proposed Termination Date and all other amounts of Rent and other
amounts payable hereunder or under the other Operative Agreements and due on or
prior to such date, including, without limitation, Supplemental Rent in respect
of all other sums due and payable to the Holders under the Certificates
(including, without limitation, Break Amount or Premium, if any, as of such TV
Determination Date). If the amounts required to be paid pursuant to this
Section 9.3 shall not be received by the respective payees thereof on the
proposed Termination Date, this Lease shall continue in full force and effect.
9.4 Termination As to Engines. So long as no Lease Event of
Default or Lease Default shall have occurred and be continuing, Lessee shall
have the right, at its option at any time during the Term, on at least 30 days'
prior written notice to Lessor, Indenture Trustee, the Original Loan
Participant and the Owner Participant, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe. In such event,
and prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10.2 to the same extent as if
an Event of Loss had occurred with respect to such Engine, and, upon Indenture
Trustee's release of the replaced Engine from the Lien of the Trust Indenture
Estate, Lessor shall Transfer to Lessee the replaced Engine as provided in
Section 5.2.
Section 10. Loss, Destruction, Requisition, Etc.
10.1 Event of Loss with Respect to Airframe.
10.1.1 Lessee's Election. Upon the occurrence of an Event
of Loss with respect to the Aircraft, Lessee shall forthwith (and in
any event within 15 days after such occurrence) give Lessor, Indenture
Trustee and each Participant written notice of such Event of Loss and,
within 60 days after such occurrence, give Lessor, Indenture Trustee
and each Participant written notice of its election to comply either
with Section 10.1.2 or Section 10.1.3, and if
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Lessee shall not have given notice of such election within 60 days
after such occurrence Lessee shall be deemed to have elected to comply
with Section 10.1.3.
10.1.2 Replacement of Airframe and Engines. As promptly as
practicable, and in any event on or before the Business Day next
preceding the 180th day following the date of occurrence of such Event
of Loss, Lessee shall, in compliance with Section 10.1.6, convey or
cause to be conveyed to Lessor, to be leased by Lessee hereunder in
replacement thereof, a Replacement Airframe (which need not be a new
Replacement Airframe but shall have been placed in service not earlier
than January 1, 1993) together with the same number of Replacement
Engines as the Engines, if any, subject to such Event of Loss, such
Replacement Airframe and Replacement Engines to be free and clear of
all Liens (except Permitted Liens), to have a value, remaining useful
life and utility at least equal to, and to be in as good operating
condition as, the Airframe and Engines, if any, so replaced (for such
purpose, it shall be assumed that the Airframe and such Engines were
in the condition and repair required by the terms of this Lease). If
Lessee shall not effect such replacement hereunder on or before the
Business Day next preceding the 150th day following the date of the
occurrence of such Event of Loss, then Lessee shall immediately
deposit with Lessor, in the manner and in funds of the type specified
in Section 3.6, an amount equal to the excess of the Stipulated Loss
Value for the Aircraft over any funds then being held by Lessor or the
Indenture Trustee with respect to such Event of Loss. If Lessee shall
not perform its obligation to effect such replacement hereunder on or
before the Business Day next preceding the 180th day following the
date of the occurrence of such Event of Loss, then Lessee shall
immediately pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, the aggregate amount specified in clauses
(A), (B) and (C) of Section 10.1.3, net of any amount deposited with
Lessor pursuant to the next preceding sentence of this Section 10.1.2.
10.1.3 Payment of Stipulated Loss Value and Rent. On or
before the Business Day next preceding the earlier of (i) the 180th
day following the date of the occurrence of such Event of Loss, or
(ii) the later of 15 days following the receipt of insurance proceeds
with respect to such occurrence or the date Lessee shall have made or
shall be deemed to have made its election under Section 10.1.1 to
comply with Section 10.1.3, Lessee shall pay to Lessor, in the manner
and in funds of the type specified in Section 3.6, (A) the Stipulated
Loss Value for the Aircraft, determined as of the date of payment (as
described in the definition of Stipulated Loss Value), (B) all unpaid
Basic Rent due on or prior to the SLV Determination Date with
reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated in
Exhibit C hereto as payable in advance on such SLV Determination
Date), and (C) (without duplication) any other Rent which is due and
payable through and including the date of payment.
10.1.4 Stipulated Loss Value Payment. In the event of
payment in full of the Stipulated Loss Value for the Aircraft pursuant
to Section 10.1.2 or 10.1.3 and, in either case, the amounts referred
to in clauses (B) and (C) of Section 10.1.3, (A) the obligation of
Lessee to pay Interim Rent and Basic Rent due after the SLV
Determination Date with refer-
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ence to which such Stipulated Loss Value is computed shall terminate
(but Lessee shall remain liable for all payments of Supplemental Rent
due through and including the date of such payment of Stipulated Loss
Value), (B) the Term for the Aircraft shall end, and (C) Lessor will
comply with the applicable provisions of Section 10.01 of the Trust
Indenture and, upon Indenture Trustee's release of the Aircraft from
the Lien of the Trust Indenture Estate, will Transfer to Lessee the
Aircraft.
10.1.5 Payment of Rent. In the event of an Event of Loss,
during the period between the occurrence of the Event of Loss and the
date of payment pursuant to Section 10.1.3 or replacement, the
obligation of Lessee to pay Interim Rent, Basic Rent or Renewal Rent
shall continue unchanged, except that upon such replacement, it shall
become an obligation to pay such Rent in respect of the Replacement
Aircraft.
10.1.6 Conditions to Replacement of Aircraft. Lessee's
right to exercise the replacement options contemplated by Section
10.1.1 with respect to the Aircraft shall be subject to the
fulfillment prior to or at the time of any such replacement, in
addition to the requirements contained in Section 10.1.2, of the
conditions precedent set forth below:
10.1.6.1 No Default. No Lease Event of Default or
Lease Default shall have occurred and be continuing.
10.1.6.2 Tax Loss. Owner Participant and Lessor
shall have received, at Lessee's expense, a tax opinion of
Vinson & Elkins L.L.P., or other counsel reasonably acceptable
to the Owner Participant to the effect that the Event of Loss
or the Replacement of the Airframe or Aircraft in connection
therewith will not cause any adverse tax consequences to
Lessor or Owner Participant or its Affiliates (or, in lieu
thereof, Lessee shall have agreed to indemnify for such tax
risk), or if Owner Participant and Lessee shall have agreed
upon the amount, if any, payable and upon the manner of
payment thereof with respect to such replacement by Lessee
pursuant to the Tax Indemnity Agreement or Section 7(b) of the
Participation Agreement, then any such amount shall be paid.
10.1.6.3 Lessee's Obligations with Respect to
Replacement Aircraft. Lessee will promptly (all writings
referred to below to be reasonably satisfactory in form and
substance to Lessor):
(a) furnish Lessor with (i) a full
warranty bill of sale and FAA bill of sale duly
conveying to Lessor the Replacement Airframe and
Replacement Engines, if any, and (ii) an assignment
of the purchase agreement with respect to the
Replacement Airframe and Replacement Engines, if any
(if Lessee shall have any rights thereunder)
substantially in the form of the Purchase Agreement
Assignment and a consent and agreement of the
manufacturer thereof substantially in the form of
the Manufacturer's Consent;
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(b) cause a Lease Supplement
subjecting such Replacement Airframe and Replacement
Engines, if any, to this Lease, duly executed by
Lessee, to be delivered to Lessor for execution, and
an Indenture and Trust Supplement to be delivered to
Lessor for execution and, in each case upon such
execution, to be filed for recordation with the FAA
pursuant to the Act;
(c) furnish Lessor with such evidence
of compliance with (i) Section 5.01(b) of the Trust
Indenture (if the Trust Indenture shall be in effect
at such time) and (ii) the insurance provisions of
Section 11 hereof with respect to the Replacement
Airframe and Replacement Engines, if any, and the
payment of all premiums then due with respect to all
such insurance, as Lessor may reasonably request;
(d) furnish Lessor with an opinion or
opinions of counsel reasonably satisfactory to
Lessor to the effect that, upon such conveyance,
Lessor will acquire good title to the Replacement
Airframe and Replacement Engines, if any, free and
clear of all Liens other than Permitted Liens, the
Replacement Airframe and Replacement Engines, if
any, will be leased hereunder and subject to the
Lien of the Trust Indenture (if then in effect) to
the same extent as the Airframe and Engines replaced
thereby, Lessor and (assuming the Trust Indenture is
still in effect) the Indenture Trustee shall be
entitled to the benefit of Section 1110 of the
Bankruptcy Code with respect to the Replacement
Aircraft to the same extent as the Aircraft, and to
such further effect as Lessor may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Airframe
which shall be identified by manufacturer,
model, FAA registration number and
manufacturer's serial number;
(ii) a description of the Replacement
Airframe to be received (including the
manufacturer, model, FAA registration
number and manufacturer's serial number)
as consideration for the Airframe to be
released;
(iii) that on the date of the Indenture
and Trust Supplement and the Lease
Supplement relating to the Replacement
Airframe, Lessor will be the legal owner
of such Replacement Airframe free and
clear of all Liens (other than Permitted
Liens), that such Replacement Airframe
will on such date be in good working order
and condition, and that such Replacement
Airframe has been or, substantially
concurrently with such replacement, will
be duly
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registered in the name of Lessor under the
Act and that an airworthiness certificate
has been duly issued under the Act with
respect to such Replacement Airframe, and
that such registration and certificate are
in full force and effect, and that Lessee
will have the full right and authority to
use such Replacement Airframe;
(iv) that the insurance required by
Section 11 is in full force and effect
with respect to such Replacement Airframe
and all premiums then due thereon have
been paid in full;
(v) that the Replacement Airframe is
of the same or an improved model as the
Airframe requested to be released from the
Lien of the Trust Indenture;
(vi) that no Lease Default or Lease
Event of Default has occurred and is
continuing or would result from the making
and granting of the request for release
and the addition of a Replacement
Airframe; and
(vii) if the Trust Indenture has not
theretofore been discharged, the release
of the Airframe so to be released will not
impair the security of the Trust Indenture
or be in contravention of any of the
provisions of the Trust Indenture;
(f) furnish Lessor with a certificate
or certification of qualified independent aircraft
appraisers reasonably satisfactory to Lessor
certifying that the Replacement Airframe and
Replacement Engines, if any, have a value, remaining
useful life and utility at least equal to, and are
in at least as good operating condition as, the
Airframe and Engines, if any, so replaced (assuming
the Airframe and Engines were in the condition and
repair required by the terms hereof immediately
prior to the occurrence of such Event of Loss); and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to
the financing statements filed on or before the
Delivery Date) as Lessor or any Participant may
reasonably request to effect such replacement.
10.1.7 Recordation and Opinions. In the case of any
Replacement Airframe and/or Replacement Engines conveyed to Lessor
under this Section 10.l, promptly upon the registration of the
Replacement Aircraft and the recordation of the Lease Supplement and
Indenture and Trust Supplement covering the Replacement Airframe and
Replacement Engines, if any, pursuant to the Act, Lessee will cause to
be delivered to Lessor an opinion
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of Daugherty, Fowler & Peregrin or other FAA counsel satisfactory to
Lessor as to the due registration of the Replacement Aircraft and the
due recordation of such Lease Supplement and Indenture and Trust
Supplement.
10.1.8 Conveyance. Upon compliance by Lessee with all of
the terms of this Section 10.1, (i) Lessor will comply with the
applicable provisions of Section 10.01 of the Trust Indenture and,
upon Indenture Trustee's release of the Aircraft and Engines (if
applicable) from the Lien of the Trust Indenture Estate, Transfer to
Lessee the replaced Airframe and Engines (if any), and (ii) Lessee
will be subrogated to all claims of Lessor, if any, against third
parties for damage to or loss of such Airframe and Engines to the
extent of the then insured value thereof.
10.2 Event of Loss with Respect to an Engine.
10.2.1 Event of Loss. Upon the occurrence of an Event of
Loss with respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe, Lessee
shall forthwith (and in any event within 15 days after such
occurrence) give Lessor, Indenture Trustee and each Participant
written notice thereof and shall, as promptly as possible and in any
event within 60 days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement for the
Engine with respect to which such Event of Loss occurred, title to a
Replacement Engine free and clear of all Liens, other than Permitted
Liens, and having a value, remaining useful life and utility at least
equal to, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such Engine was
of the value, remaining useful life and utility and in the condition
and repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss.
10.2.2 Conditions; Lessee's Obligations. Prior to or at
the time of any such conveyance, Lessee will promptly:
(a) furnish Lessor with a full warranty (as to
title) bill of sale duly conveying to Lessor such Replacement
Engine;
(b) cause a Lease Supplement subjecting such
Replacement Engine to this Lease, duly executed by Lessee, to
be delivered to Lessor for execution, and an Indenture and
Trust Supplement to be delivered to Lessor for execution and,
in each case upon execution, to be filed for recordation with
the FAA pursuant to the Act;
(c) furnish Lessor with such evidence of
compliance with (i) Section 5.01(b) of the Trust Indenture (if
the Trust Indenture shall be in effect at such time) and (ii)
the insurance provisions of Section 11 hereof with respect to
such Replacement Engine and the payment of all premiums then
due with respect to such insurance, as Lessor may reasonably
request;
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(d) furnish Lessor with an opinion or opinions
of Lessee's counsel, in form, substance and scope reasonably
satisfactory to Lessor, to the effect that, upon such
conveyance, Lessor will acquire good title to such Replacement
Engine free and clear of all Liens other than Permitted Liens,
and that such Replacement Engine will be leased hereunder and
subject to the Lien of the Trust Indenture (if then in effect)
to the same extent as the Engine replaced thereby and to such
further effect as Lessor or Indenture Trustee may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Engine which
shall be identified by manufacturer's serial number;
(ii) a description of the Replacement
Engine (including the manufacturer's name, model and
serial number) as consideration for the Engine to be
released;
(iii) that on the date of the Lease
Supplement and the Indenture and Trust Supplement
relating to the Replacement Engine, Lessor will be
the legal owner of such Replacement Engine free and
clear of all Liens except Permitted Liens, that such
Replacement Engine will on such date be in good
working order and condition, and that such
Replacement Engine is the same or an improved or
equivalent model as the Engine to be released; and
(iv) if the Trust Indenture has not
theretofore been discharged, that the release of the
Engine so to be released will not impair the
security of the Trust Indenture or be in
contravention of any of the provisions of the Trust
Indenture;
(f) furnish Lessor with a certificate of a
qualified aircraft engineer (who may be an employee of Lessee)
certifying that such Replacement Engine has a value, remaining
useful life and utility at least equal to, and is in at least
as good operating condition as, the Engine so replaced
assuming such Engine was in the condition and repair required
by the terms hereof immediately prior to the occurrence of
such Event of Loss; and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to the
financing statements filed on or before the Delivery Date) as
Lessor or any Participant may reasonably request to effect
such replacement.
10.2.3 Recordation and Opinions. In the case of any
Replacement Engine conveyed to Lessor under this Section 10.2,
promptly upon the recordation of the Lease Supplement and the
Indenture and Trust Supplement covering such Replacement Engine
pursuant to the
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Act, Lessee will cause to be delivered to Lessor an opinion of
Daugherty, Fowler & Peregrin or other FAA counsel satisfactory to
Lessor as to the due recordation of such Lease Supplement and
Indenture and Trust Supplement.
10.2.4 Conveyance; Replacement Engine. Upon compliance by
Lessee with the terms of this Section 10.2, Lessor will comply with
the provisions of the Trust Indenture applicable thereto and, upon
Indenture Trustee's release of the Engine with respect to which such
Event of Loss occurred from the Lien of the Trust Indenture Estate,
Transfer such Engine to Lessee, and Lessee will be subrogated to all
claims of Lessor, if any, against third parties for damage to or loss
of such Engine to the extent of the insured value thereof.
10.2.5 No Reduction of Rent. No Event of Loss with respect
to an Engine under the circumstances contemplated by the terms of this
Section 10.2 shall result in any reduction of Interim Rent, Basic Rent
or Renewal Rent.
10.3 Application of Certain Payments. Any payments (other than
insurance proceeds, the application of which is provided for in Section 11)
received at any time by Lessor, Lessee or any Permitted Sublessee from any
governmental authority or other Person with respect to any Event of Loss, will
be applied as follows:
10.3.1 Replacement of Airframe and Engines. If such
payments are received with respect to the Airframe and the Engines (or
engines) installed on the Airframe that have been or are being
replaced by Lessee pursuant to Section 10.1 (other than Section
10.1.3), such payments shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect,
Lessor, and upon completion of such replacement be paid over to
Lessee, provided Lessee shall have fully performed or, concurrently
therewith will fully perform, the terms of Section 10.1 with respect
to the Event of Loss for which such payments are made.
10.3.2 Replacement of Engine. If such payments are
received with respect to an Engine that has been or is being replaced
by Lessee pursuant to Section 10.2, such payments shall be paid over
to, or retained by, Indenture Trustee or, if the Trust Indenture is no
longer in effect, Lessor, and upon completion of such replacement be
paid over to Lessee, provided Lessee shall have fully performed or,
concurrently therewith will fully perform, the terms of Section 10.2
with respect to the Event of Loss for which such payments are made.
10.3.3 Nonreplacement. If such payments are received with
respect to the Airframe or the Airframe and the Engines or engines
installed on the Airframe that has not or have not been and will not
be replaced pursuant to Section 10.1 or 10.2, so much of such payments
remaining after reimbursement of Lessor, Indenture Trustee and each
Participant for costs and expenses as shall not exceed the Stipulated
Loss Value and other amounts required to be paid by Lessee hereunder
shall be applied in reduction of Lessee's obligation to pay such
Stipulated Loss Value and other amounts required to be paid by Lessee
hereunder, if not already paid by Lessee, or, if already paid by
Lessee, shall be applied to reimburse Lessee
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for its payment of such Stipulated Loss Value and other amounts. The
balance, if any, of such payment remaining thereafter shall be divided
between Lessor and Lessee in proportion to their relative interests in
the Aircraft.
10.4 Requisition of Aircraft for Use by Governmental Authorities.
In the event of the requisition for use of the Airframe and the Engines or
engines installed on such Airframe during the Term by any governmental
authority, Lessee shall notify Lessor promptly of such requisition, and all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred. All
payments received by Lessor or Lessee from such governmental authority for the
use of such Airframe and Engines or engines prior to the time such requisition
becomes an Event of Loss shall be paid over to, or retained by, Lessee (or, if
directed by Lessee, any Permitted Sublessee); and all payments received from
such governmental authority for the use of such Airframe and Engines or engines
after such time shall be paid over to, or retained by, Indenture Trustee or, if
the Trust Indenture is no longer in effect, Lessor, and upon the performance by
Lessee of the terms of Section 10.1 with respect to such Event of Loss, shall
be paid over to Lessee.
10.5 Requisition of an Engine for Use by Governmental Authorities.
In the event of the requisition for use by any governmental authority (other
than in circumstances contemplated by Section 10.4) of any Engine but not the
Airframe, Lessee will replace such Engine hereunder by complying with the terms
of Section 10.2 to the same extent as if an Event of Loss had occurred with
respect to such Engine, and any payments received from such governmental
authority with respect to such requisition shall be paid over to, or retained
by, Indenture Trustee or, if the Trust Indenture is no longer in effect,
Lessor, and upon the performance by Lessee of the terms of Section 10.2 to the
same extent as if an Event of Loss had occurred with respect to such
requisitioned Engine, shall be paid over to Lessee.
10.6 Application of Payments During Existence of Default. Any
amount referred to in this Section 10 which is payable or creditable to or
retainable by Lessee shall not be paid or credited to or retained by Lessee if,
at the time of such payment, credit or retention, a Lease Event of Default or
Lease Default shall have occurred and be continuing hereunder but shall be paid
to and held by Indenture Trustee and applied by it as provided in the Trust
Indenture, or, if the Trust Indenture is no longer in effect, held by Lessor as
security for the obligations of Lessee under this Lease and applied against
Lessee's obligations hereunder as and when due; at such time as there shall not
be continuing any such Lease Event of Default or Lease Default, or at such
earlier time as Lessee shall have paid in full all Rent and other amounts due
and payable hereunder and under the other Operative Agreements by Lessee, any
remaining balance of such amount shall be paid to Lessee to the extent not
previously applied in accordance with the preceding clause of this sentence.
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Section 11. Insurance.
11.1 Public Liability and Property Damage Insurance. Lessee shall
at all times maintain, or cause to be maintained, at its or any Permitted
Sublessee's expense, public liability (including without limitation contractual
liability, passenger legal liability and property damage, but excluding
manufacturer's product liability coverage) insurance which shall:
11.1.1 Type, Form and Amount. Be of a type and form
carried by similarly situated United States commercial air carriers
generally, and carried in amounts not less than that carried by Lessee
on similar equipment owned or leased by Lessee and not less than the
minimum amount of $350,000,000 (per occurrence) combined single limit
(or such greater amount as Lessee may carry from time to time on other
737-300 series aircraft in its fleet);
11.1.2 Coverage. Include, but not be limited to, public
liability insurance, contractual liability insurance, passenger
liability insurance and property damage liability insurance (including
cargo and baggage liability insurance); and
11.1.3 Additional Insureds. Name as additional insureds
Lessor (in its individual and trust capacities), Indenture Trustee,
each Participant and each other Indemnified Party, as their interests
may appear.
11.2 Insurance Against Loss of or Damage to Aircraft and Engines.
Lessee shall at all times maintain, or cause to be maintained, at its or any
Permitted Sublessee's expense, insurance against loss of or damage to the
Aircraft, Airframe and Engines as follows:
11.2.1 Type, Form and Amount. "All-risk" ground and flight
aircraft hull insurance on the Aircraft and "all-risk" coverage on
each Engine and on Parts while removed from the Aircraft or Engines,
which is of the type and form, and in an amount not less than that,
carried by Lessee on similar equipment owned or leased by Lessee and
in an amount not less than that usually carried by similarly situated
United States commercial air carriers generally; and, to the extent so
usually carried, at all times that the Aircraft or any Engine is not
covered by the insurance described in Section 11.2.2, coverage against
the perils of (i) strikes, riots, civil commotions or labor
disturbances, (ii) any malicious act or act of sabotage, and (iii)
hijacking, or any unlawful seizure or wrongful exercise of control of
the Aircraft or crew in flight (including any attempt at such seizure
or control) made by any person or persons on board the Aircraft acting
without the consent of the insured other than hijacking committed by
persons engaged in a program of irregular warfare for terrorist
purposes. Such insurance shall at all times be for an amount not less
than the Stipulated Loss Value of the Aircraft.
11.2.2 War-Risk Insurance. If at any time (a) war-risk
insurance is maintained by Lessee or any Permitted Sublessee
subleasing the Aircraft or any Engine with respect to other aircraft
operated by Lessee or such Permitted Sublessee on the same or similar
routes, (b) the Aircraft is operated on routes where the custom in the
United States commercial airline
SALE AND LEASE AGREEMENT [N604SW]
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industry is to carry war-risk insurance, (c) the Aircraft is operated
by a Permitted Foreign Air Carrier as a Permitted Sublessee in any
recognized or threatened area of hostilities, or (d) the Aircraft is
operated on any route where no other aircraft is regularly operated by
a United States commercial airline and such route is within any such
area of hostilities, then war-risk and allied perils insurance of the
type carried by similarly situated United States commercial air
carriers operating the same or comparable models of aircraft on the
same or similar routes shall be maintained on the Aircraft in an
amount not less than that specified in Section 11.2.l.
11.2.3 Certain Requirements. The insurance policies
required by this Section 11.2 shall:
11.2.3.1 Additional Insureds. Be endorsed to name
Lessor (in its individual and trust capacities), each
Participant, the Indenture Trustee and each other Indemnified
Party as additional insureds, as their interests may appear.
11.2.3.2 Payment of Proceeds. Provide that
proceeds thereunder shall be paid directly to Indenture
Trustee, so long as the Trust Indenture shall be in effect,
and thereafter to Lessor, in either case, as exclusive loss
payee; provided, however, that any proceeds payable as a
result of any property damage to the Airframe or any Engine,
which property damage does not exceed $4,000,000 ($2,000,000,
if at the time of any such payment Lessee's unsecured senior
long-term debt securities are not rated Investment Grade) and
does not constitute an Event of Loss with respect to the
Aircraft or such Engine, shall be paid to Lessee unless Lessor
or Indenture Trustee, prior to such payment, shall have
notified the insurer making such payment that a Lease Default
(of the type described in Section 14.1 or 14.5) or Lease Event
of Default has occurred and is continuing.
11.2.3.3 Waiver of Subrogation. Provide that the
insurers shall waive any rights of subrogation against Lessor,
Indenture Trustee, each Participant and each other Indemnified
Party except for claims arising out of gross negligence or
willful misconduct of such Person; provided, that the exercise
by insurers of rights of subrogation, if any, permitted by
this Section 11.2 shall not, in any way, delay payment of any
claim that would otherwise be payable by such insurers but for
the existence of such rights of subrogation or entitle such
insurers to exercise or to assert any setoff, recoupment,
counterclaim or any other deduction in respect of any amounts
payable under such policies.
11.2.4 Deductibles. The insurance required by this Section
11.2 may, subject to Section 11.8, provide for standard deductibles
which are from time to time in effect in the aviation insurance
industry generally and which are customarily maintained by similarly
situated United States commercial air carriers generally; provided,
however, such deductibles shall not be more than the deductibles
generally maintained by Lessee (and which Lessee is under no
compulsion to maintain pursuant to any indenture, mortgage, lease or
other
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agreement) with respect to its fleet of Boeing Model 737-300 series
aircraft and CFM International Model CFM56-3 engines generally.
11.2.5 Government Indemnity. In the case of a contract
with the Government in respect of the Aircraft or Engines, a valid
agreement by the Government to indemnify Lessee, Lessor, each
Participant, Indenture Trustee and each other Indemnified Party
against the same risks which are required hereunder to be insured
against in amounts at least equal to the amounts required hereunder
from time to time (such indemnity to be backed by the full faith and
credit of the United States of America), shall be considered adequate
insurance with respect to the Aircraft, Airframe and any Engine
subject to such contract to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
11.3 General Policy Provisions. Each insurance policy to be
procured and maintained hereunder shall:
11.3.1 Primary Insurance. Be primary and without right of
contribution from other insurance which may provide coverage to
Lessor, Indenture Trustee, or any Participant or any other Indemnified
Party with respect to its interest in the Aircraft, Airframe or any
Engine or its liabilities with respect to or arising out of the
transactions contemplated by the Operative Agreements;
11.3.2 Coverage for Each Insured. Expressly provide that
all the provisions thereof, except the agreed values and the limits of
the liability of the insurer under such policy, shall operate in the
same manner as if there were a separate policy covering each insured;
11.3.3 Waiver of Certain Rights. Waive any right of the
insurers to any setoff, recoupment, counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
liability of Lessee, Lessor, Indenture Trustee, any Participant or any
other Indemnified Party;
11.3.4 Breach of Warranty. Provide that, in respect of
Lessor, Indenture Trustee, each Participant and each other Indemnified
Party, such insurance shall not be invalidated by any action or
inaction by Lessee, any Indemnified Party or other Person and shall
insure the interests of Lessor, Indenture Trustee, each Participant
and each other Indemnified Party regardless of any breach or violation
by Lessee, any Indemnified Party or other Person of any
representation, warranty, declaration or condition contained in such
policy;
11.3.5 Notice of Termination or Changes. Provide for not
less than 30 days' prior written notice to be received by Lessor,
Indenture Trustee and each Participant before any lapse, alteration,
termination or cancellation of the insurance evidenced thereby shall
be effective as to Lessor, Indenture Trustee, each Participant and
each other Indemnified Party, except that war-risk and allied perils
policies may provide for not less than seven days' prior written
notice or such lesser or greater notice as shall at the time be
customary in the aviation
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insurance industry generally, and which are customarily in effect with
respect to major United States commercial air carriers generally from
time to time;
11.3.6 Nonliability for Premiums. Provide that neither
Lessor, Indenture Trustee, any Participant nor any other Indemnified
Party shall be liable for any insurance premium;
11.3.7 Identity of Insurers. Be with insurance companies,
underwriters or funds of recognized responsibility; and
11.3.8 Fifty-fifty Clause. Contain a fifty-fifty clause
per AVS 103 or its equivalent, but only in the event that such clause
is customarily included in such policies maintained by similarly
situated United States commercial air carriers generally.
11.4 Application of Insurance Proceeds. As between Lessor and
Lessee, all insurance proceeds received under policies required to be
maintained (or to be caused to be maintained) by Lessee pursuant to Section
11.2 as a result of the occurrence of an Event of Loss with respect to the
Aircraft, Airframe or any Engine will be applied in accordance with Section
10.3.1, 10.3.2 or 10.3.3, as the case may be (except that the balance referred
to in Section 10.3.3 shall be paid over to, or retained by, Lessee). All
insurance proceeds received under such policies in respect of any property
damage loss not constituting an Event of Loss with respect to the Airframe or
an Engine will be applied in payment for repairs or for replacement property in
accordance with the terms of Section 8, if not already paid for by Lessee, and
any balance remaining after compliance with such Section with respect to such
loss shall be paid to Lessee. In the case of a loss with respect to an engine
(other than an Engine) installed on the Airframe, Lessor shall hold any payment
to it of any insurance proceeds in respect of such loss for the account of
Lessee or any other third party that is entitled to receive such proceeds. The
provisions of Section 10.6 shall apply to amounts referred to in this Section
11.4.
11.5 Certificates; Reports, Etc. With respect to any policy
required hereunder, Lessee shall cause to be furnished to Lessor, Indenture
Trustee and each Participant on or prior to the Delivery Date of the Aircraft
and on or prior to expiration of such policy, certificates of the insurer or
insurers (or their authorized representatives) providing insurance pursuant to
the requirements of this Section 11. On or before the Delivery Date of the
Aircraft, and annually thereafter on or before the renewal date of such policy,
Lessee shall cause to be furnished to Lessor, Indenture Trustee, the Original
Loan Participant and Owner Participant a report signed by Willis Corroon
Aerospace (or any other firm of independent aircraft insurance brokers,
appointed by Lessee, reasonably satisfactory to the Original Loan Participant
and Owner Participant) describing in reasonable detail the insurance then
carried and maintained with respect to the Aircraft and stating the opinion of
such firm that the insurance then carried and maintained on the Aircraft
complies with the terms hereof. Lessee agrees that it will cause such firm to
advise Lessor, Indenture Trustee, the Original Loan Participant and Owner
Participant in writing promptly of any default in the payment of any premium or
any other act or omission on the part of Lessee or any Permitted Sublessee of
which they have knowledge and which might invalidate or render unenforceable,
in whole or in part, the insurance on the Aircraft. To the extent such
agreement is reasonably obtainable, Lessee further agrees to
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cause such firm to advise Lessor, Indenture Trustee and each Participant in
writing at least 30 days (seven days in the case of war-risk and allied perils
coverage or such lesser or greater notice as is customary in the aviation
industry generally) prior to any expiration, lapse, alteration, cancellation or
termination date of any insurance carried and maintained on the Aircraft
pursuant to this Section 11.
11.6 Lessor's Right to Maintain Insurance. In the event that
Lessee shall fail to maintain or cause to be maintained insurance as herein
provided, Lessor, Indenture Trustee or any Participant may at its option (but
shall not be obligated to) provide such insurance and in such event, Lessee
shall, upon demand, reimburse such Person, as Supplemental Rent, for the cost
thereof. No such payment, performance or compliance shall be deemed to cure
any Lease Default hereunder or otherwise relieve Lessee of its obligations with
respect thereto.
11.7 Insurance for Own Account. Nothing in Section 11 shall limit
or prohibit Owner Participant (directly or through Lessor) from obtaining
insurance for its own account, and any proceeds payable thereunder shall be
payable as provided in the insurance policy relating thereto; provided,
however, that no such insurance may be obtained which would limit or otherwise
adversely affect the availability or coverage or cost of any insurance required
to be obtained or maintained pursuant to this Section 11. Nothing in this
Section 11 shall limit or prohibit Lessor, Indenture Trustee or any Holder from
obtaining insurance for its own account, and any proceeds payable thereunder
shall be payable as provided in the insurance policy relating thereto;
provided, however, that no such insurance may be obtained which would limit or
otherwise adversely affect the availability or coverage or cost of any
insurance required to be obtained or maintained pursuant to this Section 11 or
obtained by Owner Participant pursuant to the preceding sentence.
11.8 Self-Insurance. Notwithstanding the foregoing provisions of
this Section 11, Lessee may, from time to time so long as no Lease Event of
Default has occurred and is continuing, self-insure with respect to the
Aircraft to the same extent as it does with respect to, or maintain policies
with deductibles or premium adjustment provisions consistent with similar
provisions applicable to, other comparable aircraft operated by Lessee;
provided, however, that in the case of public liability insurance, such
self-insurance shall in no event exceed $50,000,000; and provided, further,
that if at any time Lessee's unsecured senior long-term debt securities are not
rated Investment Grade, such self-insurance (inclusive of any such public
liability insurance and without derogation from the preceding proviso) shall in
no case be in amounts greater than 4% of Lessee's tangible net worth. As used
in this Agreement, the term "Investment Grade" means a rating of "Baa3" or
higher from Moody's Investors Service or a rating from any other nationally
recognized bond rating service equivalent to or better than such a rating.
Section 12. Inspection. At all reasonable times, and upon
reasonable notice, Lessor, Indenture Trustee or any Participant or its
authorized representatives may inspect the Aircraft and inspect and copy
(subject to any confidentiality agreements, copyright restrictions and the
like) the books and records of Lessee relative thereto. Any such inspection of
the Aircraft shall be without out-of-pocket expense or risk to Lessee and shall
be a visual, walk-around inspection and may not include opening any panels,
bays or the like; provided, that no exercise of such inspection right shall
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interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee (or any Permitted Sublessee). Subject to the proviso in
the preceding sentence, upon receipt by Lessee of a written request from the
Owner Participant or the Indenture Trustee specifying that the Owner
Participant or the Indenture Trustee desires to have an authorized
representative observe the major overhaul to be performed on the Aircraft next
following receipt of any such request, Lessee shall permit such authorized
representative to observe such overhaul. Neither Lessor, Indenture Trustee nor
any Participant shall have any duty to make any such inspection or shall incur
any liability or obligation by reason of not making any such inspection.
Section 13. Assignment.
13.1 In General. Except as otherwise expressly permitted in
Section 7.2 or Section 11(f) of the Participation Agreement, or as required in
the case of any requisition by the Government referred to in Section 7.1,
Lessee will not, without the prior or written consent of Lessor, assign or
transfer any of its rights or obligations under this Lease or any other
Operative Agreement. Lessor may assign or convey any of its right, title and
interest in and to this Lease, any of the other Operative Agreements or the
Aircraft in accordance with the Participation Agreement, the Trust Agreement or
the express provisions of this Lease. The terms and provisions of the Lease
shall be binding upon and inure to the benefit of Lessor and Lessee and their
respective permitted successors and assigns.
13.2 Security for Lessor's Obligations. In order to secure the
indebtedness evidenced by the Certificates, the Trust Indenture provides, among
other things, for the assignment by Lessor to Indenture Trustee of its right,
title and interest in, to and under this Lease and any Permitted Sublease, to
the extent set forth in the Trust Indenture, and for the creation of a first
mortgage lien on and perfected security interest in the Aircraft in favor of
Indenture Trustee. Lessee hereby consents to such assignment and to the
creation of such mortgage and security interest and acknowledges receipt of
copies of the Trust Agreement and the Trust Indenture, it being understood that
such consent shall not affect any requirement or the absence of any requirement
for any consent under any other circumstances. So long as the Trust Indenture
shall be in effect, Lessee will furnish to Indenture Trustee counterparts of
all writings of any kind required to be delivered hereunder by Lessee to
Lessor. Until the Lien of the Trust Indenture has been released, (a) Lessee
shall make all payments of Basic Rent, Stipulated Loss Value and Termination
Value and all other amounts payable hereunder (other than Excluded Payments as
defined in the Trust Indenture) to Indenture Trustee at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, and the right of Indenture Trustee to receive
such payments shall not be subject to any defense, counterclaim, setoff or
other right or claim of any kind which Lessee may be able to assert against
Lessor (in its individual or trust capacity), Indenture Trustee (in its
individual or trust capacity), any Participant or any other Person in an action
brought by any thereof on this Lease and (b) as provided in the Trust
Indenture, certain rights of Lessor with respect to this Lease, the Aircraft,
the Airframe or any Engine (or any Part thereof) or any other part of the Trust
Indenture Estate are exercisable by Indenture Trustee.
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Section 14. Events of Default. The following events shall
constitute Lease Events of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body), and each such
Lease Event of Default shall continue so long as, but only so long as, it shall
not have been remedied or waived:
14.1 Failure To Pay Rent. Lessee shall fail to make any payment of
Interim Rent or Basic Rent within seven Business Days from the due date
thereof; or Lessee shall fail to make any other payments required to be made by
it under the Operative Agreements within ten Business Days after the receipt of
written demand therefor delivered to Lessee by Lessor after such payments were
required to have been made (provided, that any failure to pay any amount owed
by Lessee under the Tax Indemnity Agreement or any failure of Lessee to pay to
Lessor or the Owner Participant when due any Excluded Payments shall not
constitute a Lease Event of Default unless written notice is given by the Owner
Participant to Lessee and the Indenture Trustee that such failure shall
constitute a Lease Event of Default); or
14.2 Specific Defaults. Lessee shall fail to carry and maintain
(or cause to be carried and maintained) insurance on or with respect to the
Aircraft in accordance with the provisions of Section 11; provided, that any
such failure shall not constitute a Lease Event of Default so long as such
failure is for a period of not more than 30 days, Lessee shall not operate or
permit to be operated the Aircraft at a time when such insurance is not in
effect and the Aircraft continues to be covered by such insurance as is
required when the Aircraft is on the ground, or Lessee shall fail to comply
with Section 7.1.1; or
14.3 General Default. Lessee shall fail to perform or observe any
other covenant, condition or agreement to be performed or observed by it
hereunder or under any other Operative Agreement (except the Tax Indemnity
Agreement), and such failure shall continue unremedied for a period of 30 days
after written notice thereof to Lessee, unless Lessee shall be diligently
proceeding to correct such failure and such failure is cured within 180 days
after such notice or by the end of the Term, whichever first occurs; or
14.4 Misrepresentation and Breach of Warranty. Any representation
or warranty made by Lessee herein or in the Participation Agreement or in any
other Operative Agreement (other than the Tax Indemnity Agreement) or in any
document or certificate furnished by Lessee in connection with any thereof,
shall prove to have been incorrect in any material respect at the time made,
shall remain material at the time of discovery and shall, if curable, remain
incorrect in any material respect after 30 days after written notice thereof to
Lessee;
14.5 Bankruptcy, Etc. Lessee shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any
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such official or agency in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing; or an involuntary case or
other proceeding shall be commenced against Lessee seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official or agency of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 90 days.
Section 15. Remedies.
15.1 Default; Remedies. Upon the occurrence of a Lease Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, so long as any such Lease Event of Default shall be
continuing, exercise one or more of the following remedies as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect
which have not been effectively waived by Lessee:
15.1.1 Return; Repossession. Lessor may cause Lessee, upon
written demand by Lessor and at Lessee's expense, to return promptly,
and Lessee shall return promptly, all or any part of the Aircraft,
Airframe or Engines as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with
all the provisions of, Section 5 as if the Aircraft, Airframe or
Engines were being returned at the end of the Term; or Lessor, at its
option, may enter upon the premises where the Aircraft, Airframe or
any Engine, or part thereof is located and take immediate possession
of and remove the same by summary proceedings or otherwise, all
subject to receipt of notice delivered pursuant to Section 7.2.3 (if
applicable) and without liability accruing to Lessor for or by reason
of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise, and Lessee
expressly waives any right it may have under applicable law to a
hearing prior to repossession of the Aircraft, Airframe or any Engine
or part thereof; or
15.1.2 Sale; Use Etc. Lessor may sell all or any part of
the Aircraft, Airframe or any Engine, at public or private sale, at
such times and places, to such Persons (including Lessor, Indenture
Trustee, or any Participant) as Lessor may determine, or otherwise
dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, Airframe or any Engine or part thereof, as Lessor, in its
sole discretion, may determine, all free and clear of any rights of
Lessee except as hereinafter set forth in this Section 15 and without
any duty to account to Lessee with respect to such action or inaction
or for any proceeds with respect thereto; or
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15.1.3 Certain Liquidated Damages.
15.1.3.1 Liquidated Damages--Fair Market Rental
Value. Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under
Section 15.1.1 or 15.1.2 with respect to the Aircraft,
Airframe or any Engine or part thereof, Lessor, by written
notice to Lessee specifying a payment date (which shall be an
SLV Determination Date) not earlier than ten days from the
date of such notice, may cause Lessee to pay to Lessor, and
Lessee shall pay to Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Interim Rent, Basic Rent or
Renewal Rent, as the case may be, due after the date specified
for payment in such notice), any unpaid Interim Rent, Basic
Rent or Renewal Rent, as the case may be, due on or prior to
such SLV Determination Date (it being understood and agreed
that Lessee shall not be required to pay the portion, if any,
of such Interim Rent or Basic Rent designated in Exhibit C
hereto as payable in advance on such SLV Determination Date)
plus an amount equal to the excess, if any, of the Stipulated
Loss Value for the Aircraft, computed as of such SLV
Determination Date, over the fair market rental value
(determined as hereafter provided in this Section 15) of the
Aircraft for the remainder of the Term, after discounting such
fair market rental value semiannually (effective on each Rent
Payment Date) by a rate equal to the higher of the Certificate
Rate or the rate specified in clause (ii) of the definition of
Overdue Rate to present worth as of the date specified for
payment in such notice, together with interest, if any, on
such amount and unpaid Interim Rent, Basic Rent or Renewal
Rent, as the case may be, at the Overdue Rate from the date
specified for payment in such notice to the date of payment in
full; or
15.1.3.2 Liquidated Damages--Fair Market Sales
Value. If Lessor shall not have sold the Aircraft, Lessor, by
written notice to Lessee specifying a payment date (which
shall be an SLV Determination Date) not earlier than ten days
from the date of such notice, may cause Lessee to pay to
Lessor, and Lessee shall pay to Lessor, on the payment date
specified in such notice, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Interim Rent,
Basic Rent or Renewal Rent, as the case may be, due after the
date specified for payment in such notice), any unpaid Interim
Rent, Basic Rent or Renewal Rent, as the case may be, due on
or prior to such SLV Determination Date (it being understood
and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated
in Exhibit C hereto as payable in advance on such SLV
Determination Date) plus an amount equal to the excess, if
any, of the Stipulated Loss Value for the Aircraft, computed
as of such SLV Determination Date, over the fair market sales
value of the Aircraft (determined as hereafter provided in
this Section 15 as of the date specified for payment in such
notice), together with interest, if any, on such amount and
unpaid Interim Rent, Basic Rent or Renewal Rent, as the case
may be, at the Overdue Rate from the date specified for
payment in such notice to the date of payment in full; or
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15.1.4 Liquidated Damages upon Sale. If Lessor,
pursuant to Section 15.1.2 or applicable law, shall have sold
the Aircraft, Lessor, in lieu of exercising its rights under
Section 15.1.3 with respect to the Aircraft, may, if Lessor
shall so elect, upon giving written notice to Lessee, cause
Lessee to pay Lessor, and Lessee shall pay to Lessor, on the
date of such sale, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Interim Rent, Basic Rent
or Renewal Rent, as the case may be, due after the date of
such sale), any unpaid Interim Rent, Basic Rent or Renewal
Rent, as the case may be, due on or prior to the SLV
Determination Date (it being understood and agreed that Lessee
shall not be required to pay the portion, if any, of such
Interim Rent or Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date) on or
immediately preceding such date of sale plus the amount of any
deficiency between the net proceeds of such sale or (if such
sale is a private sale and is made to Lessor, Indenture
Trustee, a Participant or any Affiliate thereof) between the
fair market sales value of the Aircraft, determined as of the
date of such sale as hereinafter provided in this Section 15,
and the Stipulated Loss Value of the Aircraft, computed as of
the date of such sale, together with interest, if any, on such
amount and such unpaid Interim Rent, Basic Rent or Renewal
Rent at the Overdue Rate from the date of such sale, to the
date of payment in full; or
15.1.5 Rescission and Other Remedies. Lessor may
rescind and terminate this Lease, or may exercise any other
right or remedy which may be available to it under applicable
law or proceed by appropriate court action to enforce the
terms hereof or to recover damages for the breach hereof,
including without limitation Lessee's agreement to lease the
Aircraft for the Term and to pay Rent.
In addition to the foregoing remedies, Lessee shall be liable (except
as otherwise provided above and without duplication of amounts otherwise
payable hereunder) for any and all unpaid Rent due hereunder before, during or
after the exercise of any of the foregoing remedies and for all legal fees and
other costs and expenses (including the fees and expenses of all appraisers
required by this Section 15) of Lessor, Indenture Trustee, and Participants,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all insurance and
storage costs and all costs and expenses incurred in connection with the return
of the Aircraft, Airframe or any Engine or part thereof, in accordance with the
terms of Section 5 or in placing the Aircraft, Airframe or any Engine or part
thereof, in the condition and airworthiness required by Section 5.
Lessor agrees to give Lessee at least 15 days' prior written notice of
the date fixed for any public sale of the Aircraft, the Airframe or any Engine
or part thereof, and of the date on or after which will occur the execution of
any contract providing for any private sale.
15.2 Determination of Fair Market Rental Value and Fair Market
Sales Value. For the purpose of this Section 15, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
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arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession, as the case may
be, and in each case shall be determined on an "as is, where is" basis pursuant
to an appraisal by a recognized independent aircraft appraiser chosen by
Lessor.
15.3 No Waiver, Etc. No remedy referred to in this Section 15 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. No express or implied waiver by
Lessor of any Lease Event of Default shall in any way be, or be construed to
be, a waiver of any earlier or subsequent Lease Event of Default. To the
extent permitted by applicable law, Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use the Aircraft, Airframe or any Engine, or part thereof,
in mitigation of Lessor's damages as set forth in this Section 15 or which may
otherwise limit or modify any of Lessor's rights or remedies under this Section
15.
Section 16. Notices. All notices required under the terms and
provisions hereof shall be in writing and shall be given by certified mail,
telecopy or any other customary means of written communication, addressed:
If to Lessee, at 2702 Love Field Drive, P.O. Box 36611, Dallas, Texas
75235-1611 (telecopy no. 214/904-4022), Attention: Treasurer, or at such other
address as Lessee shall from time to time designate in writing;
If to Lessor, at 777 Main Street, Hartford, Connecticut 06115
(telecopy no. 203/240-7920), Attention: Corporate Trust Administration, or at
such other address as Lessor shall from time to time designate in writing;
If to any Participant or Indenture Trustee, at the applicable address
set forth in the signature pages of the Participation Agreement or Schedule I
thereto, or at such other address as any such Participant or Indenture Trustee,
as the case may be, shall from time to time designate in writing.
The effective date of any such notice shall be, if sent by mail, five
days (ten days, if international) after mailing or, if sent by telex or
telecopy, the date when such notice is sent or dispatched, and otherwise the
date on which it is received by the addressee. Lessee shall furnish to Lessor
for transmission to Indenture Trustee and Participants a sufficient number of
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished hereunder, except in any case where
Lessee shall have transmitted the same directly to any such person.
Section 17. Net Lease; Lessee's Obligations; No Setoff,
Counterclaim, Etc. This is a net lease and it is hereby recognized that Lessor
is the owner of the Aircraft (except that Owner Participant will be the owner
for income tax purposes) and Lessee is the lessee thereof. It is the
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intent of the parties hereto that this Lease be a "true lease". Lessee's
obligation to pay all Rent payable hereunder as and when due and to the Person
entitled thereto shall, subject to Section 3.8, be absolute and unconditional
and shall not be affected by any circumstance, including without limitation:
(a) any setoff, counterclaim, recoupment, defense or other right which Lessee
may have against Lessor (in its individual or trust capacity), Indenture
Trustee (in its individual or trust capacity), any Participant, Manufacturer,
any Indemnified Party or any other Person for any reason whatsoever; (b) any
defect in the title, airworthiness, condition, design, operation or fitness for
use of, or any damage to or loss, theft, taking, requisition, condemnation,
confiscation or destruction of, the Aircraft, Airframe or any Engine, or any
interruption or cessation in the use or possession thereof by Lessee, any
sublessee or any other Person for any reason whatsoever; (c) any insolvency,
bankruptcy, reorganization or similar proceedings by or against Lessee or any
other Person; (d) any restriction, prevention or curtailment of or interference
with any use of the Aircraft or part thereof; (e) any invalidity or
unenforceability or disaffirmance of this Lease or any provision hereof or any
of the other Operative Agreements or any provision thereof, in each case
whether against or by Lessee or otherwise; or (f) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing;
provided, that nothing in this sentence shall be construed to modify or limit
in any way Lessee's rights under Section 3.8.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees, subject to Section 3.8, to pay an amount
equal to each Interim Rent, Basic Rent, Renewal Rent and Supplemental Rent
payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part. All Rent payable by Lessee shall be paid without notice or demand
(except as otherwise expressly provided) and, subject to Section 3.8, without
abatement, suspension, deferment, deduction, diminution or proration by reason
of any circumstance or occurrence whatsoever. Lessee hereby waives, to the
extent permitted by applicable law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease or any part hereof, or to
any abatement, suppression, deferment, diminution, reduction or proration of
Rent except in accordance with the express terms hereof. Each payment of Rent
made by Lessee shall, subject to Section 3.8, be final as to Lessor and Lessee.
Lessee will not, subject to Section 3.8, seek to recover all or any part of any
such payment of Rent for any reason whatsoever. Lessee covenants that it will
remain obligated under this Lease in accordance with its terms and will take no
action to terminate, rescind or avoid this Lease solely as a result of the
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding-up or other similar proceeding affecting Lessor or Owner
Participant or any other action with respect to this Lease which may be taken
in any such proceeding by any trustee or receiver of Lessor or Owner
Participant or by any court (it being understood that nothing in this sentence
shall prevent Lessee from taking any action to which it would have been
entitled had such bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding- up or other similar proceeding
not occurred).
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Section 18. Renewal and Purchase Options.
18.1 Renewal Options. At the end of the Base Lease Term and any
Renewal Term (other than the fourth Floating Rate Renewal Term or any prior
Floating Rate Renewal Term ending four years after the end of the Base Lease
Term), so long as no Lease Event of Default or Lease Default (of the type
described in Section 14.1 or 14.5) has occurred and is continuing, Lessee shall
have the option to renew this Lease for a Renewal Term. In order to exercise
the option to renew, Lessee shall notify Lessor thereof in writing not more
than nine months nor less than six months prior to the commencement of the
applicable Renewal Term (which notice shall be irrevocable and shall specify
the length of such Renewal Term). Renewal Rent shall be payable in arrears for
each Lease Period occurring during any Renewal Term. The Renewal Rent payable
for any Floating Rate Renewal Term hereunder shall be the fair market rental
value of the Aircraft (as defined below) calculated as of the commencement of
such Renewal Term. Such fair market rental value shall be determined not later
than three months prior to the commencement of such Renewal Term by mutual
consent of Owner Participant and Lessee or, if they shall be unable so to
agree, by three recognized independent aircraft appraisers, one chosen and paid
for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market rental value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two appraisals, then the appraisal
of such appraiser shall be excluded, the remaining appraisals shall be averaged
and such average shall be deemed to be the fair market rental value of the
Aircraft for all purposes hereof. If either Owner Participant or Lessee shall
fail to appoint an appraiser by the date which is two months prior to the
commencement of such Renewal Term or if such two appraisers cannot agree on the
amount of such appraisal and fail to appoint a third appraiser by the date
which is one month before the commencement of such Renewal Term, then either
Owner Participant or Lessee may apply to any court having jurisdiction
(including, without limitation, the courts referred to in Section 13(b) of the
Participation Agreement) to make such appointment. For purposes of this
Section 18.1, fair market rental value shall be the cash rental obtainable in
an arm's-length lease between an informed and willing lessee (under no
compulsion to lease) and an informed and willing lessor (under no compulsion to
lease) and shall be determined on the assumptions that the Aircraft is in the
United States of America, available for use by Lessee, unencumbered by any
renewal or purchase option contained in this Lease, in the return condition
required by Section 5 of this Lease and otherwise in compliance with and
subject to the terms and requirements of this Lease. Stipulated Loss Value
amounts that are payable during any such Renewal Term shall be calculated as of
the date of commencement of such Renewal Term and shall be determined in the
same manner referred to above based on the fair market sales value of the
Aircraft on such date determined in accordance with Section 18.2(a).
SALE AND LEASE AGREEMENT [N604SW]
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18.2 Purchase Options. (a) Lessee shall have the option to
purchase the Aircraft at the end of the Base Lease Term and each Renewal Term,
so long as no Lease Default (of the type described in Section 14.1 or 14.5) or
Lease Event of Default shall have occurred and be continuing on the date of
notice of exercise of such option. In order to exercise such option, Lessee
shall notify Lessor thereof in writing not more than nine months nor less than
six months prior to the end of the Base Lease Term or such Renewal Term, as
applicable (which notice shall be irrevocable). In such case, Lessee shall
purchase the Aircraft on the last Business Day of the Base Lease Term or such
Renewal Term, as applicable, at a purchase price equal to the fair market sales
value thereof as of such last Business Day. Such fair market sales value shall
be determined not later than three months prior to such last Business Day by
mutual consent of Owner Participant and Lessee or, if they shall be unable so
to agree, by three recognized independent aircraft appraisers, one chosen and
paid for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market sales value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two appraisals, then the appraisal
of such appraiser shall be excluded, the remaining appraisals shall be averaged
and such average shall be deemed to be the fair market sales value of the
Aircraft for all purposes hereof. If either Owner Participant or Lessee shall
fail to appoint an appraiser by the date which is two months prior to such last
Business Day or if such two appraisers cannot agree on the amount of such
appraisal and fail to appoint a third appraiser by the date which is one month
before such last Business Day, then either Owner Participant or Lessee may
apply to any court having jurisdiction to make such appointment. For purposes
of this Section 18.2, fair market sales value shall be the cash price
obtainable in an arm's-length sale between an informed and willing buyer (under
no compulsion to buy) and an informed and willing seller (under no compulsion
to sell) and shall be determined on the assumptions that the Aircraft is in the
United States of America, available for use by the buyer, unencumbered by any
renewal or purchase option contained in this Lease, in the return condition
required by Section 5 of this Lease and otherwise in compliance with the
requirements of this Lease. At the time of payment to Lessor, in funds of the
type specified in Section 3.6, of the full amount of the purchase price
pursuant to this Section 18.2(a), Lessee shall also pay to Lessor all unpaid
Interim Rent and Basic Rent due on or prior to the last day of the Term and
(without duplication) any other Rent which is due and payable through and
including the date of payment.
(b) So long as no Lease Default (of the type described in Section
14.1 or 14.5) or Lease Event of Default shall have occurred and be continuing
on the date of notice of exercise of such option, Lessee shall have the option
to purchase the Aircraft on January 1, 2017 or, if such date is not a Business
Day, on the next succeeding Business Day (the "Special Purchase Option Date")
at a purchase price equal to the percentage of Lessor's Cost indicated in Part
III of Schedule C (the "Special Purchase Price"); provided, that if there has
been an adjustment prior to the Special Purchase Option Date pursuant to
Section 3.7, the Special Purchase Price (including any installments thereof)
shall be at all times calculated to preserve the Owner Participant's Special
Purchase Price After-Tax Yield, but in any event subject to Section 3.7.2.
Such option to purchase the Aircraft shall be exercised upon written notice
from Lessee to Lessor given not more than nine months nor
SALE AND LEASE AGREEMENT [N604SW]
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less than six months prior to the Special Purchase Option Date. Such notice
shall be irrevocable and shall contain the statement that this Lease will
terminate upon the consummation of such purchase. On the Special Purchase
Option Date, Lessee shall pay to Lessor, in funds of the type specified in
Section 3.6, the full amount of the Special Purchase Price pursuant to this
Section 18.2(b), together with all unpaid Interim Rent and Basic Rent due on or
prior to the Special Purchase Option Date (it being understood and agreed that
Lessee shall not be required to pay the portion, if any, of such Basic Rent
designated in Exhibit C hereto as payable in advance on such Special Purchase
Option Date) and (without duplication) any other Rent (including Supplemental
Rent in respect of Premium, if any, and Break Amount, if any, payable in
respect of the Certificates) which is due and payable through and including the
date of payment; provided, that Lessee may elect on ten days' prior notice to
Lessor to pay the Special Purchase Price in installments as Supplemental Rent,
secured as provided herein, in which case Lessee shall pay to Lessor, on each
EBO Installment Payment Date, the amount determined by multiplying Lessor's
Cost by the percentage set forth opposite such EBO Installment Payment Date in
Part II of Exhibit C.
(c) In connection with any purchase pursuant to Section 18.2(b),
Lessee may, at its option, as part or all, as the case may be, of the
applicable purchase price, assume all of the rights and obligations of Lessor
under the Trust Indenture in respect of the Certificates (including, without
limitation, any scheduled payment of principal of or accrued interest on the
Certificates due and payable on such date of purchase but only to the extent
that any Basic Rent installment payable by Lessee on any such date of purchase
does not cover such scheduled payment of principal or accrued interest on the
Certificates and excluding any obligations or liabilities of Lessor in its
individual capacity incurred on or prior to such date of purchase, which
obligations and liabilities shall remain the sole responsibility of Lessor in
its individual capacity) in accordance with Section 7.03 of the Trust Indenture
and simultaneously shall pay to Lessor, in funds of the type specified in
Section 3.6, an amount equal to (i) the excess, if any, of the applicable
purchase price over an amount equal to the sum of the principal of, and accrued
and unpaid interest on, the Outstanding Certificates on such date of purchase,
after taking into account any payments of principal and interest made in
respect of the Outstanding Certificates on or before such date of purchase,
plus (ii) all unpaid Interim Rent and Basic Rent due and owing by Lessee
hereunder on or prior to such date of purchase and (without duplication) any
other Rent which is due and payable through and including the date of payment
(it being understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Basic Rent designated in Exhibit C hereto as payable
in advance on such date of purchase); provided, that Lessee may elect, by
notice to Lessor concurrently with notice of its election to assume such
obligations of Lessor, to pay the amount of the excess calculated pursuant to
clause (i) above in installments as Supplemental Rent, in which case (I) Lessee
shall pay to Lessor on the first EBO Installment Payment Date, the excess, if
any, of (x) the amount determined by multiplying Lessor's Cost by the
percentage set forth opposite such EBO Installment Payment Date in Part II of
Exhibit C hereto, over (y) the principal amount of the Certificates outstanding
on such date, and shall pay to Lessor on each subsequent EBO Installment
Payment Date the amount determined by multiplying Lessor's Cost by the
percentage set forth opposite such EBO Installment Payment Date in Part II of
Exhibit C hereto and (II) Section 8(aa) of the Participation Agreement shall
apply.
SALE AND LEASE AGREEMENT [N604SW]
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(d) Upon payment of the applicable purchase price for the Aircraft
as set forth in this Section 18.2, together with the other amounts specified
above to be paid by Lessee concurrently with such purchase, Lessor will
Transfer to Lessee all of the Lessor's right, title and interest in and to the
Aircraft, this Lease will terminate and, if Lessee shall not have assumed the
rights and obligations of the Owner Trustee under the Trust Indenture in
respect of the Certificates as provided for above, Lessor will request the
Indenture Trustee to execute and deliver to Lessee an appropriate instrument
releasing the Airframe and Engines with respect to which title is transferred
from the lien of the Trust Indenture and releasing the Purchase Agreement, the
Purchase Agreement Assignment, the Engine Purchase Agreement and the Engine
Purchase Agreement Assignment from the assignment and pledge, if any,
thereunder; provided, that if Lessee elects to pay the Special Purchase Price
in installments as provided for above (and shall have paid in full the
installment thereof due on the Special Purchase Option Date), the following
provisions shall also be applicable: (a) this Lease shall continue in full
force and effect (except as hereinafter provided) but shall constitute then and
thereafter a lease intended for security securing the payment of such
installments (and any appropriate UCC financing statements or amendments to UCC
financing statements shall be filed in order to indicate that this Lease is
intended for security purposes), (b) Lessor shall permit re-registration of the
Aircraft in the name of Lessee or a Sublessee on the Special Purchase Option
Date (it being understood that in all other respects the registration
provisions of the Operative Agreements shall remain fully applicable), (c) no
Basic Rent shall be payable after the Special Purchase Option Date, (d) the
Stipulated Loss Value of the Aircraft determined at any time after the Special
Purchase Option Date shall be equal to the aggregate amount of the installments
of the Special Purchase Price which have not been paid at the time of such
determination, (e) the reference to Basic Rent in Section 14.1 shall be deemed
to refer to installments of the Special Purchase Price and (f) in the event of
the occurrence and continuance of a Lease Event of Default after the Special
Purchase Option Date, Lessor shall be entitled to accelerate the unpaid
installments and exercise all the remedies available under applicable law to a
secured creditor with respect thereto.
(e) If Lessee shall have elected both (i) to assume all of the
rights and obligations of Lessor under the Trust Indenture in accordance with
Section 7.03 of the Trust Indenture and (ii) to pay to Lessor the installments
specified in the proviso to Section 18.2(c) of this Lease, then, as further
conditions precedent to those specified in paragraphs (c) and (d) of this
Section 18.2 to such assumption:
(1) the Indenture Trustee shall have received evidence reasonably
satisfactory to it that the Trust Indenture, after giving effect to the
transactions contemplated by Section 18.2(d) of this Lease, constitutes a first
priority and perfected security interest in the Aircraft, which evidence shall
include an opinion of the tenor contemplated by Section 7.03(h) of the Trust
Indenture and the Owner Trustee shall have received evidence reasonably
satisfactory to it that it has a second priority and perfected security
interest in the Aircraft; and (2) the Indenture Trustee and the Owner Trustee
shall execute and deliver an intercreditor agreement that covers the following
matters:
(a) the Owner Trustee shall not, notwithstanding any
Lease Event of Default, exercise any remedy accorded to it pursuant to
Section 15 of this Lease until the Trust Indenture shall have been
discharged pursuant to Section 10.01 of the Trust Indenture;
SALE AND LEASE AGREEMENT [N604SW]
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<PAGE> 65
(b) payment of the Supplemental Rent in respect of the
installments specified in Section 18.2(c), and all other amounts owing
to the Owner Trustee (other than Excluded Payments) (collectively,
"Equity Payments"), shall be fully and unconditionally subordinated to
the payment in full in cash of principal, interest, Break Amount or
Premium, if any, and all other amounts owing to the Holders or the
Indenture Trustee under or in respect of the Certificates or the Trust
Indenture (collectively, "Debt Payments"), all pursuant to such terms
of subordination as shall be effectively and substantively equivalent
to the manner in which Debt Payments are paid or payable in priority
to the Equity Payments, and such other customary terms of
subordination as shall be reasonably required by the Indenture
Trustee; and
(c) the Owner Trustee shall have the substantive
equivalent of the cure and buy-out rights specified in clauses (e)(i)
and (e)(ii) of Section 8.03 of the Trust Indenture.
Section 19. Successor Owner Trustee. Lessee agrees that in the
case of the appointment of any successor Owner Trustee pursuant to the terms of
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft for all purposes hereof without the necessity of any consent or
approval by Lessee (but such successor Owner Trustee shall qualify under the
terms of Section 8(b) of the Participation Agreement) and without in any way
altering the terms of this Lease or Lessee's obligations hereunder. One such
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Trust Agreement, and such right may be exercised repeatedly as
long as this Lease shall be in effect.
Section 20. Right to Perform for Lessee. If Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor (subject
to the terms of the Trust Indenture) or Indenture Trustee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or
Indenture Trustee incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
Section 21. Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred, and be continuing, during the Term, Lessor will
not, through its own actions or inactions, interfere in the quiet enjoyment of
the Aircraft by Lessee or any Permitted Sublessee.
Section 22. Investment of Security Funds; Miscellaneous;
Amendment.
22.1 Investment of Security Funds. Subject always to the terms of
the Trust Indenture for so long as the Trust Indenture shall remain in effect,
any moneys required to be paid to or retained by Lessor which are not required
to be paid to Lessee pursuant to Section 10.6 or 11.4 solely because a Lease
Event of Default or Lease Default shall have occurred and be continuing, or
which
SALE AND LEASE AGREEMENT [N604SW]
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<PAGE> 66
are held by Lessor pending payment to Lessee pursuant to Section 11.4 or which
are required to be paid to Lessee pursuant to Section 10.3 or 11.4 after
completion of a replacement to be made pursuant to Section 10.1 or 10.2, shall,
until paid to Lessee as provided in Section 10 or 11 or applied as provided
herein or in the Trust Indenture or Trust Agreement, be invested by Lessor from
time to time as directed in writing by Lessee and at the expense and risk of
Lessee in the following securities (which shall mature within 91 days of the
date of purchase thereof): (a) direct obligations of the Government; (b)
obligations fully guaranteed by the Government; (c) open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any State thereof rated P-1 or its equivalent by Moody's Investors
Service and A-l or its equivalent by Standard & Poor's Rating Group, a division
of McGraw-Hill, Inc.; or (d) certificates of deposit issued by, or bankers'
acceptances of, or time deposits or a deposit account with (i) the Owner
Trustee or Indenture Trustee (in their individual capacities) or (ii) any bank,
trust company or national banking association incorporated or doing business
under the laws of the United States of America or any state thereof having a
combined capital and surplus of at least $100,000,000. There shall be promptly
remitted to Lessee or its order any gain (including interest received) realized
as the result of any such investment (net of any fees, commissions and other
expenses, if any, incurred in connection with such investment) unless a Lease
Event of Default or a Lease Default (of the type described in Section 14.1 or
14.5) shall have occurred and be continuing. Lessee will promptly pay to
Lessor, on demand, the amount of any loss realized as the result of any such
investment (together with any fees, commissions and other expenses, including
Taxes, if any, incurred in connection with such investment), such amount to be
disposed of in accordance with the terms of the Trust Indenture or the Trust
Agreement.
22.2 Miscellaneous; Amendment. Lessee shall do, execute,
acknowledge and deliver, or shall cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances and assurances as Owner Trustee,
Indenture Trustee or any Participant shall reasonably require for accomplishing
the purposes of this Agreement and the other Operative Agreements. Any
provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. This Lease shall constitute an
agreement of lease, and nothing herein shall be construed as conveying to
Lessee any right, title or interest in or to the Aircraft, Airframe or Engines
except as a lessee only. The section and paragraph headings in this Lease and
the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN, AND EACH LEASE SUPPLEMENT AND
AMENDMENT HERETO IS INTENDED TO BE, DELIVERED IN THE STATE OF NEW YORK AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
SALE AND LEASE AGREEMENT [N604SW]
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<PAGE> 67
MADE IN SUCH STATE BY RESIDENTS THEREOF AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
This Lease and each Lease Supplement and amendment hereto may be executed in
several counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute one and the same instrument; provided, that no
security interest in Lessor's right, title and interest in and to this
Agreement may be created through the transfer or possession of any counterpart
other than the counterpart identified, for purposes of perfection of a security
interest in chattel paper (as such term is defined in the UCC), as the original
counterpart on the cover hereof.
Section 23. Permitted Foreign Air Carriers. Lessor may, in the
exercise of its reasonable business judgment, by written notice to Lessee,
remove any foreign air carrier from Exhibit D and Lessee may, by written notice
to Lessor, request that any foreign air carrier be added to Exhibit D, subject
to Lessor's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no deletion of an airline from the
list of Permitted Foreign Air Carriers pursuant hereto shall (i) affect any
existing sublease or other agreement providing for transfer of possession of
the Aircraft, Airframe, any Engine or Part which was permitted hereunder at the
time entered into, or (ii) preclude any subsequent renewal or extension of such
sublease or other agreement to which the Permitted Foreign Air Carrier under a
sublease is entitled by the terms thereof as originally in effect.
SALE AND LEASE AGREEMENT [N604SW]
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<PAGE> 68
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed and delivered as of the day and year first above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity except as expressly
stated herein, and otherwise solely as
Owner Trustee under the Trust Agreement
By: /s/ Michelle K. Blezard
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By: /s/ John D. Owen
Treasurer
SALE AND LEASE AGREEMENT [N604SW]
<PAGE> 69
EXHIBIT A TO
LEASE AGREEMENT
SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____
THIS SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____, dated
______________, _____ between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner Trustee under that certain
Trust Agreement, dated as of August 1, 1995 (the "Trust Agreement"), between
the Owner Participant named therein and such Bank ("Lessor"), and SOUTHWEST
AIRLINES CO., a Texas corporation ("Lessee"),
RECITALS.
A. On ________________ an AC Form 8050-2 Bill of Sale from
Manufacturer (as defined in the Sale and Lease Agreement hereinbelow referred
to) in favor of Lessee covering the Aircraft hereinbelow described was recorded
by the Federal Aviation Administration as Conveyance Number ________;
B. Lessor and Lessee have heretofore entered into that certain
Sale and Lease Agreement dated as of August 1, 1995, as supplemented and
amended from time to time (herein called the "Lease Agreement" and the defined
terms therein being herein used with the same meaning), which Lease Agreement
provides in Section 2 for the execution of a Lease Supplement substantially in
the form hereof for the purpose of Lessee's selling to Lessor, and Lessor's
leasing back to Lessee, the Aircraft under the Lease Agreement as and when
delivered by Lessor to Lessee in accordance with the terms thereof; and
C. The Lease Agreement relates to the airframe and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation with the FAA on the date hereof as
one document.
______________________
All of the right, title and interest of Lessor in and to this Sale and
Lease Agreement Supplement has been assigned to and is subject to a security
interest in favor of Wilmington Trust Company, as Indenture Trustee. This Sale
and Lease Agreement Supplement has been executed in several counterparts. No
security interest in Lessor's right, title and interest in and to this Sale and
Lease Agreement Supplement may be created through the transfer or possession of
any counterpart other than the counterpart identified, for purposes of
perfection of a security interest in chattel paper (as such term is defined in
the UCC), as the original counterpart. [This is not the original counterpart.]
A-1
<PAGE> 70
In consideration of the premises and other good and sufficient
consideration, and pursuant to Section 2 of the Lease Agreement, Lessor and
Lessee hereby agree as follows:
1. Lessee hereby delivers and sells to Lessor and Lessor hereby
accepts and purchases from Lessee and in turn delivers and leases back to
Lessee, and Lessee hereby accepts and leases back from Lessor, under the Lease
Agreement, as herein supplemented, the following-described Boeing Model 737-3H4
Series Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the
date hereof consists of the following:
Airframe: U.S Registration Number N604SW and Manufacturer's Serial No.
27955; and
Engines: Two CFM International Model CFM56-3-B1 Engines installed
thereon bearing Engine Manufacturer's Serial Numbers as follows: 859176 and
858187.
Each of the Engines described above has 750 or more rated takeoff
horsepower or the equivalent of such horsepower.
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms to Lessor that the Delivered Aircraft
has been or will be duly marked in accordance with the terms of Section 7.l.2
of the Lease and that Lessee has accepted the Delivered Aircraft for all
purposes hereof and of the Lease Agreement, including its being airworthy, in
accordance with specifications, in good working order and repair and without
defect or inherent vice in title, condition, design, operation or fitness for
use, whether or not discoverable by Lessee as of the date hereof, and free and
clear of all Liens except Permitted Liens; provided, however, that this Section
3 is without prejudice to the rights of Lessee or Lessor against Manufacturer
or any supplier of the Aircraft, Engines or any Part.
4. Lessor's Cost for the Delivered Aircraft is $33,000,000.
5. All the provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement, on and as of the date of
this Lease Supplement, to the same extent as if fully set forth herein.
6. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW
YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
A-2
<PAGE> 71
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered as of the date and year first
above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By ___________________________________
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By ____________________________________
Treasurer
SALE AND LEASE AGREEMENT SUPPLEMENT [N604SW]
<PAGE> 72
EXHIBIT B-1 TO
LEASE AGREEMENT
STIPULATED LOSS VALUE SCHEDULE
<TABLE>
<CAPTION>
SLV
Determination Stipulated Loss Value
Date (% of Lessor's Cost)
------------------ ---------------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
_________________________
* NOTE: If the event giving rise to an obligation to pay any Stipulated
Loss Value occurs and the actual date of the loss of tax benefits
resulting from such event shall be earlier or later than the date
assumed in calculating the Federal income tax consequences reflected
in the applicable Stipulated Loss Value, such Stipulated Loss Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-1-1
<PAGE> 73
EXHIBIT B-2 TO
LEASE AGREEMENT
TERMINATION VALUE SCHEDULE
<TABLE>
<CAPTION>
TV
Determination Termination Value
Date (% of Lessor's Cost)
-------------- --------------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
_________________________
* NOTE: If the event giving rise to an obligation to pay any
Termination Value occurs and the actual date of the loss of tax
benefits resulting from such event shall be earlier or later than the
date assumed in calculating the Federal income tax consequences
reflected in the applicable Termination Value, such Termination Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-2-1
<PAGE> 74
EXHIBIT C TO
LEASE AGREEMENT
PART I
RENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Percentage of
Lessor's Cost
--------------------------------------
Rent Payment
Date Total Advance Arrears
-------------- ----- ------- -------
<S> <C> <C> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
C-1
<PAGE> 75
EXHIBIT C TO
LEASE AGREEMENT
PART II
EBO INSTALLMENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
EBO Installment Percentage of
Payment Date Lessor's Cost
- ----------------- -------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
C-2
<PAGE> 76
EXHIBIT C TO
LEASE AGREEMENT
PART III
SPECIAL PURCHASE PRICE
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
________________________%
C-3
<PAGE> 77
EXHIBIT D TO
LEASE AGREEMENT
PERMITTED FOREIGN AIR CARRIERS
<TABLE>
<S> <C>
Aer Lingus Icelandair
Aeromexico Interflug
Air Canada Japan Air Lines
Air Europa Japan Air Lines System
Air France Japan TransOcean Air
Air Inter KLM
Air New Zealand Korean Air
Air UK LAN Chile
Alitalia Lauda Air
All Nippon Airways Lufthansa
ALM Luxair
Ansett Airlines of Australia Maersk
Australian Airlines Malaysian Airline System
Austrian Airlines Martinair
Bahamasair Mexicana
Braathens S.A.F.E. Monarch Airlines
Britannia Nordair
British Airways QANTAS Airways
British Midland Quebecair
BWIA Ryanair
Canadian Airlines International Sabena
Cathay Pacific Airways SAS
Cayman Airways Singapore Airlines
Condor Flugdienst Swissair
DanAir TAP
Finnair Thai Airways
Garuda Trans Australia Airlines
Hopag Lloyd Transavia Holland
Transbrasil
VARIG
</TABLE>
D-1
<PAGE> 78
EXHIBIT E TO
LEASE AGREEMENT
ASSUMED INTEREST AMOUNTS
<TABLE>
<CAPTION>
Rent Payment Assumed Interest
Date Amount
-------------- ----------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
E-1
<PAGE> 79
APPENDIX A TO
LEASE AGREEMENT
CERTAIN RETURN CONDITIONS
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of its return of the Aircraft pursuant to Section 5.3, the
Airframe shall have at least one year remaining until the next scheduled "D"
check (which term, as used in this paragraph, shall refer to a "full D" check
accomplished at ten year intervals, rather than to any "quarter D" or "half D"
check which may be scheduled under the Maintenance Program then used by Lessee
or any Permitted Sublessee, as the case may be).
* * *
APP-1
<PAGE> 1
EXHIBIT 4.40
FIRST AMENDMENT TO
SALE AND LEASE AGREEMENT
dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
_______________________
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N604SW)
All right, title and interest of Lessor in and to the Sale and Lease
Agreement, as amended, and the Aircraft (including the Engines), has been
assigned to and is subject to a security interest in favor of WILMINGTON TRUST
COMPANY, as Indenture Trustee. This First Amendment to Sale and Lease
Agreement has been executed in several counterparts. No security interest in
Lessor's right, title and interest in and to this First Amendment to Sale and
Lease Agreement may be created through the transfer or possession of any
counterpart other than the counterpart identified, for purposes of perfection
of a security interest in chattel paper (as such term is defined in the UCC),
as the original counterpart. This is not the original counterpart.
<PAGE> 2
THIS FIRST AMENDMENT TO SALE AND LEASE AGREEMENT, dated as of October
1, 1995 (the "Amendment"), between SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee under that certain Trust Agreement establishing
Southwest Airlines 1995 Trust N604SW and dated as of August 1, 1995 ("Lessor"),
and SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), amends that certain
related Sale and Lease Agreement dated as of August 1, 1995 (the "Original
Lease") between Lessee and Lessor (the Original Lease, as supplemented by Sale
and Lease Agreement Supplement No. One thereto relating to the Aircraft
referred to below dated August 25, 1995 ("Lease Supplement No. 1") between
Lessor and Lessee, being referred to herein as the "Lease"),
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor, the
Aircraft, which consists of the following components: (i) Airframe: One (1)
Boeing 737-3H4, FAA Registration No. N604SW, Manufacturer's serial no. 27955;
and (ii) Engines: Two (2) CFM International Model CFM56-3-B1 Engines bearing,
respectively, Manufacturer's serial numbers 859176 and 858187; and
WHEREAS, a counterpart of the Original Lease, to which was attached
and made a part thereof a counterpart of Lease Supplement No. 1, was recorded
by the Federal Aviation Administration on September 15, 1995 and assigned
Conveyance No. Z96924; and
WHEREAS, in connection with the refinancing of the Certificates
pursuant to Section 18 of the Participation Agreement, the parties wish to
recalculate Interim Rent, Basic Rent, Stipulated Loss Value percentages and
Termination Value percentages and Special Purchase Price; and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to Exhibits B-1, B-2, C and E. Exhibits
B-1, B-2 and C to the Lease are hereby deleted in their entirety and replaced
with Exhibits B-1, B-2 and C, respectively, to this Amendment. Exhibit E to
the Lease is hereby deleted in its entirety.
Section 2. Amendments to Section 1. Section 1 of the Lease is
hereby amended in the following manner:
(a) The following defined terms are hereby added to
Section 1 in alphabetical order:
SALE AND LEASE AMENDMENT [N604SW]
-1-
<PAGE> 3
"`First Amendment to Sale and Lease Agreement' means that certain
First Amendment to Sale and Lease Agreement dated as of October 1, 1995 by and
between Lessee and Lessor relating to the Aircraft."
"`First Amendment to Participation Agreement' means that certain First
Amendment to Participation Agreement dated as of October 1, 1995 by and among
Lessee, Owner Participant, Owner Trustee, Indenture Trustee and Pass Through
Trustee relating to the Aircraft."
"`First Amendment to Trust Indenture' means that certain First
Amendment to Trust Indenture and Security Agreement, dated as of October 1,
1995 between Owner Trustee and Indenture Trustee relating to the Aircraft."
"`Pass Through Certificates' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trust Agreements' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trustee' is defined in Section 1.01(b) of the Trust
Indenture."
"`Pass Through Trust Supplement' means each of the two separate Trust
Supplements Nos. 1995-A3 and 1995-A4 dated as of October 1, 1995 between Lessee
and Pass Through Trustee."
"`Refinancing Agreement' means that certain Refinancing Agreement
relating to the Aircraft dated as of October 1, 1995 by and among Lessee, Owner
Participant, Original Loan Participant, Owner Trustee, Indenture Trustee and
Pass Through Trustee."
(b) The definition of "Indemnified Parties" is hereby
amended to be and read in its entirety as follows:
"`Indemnified Parties' means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N604SW
Certificate (including without limitation the Pass Through Trustee), (v) the
Estate and the Trust Indenture Estate, (vi) the Original Loan Participant,
(vii) the Guarantor, (viii) the respective Affiliates, successors and assigns
of the foregoing and (ix) the respective directors, officers, employees,
agents, partners and servants of the foregoing."
(c) The definition of "Lease", "this Lease", "this
Agreement", "hereby", "herein", "hereof", and "hereunder" is hereby amended to
be and read in its entirety as follows:
"`Lease', `this Lease', `this Agreement', `hereby', `herein',
`hereof', `hereunder' or other words mean this Sale and Lease Agreement as
amended by the First Amendment to Sale and Lease Agreement, and as supplemented
by one or more Lease Supplements and as may be further amended from time to
time."
SALE AND LEASE AMENDMENT [N604SW]
-2-
<PAGE> 4
(d) The definition of "Operative Agreements" is hereby
amended to be and read in its entirety as follows:
"`Operative Agreements' means this Lease, each Lease Supplement, the
Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement,
the Manufacturer's Consent and the Refinancing Agreement, including any
consents included in or attached to any thereof, and the letter agreement dated
August 25, 1995 among Lessee, the Owner Participant and the Owner Trustee."
(e) The definition of "Participant" is hereby amended to
be and read in its entirety as follows:
"`Participant' means Owner Participant and its successors and
permitted assigns."
(f) The definition of "Participation Agreement" is hereby
amended to be and read in its entirety as follows:
"`Participation Agreement' means the Participation Agreement relating
to the Aircraft, dated as of August 1, 1995, among Lessee, Owner Participant,
Original Loan Participant, Lessor and Indenture Trustee as amended by the First
Amendment to Participation Agreement and as may be further amended from time to
time."
(g) The definition of "Special Purchase Price After-Tax
Yield" means the after-tax economic yield, total aggregate after-tax cash flow
and general pattern of book earnings expected by the Owner Participant with
respect to the Aircraft through the Special Purchase Option Date if the Special
Purchase Option were exercised and the Special Purchase Option Price paid in
installments, utilizing the multiple investment sinking fund method of analysis
and the same assumptions as used by Owner Participant (including the Tax
Assumptions set forth in Section 2 of the Tax Indemnity Agreement) in its
economic analysis of the transaction as of the Delivery Date.
(h) The definition of "Stipulated Loss Value" is hereby
amended to be and read in its entirety as follows:
"`Stipulated Loss Value' means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment. Stipulated Loss
Value may be subject to adjustment in accordance with Section 3.7 and Section
18.2(d) of this Agreement."
(i) The definition of "Termination Value" is hereby
amended to be and read in its entirety as follows:
SALE AND LEASE AMENDMENT [N604SW]
-3-
<PAGE> 5
"`Termination Value' means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined. Termination Value may be subject to adjustment in accordance with
Section 3.7 of this Agreement."
(j) The definition of "Trust Indenture" is hereby amended
to be and read in its entirety as follows:
"`Trust Indenture' means the Trust Indenture and Security Agreement,
dated as of August 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft, as supplemented by the Trust Agreement and Trust
Indenture and Security Agreement Supplement, dated August 25, 1995, and as
amended by the First Amendment to Trust Indenture and as may be further amended
or supplemented from time to time."
(k) The definitions of "Assumed Interest Rate," "Assumed
Interest Amount," "Break Amount" and "Rent Differential Amount" are hereby
deleted in their entirety.
Section 3. Amendments to Section 3. Section 3 of the Lease is
hereby amended in the following manner:
(a) Section 3.3 is hereby amended to be and read in its
entirety as follows:
"3.3 Interim and Basic Rent. No Interim Rent or Basic
Rent shall be paid during the Preliminary Lease Term. Lessee hereby agrees to
pay to Lessor (i) Interim Rent for the Interim Lease Term with respect to the
Aircraft on the first Rent Payment Date set forth in Part I of Exhibit C, and
(ii) Basic Rent for the Base Lease Term with respect to the Aircraft on each
subsequent Rent Payment Date set forth in Part I of Exhibit C, in each case in
an amount equal to the percentage of Lessor's Cost of the Aircraft set forth in
Part I of Exhibit C opposite such Rent Payment Date, subject to the terms of
the next succeeding paragraph of this Section 3.3 and Section 3.7. Each
installment (or portion of an installment) of Interim Rent or Basic Rent under
the heading `Advance' in Part I of Exhibit C payable on a Rent Payment Date
shall relate to the respective Lease Period immediately following such Rent
Payment Date, and each installment (or portion of an installment) of Interim
Rent or Basic Rent under the heading `Arrears' in Part I of Exhibit C payable
on a Rent Payment Date shall relate to the respective Lease Period immediately
preceding such Rent Payment Date.
"Anything contained in the Participation Agreement or this
Lease or any other Operative Agreement to the contrary notwithstanding, (a)
each installment of Basic Rent payable under this Lease, whether or not
adjusted in accordance with the provisions of Section 3.7 hereof, shall be,
under any circumstances and in any event, in an amount at least sufficient to
pay in full, on such Rent Payment Date, any scheduled payments then required to
be made on account of the principal of and interest on the Certificates, and
(b) Stipulated Loss Value, Termination Value and, unless Lessee shall have
assumed the Certificates pursuant to Section 18.2(c) hereof, the Special
Purchase Price and the initial installment of the Special Purchase Price if
paid in installments, in each case whether or not adjusted in accordance with
the provisions of Section 3.7, as of the date of determination thereof,
together with any amount of
SALE AND LEASE AMENDMENT [N604SW]
-4-
<PAGE> 6
Basic Rent required to be paid on such date and all other amounts payable on
such date, shall equal under any circumstances and in any event, an amount at
least sufficient to pay in full any scheduled payments then required to be made
on account of the principal of and interest (including, without limitation any
interest on overdue principal and, to the extent permitted by applicable law,
interest), and Premium, if any, on the Certificates and all amounts which would
be payable prior thereto or on a parity therewith if Section 3.03 of the Trust
Indenture were applicable at the time of such payment."
(b) Section 3.4 of the Lease is hereby amended to be and
read in its entirety as follows:
"3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Premium (if any) payable on the Certificates, amounts due pursuant to
Section 15.05 of the Trust Indenture and each other amount required to be paid
(other than principal and interest on the Certificates) by Lessor as Owner
Trustee under the Trust Indenture, on the same date that such amounts are due
under the Trust Indenture and as provided in Section 3.6."
(c) Section 3.7.1 of the Lease is hereby amended to be
and read in its entirety as follows:
"3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a) of the
Participation Agreement paid by Owner Participant in connection with the
closing of this transaction on the Delivery Date are equal to an amount which
is other than 0.386568% of Lessor's Cost, (b) the Transaction Costs referred to
in Section 16(a) of the Participation Agreement paid by Owner Participant in
connection with the initial refinancing or refunding of the Certificates
pursuant to Section 18 of the Participation Agreement are equal to an amount
which is other than 0.623122% of Lessor's Cost, (c) a refinancing or refunding
of the Certificates pursuant to Section 17 of the Participation Agreement
occurs, or (d) any recalculation of Interim Rent, Basic Rent, Stipulated Loss
Value, Termination Value and the Special Purchase Price is required by the
terms of the Tax Indemnity Agreement, then in each case, the Interim Rent and
Basic Rent percentages set forth in Exhibit C, the Stipulated Loss Value
percentages set forth in Exhibit B-1 and the Termination Value percentages set
forth in Exhibit B-2 shall be recalculated by Owner Participant (i) in the case
of a recalculation pursuant to clause (a), on or prior to August 23, 1996, (ii)
in the case of a recalculation pursuant to clause (b), on or prior to the
second Rent Payment Date following the relevant Section 18 Refinancing Date,
(iii) in the case of a recalculation pursuant to clause (c), prior to the
relevant Refinancing Date or (iv) in the case of a recalculation pursuant to
clause (d), prior to the Rent Payment Date next following the event described
in clause (d), in each case in order to: (A) maintain Net Economic Return and
(B) minimize the Net Present Value of Rents to the extent possible consistent
with clause (A). In addition, in the event of an adjustment pursuant to this
Section 3.7, the Special Purchase Price (including any installments thereof)
shall be recalculated in accordance with the terms of Section 18.2(b)."
(d) The first sentence of Section 3.8 is hereby amended to be
and read in its entirety as follows:
SALE AND LEASE AMENDMENT [N604SW]
-5-
<PAGE> 7
"3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received the
Deferred Equity Amount on the Deferred Equity Date, then Lessee shall
pay to the Indenture Trustee on behalf of the Owner Participant on the
Deferred Equity Date an amount equal to the amount not so paid by the
Owner Participant (such amount herein referred to as an "Advance")."
Section 4. Amendment to Section 7. Section 7.3.3 of the Lease
is hereby amended to delete all references therein to the Original Loan
Participant.
Section 5. Amendment to Section 10. Section 10.1.3 of the Lease
is hereby amended to be and read in its entirety as follows:
"10.1.3 Payment of Stipulated Loss Value and Rent. On any Business
Day designated by Lessee upon 30 days' irrevocable notice to Lessor and the
Indenture Trustee, but in no event later than the earlier of (i) the 180th day
following the date of the occurrence of such Event of Loss or (ii) the later of
15 days following receipt of insurance proceeds with respect to such occurrence
or the date Lessee shall have made or shall have deemed to have made its
election under Section 10.1.1 to comply with Section 10.1.3, Lessee shall pay
to Lessor in the manner and in funds of the type specified in Section 3.6, (A)
the Stipulated Loss Value for the Aircraft, determined as of the date of
payment (as described in the definition of Stipulated Loss Value), (B) all
unpaid Interim Rent and Basic Rent due on or prior to the SLV Determination
Date with reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the portion, if
any, of such Interim Rent or Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date), and (C) (without
duplication) any other Rent which is due and payable through and including the
date of payment."
Section 6. Amendments to Section 11.
(a) Section 11.5 of the Lease is hereby amended to delete
all references therein to the Original Loan Participant.
(b) Section 11.6 of the Lease is hereby amended to be and
read in its entirety as follows:
"11.6 Lessor's Right to Maintain Insurance. In the event that Lessee
shall fail to maintain or cause to be maintained insurance as herein provided,
Lessor, Indenture Trustee, Owner Participant or, so long as Pass Through
Trustee is a Holder, Pass Through Trustee, may at its option (but shall not be
obligated to) provide such insurance and in such event, Lessee shall, upon
demand, reimburse such Person, as Supplemental Rent, for the cost thereof. No
such payment, performance or compliance shall be deemed to cure any Lease
Default hereunder or otherwise relieve Lessee of its obligations with respect
thereto."
Section 7. Ratification. Except as amended hereby, the Lease
continues and shall remain in full force and effect in all respects.
SALE AND LEASE AMENDMENT [N604SW]
-6-
<PAGE> 8
Section 8. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same instrument.
SALE AND LEASE AMENDMENT [N604SW]
-7-
<PAGE> 9
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Sale and Lease Agreement to be duly delivered in the State of New
York and executed as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By: /s/ PHILIP G. KANE, JR.
Corporate Trust Officer
SOUTHWEST AIRLINES CO., Lessee
By: /s/ JOHN D. OWEN
Treasurer
Approved and Consented to:
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
SALE AND LEASE AMENDMENT [N604SW]
-8-
<PAGE> 10
EXHIBIT B-1 TO
SALE AND LEASE AGREEMENT
Stipulated Loss Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N604SW]
B-1
<PAGE> 11
EXHIBIT B-2 TO
SALE AND LEASE AGREEMENT
Termination Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N604SW]
B-2
<PAGE> 12
EXHIBIT C TO
SALE AND LEASE AGREEMENT
Part I
Rent Payment Schedule
Part II
EBO Installment Payment Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
Part III
Special Purchase Price
45.79938905% of Lessor's Cost
SALE AND LEASE AMENDMENT [N604SW]
C-1
<PAGE> 1
EXHIBIT 4.41
________________________________________________________________________________
TRUST AGREEMENT
dated as of August 1, 1995
between
AMSOUTH LEASING CORPORATION,
Owner Participant
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N604SW
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01 Authority to Execute Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.01 Purchase of Certain Rights in the Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.02 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.01 Distribution of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.02 Method of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V
DUTIES OF THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.01 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.02 Action Upon Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.03 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.04 No Duties Except as Specified in Trust Agreement or Instructions . . . . . . . . . . . . . . . 7
SECTION 5.05 No Action Except Under Specified Documents or Instructions . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.06 No Power to Reinvest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI
THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6.01 Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6.02 Absence of Certain Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.03 No Representations or Warranties as to Certain Matters . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.04 No Segregation of Monies; Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.05 Reliance Upon Certificates, Counsel and Agents . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.06 Not Acting in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.07 Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.08 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VII
INDEMNIFICATION OF SBC
BY OWNER PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7.01 Owner Participant to Indemnify SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST . . . . . . . . . . . . . . . . . 12
SECTION 8.01 Transfer of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
TRUST AGREEMENT [N604SW]
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES . . . . . . . . . . . . . . . . . . 12
SECTION 9.01 Resignation of Owner Trustee: Appointment of Successor . . . . . . . . . . . . . . . . . . . . 12
SECTION 9.02 Co-Trustees and Separate Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . 14
SECTION 10.01 Supplements and Amendments and Delivery Thereof . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 10.02 Discretion as to Execution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.03 Distribution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.04 Absence of Requirement as to Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.01 Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.02 Owner Participant Has No Legal Title in Trust Estate . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.03 Assignment, Sale, Etc. of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.04 Trust Agreement for Benefit of Certain Parties Only . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.05 [Intentionally reserved for potential future use] . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.08 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.10 Binding Effect, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.11 Headings; References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
TRUST AGREEMENT [N604SW]
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<TABLE>
<S> <C> <C>
SECTION 11.13 Performance by the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.14 Authorization to Owner Trustee for Trust Indenture . . . . . . . . . . . . . . . . . . . . . . 17
EXHIBIT 1 Affidavit of Citizenship
</TABLE>
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TRUST AGREEMENT
This TRUST AGREEMENT, dated as of August 1, 1995, is between
AMSOUTH LEASING CORPORATION, an Alabama corporation, and SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in its
individual capacity, together with its successors and permitted assigns, "SBC",
and otherwise not in its individual capacity but solely as trustee hereunder
with its permitted successors and assigns, the "Owner Trustee").
W I T N E S S E T H:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01 Certain Definitions. Unless the context
shall otherwise require and except as contained in this Section 1.01, the
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings assigned thereto in the Lease (as hereinafter defined) or,
if not defined in the Lease, in the Trust Indenture (as defined in the Lease),
for all purposes hereof. All definitions contained in this Section 1.01 shall
be equally applicable to both the singular and plural forms of the terms
defined. For all purposes of this Trust Agreement the following terms shall
have the following meanings:
"Commitment" has the meaning ascribed to such term in Section
1 of the Participation Agreement.
"Excluded Payments" has the meaning ascribed to such term in
the Trust Indenture.
"Indenture Event of Default" has the meaning ascribed to such
term in the Trust Indenture.
"Lease" means that certain Sale and Lease Agreement, dated as
of the date hereof, relating to that certain Boeing 737-3H4 aircraft bearing
U.S. Registration No. N604SW and Manufacturer's serial number 27955, to be
entered into by the Owner Trustee and Lessee concurrently with the execution
and delivery of this Trust Agreement, as said Sale and Lease Agreement may from
time to time be supplemented or amended, or the terms thereof waived or
modified, to the extent permitted by, and in accordance with, the terms of this
Trust Agreement. The term "Lease" shall also include said Sale and Lease
Agreement as supplemented by each Lease Supplement from time to time entered
into pursuant to the terms of the Lease.
"Lease Event of Default" has the meaning ascribed to such term
in the Lease.
"Lessee" means Southwest Airlines Co., a Texas corporation,
and its permitted successors and assigns under the Lease and the Participation
Agreement.
"Owner Participant" means and includes (i) Amsouth Leasing
Corporation, an Alabama corporation, as the original Owner Participant, and
(ii) the successors and permitted assigns of AmSouth Leasing Corporation.
TRUST AGREEMENT [N604SW]
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"Trust Estate" means all estate, right, title and interest of
the Owner Trustee in and to the Aircraft, the Participation Agreement, the
Lease, any Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Bills of Sale and the other Operative Agreements including,
without limitation, all amounts of Basic Rent and Supplemental Rent including,
without limitation, insurance proceeds (other than insurance proceeds payable
to or for the benefit of the Owner Trustee, for its own account or in its
individual capacity, the Owner Participant, the Holders or the Indenture
Trustee), all payments and proceeds as a result of the sale, lease or other
disposition of the Aircraft, the Airframe, any Engine or any Part thereof, and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (except amounts owing to the Owner Participant, to the Indenture
Trustee, to the Owner Trustee, in its individual capacity, or to a Holder, or
to any of their respective directors, officers, employees, servants and agents,
pursuant to Section 7 of the Participation Agreement) including, without
limitation, any and all payments and proceeds received by the Owner Trustee
after the termination of the Lease with respect to the Aircraft resulting from
the sale, lease or other disposition thereof, subject, however to the
provisions of and the Lien created by the Trust Indenture. Notwithstanding the
foregoing, "Trust Estate" shall (i) not include any Excluded Payment and (ii)
include all property and rights purported to be included in the Trust Indenture
Estate.
"Trust Indenture Estate" has the meaning ascribed to the term
"Indenture Estate" in the Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the
Trust Indenture.
"Trust Supplement" means a supplement to this Trust Agreement
and to the Trust Indenture in substantially the form of Exhibit C to the Trust
Indenture.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST
SECTION 2.01 Authority to Execute Documents. The Owner
Participant hereby authorizes and directs the Owner Trustee to, and the Owner
Trustee agrees for the benefit of the Owner Participant that it will, on or
before the Delivery Date, execute and deliver the Operative Agreements to which
it is a party and any other agreements, instruments or documents to which the
Owner Trustee is a party in the respective forms thereof which are delivered
from time to time by the Owner Participant to the Owner Trustee for execution
and delivery and, subject to the terms hereof, to exercise its rights (upon
instructions received from the Owner Participant) and perform its duties under
said Operative Agreements in accordance with the terms thereof.
SECTION 2.02 Declaration of Trust. SBC hereby declares
that it will hold as the Owner Trustee the Trust Estate upon the trusts
hereinafter set forth for the use and benefit of the Owner Participant,
subject, however, to the Lien created by the Trust Indenture.
TRUST AGREEMENT [N604SW]
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ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES
SECTION 3.01 Purchase of Certain Rights in the Aircraft.
The Owner Participant hereby authorizes and directs the Owner Trustee to, and
the Owner Trustee agrees for the benefit of the Owner Participant that it will,
on the Delivery Date, subject to due compliance with the terms of Section 3.02
hereof:
(a) purchase the Aircraft pursuant to the Lease;
(b) accept from Lessee the Lessee Warranty Bill of Sale
and the Lessee FAA Bill of Sale and the invoice furnished pursuant to
the Participation Agreement;
(c) execute and deliver a Lease Supplement covering the
Aircraft;
(d) execute and deliver each of the other Operative
Agreements to which the Owner Trustee is to be a party including,
without limitation, a Trust Supplement covering the Aircraft;
(e) execute, issue and deliver to the Original Loan
Participant one or more authenticated Certificates in the amounts and
otherwise as provided in Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred
to in Section 4(a)(vi) of the Participation Agreement, together with
all other agreements, documents and instruments referred to in Section
4 of the Participation Agreement to which the Owner Trustee is to be a
party;
(g) effect the registration of the Aircraft in the name
of the Owner Trustee by filing or causing to be filed with the FAA:
(i) the Lessee FAA Bill of Sale; (ii) an application for registration
of the Aircraft in the name of the Owner Trustee (including, without
limitation, an affidavit from the Owner Trustee in the form of Exhibit
1 hereto in compliance with the provisions of 14 C.F.R. Section
47.7(c)(2)(ii)); and (iii) this Trust Agreement;
(h) authorize a representative or representatives of the
Owner Trustee (who shall be an employee or employees of Lessee) to
accept delivery of the Aircraft pursuant to the Participation
Agreement; and
(i) execute and deliver all such other instruments,
documents or certificates and take all such other actions in
accordance with the directions of the Owner Participant, as the Owner
Participant may deem necessary or advisable in connection with the
transactions contemplated hereby.
SECTION 3.02 Conditions Precedent. The rights and
obligations of the Owner Trustee to take the actions required by Section 3.01
hereof with respect to the Aircraft shall be subject to the following
conditions precedent: (a) the Owner Participant shall have made the full
TRUST AGREEMENT [N604SW]
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amount of its Commitment with respect to the Aircraft available to the Owner
Trustee, in immediately available funds, in accordance with Sections 1 and 2 of
the Participation Agreement; and (b) the Owner Participant shall have notified
the Owner Trustee that the terms and conditions of Section 4 of the
Participation Agreement, insofar as they relate to conditions precedent to
performance by the Owner Participant of its obligations thereunder, shall have
been either fulfilled to the satisfaction of or waived by the Owner
Participant. The Owner Participant shall, by instructing the Owner Trustee to
release the funds then held by the Owner Trustee as provided in Section 2 of
the Participation Agreement, be deemed to have found satisfactory to it, or
waived, all such conditions precedent.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.01 Distribution of Payments.
(a) Payments to the Indenture Trustee. Until the Trust
Indenture shall have been discharged pursuant to Section 10.01 thereof or
defeased pursuant to Section 10.05 thereof, all Rent, insurance proceeds and
requisition or other payments of any kind included in the Trust Estate (other
than Excluded Payments and other than payments received from the Indenture
Trustee under the Trust Indenture) payable to the Owner Trustee shall be
payable directly to the Indenture Trustee (and any of the same which are
received by the Owner Trustee shall upon receipt be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind) for distribution
in accordance with the provisions of Article III of the Trust Indenture;
provided, however, that any payments received by the Owner Trustee from (i) the
Lessee with respect to the Owner Trustee's fees and disbursements, or (ii) the
Owner Participant pursuant to Article VII hereof shall not be paid over to the
Indenture Trustee but shall be retained by the Owner Trustee and applied toward
the purpose for which such payments were made.
(b) Payments to the Owner Trustee; Other Parties. After
the Trust Indenture shall have been discharged pursuant to Section 10.01
thereof or defeased pursuant to Section 10.05 thereof, any payment of the type
referred to in Section 4.01(a) hereof (other than Excluded Payments) received
by the Owner Trustee, any payments received from the Indenture Trustee other
than as specified in Section 4.01(c) or (d) hereof and any other amount
received as part of the Trust Estate and for the application or distribution of
which no provision is made herein, shall be distributed forthwith upon receipt
by the Owner Trustee in the following order of priority: first, so much of
such payment as shall be required to reimburse the Owner Trustee for any
expenses not otherwise reimbursed as to which the Owner Trustee is entitled to
be so reimbursed by the Owner Participant pursuant to the provisions hereof
shall be retained by the Owner Trustee; second, so much of the remainder for
which provision as to the application thereof is contained in the Lease or any
of the other Operative Agreements shall be applied and distributed in
accordance with the terms of the Lease or such other Operative Agreement; and
third, the balance, if any, shall be paid to the Owner Participant.
(c) Certain Distributions to the Owner Participant. All
amounts from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the Trust Indenture shall,
TRUST AGREEMENT [N604SW]
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if paid to the Owner Trustee, be distributed by the Owner Trustee to the Owner
Participant in accordance with the provisions of Article III of the Trust
Indenture.
(d) Excluded Payments. Any Excluded Payments received by
the Owner Trustee shall be paid by the Owner Trustee to the Person to whom such
Excluded Payments are payable under the provisions of the Participation
Agreement, the Tax Indemnity Agreement or the Lease.
(e) Legal Title. The Owner Participant shall have no
legal title to the Aircraft or any other portion of the Trust Estate.
SECTION 4.02 Method of Payments. The Owner Trustee shall
make distributions or cause distributions to be made to (i) the Owner
Participant pursuant to this Article IV by transferring by wire transfer in
immediately available funds on the day received (or on the next succeeding
Business Day if the funds to be so distributed shall not have been received by
the Owner Trustee by 3:00 p.m., New York City time), the amount to be
distributed as provided in Schedule I to the Participation Agreement or to such
account or accounts of the Owner Participant as the Owner Participant may
designate from time to time in writing to the Owner Trustee and (ii) the
Indenture Trustee pursuant to this Article IV by transferring the amount to be
distributed to the Indenture Trustee in the manner specified in the Trust
Indenture.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01 Notice of Event of Default. If the Owner
Trustee shall have knowledge of a Lease Event of Default or Indenture Event of
Default (or an event which with the passage of time or the giving of notice or
both would constitute a Lease Event of Default or an Indenture Event of
Default), the Owner Trustee shall give to the Owner Participant and Lessee
prompt telephonic or facsimile notice thereof followed by prompt written
confirmation thereof by certified mail, postage prepaid, provided, that (i) in
the case of an event which with the passage of time would constitute an
Indenture Event of Default referred to in paragraph (b) of Section 8.01 of the
Trust Indenture, such notice shall in no event be furnished later than ten (10)
days after the Owner Trustee shall first have knowledge of such event and (ii)
in the case of a misrepresentation by the Owner Trustee which with the passage
of time would constitute an Indenture Event of Default referred to in paragraph
(c) of Section 8.01 of the Trust Indenture, such notice shall in no event be
furnished later than ten (10) days after the Owner Trustee shall first have
knowledge of such event. The notice shall set forth in reasonable detail the
facts or circumstances known to it with respect to such Lease Event of Default
or Indenture Event of Default. Subject to the terms of Section 5.03 hereof,
the Owner Trustee shall take such action or shall refrain from taking such
action, not inconsistent with the provisions of the Trust Indenture or the
other Operative Agreements, with respect to such Lease Event of Default,
Indenture Event of Default or other event as the Owner Trustee shall be
directed in writing by the Owner Participant. For all purposes of this Trust
Agreement, the Lease and the other Operative Agreements, in the absence of
actual knowledge by a responsible officer of the Trust Office of the Owner
Trustee in his or her capacity as such, the Owner Trustee shall not be deemed
to have knowledge of a Lease Event of Default, Indenture Event of Default or
other event referred to in this Section 5.01 unless notified in writing thereof
by the Indenture Trustee, the Owner Participant or Lessee.
TRUST AGREEMENT [N604SW]
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SECTION 5.02 Action Upon Instructions. Subject to the
terms of Sections 5.01 and 5.03 hereof and to the terms of the other Operative
Agreements, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following
actions, not inconsistent with the provisions of the Lease and the Trust
Indenture, as may be specified in such instructions: (i) give such notice or
direction or exercise such right, remedy or power hereunder or take such other
actions under any of the Operative Agreements to which the Owner Trustee is a
party or in respect of all or any part of the Trust Estate as shall be
specified in such instructions; (ii) take such action to preserve or protect
the Trust Estate (including the discharge of Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Agreements to be satisfactory to the
Owner Trustee, it being understood that without written instructions of the
Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it; (iv) subject to the rights of Lessee under the Operative
Agreements, after the expiration or earlier termination of the Lease, convey
all of the Owner Trustee's right, title and interest in and to the Aircraft for
such amount, on such terms and to such purchaser or purchasers as shall be
designated in such instructions, or net lease the Aircraft to such lessee or
lessees and on such terms as shall be designated in such instructions or
deliver the Aircraft to the Owner Participant in accordance with such
instructions; and (v) take such other action as is requested by the Owner
Participant, which action is not inconsistent with the terms of the Operative
Agreements.
SECTION 5.03 Indemnification. The Owner Trustee shall not
be required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof unless the Owner Trustee shall have
been indemnified by the Owner Participant, in manner and form satisfactory to
the Owner Trustee, against any liability, cost or expense (including reasonable
counsel fees and disbursements) which may be incurred in connection therewith
other than that which results from the willful misconduct or gross negligence
of the Owner Trustee; and, if the Owner Participant shall have directed the
Owner Trustee to take any such action or refrain from taking any action, the
Owner Participant agrees to furnish such indemnity as shall be required and, in
addition to the extent not otherwise paid pursuant to the provisions of the
Lease or of the Participation Agreement, to pay the reasonable fees and charges
of the Owner Trustee for the services performed or to be performed by it
pursuant to such direction. The Owner Trustee shall not be required to take
any action under Section 5.01 (other than the giving of the notices referred to
therein) or 5.02 hereof if the Owner Trustee shall reasonably determine, or
shall have been advised by counsel, that such action is contrary to the terms
of any of the Operative Agreements to which the Owner Trustee is a party, or is
otherwise contrary to law and the Owner Trustee shall have delivered to the
Owner Participant written notice of the basis of its refusal to act.
SECTION 5.04 No Duties Except as Specified in Trust
Agreement or Instructions. The Owner Trustee shall not have any duty or
obligation to manage, control, use, sell, dispose of or otherwise deal with the
Aircraft or any other part of the Trust Estate, or to otherwise take or refrain
from taking any action under, or in connection with any of the Operative
Agreements to which the Owner Trustee is a party, except (i) as expressly
required by the terms of any of the Operative Agreements to which the Owner
Trustee is a party, or (ii) (to the extent not inconsistent with the provisions
of the Trust Indenture, as expressly provided by the terms hereof) as expressly
provided in a written instruction from the Owner Participant received pursuant
to the terms of Section 5.01 or 5.02 hereof, and no implied duties or
obligations shall be read into this Trust Agreement against the Owner Trustee.
SBC agrees that it will, in its individual capacity and at its own cost or
expense (but without any right of indemnity in respect of any such cost or
expense under
TRUST AGREEMENT [N604SW]
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Section 5.03 or 7.01 hereof), promptly take such action as may be necessary to
duly discharge and satisfy in full all Lessor Liens attributable to it in its
individual capacity which it is required to discharge pursuant to Section 8(g)
of the Participation Agreement and otherwise comply with the terms of said
Section binding upon it.
SECTION 5.05 No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall have no power, right or authority to,
and the Owner Trustee agrees that it will not, manage, control, use, sell,
dispose of or otherwise deal with the Aircraft or any other part of the Trust
Estate except (i) as expressly required by the terms of any of the Operative
Agreements to which the Owner Trustee is a party, (ii) as expressly provided by
the terms hereof, or (iii) as expressly provided in written instructions from
the Owner Participant pursuant to Section 5.01 or 5.02 hereof, but subject
always to the provisions of and Lien created by the Trust Indenture.
SECTION 5.06 No Power to Reinvest. Notwithstanding
anything contained in Section 5.01, 5.02, 5.04 or 5.05 to the contrary, the
Owner Trustee shall not be authorized and shall have no power to reinvest the
proceeds of the Trust Estate or to otherwise "vary the investment" of the Owner
Participant within the meaning of Treasury Regulations Section
301.7701-4(c)(1); provided, however, that nothing contained in this Section
5.06 shall limit the indemnity provided in Section 5.03 hereof or any
requirement pertaining to the investment of funds in the Operative Agreements.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01 Acceptance of Trusts and Duties. SBC accepts
the trusts hereby created and agrees to perform the same but only upon the
terms hereof applicable to it. The Owner Trustee also agrees to receive and
disburse all monies received by it constituting part of the Trust Estate upon
the terms hereof. SBC shall not be answerable or accountable under any
circumstances, except for (a) its or the Owner Trustee's own willful misconduct
or gross negligence, (b) its failure to perform its obligations under the last
sentence of Section 5.04 hereof and the first sentence of Section 5.01 hereof,
(c) its or the Owner Trustee's failure to use ordinary care in handling and
disbursing funds, (d) any Tax based on or measured by any fees, commissions or
compensation received by it for acting as trustee in connection with any of the
transactions contemplated by the Operative Agreements, and (e) liabilities that
may result from the inaccuracy of any representation or warranty of it (or from
the failure by it to perform any covenant) in Section 6.03 hereof or in any of
the other Operative Agreements (including, without limitation, covenants of SBC
contained in the Participation Agreement and the Trust Indenture).
SECTION 6.02 Absence of Certain Duties. Except in
accordance with written instructions furnished pursuant to Section 5.01 or 5.02
hereof and except as provided in, and without limiting the generality of,
Sections 3.01, 5.04 and 5.05 hereof and the last sentence of Section 9.01(b)
hereof, neither the Owner Trustee nor SBC shall have any duty (i) to see to any
recording or filing of any Operative Agreement or of any supplement to any
thereof or to see to the maintenance of any such recording or filing or any
other filing of reports with the Federal Aviation Administration or other
governmental agencies, except that SBC in its individual capacity agrees to
comply with the Federal Aviation Administration reporting requirements set
forth in
TRUST AGREEMENT [N604SW]
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14 C.F.R. Section 47.45 and 14 C.F.R. Section 47.51, and the Owner Trustee
shall, to the extent that information for that purpose is timely supplied by
Lessee and approved by the Owner Participant pursuant to any of the Operative
Agreements, complete and timely submit (and furnish the Owner Participant with
a copy of) any and all reports relating to the Aircraft which may from time to
time be required by the Federal Aviation Administration or any government or
governmental authority having jurisdiction, (ii) to see to any insurance on the
Aircraft or to effect or maintain any such insurance, whether or not Lessee
shall be in default with respect thereto, other than to forward to the Owner
Participant copies of all reports and other written information which the Owner
Trustee receives from Lessee pursuant to Section 11 of the Lease, (iii) to see
to the payment or discharge of any tax, assessment or other governmental charge
or any lien or encumbrance of any kind owing with respect to, assessed or
levied against any part of the Trust Indenture Estate or the Trust Estate,
except as provided in Section 5.04 hereof, Section 4.01(ii) or 4.02 of the
Trust Indenture or Section 8(g) of the Participation Agreement, or (iv) to
inspect Lessee's books and records with respect to the Aircraft at any time
permitted pursuant to the Lease. Notwithstanding the foregoing, the Owner
Trustee will furnish to the Indenture Trustee and the Owner Participant,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to the Owner Trustee under the Lease or any other Operative Agreement
to the extent that any of the same shall not state on its face or otherwise
that it has been so distributed.
SECTION 6.03 No Representations or Warranties as to
Certain Matters. NEITHER THE OWNER TRUSTEE NOR SBC MAKES OR SHALL BE DEEMED TO
HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF,
AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR
ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
AIRCRAFT OR ANY PART THEREOF WHATSOEVER, except that SBC in its individual
capacity warrants that (i) on the Delivery Date, the Owner Trustee shall have
received whatever title was conveyed to it by Lessee, (ii) on the Delivery
Date, the Owner Trustee shall be in compliance with the last sentence of
Section 5.04 hereof, and (iii) the Aircraft shall during the Term of the Lease
be free of Lessor Liens attributable to SBC, or (b) any representation or
warranty as to the validity, legality or enforceability of this Trust Agreement
or any other Operative Agreement to which the Owner Trustee is a party, or any
other document or instrument, or as to the correctness of any statement
contained in any thereof except to the extent that any such statement is
expressly made herein or therein by such party as a representation by SBC or by
the Owner Trustee, as the case may be, and except that SBC hereby represents
and warrants that this Trust Agreement has been, and (assuming due
authorization, execution and delivery by the Owner Participant of this Trust
Agreement) the other Operative Agreements to which it or the Owner Trustee is a
party have been (or at the time of execution and delivery of any such
instrument by it or the Owner Trustee hereunder or pursuant to the terms of the
Participation Agreement that such an instrument will be) duly executed and
delivered by one of its officers who is or will be, as the case may be, duly
authorized to execute and deliver such instruments on behalf of SBC or the
Owner Trustee, as the case may be, and that this Trust Agreement constitutes
the legal, valid and binding obligation of SBC or the Owner Trustee, as the
case may be, enforceable against SBC or the Owner Trustee, as the case may be,
in accordance with its terms.
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SECTION 6.04 No Segregation of Monies; Interest. Monies
received by the Owner Trustee hereunder need not be segregated in any manner
except to the extent required by law and the Owner Trustee shall not be liable
for any interest thereon.
SECTION 6.05 Reliance Upon Certificates, Counsel and
Agents. The Owner Trustee shall incur no liability to anyone in acting in
reliance upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper reasonably
believed by it in good faith to be genuine and reasonably believed by it in
good faith to be signed by the proper party or parties. Unless other evidence
in respect thereof is specifically prescribed herein, any request, direction,
order or demand of the Owner Participant or Lessee mentioned herein or in any
of the other Operative Agreements to which the Owner Trustee is a party shall
be sufficiently evidenced by written instruments signed by the Chairman of the
Board, the President, any Vice President, the Treasurer or any other duly
authorized officer or representative and in the name of any such Owner
Participant or Lessee, as the case may be. The Owner Trustee may accept a copy
of a resolution of the Board of Directors or Executive Committee of Lessee or
the Owner Participant, as the case may be, certified by the Secretary or an
Assistant Secretary of Lessee or the Owner Participant, as the case may be, as
duly adopted and in full force and effect, as conclusive evidence that such
resolution has been duly adopted by said Board or Committee and that the same
is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically described herein, the Owner Trustee
may for all purposes hereof rely on a certificate signed by the Chairman of the
Board, the President, any Vice President, the Treasurer or any other duly
authorized officer or representative of Lessee or the Owner Participant, as the
case may be, as to such fact or matter, and such certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be
taken by it in good faith in reliance thereon. In the administration of trusts
hereunder, the Owner Trustee may execute any of the trusts or powers hereof and
perform its powers and duties hereunder directly or through agents or attorneys
and may, at the expense of the Trust Estate, consult with counsel, accountants
and other skilled persons to be selected and employed by it. The Owner Trustee
shall not be liable for anything done, suffered or omitted in good faith by it
in accordance with the advice or opinion, within the scope of such person's
competence, of any such counsel, accountants or other skilled persons and the
Owner Trustee shall not be liable for the negligence of any such counsel,
accountant or other skilled person appointed by it with due care hereunder.
SECTION 6.06 Not Acting in Individual Capacity. In
executing the trusts accepted by SBC hereunder, the Owner Trustee acts solely
as trustee and not in its individual capacity except as otherwise expressly
provided herein; and, except as may be otherwise expressly provided in this
Trust Agreement, the Lease, the Participation Agreement and the Trust
Indenture, all persons, other than the Owner Participant, as provided herein,
having any claim against the Owner Trustee by reason of the transactions
contemplated hereby shall look only to the Trust Estate for payment or
satisfaction thereof except to the extent the Owner Trustee shall expressly
agree otherwise in writing.
SECTION 6.07 Fees and Compensation. The Owner Trustee
shall be entitled to receive compensation, reasonable as regards its
responsibilities hereunder, together with reimbursement within three (3) months
of its request for all reasonable expenses incurred or made by it in accordance
with any of the provisions of this Trust Agreement or any other Operative
Agreement (including the reasonable compensation of the expenses of its
counsel, accountants or other skilled persons and of all other persons not
regularly in its employ). If a Lease Event of
TRUST AGREEMENT [N604SW]
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Default or Indenture Event of Default shall occur and be continuing, the Owner
Trustee shall be entitled to receive compensation, reasonable as regards its
additional responsibilities hereunder, and payment or reimbursement for its
expenses as provided above. Pursuant to Section 7(c) of the Participation
Agreement and subject to Section 16 thereof, Lessee shall be required to pay
the reasonable fees and expenses of the Owner Trustee comprising the
compensation and reimbursement of expenses to which the Owner Trustee is
entitled under this Section 6.07. Except as otherwise expressly provided in
Section 5.03 or Section 7.01 of this Trust Agreement, neither the Owner
Participant nor the Trust Estate shall have any liability for any such fees and
expenses; provided, however, the Owner Participant shall be liable for such
additional compensation of the Owner Trustee if the same is attributable to an
Indenture Event of Default which is caused solely by the actions or inactions
of the Owner Participant.
SECTION 6.08 Tax Returns. The Owner Participant shall be
responsible for causing to be prepared and filed all income tax returns to be
filed by the Owner Participant. The Owner Trustee will, upon request, furnish
the Owner Participant with all such information as may be reasonably required
or necessary from the Owner Trustee in connection with the preparation of such
tax returns and in connection with any other filing or audit and related
litigation obligations. The Owner Trustee shall be responsible for causing to
be prepared at the request of the Owner Participant all income tax returns
required to be filed with respect to the trust created hereby and shall execute
and, with the approval of the Owner Participant, file such returns; provided,
however, that the Owner Trustee shall send a completed copy of each such return
to the Owner Participant not more than 60 nor less than 30 days prior to the
due date of such return; provided that the Owner Trustee shall have timely
received all necessary information to complete and deliver to the Owner
Participant such return. The Owner Participant, upon request, will furnish the
Owner Trustee with all such information as may be required from the Owner
Participant in connection with the preparation of such tax returns. The Owner
Trustee will give to the Owner Participant, upon request, such periodic
information concerning receipts and disbursements by it with respect to the
Trust Estate as would be helpful to the Owner Participant in preparing its tax
returns.
ARTICLE VII
INDEMNIFICATION OF SBC
BY OWNER PARTICIPANT
SECTION 7.01 Owner Participant to Indemnify SBC. The
Owner Participant hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and hereby
indemnifies, protects, saves and keeps harmless SBC in its individual capacity
and its successors, assigns, legal representatives and agents, from and against
any and all Losses indemnified against by Lessee pursuant to Section 7(b) or
7(c) of the Participation Agreement, disregarding those exclusions contained in
clause (3) of Section 7(b)(ii) and in clauses (A) and (B) of Section 7(c)(ii),
and, to the extent that SBC acts in its capacity as the Owner Trustee and in
accordance with instructions received from the Owner Participant, clause (E) of
Section 7(c)(ii), and except (a) in the case of willful misconduct or gross
negligence on the part of the Owner Trustee or SBC in the performance or
nonperformance of its duties hereunder or under any of the other Operative
Agreements to which the Owner Trustee is a party, (b) those claims resulting
from the inaccuracy of any representation or warranty of SBC (or from the
failure of SBC to perform any of its covenants) in Section 6.03 hereof or in
any of the other Operative Agreements, (c) as may result from a breach by SBC
of its covenant in the last sentence of Section 5.04 hereof
TRUST AGREEMENT [N604SW]
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or a breach by SBC of any other of its covenants contained herein or (d) in the
case of the failure to use ordinary care on the part of the Owner Trustee or
SBC in the receipt or disbursement of funds; provided, however, that the
exception set forth in clause (a) of this Section 7.01 shall not apply to any
action taken or omission made by the Owner Trustee pursuant to and in
accordance with written directions given to the Owner Trustee by the Owner
Participant. The indemnities contained in this Section 7.01 extend to SBC only
in its individual capacity and shall not be construed as indemnities of the
Trust Indenture Estate or the Trust Estate (except to the extent, if any, that
SBC has been reimbursed by the Trust Indenture Estate or the Trust Estate for
amounts covered by the indemnities contained in this Section 7.01). The
indemnities contained in this Section 7.01 shall survive the termination of
this Trust Agreement. In addition, if necessary, SBC shall be entitled to
indemnification from the Trust Estate, subject to the provisions of Section
4.01 hereof and the Lien of the Trust Indenture, for any liability, obligation,
loss, damage, penalty, tax, claim, action, suit, cost, expense or disbursement
indemnified against pursuant to this Section 7.01 to the extent not reimbursed
by Lessee, the Owner Participant or others, but without releasing any of them
from their respective agreements of reimbursement; and, to secure the same, SBC
shall have a lien on the Trust Estate, subject to the provisions of Section
4.01 hereof and the Lien of the Trust Indenture, which shall be prior to any
interest therein of the Owner Participant. The payor of any indemnity under
this Article VII shall be subrogated to any right of the person indemnified in
respect of the matter as to which such indemnity was paid. Notwithstanding the
foregoing, SBC shall not make any claim under this Section 7.01 for any claim,
loss, tax or other liability indemnified against by the Lessee under the
Participation Agreement without first making demand on the Lessee for payment
of such claim, loss, tax or other liability, and pursuing such demand on a
reasonable basis for a reasonable length of time.
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01 Transfer of Interest. All provisions of
Section 8(l) of the Participation Agreement shall (with the same force and
effect as if set forth, mutatis mutandis, in full in this Section 8.01) be
applicable to any assignment, conveyance or other transfer by the Owner
Participant of its right, title or interest in and to the Participation
Agreement, the Trust Estate or this Trust Agreement.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01 Resignation of Owner Trustee: Appointment of
Successor.
(a) Resignation or Removal. The Owner Trustee or any
successor Owner Trustee (i) shall resign if required to do so pursuant to
Section 8(b) of the Participation Agreement and (ii) may resign at any time
without cause by giving at least 60 days' prior written notice to the Owner
Participant, the Indenture Trustee and Lessee, such resignation to be effective
upon the acceptance of appointment by the successor Owner Trustee under Section
9.01(b) hereof. In addition, the Owner Participant may at any time remove the
Owner Trustee with or without cause by a notice in writing delivered to the
Owner Trustee, the Holders, the Indenture Trustee and Lessee, such removal to
be effective upon the acceptance of appointment by the successor Owner Trustee
TRUST AGREEMENT [N604SW]
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under Section 9.01(b) hereof. In the case of the removal or resignation of the
Owner Trustee, the Owner Participant may, after consultation in good faith with
Lessee, appoint a successor Owner Trustee by an instrument signed by the Owner
Participant. If a successor Owner Trustee shall not have been appointed within
30 days after such notice of resignation or removal, the Owner Trustee, the
Owner Participant, Lessee or the Indenture Trustee may apply to any court of
competent jurisdiction to appoint a successor Owner Trustee to act until such
time, if any, as a successor shall have been appointed as above provided. Any
successor Owner Trustee so appointed by such court shall immediately and
without further act be superseded by any successor Owner Trustee appointed as
above provided.
(b) Execution and Delivery of Documents, Etc. Any
successor Owner Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee an instrument accepting such appointment, and
thereupon such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor Owner Trustee in the trusts hereunder with like effect as if
originally named the Owner Trustee herein; but nevertheless, upon the written
request of such successor Owner Trustee, such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner Trustee,
upon the trusts herein expressed, all the estates, properties, rights, powers
and trusts of such predecessor Owner Trustee, and such predecessor Owner
Trustee shall duly assign, transfer, deliver and pay over to such successor
Owner Trustee all monies or other property then held by such predecessor Owner
Trustee upon the trusts herein expressed. Upon the appointment of any
successor Owner Trustee hereunder, the predecessor Owner Trustee will complete,
execute and deliver such documents as are provided to it by such successor
Owner Trustee and will take such further actions as are requested of it by such
successor Owner Trustee as are reasonably required to cause registration of the
Aircraft included in the Trust Estate to be transferred upon the records of the
Federal Aviation Administration, or other governmental authority having
jurisdiction, into the name of the successor Owner Trustee.
(c) Qualifications. Any successor Owner Trustee, however
appointed, shall be a "citizen of the United States" within the meaning of the
Act and shall also be a bank or trust company organized under the laws of the
United States or any state thereof having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
or customary terms.
(d) Merger, Etc. Any corporation into which SBC may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which SBC shall be a
party, or any corporation to which substantially all the corporate trust
business of SBC may be transferred, shall, subject to the terms of Section
9.01(c) hereof, be the Owner Trustee hereunder without further act.
SECTION 9.02 Co-Trustees and Separate Trustees. If at any
time it shall be necessary or prudent in order to conform to any law of any
jurisdiction in which all or any part of the Trust Estate is located, or make
any claim or bring any suit with respect to the Trust Estate or the Lease, or
in the event that the Owner Trustee shall have been requested to do so by the
Owner Participant or the Owner Trustee being advised by counsel shall determine
that it is so necessary or prudent in the interest of the Owner Participant or
the Owner Trustee, or the Owner Trustee shall have been directed to do so by
the Owner Participant, the Owner Trustee and Owner Participant shall execute
and deliver an agreement supplemental hereto and all other instruments and
agreements
TRUST AGREEMENT [N604SW]
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necessary or proper to constitute another bank or trust company or one or more
persons (any and all of which shall be a "citizen of the United States" as
defined in 49 U.S.C. Section 40102(a)(15)(C)) approved by the Owner Trustee and
the Owner Participant, either to act as co-trustee, jointly with the Owner
Trustee, or to act as separate trustee hereunder (any such co-trustee or
separate trustee being herein sometimes referred to as an "additional
trustee").
Every additional trustee hereunder shall, to the extent
permitted by law, be appointed and act, and the Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
(A) all powers, duties, obligations and rights conferred
upon the Owner Trustee in respect of the custody, control and
management of monies, the Aircraft or documents authorized to be
delivered hereunder or under the Participation Agreement shall be
exercised solely by the Owner Trustee;
(B) all other rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee and any limitations
thereon shall be conferred or imposed upon and exercised or performed
by the Owner Trustee and such additional trustee jointly, except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (including the holding of
title to the Trust Estate) the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be exercised and performed by
such additional trustee;
(C) notwithstanding anything to the contrary contained
herein, no power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised hereunder
by such additional trustee, except jointly with, or with the consent
in writing of, the Owner Trustee;
(D) no trustee hereunder shall be personally liable by
reason of any action or omission of any other trustee hereunder;
(E) the Owner Participant, at any time, by an instrument
in writing may remove any such additional trustee; and
(F) no appointment of, or action by, any additional
trustee will relieve the Owner Trustee of any of its obligations
under, or otherwise affect any of the terms of, the Trust Indenture or
affect the interests of the Indenture Trustee or the Holders in the
Trust Indenture Estate.
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ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS
SECTION 10.01 Supplements and Amendments and Delivery
Thereof.
(a) Supplements and Amendments. This Trust Agreement may
not be amended, supplemented or otherwise modified except by an instrument in
writing signed by the Owner Trustee and (except in the case of a Trust
Supplement) the Owner Participant. Subject to Section 10.02 hereof, Section 10
of the Participation Agreement and, until the Trust Indenture shall have been
satisfied and discharged pursuant to Section 10.01 thereof, Section 11.06 of
the Trust Indenture, the Owner Trustee will execute any amendment, supplement
or other modification of this Trust Agreement or of any other Operative
Agreement to which the Owner Trustee is a party which it is requested to
execute by the Owner Participant except that the Owner Trustee shall not
execute any such amendment, supplement or other modification which, by the
express provisions of any of the above documents, requires the consent of any
other party unless such consent shall have been obtained.
(b) Delivery of Amendments and Supplements to Certain
Parties. A signed copy of each amendment or supplement referred to in Section
10.01(a) hereof shall be delivered promptly by the Owner Trustee to Lessee and,
until the Trust Indenture shall have been satisfied and discharged pursuant to
Section 10.01 thereof, the Indenture Trustee.
SECTION 10.02 Discretion as to Execution of Documents.
Prior to executing any document required to be executed by it pursuant to the
terms of Section 10.01 hereof, the Owner Trustee shall be entitled to receive
an opinion of its counsel to the effect that the execution of such document is
authorized hereunder. If in the opinion of the Owner Trustee any document
required to be executed by the Owner Trustee pursuant to the terms of Section
10.01 hereof adversely affects any right, duty, immunity or indemnity in favor
of the Owner Trustee hereunder or under any other Operative Agreement to which
the Owner Trustee is a party, the Owner Trustee may in its discretion decline
to execute such document.
SECTION 10.03 Distribution of Documents. Promptly after
the execution by the Owner Trustee of any document entered into pursuant to
Section 10.01 hereof, the Owner Trustee shall mail, by certified mail, postage
prepaid, a conformed copy thereof to the Owner Participant, but the failure of
the Owner Trustee to mail such conformed copy shall not impair or affect the
validity of such document.
SECTION 10.04 Absence of Requirement as to Form. It shall
not be necessary for any written request furnished pursuant to Section 10.01 to
specify the particular form of the proposed documents to be executed pursuant
to such Section, but it shall be sufficient if such request shall indicate the
substance thereof.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Termination of Trust Agreement. This Trust
Agreement and the trusts created hereby shall terminate and this Trust
Agreement shall be of no further force or effect upon the earlier of (a) the
later of (x) the final satisfaction and discharge of the Trust Indenture
pursuant to Section 10.01 thereof and the sale or other final disposition by
the Owner Trustee of all property constituting part of the Trust Estate and the
final distribution by the Owner Trustee of all monies or other property or
proceeds constituting part of the Trust Estate in accordance with Article IV
hereof, provided, that at such time Lessee shall have fully complied with all
of the terms of the Lease and the Participation Agreement and (y) the
expiration or termination of the Lease in accordance with its terms, (b)
twenty-one years less one day after the death of the last survivor of all of
the descendants of Robert E. Lee, late General in Chief of the Armies of the
Confederate States, living on the date of the earliest execution of this Trust
Agreement by any party hereto, or (c) the date of revocation of such trusts by
the Owner Participant (in which case the Trust Estate, subject to the Trust
Indenture, shall be distributed in accordance with the terms hereof); otherwise
this Trust Agreement and the trusts created hereby shall continue in full force
and effect in accordance with the term hereof.
SECTION 11.02 Owner Participant Has No Legal Title in Trust
Estate. The Owner Participant shall not have legal title to any part of the
Trust Estate. No transfer, by operation of law or otherwise, of any right,
title and interest of the Owner Participant in and to the Trust Estate
hereunder shall operate to terminate this Trust Agreement or the trusts
hereunder or entitle any successors or transferees of the Owner Participant to
an accounting or to the transfer of legal title to any part of the Trust
Estate.
SECTION 11.03 Assignment, Sale, Etc. of Aircraft. Any
assignment, sale, transfer or other conveyance of the Aircraft, any Engine or
any interest therein by the Owner Trustee made in accordance with the express
terms hereof or of the Lease or the Participation Agreement shall bind the
Owner Participant and shall be effective to transfer or convey all right, title
and interest of the Owner Trustee and the Owner Participant in and to the
Aircraft, such Engine or interest therein. No purchaser or other grantee shall
be required to inquire as to the authorization, necessity, expediency or
regularity of such assignment, sale, transfer or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.
SECTION 11.04 Trust Agreement for Benefit of Certain
Parties Only. Except for the terms of Section 8(l) of the Participation
Agreement incorporated in Article VIII hereof and except as otherwise provided
in Articles V and IX and Sections 2.02, 3.01, 4.01, 6.07, 10.01, 10.02 and
11.01 hereof, nothing herein, whether expressed or implied, shall be construed
to give any person other than the Owner Trustee and the Owner Participant any
legal or equitable right, remedy or claim under or in respect of this Trust
Agreement; but this Trust Agreement shall be held to be for the sole and
exclusive benefit of the Owner Trustee and the Owner Participant.
SECTION 11.05 [Intentionally reserved for potential future
use].
SECTION 11.06 Notices. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in
TRUST AGREEMENT [N604SW]
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writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid, or by telecopier, or by prepaid courier service, and
shall be deemed to be given for purposes of this Trust Agreement on the day
that such writing is delivered or, if sent by registered or certified mail,
three Business Days after being deposited in the mails addressed to the
intended recipient thereof in accordance with the provisions of this Section
11.06. Unless otherwise specified in a notice sent or delivered in accordance
with the foregoing provisions of this Section 11.06, notices, demands,
instructions and other communications in writing shall be given to or made upon
the respective parties hereto at their respective addresses (or to their
respective telecopier numbers) as follows: (A) if to Lessee, the Owner
Trustee, the Indenture Trustee or the Owner Participant, to the respective
addresses set forth on Schedule I to the Participation Agreement or (B) if to
any Holder, addressed to such Holder at its address as set forth in the
Register maintained pursuant to the Trust Indenture.
SECTION 11.07 Severability. Subject to Section 11.12
hereof, any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.08 Waivers, Etc. No term or provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing entered into in compliance with the terms of Article X
hereof; and any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.
SECTION 11.09 Counterparts. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10 Binding Effect, Etc. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Owner Trustee and its successors and assigns, and the Owner Participant,
its successors and, to the extent permitted by Article VIII hereof, its
assigns. Any request, notice, direction, consent, waiver or other instrument
or action by an Owner Participant shall bind its successors and permitted
assigns.
SECTION 11.11 Headings; References. The headings of the
various Articles and Sections herein are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof. The trust
created hereby, together with the trust created by the Trust Indenture, may for
convenience of reference be referred to, collectively, as "Southwest Airlines
1995 Trust N604SW."
SECTION 11.12 Governing Law. THIS TRUST AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE. THIS TRUST AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW
YORK.
SECTION 11.13 Performance by the Owner Participant. Any
obligation of SBC in its individual capacity or as the Owner Trustee hereunder
or under any other Operative Agreement
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or other document contemplated herein, may be performed by the Owner
Participant and any such performance shall not be construed as a revocation of
the trust created hereby.
SECTION 11.14 Authorization to Owner Trustee for Trust
Indenture. Notwithstanding any contrary provision in this Trust Agreement, the
Owner Trustee is hereby authorized and instructed to enter into and perform
fully the Trust Indenture. This provision is for the benefit of the Owner
Trustee and the Indenture Trustee and the Holders from time to time of the
Certificates and shall not be changed prior to the termination of the Trust
Indenture pursuant to Section 10.01 thereof.
TRUST AGREEMENT [N604SW]
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AMSOUTH LEASING CORPORATION
By: /s/ Charles F. Kiser
President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By: /s/ Michelle K. Blezard
Corporate Trust Officer
TRUST AGREEMENT [N604SW]
<PAGE> 24
EXHIBIT 1
to Trust Agreement
AFFIDAVIT
STATE OF CONNECTICUT Section
Section ss.:
COUNTY OF HARTFORD Section
The undersigned, having been first duly sworn, deposes and says:
1. He is a duly elected and qualified officer of Shawmut Bank
Connecticut, National Association, a national banking association;
2. Shawmut Bank Connecticut, National Association is the Owner
Trustee (the "Owner Trustee") under the Trust Agreement, dated as of August 1,
1995 (the "Trust Agreement"), with Amsouth Leasing Corporation, an Alabama
corporation (the "Owner Participant");
3. The Owner Trustee is the applicant for registration under
Subtitle VII of Title 49 of the United States Code, of one Boeing Model 737-3H4
aircraft with Manufacturer's serial number 27955 and United States nationality
and registration mark N604SW (the "Aircraft");
4. The Owner Trustee is a "Citizen of the United States" as
defined in 49 U.S.C. Section 40102(a)(15)(C);
5. There are no persons whose security interest in the Aircraft
is incorporated in the trust within the meaning of 14 C.F.R. Section 47.7
(1994);
6. The sole beneficiary of the trust created pursuant to the
Trust Agreement is the Owner Participant.
7. Based upon an Affidavit of the Owner Participant provided by
the Owner Participant to the Owner Trustee, which Affidavit is attached hereto,
the Owner Participant is a "Citizen of the United States" as defined in 49
U.S.C. Section 40102(a)(15)(C); and
________________________________________
Name: Phillip G. Kane, Jr.
Title: Vice President, Corporate Trust
Administration
Sworn to before me this _____
day of __________, 1995
_______________________________________
Notary Public
TRUST AGREEMENT [N604SW]
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EXHIBIT 4.42
________________________________________________________________________________
TRUST INDENTURE
AND SECURITY AGREEMENT
dated as of August 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly
set forth herein and otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N605SW
________________________________________________________________________________
Southwest Airlines Co.
Series SWA 1995 Trust N605SW-I and N605SW Certificates
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05. Holder Lists; Ownership of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 16
Section 2.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.08. Payment on Certificates; Defaulted Principal and Interest . . . . . . . . . . . . . . . . 17
Section 2.09. Payment from Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.10. Execution, Delivery and Dating of Certificates upon Issuance . . . . . . . . . . . . . . 19
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.02. Payment in Case of Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.03. Application of Rent When No Indenture Event of Default Is Continuing . . . . . . . . . . 20
Section 3.04. Application of Certain Payments in Case of Requisition or Event of Loss . . . . . . . . 21
Section 3.05. Payments During Continuance of Indenture Event of Default . . . . . . . . . . . . . . . . 22
Section 3.06. Payments for Which Application Is Provided in Other Documents . . . . . . . . . . . . . . 23
Section 3.07. Payments for Which No Application Is Otherwise Provided . . . . . . . . . . . . . . . . . 23
Section 3.08. Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.02. Covenants of Shawmut Bank Connecticut, National Association . . . . . . . . . . . . . . . 25
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of Property Included in the Indenture Estate
During Continuation of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.02. Certificates in Respect of Replacement Aircraft and Engines . . . . . . . . . . . . . . . 27
ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain Events . . . . . . . . . . . . . . . . . . . . . 27
Section 6.02. Redemption or Purchase of Certificates Upon Certain Indenture Events of Default . . . . . 28
Section 6.03. Notice of Redemption to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.04. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.05. Certificates Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments Held by the Indenture Trustee . . . . . . . 30
Section 7.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.03. Assumption of Obligations of Owner Trustee by the Company . . . . . . . . . . . . . . . . 30
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.02. Acceleration; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.03. Other Remedies Available to Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.04. Waiver of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.05. Waiver of Existing Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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Section 8.06. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.07. Limitation on Suits by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.08. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.09. Indenture Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent; Investments . . . . . . . . . . . 44
Section 9.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.06. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.07. Replacement of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.08. Successor Indenture Trustee, Agents by Merger, Etc. . . . . . . . . . . . . . . . . . . . 47
Section 9.09. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.10. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.11. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.12. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.13. Certain Rights of Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . . . 48
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance; Termination of Obligations . . . . . 49
Section 10.02. Survival of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.03. Monies to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.04. Monies to Be Returned to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.05. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent of Holders . . . . . . . . . . . . . . . . . 53
Section 11.02. Amendments to this Agreement with Consent of Holders . . . . . . . . . . . . . . . . . . 54
Section 11.03. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.04. Notation on or Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.05. Indenture Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.06. Amendments, Waivers, Etc. of Other Operative Agreements . . . . . . . . . . . . . . . . . 55
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Section 11.07. Trust Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 12.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.03. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.04. Rules by Indenture Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.05. Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.06. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.07. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.09. Applicability Only to Original Holders . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of Lease . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE] . . . . . . . . . . . . . . . . . . . 61
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N605SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N605SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N605SW-I
CERTIFICATES
Section 15.01. Conditions Precedent to Issuance of Series SWA 1995 Trust N605SW Certificates . . . . . . 61
Section 15.02. Payment upon Issuance of Series SWA 1995 Trust N605SW Certificates . . . . . . . . . . . 62
Section 15.03. Special Provision Governing Refinancing of the Series SWA 1995 Trust N605SW-I
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
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Section 15.04. Special Provision for Payments in Respect of the Series SWA 1995 Trust N605SW-I
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 15.05. Increased Costs, Break Amount, Additional Interest, Taxes, Etc . . . . . . . . . . . . . 62
EXHIBITS
Exhibit A - Form of Series SWA 1995 Trust N605SW-I Certificate
Exhibit A-1 - Form of Series SWA 1995 Trust N605SW Installment Certificates
Exhibit A-2 - Form of Series SWA 1995 Trust N605SW Serial Certificates
Exhibit B - Maturity Dates, Principal Amounts and Interest Rates on Series SWA 1995 Trust N605SW
Certificates
Exhibit B-1 - Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 - Issuance of Series SWA 1995 Trust N605SW Certificates
Exhibit C - [FORM OF] Trust Agreement and Trust Indenture and Security Agreement Supplement
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TRUST INDENTURE AND SECURITY AGREEMENT
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of
August 1, 1995, is between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association organized under the laws of the United States, in
its individual capacity only as expressly provided herein and otherwise solely
as Owner Trustee under the Trust Agreement (capitalized terms used herein
having the respective meanings specified therefor in Article 1), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as Indenture Trustee hereunder.
W I T N E S S E T H:
WHEREAS, the Owner Participant and the Owner Trustee in its
individual capacity have entered into the Trust Agreement whereby, among other
things, (i) the Owner Trustee has established a certain trust for the use and
benefit of the Owner Participant, subject, however, to the Indenture Estate
created pursuant hereto for the use and benefit of, and with the priority of
payment to, the holders of the Certificates issued hereunder, and (ii) the
Owner Trustee has been authorized and directed to execute and deliver this
Agreement;
WHEREAS, the parties desire by this Agreement, among other
things, (i) to provide for the issuance by the Owner Trustee of the Series SWA
1995 Trust N605SW-I Certificates and for the potential issuance by the Owner
Trustee of the Series SWA 1995 Trust N605SW Certificates in respect of the
refinancing and redemption of the Series SWA 1995 Trust N605SW-I Certificates
and (ii) to provide for the assignment, mortgage and pledge by the Owner
Trustee to the Indenture Trustee, as part of the Indenture Estate hereunder,
among other things, of certain of the Owner Trustee's right, title and interest
in and to the Aircraft and the Operative Agreements and certain payments and
other amounts received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's obligations to
the Indenture Trustee, for the ratable benefit and security of the Holders; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner Trustee and the Indenture
Trustee, for the uses and purposes herein set forth, in accordance with its
terms, have been done and performed and have happened;
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GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND SECURITY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal of, Premium, if
any, and interest on, Break Amount, if any, and all other amounts due with
respect to, all Certificates from time to time Outstanding and all other
amounts due to the Holders hereunder and under the Participation Agreement and
the performance and observance by each of the Company and the Owner Trustee of
all the agreements, covenants and provisions contained herein and in the
Operative Agreements to which it is a party, for the benefit of Indenture
Trustee and the Holders, and for the uses and purposes hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of the sum of $1 paid to the
Owner Trustee by the Indenture Trustee at or before the delivery hereof, the
receipt whereof is hereby acknowledged, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time, a
security interest in and mortgage lien on all estate, right, title and interest
of the Owner Trustee in, to and under the following described property, rights,
interests and privileges, other than Excluded Payments (which collectively,
including all property hereafter specifically subjected to the lien of this
Agreement by any instrument supplemental hereto, but excluding the Excluded
Payments, are herein called the "Indenture Estate"):
(1) the Aircraft (including the Airframe and the
Engines originally installed thereon on the Delivery Date), and all
replacements thereof and substitutions therefor in which the Owner
Trustee shall from time to time acquire an interest in accordance with
the Lease, as more particularly described in the Trust Supplement and
the Lease Supplement executed and delivered with respect to the
Aircraft or any such replacements or substitutions therefor, as
provided in this Agreement, and all Records maintained with respect to
the foregoing property;
(2) the Lease and all Rent thereunder, including,
without limitation, all amounts of Interim Rent, Basic Rent,
Supplemental Rent, payments of any kind required to be made by the
Company thereunder (including the purchase price for the Aircraft
pursuant to Section 18.2 of the Lease) and any sales proceeds of the
Aircraft sold pursuant to Section 9 of the Lease or otherwise; the
Purchase Agreement (to the extent assigned by the Purchase Agreement
Assignment); all subleases of the Airframe and the Engines and all
rent thereunder to the extent assigned to the Owner Trustee by Lessee;
the Purchase Agreement Assignment; the Bills of Sale; the
Participation Agreement; and the Manufacturer's Consent; including,
without limitation, in respect of each of the foregoing documents and
instruments, all rights of the Owner Trustee to receive any payments
or other amounts or to exercise any election or option or to make any
decision or determination or to give or receive any notice, consent,
waiver or approval or to take any other action under or in respect of
any such document or to accept surrender or redelivery of the Aircraft
or any part thereof, as well as all the rights, powers and remedies on
the part of the Owner Trustee, whether acting under any such document
or by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default;
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(3) all rents, issues, profits, revenues and
other income of the property subjected or required to be subjected to
the Lien of this Agreement;
(4) all requisition proceeds with respect to the
Aircraft or any part thereof and all insurance proceeds with respect
to the Aircraft or any part thereof;
(5) all moneys and securities now or hereafter
paid or deposited or required to be paid or deposited to or with the
Indenture Trustee by or for the account of the Owner Trustee pursuant
to any term of any Operative Agreement and held or required to be held
by the Indenture Trustee hereunder; and
(6) all proceeds of the foregoing.
Concurrently with the delivery hereof, the Owner Trustee is
delivering to the Indenture Trustee an executed chattel paper original
counterpart of each of the Lease and the Lease Supplement covering the
Aircraft, together with executed copies of the Trust Agreement and each of the
other Indenture Documents (other than the Purchase Agreement, the Participation
Agreement and the FAA bills of sale). All property referred to in this
Granting Clause, whenever acquired by the Owner Trustee, shall secure all
obligations under and with respect to the Certificates at any time Outstanding.
Any and all properties referred to in this Granting Clause which are hereafter
acquired by the Owner Trustee, shall, without further conveyance, assignment or
act by the Owner Trustee or the Indenture Trustee thereby become and be subject
to the security interest hereby granted as fully and completely as though
specifically described herein.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Indenture Trustee and the Holders from time to
time, without any priority of any one Certificate over any other, and for the
uses and purposes and subject to the terms and provisions set forth in this
Agreement.
The Owner Trustee agrees that this Agreement is intended to
and shall create and grant a security interest in the Aircraft to the Indenture
Trustee, which security interest shall attach on the Delivery Date. The
security interest created by this Agreement and granted to the Indenture
Trustee hereunder in the Indenture Estate other than in the Aircraft shall
attach in the case of each other item of property included in the Indenture
Estate upon the delivery thereof or upon the Owner Trustee's acquiring rights
in such property.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Agreements to which it is a party, to perform all of the
obligations assumed by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Indenture Trustee and the Holders
shall have no obligation or liability under any of the Operative Agreements to
which the Owner Trustee is a party by reason of or arising out of the
assignment hereunder, nor shall the Indenture Trustee or the Holders be
required or obligated in any manner to perform or fulfill any obligations of
the Owner Trustee under any of
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the Operative Agreements to which the Owner Trustee is a party, or, except as
herein expressly provided, to make any payment, or to make any inquiry as to
the nature or sufficiency of any payment received by it, or present or file any
claim, or take any action to collect or enforce the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
The Owner Trustee does hereby constitute the Indenture Trustee
the true and lawful attorney of the Owner Trustee, irrevocably, with full power
(in the name of the Owner Trustee or otherwise) to ask, require, demand,
receive and, to the extent permitted by Article 8 hereof (if an Event of
Default shall have occurred and be continuing), give acquittance for any and
all moneys and claims for moneys due and to become due to the Owner Trustee
(other than Excluded Payments) under or arising out of any Indenture Document
and all other property which now or hereafter constitutes part of the Indenture
Estate, to endorse any checks or other instruments or orders in connection
therewith and, to file any claims or take any action or institute any
proceedings which the Indenture Trustee may deem to be necessary or advisable
in the premises. The Owner Trustee has directed the Company to make all
payments of Rent (other than Excluded Payments) payable to the Owner Trustee by
the Company and all other amounts which are required to be paid to or deposited
with the Owner Trustee pursuant to the Lease directly to the Indenture Trustee
at such address as the Indenture Trustee shall specify, for application as
provided in this Agreement. The Owner Trustee agrees that promptly on receipt
thereof, it will transfer to the Indenture Trustee any and all moneys from time
to time received by it constituting part of the Indenture Estate, for
distribution by the Indenture Trustee pursuant to this Agreement, except that
the Owner Trustee shall accept for distribution pursuant to the Trust Agreement
any amounts distributed to it by the Indenture Trustee as expressly provided in
this Agreement and any Excluded Payments.
The Owner Trustee agrees that at any time and from time to
time, upon the written request of the Indenture Trustee, the Owner Trustee will
promptly and duly execute and deliver or cause to be duly executed and
delivered any and all such further instruments and documents as the Indenture
Trustee may reasonably deem desirable in obtaining the full benefits of the
assignment hereunder and of the rights and powers herein granted.
The Owner Trustee does hereby warrant and represent that it
has not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of its
right, title or interest hereby assigned, to anyone other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement
amending or supplementing any of the Operative Agreements, execute any waiver
or modification of, or consent under the terms of any of the Operative
Agreements, settle or compromise any claim (other than claims in respect of
Excluded Payments) against the Company arising under any of the Operative
Agreements, or submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Operative Agreements,
to arbitration thereunder.
The Owner Trustee does hereby ratify and confirm the Indenture
Documents and does hereby agree that (except as permitted herein) it will not
take or omit to take any action, the taking or omission of which would result
in an alteration or impairment of any of the Indenture Documents or of any of
the rights created by any thereof or the assignment hereunder.
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Notwithstanding the Granting Clause, any of the preceding
paragraphs or any other provision of this Indenture, there are hereby expressly
excluded from the foregoing grant, bargain, sale, assignment, transfer,
conveyance, mortgage, pledge and security interest all Excluded Payments.
Further, nothing in the Granting Clause or any of the preceding paragraphs
shall impair in any respect the rights of the Owner Trustee or the Owner
Participant under Section 9.13 or 11.06.
IT IS HEREBY COVENANTED AND AGREED by and among the parties
hereto as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article 1 have the
meanings assigned to them in this Article 1, and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(3) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision; and
(4) unless otherwise specified, all references in
this Agreement to Articles, Sections and Exhibits refer to Articles,
Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Paying Agent or Registrar, as the context
may require.
"Bankruptcy Code" means the United States Bankruptcy Code of
1978, as amended, or any successor statute.
"Basis Point" shall have the meaning specified therefor in
Exhibit A.
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"Break Amount" shall have the meaning specified therefor in
Section 15.05(b).
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in the
City of Dallas, Texas; New York, New York; the city and state in which (i) so
long as any Certificates shall be Outstanding, the Indenture Trustee and (ii)
thereafter, the Owner Trustee, has its principal place of business; and the
city and state in which the Indenture Trustee or the Owner Trustee, as the case
may be, receives and disburses funds; provided, however, that so long as the
Series SWA 1995 Trust N605SW-I Certificates are Outstanding, such day must also
be a day on which dealings are carried on in the applicable offshore dollar
interbank market.
"Certificate" or "Certificates" means any certificate or other
debt instrument issued under this Agreement, including the Series SWA 1995
Trust N605SW-I Certificates and the Series SWA 1995 Trust N605SW Certificates,
if any, issued hereunder.
"Company" means Southwest Airlines Co., a Texas corporation,
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company
executed on its behalf by a Responsible Company Officer of the Company.
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Debt" means any liability for borrowed money, or any
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
"Debt Rate" shall have the meaning specified therefor in
Exhibit A.
"Defaulted Installment" shall have the meaning specified
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
in Section 2.08.
"Defeasance Trustee" shall have the meaning specified therefor
in Section 10.05.
"Deferred Equity Amount" shall have the meaning specified in
Section 8(dd) of the Participation Agreement.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System or
any governmental authority which is the successor thereto, as in effect from
time to time.
"Eurocurrency Reserve Percentage" for any day means the
reserve percentage applicable in respect of such day under Regulation D of the
Board of Governors of the Federal Reserve System (or any governmental authority
which is the successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
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marginal reserve requirement) for an Original Holder with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities.
"Excluded Payments" means (i) any right, title or interest of
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective, successors, permitted assigns,
directors, officers, employees, servants and agents to any indemnity payment,
including, but not limited to, any payment which by the terms of Section 7(b),
7(c), 7(f), 16, 17 or 18 of the Participation Agreement, Section 5.03 or 7.01
of the Trust Agreement or any section of the Tax Indemnity Agreement or any
corresponding payment under Section 3.5 of the Lease shall be payable to the
Owner Trustee in its individual capacity or to the Owner Participant, as the
case may be, pursuant to the terms of the Operative Agreements, (ii) any
insurance proceeds payable under insurance maintained by the Owner Trustee in
its individual or trust capacity or the Owner Participant (whether directly or
through the Owner Trustee), or to their respective Affiliates, successors,
permitted assigns, directors, officers, employees, servants and agents, (iii)
any insurance proceeds (or proceeds of governmental indemnities in lieu
thereof) payable to the Owner Trustee in its individual capacity or to the
Owner Participant or to their respective Affiliates, successors, permitted
assigns, directors, officers, employees, servants and agents, under any
liability insurance maintained by the Company pursuant to Section 11 of the
Lease or by any other Person (or proceeds of governmental indemnities in lieu
thereof), (iv) payments to the Owner Participant by the Owner Trustee pursuant
to Section 2 of the Participation Agreement and any funds held by the Owner
Trustee or payable to the Owner Participant pursuant to any funding letter
entered into in lieu of the provisions of Section 2 of the Participation
Agreement, (v) amounts paid or payable to the Owner Trustee from Lessee
pursuant to Section 18.2(c) of the Lease, (vi) Transaction Costs or other
amounts or expenses paid or payable to, or for the benefit of, the Owner
Participant pursuant to the Participation Agreement, (vii) the respective
rights of the Owner Trustee in its individual or trust capacity or the Owner
Participant to the proceeds of the foregoing, and (viii) any right to demand,
collect, sue or otherwise receive and enforce the payment of any amount
described in clauses (i) through (vii) above.
"Federal Aviation Act" means Subtitle VII of Title 49, U.S.C.
as amended.
"Fixed Period" means the period after the Floating Period.
"Floating Period" means the period any Series SWA 1995 Trust
N605SW-I Certificate is Outstanding.
"Government Obligations" shall have the meaning specified
therefor in Section 10.05.
"Holder" or "Certificate Holder" means a Person in whose name
a Certificate is registered on the Register.
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Documents" means each and every document or
instrument referred to in the Granting Clause hereof.
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"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Section 8.01.
"Indenture Trustee" means Wilmington Trust Company, and each
other Person which may from time to time be acting as Indenture Trustee in
accordance with the provisions of this Agreement.
"Independent" when used with respect to an engineer, appraiser
or other expert, means an engineer, appraiser or other expert who (i) is in
fact independent, (ii) does not have any direct financial interest or any
material indirect financial interest in the Company or any Affiliate of the
Company and (iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"Independent Investment Banker" means an Independent
investment banking institution of national standing appointed by the Company on
behalf of the Owner Trustee (and reasonably acceptable to the Owner
Participant, which acceptance shall not be unreasonably withheld after notice
to the Owner Participant); provided, that if the Indenture Trustee shall not
have received written notice of such an appointment at least 10 days prior to
the relevant Redemption Date or if a Lease Event of Default shall have occurred
and be continuing, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
"Installment Certificate" means a Certificate, other than a
Series SWA 1995 Trust N605SW-I Certificate, should any such Certificate be
issued hereunder which shall provide for the payments of principal in
installments.
"Installment Payment Amount" means, with respect to each
Installment Certificate, the amount of the installment payment of principal due
and payable on each Installment Payment Date, which amount shall be equal to
the product of the original principal amount of such Certificate and the
Installment Payment Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an
installment payment of principal is due and payable on the Certificates, as set
forth in Exhibit B-l as completed in accordance with Article 15.
"Installment Payment Percentage" means, with respect to each
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-l as completed in accordance with Article 15.
The term "interest" payable, or to be payable, on any date
during the Floating Period in respect of the Series SWA 1995 Trust N605SW-I
Certificates shall include, without limitation, any and all accrued and unpaid
compounded interest thereon.
"Interest Payment Date" means each July 1 and January 1
commencing on January 1, 1996.
"Interest Period" shall have the meaning specified therefor in
Exhibit A.
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"Lease" means the Sale and Lease Agreement, dated as of the
date hereof, between the Owner Trustee, as lessor, and the Company, as lessee,
relating to the Aircraft as such Sale and Lease Agreement may from time to time
be supplemented, amended or modified in accordance with the terms thereof and
this Agreement. The term "Lease" shall also include each Lease Supplement
entered into pursuant to the terms of the Lease.
"Lease Loss Payment Date" means the date on which Stipulated
Loss Value is payable pursuant to Section 10.1.4 of the Lease in connection
with an Event of Loss in respect of the Aircraft.
"Lease Termination Date" means the date the Lease terminates
pursuant to Section 9 of the Lease.
"Lending Office" of any Holder of a Series SWA 1995 Trust
N605SW-I Certificate means the office through which such Holder makes and/or
books and maintains the loan evidenced by its Certificate.
"Maturity Date" means, with respect to the Series SWA 1995
Trust N605SW Certificates, each of the dates specified in Exhibit B as a
maturity date of such Certificates and shall have, in respect of the Series SWA
1995 Trust N605SW-I Certificates, the meaning specified therefor in Exhibit A.
"Officers' Certificate" means a certificate signed in the case
of the Company, by (i) the Chairman of the Board of Directors, the President,
or any Executive or Senior Vice President of the Company, signing alone, or
(ii) any Vice President signing together with the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer or the Controller of the
Company or, in the case of the Owner Trustee, a Responsible Officer of the
Owner Trustee.
"Offshore Rate" shall have the meaning specified therefor in
Exhibit A.
"Opinion of Counsel" means a written opinion of legal counsel,
who in the case of counsel for the Company may be (i) the senior corporate
attorney employed by the Company, (ii) Vinson & Elkins L.L.P. or (iii) other
counsel designated by the Company and who shall be reasonably satisfactory to
the Indenture Trustee or, in the case of legal counsel for the Owner Trustee,
may be (x) Shipman & Goodwin or (y) other counsel designated by the Owner
Trustee and who shall be reasonably satisfactory to the Indenture Trustee.
"Original Holder" means the Original Loan Participant as such
term is defined in the Lease.
"Outstanding", when used with respect to Certificates, means,
as of the date of determination, all Certificates theretofore executed and
delivered under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation
pursuant to Section 2.07 or otherwise;
(ii) Certificates for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates; provided, that
if such Certificates are to be redeemed, notice of such redemption
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has been duly given pursuant to this Agreement or provision therefor
satisfactory to the Indenture Trustee has been made; and
(iii) Certificates in exchange for or in lieu of which
other Certificates have been executed and delivered pursuant to this
Agreement;
provided, however, that in determining whether the Holders of the requisite
aggregate principal amount of Certificates Outstanding have given any request,
demand, authorization, declaration, direction, notice, consent or waiver
hereunder, Certificates owned by or pledged to the Company or any Affiliate of
the Company or the Owner Trustee or the Owner Participant or any Affiliate
thereof, shall (unless all Certificates are then owned thereby) be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, declaration, direction, notice, consent or waiver, only
Certificates which the Indenture Trustee knows to be so owned or so pledged
shall be disregarded. Certificates owned by the Company, or the Owner Trustee
or the Owner Participant, which have been pledged in good faith may be regarded
as Outstanding if the Company, or the Owner Trustee or the Owner Participant,
as the case may be, establishes to the satisfaction of the Indenture Trustee
the pledgee's right to act with respect to such Certificates and that the
pledgee is not the Company, or the Owner Trustee or the Owner Participant or
any Affiliate thereof.
"Owner Trustee" means Shawmut Bank Connecticut, National
Association, not in its individual capacity, except as expressly provided
herein, but solely as trustee under the Trust Agreement, and each other Person
which may from time to time be acting as Owner Trustee in accordance with the
provisions of the Operative Agreements.
"Past Due Rate" means, in respect of any Certificate, the rate
of interest applicable pursuant to the provisions of such Certificate to any
amount of principal or interest payable thereunder not paid when due.
"Paying Agent" means any person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means any Installment Payment Date, Interest
Payment Date or Maturity Date.
"Permitted Investment" means any of the investments permitted
by Section 22.1 of the Lease.
"Premium" means, with respect to each Series SWA 1995 Trust
N605SW Certificate to be redeemed, purchased or otherwise prepaid pursuant to
Article 6, an amount determined as of the Business Day next preceding the
applicable Redemption Date which an Independent Investment Banker determines to
be equal to an excess, if any, of (i) the present values of all remaining
scheduled payments of such principal amount or portion thereof and interest
thereon (excluding interest accrued from the immediately preceding Interest
Payment Date to such Redemption Date) to the Maturity Date of such Certificate
in accordance with generally accepted financial practices assuming a 360-day
year consisting of twelve 30-day months at a discount rate equal to the
Treasury Yield, all as determined by the Independent Investment Banker over
(ii) the unpaid principal amount of such Certificate. Premium shall never be
below zero.
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"Premium Termination Date" means, with respect to each Series
SWA 1995 Trust N605SW Certificate, the date set forth as the "Premium
Termination Date" in Exhibit B hereto completed in accordance with Article 15
for Certificates of the Maturity Date of such Certificate.
"Principal Payment Date" shall have the meaning specified
therefor in Exhibit A.
"Record Date" for the interest or Installment Payment Amount
payable on any Interest Payment Date or Installment Payment Date (other than
the Maturity Date of the Certificates), as the case may be, means the calendar
day (whether or not a Business Day) which is 15 calendar days prior to the
related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are
to be redeemed or purchased pursuant to Section 6.01 or 6.02.
"Redemption Price" means the price at which any or all of the
Certificates (as the context may require) are to be redeemed or purchased,
determined as of the applicable Redemption Date, pursuant to Section 6.01, 6.02
or 15.03, as the case may be.
"Refinancing Date" means the date designated by the Company as
the date for a refinancing of the Certificates in accordance with Section 17 of
the Participation Agreement.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Remaining Weighted Average Life" means, for any Installment
Certificate, at the Redemption Date of such Certificate, the number of days
equal to the quotient obtained by dividing (a) the sum of the products obtained
by multiplying (i) the amount of each then remaining scheduled payment of
principal, including the payment due on the Maturity Date of such Certificate,
by (ii) the number of days from and including the Redemption Date to but
excluding the regularly scheduled date of such scheduled payment of principal;
by (b) the then unpaid principal amount of such Certificate.
"Responsible Company Officer" means, with respect to the
Company or Owner Participant, its Chairman of the Board, its President, the
Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (a) working under the direct supervision of such Chairman
of the Board, President, Chief Financial Officer, Vice President or Treasurer
and (b) whose responsibilities include the administration of the transactions
and agreements, including the Lease, contemplated by the Participation
Agreement.
"Responsible Officer", with respect to Shawmut Bank
Connecticut, National Association, the Owner Trustee or the Indenture Trustee,
means any officer in its Corporate Trust Administration Department or any
officer of the Owner Trustee or the Indenture Trustee, as the case may be,
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of his knowledge of and familiarity with a
particular subject, and in each case whose responsibilities include the
administration of the transactions and agreements, including the Lease,
contemplated by the Participation Agreement.
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"SEC" means the Securities and Exchange Commission.
"Section 18 Refinancing Date" means the date specified by the
Company for the refinancing of the Series SWA 1995 Trust N605SW-I Certificates
in accordance with Section 18 of the Participation Agreement.
"Series SWA 1995 Trust N605SW Certificate" means any
certificate of such designation issued by the Owner Trustee under this
Agreement substantially in the form of Exhibit A-1 or A-2, should any of such
certificates be issued hereunder, and any such certificate issued in
replacement or exchange thereof in accordance with the provisions hereof.
"Series SWA 1995 Trust N605SW-I Certificate" means any
certificate issued by the Owner Trustee under this Agreement, substantially in
the form of Exhibit A, and any such certificate issued in replacement or
exchange thereof in accordance with the provisions hereof.
"Treasury Rate" shall have the meaning specified therefor in
Exhibit A.
"Treasury Yield" means (i) In the case of a Certificate having
a Maturity within one year after the Redemption Date the average yield to
maturity on a government bond equivalent basis of the applicable United States
Treasury Bill due the week of Maturity of such Certificate and (ii) in the case
of a Certificate having a Maturity one year or more after the Redemption Date,
the average yield of the most actively traded United States Treasury Notes (as
reported by Cantor Fitzgerald Securities Corp. on page 5 of Telerate Systems,
Inc., a financial news service, or if such report is not available, a source
deemed comparable by the Independent Investment Banker selected to determine
the Premium and reasonably acceptable to the Company and the Owner Participant)
corresponding in maturity (x) for any Certificate issued in serial form, the
Maturity Date or (y) for any Certificate issued in installment form, to the
Average Life Date, in each case, of such Certificate (or, if there is no
corresponding maturity, an interpolation of maturities by the Independent
Investment Banker), in each case determined by the Independent Investment
Banker selected to determine the Premium based on the average of the yields to
stated maturity determined from the bid prices as of 10:00 A.M. and 2:00 P.M.
New York time, on the second Business Day preceding the Redemption Date.
"Average Life Date" means, with respect to the redemption of an Installment
Certificate, the date which follows the Redemption Date by a period equal to
the Remaining Weighted Average Life of such Certificate.
"Trust Estate" shall have the meaning specified therefor in
the Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Security Agreement", "this Indenture" or
"this Agreement" means this Trust Indenture and Security Agreement, as the same
may from time to time be supplemented, amended or modified, including by any
Trust Supplement.
"Trust Office" means the principal corporate trust office of
the Owner Trustee located at 777 Main Street, Hartford, Connecticut 06115,
Attention: Corporate Trust Administration, or at such other office at which the
Owner Trustee's corporate trust business shall be administered which the Owner
Trustee shall have specified by notice in writing to the Company, the Indenture
Trustee and each Holder.
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"Trust Supplement" means a supplement to the Trust Agreement
and this Agreement substantially in the form of Exhibit C.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
Section 1.02 Other Definitions. For all purposes of this
Agreement, terms defined in the heading and recitals of this Agreement are used
as so defined and capitalized terms used but not defined herein are used as
defined in the Lease.
ARTICLE 2
THE CERTIFICATES
Section 2.01. Certificates; Title and Terms. One or more
Series SWA 1995 Trust N605SW-I Certificates in the aggregate face amount equal
to the Original Holder's Commitment under Section 1(b) of the Participation
Agreement shall be issued on the Delivery Date as provided in Section 3(e) of
the Participation Agreement in substantially the form set forth, and shall bear
interest as provided, in Exhibit A. In the event more than one such Certificate
is so issued, all references in this Indenture to a single Series SWA 1995
Trust N605SW-I Certificate shall be deemed to include each other such
Certificate. Each Series SWA 1995 Trust N605SW-I Certificate shall be dated
the Delivery Date and shall be payable in installments on each Principal
Payment Date as set forth in Annex A to the Series SWA 1995 Trust N605SW-I
Certificate.
In connection with a refinancing of the Series SWA 1995 Trust
N605SW-I Certificate in accordance with Section 18 of the Participation
Agreement and Section 15.01 hereof, an additional series of Certificates may be
issued hereunder. Such additional series of Certificates shall be designated as
Series SWA 1995 Trust N605SW Certificates. The Series SWA 1995 Trust N605SW
Certificates shall be substantially in the form set forth in Exhibit A-l or
A-2. The Series SWA 1995 Trust N605SW Certificates shall be dated the Delivery
Date, shall be issued in the maturities and principal amounts, and shall bear
the interest rates per annum (subject to Section 2.10 hereof), in each case as
specified in Exhibit B to be delivered in connection with such refinancing of
the Series SWA 1995 Trust N605SW-I Certificate in accordance with Section 15.01
of this Agreement. The principal of each Certificate, other than Installment
Certificates, shall be payable in full on the Maturity Date for such
Certificate. The principal of each Installment Certificate shall be payable in
installments, on each Installment Payment Date, in amounts equal to the
Installment Payment Amount for such Installment Payment Date.
The Series SWA 1995 Trust N605SW Certificates shall be issued
in denominations of $1,000 and integral multiples thereof, except that one of
such Certificates may be issued in any denomination. The Series SWA 1995 Trust
N605SW-I Certificates may be issued in any denomination.
The Certificates shall be issued in registered form only. The
Certificates are not redeemable prior to maturity except as provided in this
Agreement. Interest accrued on the Certificates shall be calculated on the
basis set forth therein.
The principal of, Break Amount, if any, Premium, if any, and
interest on the Certificates shall be payable at the principal corporate trust
office of the Indenture Trustee or at any
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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office or agency maintained for such purpose pursuant to Section 2.03,
provided, that subject to Section 15.04, all such amounts (other than those
payable on the Maturity Date of the Installment Certificates) may be payable at
the option of the Indenture Trustee or the Paying Agent by check mailed on or
before the due date by the Indenture Trustee or the Paying Agent to the address
of the Holder entitled thereto as such address shall appear in the Register.
All payments in respect of the Certificates shall be made in
Dollars. Any payment due on any Certificate on a day that is not a Business
Day shall be made on the next succeeding day which is a Business Day and
(provided such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date.
Section 2.02. Execution and Authentication. (a)
Certificates shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its president, a senior vice president, a vice
president, an assistant vice president, its treasurer, its secretary, an
assistant secretary or an assistant treasurer.
(b) If any officer of the Owner Trustee executing the
Certificates by facsimile signature no longer holds that office at the time the
Certificate is executed on behalf of the Owner Trustee, the Certificate shall
be valid nevertheless.
(c) At any time and from time to time after the execution
of the Certificates, the Owner Trustee may deliver such Certificates to the
Indenture Trustee for authentication and, subject to the provisions of Section
2.10, the Indenture Trustee shall authenticate the Certificates by manual
signature upon written orders of the Owner Trustee. Certificates shall be
authenticated on behalf of the Indenture Trustee by any authorized officer or
signatory of the Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for
any purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner Trustee by the manual or facsimile signature of the officer
of the Owner Trustee specified in the first sentence of Section 2.02(a) and
until authenticated on behalf of the Indenture Trustee by the manual signature
of the officer or signatory of the Indenture Trustee specified in the second
sentence of Section 2.02(c). Such signatures shall be conclusive evidence that
such Certificate has been duly executed, authenticated and issued under this
Agreement.
Section 2.03. Registrar and Paying Agent. The Indenture
Trustee shall maintain an office or agency where the Certificates may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where (subject to Sections 2.04 and 2.08) the Certificates may
be presented for payment or for exchange (the "Paying Agent"). The Registrar
shall keep a register (the "Register") with respect to the Certificates and to
their transfer and exchange and the payments of Installment Payment Amounts
thereon, if any. The Indenture Trustee may appoint one or more co-registrars
(the "Co-Registrars") and one or more additional Paying Agents for the
Certificates and the Indenture Trustee may terminate the appointment of any
Co-Registrar or Paying Agent at any time upon written notice. The term
"Registrar" includes any Co-Registrar. The term "Paying Agent" includes any
additional Paying Agent.
The Indenture Trustee shall initially act as Registrar and
Paying Agent.
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Section 2.04. Transfer and Exchange. At the option of the
Holder thereof, Series SWA 1995 Trust N605SW-I Certificates or Series SWA 1995
Trust N605SW Certificates may be exchanged for an equal aggregate initial
principal amount of other Series SWA 1995 Trust N605SW-I Certificates or Series
SWA 1995 Trust N605SW Certificates of the same maturity and type, dated the
Delivery Date, and of any authorized denominations or transferred upon
surrender of the Series SWA 1995 Trust N605SW-I Certificates or Series SWA 1995
Trust N605SW Certificates to be exchanged or transferred at the principal
corporate trust office of the Indenture Trustee, or at any office or agency
maintained for such purpose pursuant to Section 2.03. Whenever any Series SWA
1995 Trust N605SW-I Certificate or Series SWA 1995 Trust N605SW Certificate is
so surrendered for exchange, the Owner Trustee shall execute, and the Indenture
Trustee shall authenticate and deliver, the replacement Series SWA 1995 Trust
N605SW-I Certificate or Series SWA 1995 Trust N605SW Certificate which the
Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Owner Trustee,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Certificates surrendered upon such registration of
transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Holder or any transferee
for any registration of transfer or exchange of Certificates, but the Registrar
may, as a condition to any transfer or exchange hereunder require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of such transfer or exchange of
Certificates.
The Registrar shall not be required to register the transfer
of or to exchange any Certificate called for redemption or purchase pursuant to
Section 6.01 or 6.02.
Section 2.05. Holder Lists; Ownership of Certificates. (a)
The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semiannually on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders.
(b) Ownership of the Certificates shall be proved by the
Register kept by the Registrar. Prior to due presentment for registration of
transfer of any Certificate, the Owner Trustee, the Owner Participant, the
Company, the Indenture Trustee, the Paying Agent and the Registrar may deem and
treat the Person in whose name any Certificate is registered as the absolute
owner of such Certificate for the purpose of receiving payment of principal
(including, subject to the provisions herein regarding the applicable record
dates, Installment Payment Amounts) of, Premium, if any, and (subject to the
provisions herein regarding the applicable record dates), interest on such
Certificate
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and for all other purposes whatsoever, whether or not such Certificate is
overdue, and none of the Owner Trustee, the Owner Participant, the Company, the
Indenture Trustee, the Paying Agent or the Registrar shall be affected by
notice to the contrary.
Section 2.06. Mutilated, Destroyed, Lost or Stolen
Certificates. If any Certificate shall become mutilated, destroyed, lost or
stolen, the Owner Trustee shall, upon the written request of the Holder of such
Certificate, issue and execute, and the Indenture Trustee shall authenticate
and deliver, in replacement thereof, as applicable, a new Series SWA 1995 Trust
N605SW-I Certificate or a new Series SWA 1995 Trust N605SW Certificate of the
same type and having the same maturity, payable to the same Holder in the same
principal amount and dated the same date as the Certificate so mutilated,
destroyed, lost or stolen. If the Certificate being replaced has become
mutilated, such Certificate shall be surrendered to the Indenture Trustee. If
the Certificate being replaced has been destroyed, lost or stolen, the Holder
of such Certificate shall furnish to the Owner Trustee and the Indenture
Trustee such security or indemnity as may be required by it to save the Owner
Trustee and the Indenture Trustee harmless and evidence satisfactory to the
Owner Trustee and the Indenture Trustee of the destruction, loss or theft of
such Certificate and of the ownership thereof; provided, however, that if the
affected Holder is the Original Holder, the written notice of such destruction,
loss or theft and such ownership and the written undertaking of such Holder
delivered to the Owner Trustee and the Indenture Trustee to hold harmless the
Owner Trustee and the Indenture Trustee in respect of the execution,
authentication and delivery of such new Certificate shall be sufficient
evidence, security and indemnity.
Section 2.07. Cancellation. The Registrar and any Paying
Agent shall forward to the Indenture Trustee all Certificates surrendered to
them for replacement, redemption, registration of transfer, exchange or
payment. The Indenture Trustee shall cancel all Certificates surrendered for
replacement, redemption, registration of transfer, exchange, payment or
cancellation and shall destroy cancelled Certificates.
Section 2.08. Payment on Certificates; Defaulted Principal
and Interest. (a) The Indenture Trustee will arrange directly with any Paying
Agent for the payment, or the Indenture Trustee will make payment, all pursuant
to Section 2.09, of the principal of, the Break Amount, if any, Premium, if
any, and interest on, and any other amounts payable on or in respect of each
Certificate or to the Holder thereof hereunder. Interest, principal and other
amounts payable on or in respect of the Series SWA 1995 Trust N605SW-I
Certificate shall be paid as provided for therein and in Article 15. Payment on
Series SWA 1995 Trust N605SW Certificates in respect of interest and
Installment Payment Amounts, if any, payable on an Interest Payment Date or
Installment Payment Date, respectively (other than the Maturity Date of the
Series SWA 1995 Trust N605SW Certificates) shall be paid in Dollars on each
Interest Payment Date or Installment Payment Date (other than the Maturity Date
of such Series SWA 1995 Trust N605SW Certificates), as the case may be, to the
Holder thereof at the close of business on the relevant Record Date; provided,
however, that the Paying Agent will, at the request of the Indenture Trustee
and may, at its option, pay such interest and Installment Payment Amounts
(other than those payable on the Maturity Date of the Installment Certificate)
by check mailed on or before the due date to such Holder's address as it
appears on the Register. Otherwise, principal of Series SWA 1995 Trust N605SW
Certificates and Premium, if any, with respect thereto, shall be payable only
against presentation and surrender thereof at the principal corporate trust
office of the Indenture Trustee or at the office of the Paying Agent maintained
for such purpose pursuant to Section 2.03.
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A Holder shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal amount of,
Premium, if any, Break Amount, if any, and interest on all Certificates held by
such Holder and all other sums payable to such Holder hereunder, under such
Certificates and under the Participation Agreement shall have been paid in
full.
(b) Any Installment Payment Amount payable on an
Installment Payment Date (other than the Maturity Date with respect to a
Certificate) or any interest payable on an Interest Payment Date on any Series
SWA 1995 Trust N605SW Certificate which is not punctually paid on such
Installment Payment Date or such Interest Payment Date, as the case may be
(herein called, respectively, a "Defaulted Installment" and "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Record Date by virtue of his having been such Holder; and such Defaulted
Installment or Defaulted Interest may be paid by the Indenture Trustee, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Indenture Trustee may elect to make
payment of any Defaulted Installment or Defaulted Interest, as the
case may be, to the Person in whose name any Series SWA 1995 Trust
N605SW Certificate is registered at the close of business on a special
record date for the payment of such Defaulted Installment or Defaulted
Interest, as the case may be, which shall be fixed in the following
manner. The Indenture Trustee shall notify the Paying Agent in writing
of the amount of Defaulted Installment or Defaulted Interest, as the
case may be, proposed to be paid on each such Certificate and the date
of the proposed payment, and at the same time the Indenture Trustee
shall make arrangements to set aside an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Installment or Defaulted Interest, as the case may be, prior to the
date of the proposed payment, to be held in trust for the benefit of
the Persons entitled to such Defaulted Installment or Defaulted
Interest, as the case may be, as this clause provides and shall fix a
special record date for the payment of such Defaulted Installment or
Defaulted Interest, as the case may be, which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment. The Indenture Trustee shall promptly notify the Owner
Trustee, the Company and the Registrar of such special record date and
shall cause notice of the proposed payment of such Defaulted
Installment or Defaulted Interest, as the case may be, and the special
record date therefor to be mailed, first class postage prepaid, to
each Holder of a Series SWA 1995 Trust N605SW Certificate at its
address as it appears in the Register, not less than 10 days prior to
such special record date. Notice of the proposed payment of such
Defaulted Installment or Defaulted Interest, as the case may be, and
the special record date therefor having been mailed, as aforesaid,
such Defaulted Installment or Defaulted Interest, as the case may be,
shall be paid to the Persons in whose names the applicable Series SWA
1995 Trust N605SW Certificates are registered on such special record
date and shall no longer be payable pursuant to the following clause
(2).
(2) The Indenture Trustee may make, or cause to
be made, payment of any Defaulted Installment or Defaulted Interest,
as the case may be, in any other lawful manner not inconsistent with
the requirements of any securities exchange on which Series SWA 1995
Trust N605SW Certificates may be listed, and upon such notice as may
be required by such exchange, if such payment shall be deemed
practicable by the Indenture Trustee.
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Any interest, principal or other amount payable on the Series
SWA 1995 Trust N605SW-I Certificates which is not punctually paid when due
shall be paid as provided in such Certificates.
(c) The Indenture Trustee shall require each Paying Agent
to agree in writing that such Paying Agent will hold in trust, for the benefit
of the Holders and the Indenture Trustee, all money held by such Paying Agent
for the payment of the principal of, Break Amount, if any, Premium, if any, or
interest or any other amounts payable to any Holder hereunder or under the
Participation Agreement and shall give to the Indenture Trustee notice of any
default in the making of any such payment upon the Certificates. The Indenture
Trustee at any time may require a Paying Agent to repay to the Indenture
Trustee all money held by it. Upon so doing the Paying Agent shall have no
further liability for the money so paid.
Section 2.09. Payment from Indenture Estate Only. All
amounts payable by the Indenture Trustee and the Owner Trustee under the
Certificates and this Agreement shall be made only from the income and proceeds
of the Indenture Estate and from the other amounts specified in Section 3.03.
Each Holder of a Certificate, by its acceptance of such Certificate, agrees
that (a) it will look solely to the income and proceeds of the Indenture Estate
and from the other amounts specified in Section 3.03 for the payment of such
amounts, to the extent available for distribution to it as herein provided, and
(b) none of the Owner Trustee, the Owner Participant or the Indenture Trustee
is or shall be personally liable to any Holder of any Certificate for any
amount payable under such Certificate or this Agreement or, except as expressly
provided in this Agreement in the case of the Owner Trustee and the Indenture
Trustee, for any liability thereunder.
Shawmut Bank Connecticut, National Association is entering
into this Agreement solely as Owner Trustee under the Trust Agreement and not
in its individual capacity, and in no case whatsoever shall Shawmut Bank
Connecticut, National Association (or any entity acting as successor trustee
under the Trust Agreement) be personally liable for, or for any loss in respect
of, any statements, representations, warranties, agreements or obligations
hereunder or thereunder; provided, that Shawmut Bank Connecticut, National
Association shall be liable hereunder in its individual capacity, (i) for the
performance of its agreements in its individual capacity hereunder and under
Section 8 of the Participation Agreement, and (ii) for its own willful
misconduct or gross negligence. If a successor Owner Trustee is appointed in
accordance with the terms of the Trust Agreement and the Participation
Agreement, such successor Owner Trustee shall, without any further act, succeed
to all of the rights, duties, immunities and obligations hereunder, and its
predecessor Owner Trustee and Shawmut Bank Connecticut, National Association
shall be released from all further duties and obligations hereunder, without
prejudice to any claims against Shawmut Bank Connecticut, National Association
or such predecessor Owner Trustee for any default by Shawmut Bank Connecticut,
National Association or such predecessor Owner Trustee, respectively, in the
performance of its obligations hereunder prior to such appointment.
Section 2.10. Execution, Delivery and Dating of
Certificates upon Issuance. The Owner Trustee shall issue and execute, and the
Indenture Trustee shall authenticate and deliver, the Certificates for original
issuance upon payment of an amount equal to the aggregate original principal
amount of the Series SWA 1995 Trust N605SW-I Certificates to be issued at such
time in the manner contemplated by Section 2 of the Participation Agreement.
Each Certificate issued hereunder shall be dated the Delivery Date, and the
Indenture Trustee shall note thereon, if issued after the Delivery Date, the
date through which has been paid interest thereon. Interest shall accrue on
the Series SWA
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1995 Trust N605SW Certificates only from the date of issuance of such
Certificate pursuant to Section 17 or 18.
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF FUNDS IN THE INDENTURE ESTATE
Section 3.01. [Reserved for Potential Future Use]
Section 3.02. Payment in Case of Redemption of
Certificates. (a) Except as otherwise provided in Section 3.05, in the event
the Certificates are redeemed in accordance with the provisions of Section
6.01(a) or (b), the Indenture Trustee will apply on the Redemption Date any
amounts then held by it in the Indenture Estate and received by it from or on
behalf of the Owner Trustee or, as assignee of the Owner Trustee, from the
Company, including, without limitation, pursuant to Section 9, 10, 11 or
(subject to Section 7.03) 18.2 of the Lease in the following order of priority:
first, so much thereof as was received by the Indenture
Trustee with respect to the amounts due to it pursuant to Section 9.06
shall be applied to pay the Indenture Trustee such amounts;
second, so much thereof remaining as shall be required to pay
an amount equal to the Redemption Price on the Outstanding
Certificates pursuant to Section 6.01(a) or (b), as the case may be,
on the Redemption Date shall be applied to the redemption of the
Certificates on the Redemption Date; and
third, the balance, if any, thereof remaining thereafter shall
be distributed to the Owner Trustee to be held or distributed to the
Owner Participant in accordance with the terms of the Trust Agreement.
(b) In the case of any refinancing or purchase of the
Certificates pursuant to Section 6.01(c) or 6.02, the Indenture Trustee will
apply on the Redemption Date the amounts received by it from or on behalf of
the Owner Trustee, or as assignee of the Owner Trustee, from the Company, to
the payment of the Redemption Price of the Outstanding Certificates pursuant to
Section 6.01(c) or 6.02, as the case may be, on the Redemption Date; it being
understood that any such payment shall be a refinancing or purchase of the
indebtedness represented by the Outstanding Certificates and is not, and shall
not be construed so as to be, a redemption thereof or payment or prepayment
thereon.
Section 3.03. Application of Rent When No Indenture Event
of Default Is Continuing. Except as otherwise provided in Section 3.02, 3.04,
3.05 or 3.06, each amount of Basic Rent or Advance (as defined in Section 3.8
of the Lease) received by the Indenture Trustee from the Owner Trustee or, as
assignee of the Owner Trustee, from the Company, any payment of interest
payable on any Interest Payment Date on overdue installments of Basic Rent, the
amount received from the Owner Participant pursuant to Section 8(dd) of the
Participation Agreement as the Deferred Equity Amount, together with any amount
received by the Indenture Trustee pursuant to Section 8.03(e)(i), shall be
distributed by the Indenture Trustee in the following order of priority:
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first, so much of such aggregate amount as shall be required
to pay in full the interest, principal of, Premium, if any, Break
Amount, if any, and any other amounts then due on, all Outstanding
Certificates shall be distributed to the Persons entitled thereto; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Premium, if any, Break Amount, if any, such other
amounts payable to the Holders, and without any preference or priority
of one Certificate over another, ratably according to the aggregate
amount so due for interest, principal, Premium, if any, Break Amount,
if any, and such other amounts at the date fixed by the Indenture
Trustee for the distribution of such payments or amounts;
second, so much of such aggregate amount remaining as shall be
required to pay any amount due the Indenture Trustee pursuant to
Section 9.06 shall be applied to pay the Indenture Trustee such
amounts; and
third, the balance, if any, of such aggregate amount remaining
thereafter shall be distributed to the Owner Trustee to be held or
distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement; provided, however,
that if an Indenture Default shall have occurred and be continuing,
then such balance shall not be distributed as provided in this clause
"third" but shall be held by the Indenture Trustee as part of the
Indenture Estate until whichever of the following shall first occur:
(i) all Indenture Events of Default shall have been cured, in which
event such balance shall, to the extent not theretofore distributed as
provided herein, be distributed as provided in this clause third", or
(ii) Section 3.04 or Section 3.05 shall be applicable, in which event
such balance shall be distributed in accordance with the provisions of
said Section 3.04 or Section 3.05, as the case may be, or (iii) such
installment or payment shall have been held for a period in excess of
183 days (during which no Indenture Event of Default which is not a
Lease Event of Default shall have occurred and be continuing and
during which period the Indenture Trustee and the Holders shall not
have been stayed or otherwise precluded by operation of law from
taking action to accelerate the Certificates or to exercise remedies
hereunder or under the Lease), in which event such balance shall, to
the extent not theretofore applied as provided herein, be distributed
as provided in this clause third".
Section 3.04. Application of Certain Payments in Case of
Requisition or Event of Loss. Except as otherwise provided in Section 3.05, any
amounts received directly or otherwise pursuant to the Lease from any
governmental authority or other Person pursuant to Section 10 of the Lease with
respect to the Airframe or the Airframe and the Engines or engines then
installed on the Airframe as the result of an Event of Loss, to the extent that
such amounts are not required to be paid to the Company pursuant to said
Section 10, and any amounts of insurance proceeds for damage to the Indenture
Estate received directly or otherwise pursuant to the Lease (and not
constituting Excluded Payments) from any insurer pursuant to Section 11 of the
Lease with respect thereto as the result of an Event of Loss, to the extent
such amounts are not required to be paid to the Company pursuant to said
Section 11, shall, except as otherwise provided in the next sentence, be
applied by the Indenture Trustee on behalf of, and as assignee of, the Owner
Trustee in reduction of the Company's obligations to pay Stipulated Loss Value
and the other amounts payable by the Company pursuant to Section 10 of the
Lease and the remainder, if any, shall, except as provided in the next
sentence, be distributed to the Owner Trustee to be held or distributed in
accordance with the terms of the Lease and the Trust Agreement. Any portion of
any such amount referred to in the preceding sentence which is not required to
be so paid to the Company pursuant to the Lease, solely because
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a Lease Default of the type referred to in Section 14.1 or 14.5 of the Lease or
Lease Event of Default shall have occurred and be continuing, shall, subject to
Section 10.04 hereof, be held by the Indenture Trustee on behalf of the Owner
Trustee as security for the obligations of the Company under the Lease and at
such time as there shall not be continuing any Lease Default of the type
referred to in Section 14.1 or 14.5 of the Lease or Lease Event of Default or
such earlier time as shall be provided for in the Lease, or upon satisfaction
and discharge of this Indenture as provided herein, such portion shall be paid
to the Owner Trustee to be held or distributed in accordance with the terms of
the Lease, unless the Indenture Trustee (as assignee from the Owner Trustee of
the Lease) shall have theretofore commenced to exercise remedies pursuant to
Section 15 thereof, in which event such portion shall be distributed in
accordance with the provisions of Section 3.05 hereof.
Section 3.05. Payments During Continuance of Indenture
Event of Default. All payments (except Excluded Payments) received and amounts
held or realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and so long as such an Indenture Event of Default shall be
continuing, and after the Indenture Trustee shall foreclose or enforce this
Indenture or after the Certificates shall have become due and payable as
provided in Section 8.02 (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as
all payments or amounts then held or thereafter received by the Indenture
Trustee as part of the Indenture Estate while such Indenture Event of Default
shall be continuing, shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such payments or amounts as shall be
required to pay the Indenture Trustee all amounts then due it pursuant
to Section 9.06 shall be applied to pay the Indenture Trustee such
amounts;
second, so much of such payments or amounts remaining as shall
be required to (i) pay the expenses incurred (including unbilled
expenses in respect of property delivered or contracted for or
services rendered or contracted for if the amount of such expenses is
liquidated) in using, operating, storing, leasing, controlling or
managing the Indenture Estate, and of all maintenance, insurance,
repairs, replacements, alterations, additions and improvements of and
to the Indenture Estate and to make all payments which the Indenture
Trustee may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the Indenture
Estate or any part thereof (including the employment of engineers and
accountants to examine and make reports upon the properties, books and
records of the Owner Trustee and, to the extent permitted under the
Lease, the Company), all in accordance with Section 8.03(c), shall be
applied for such purposes and (ii) reimburse the Holders in full for
payments made pursuant to Section 9.01(c) (to the extent not
previously reimbursed) shall be distributed to such Holders, and if
the aggregate amount remaining shall be insufficient to reimburse all
such payments in full, it shall be distributed ratably, without
priority of any Certificate over any other, in the proportion that the
aggregate amount of the unreimbursed payments made by each such Holder
pursuant to Section 9.01(c) bears to the aggregate amount of the
unreimbursed payments made by all Holders pursuant to Section 9.01(c);
third, so much of such payments or amounts remaining as shall
be required to pay the principal of, Break Amount, if any, and accrued
interest on all Certificates Outstanding and all other amounts payable
to the Holders hereunder or under the Participation Agreement and then
due and payable, whether by declaration of acceleration pursuant to
Section 8.02 or
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otherwise, shall be applied to the payment of such interest,
principal, Break Amount, if any, and such other amounts; and in case
such payments or amounts shall be insufficient to pay in full the
whole amount so due and unpaid, then to the payment of such interest,
principal, Break Amount, if any, such other amounts and interest,
without any preference or priority of one Certificate over another,
ratably according to the aggregate amount so due for interest,
principal, Break Amount, if any, and such other amounts at the date
fixed by the Indenture Trustee for the distribution of such payments
or amounts; and
fourth, the balance, if any, of such payments or amounts
remaining thereafter shall be distributed to the Owner Trustee to be
held or distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement.
Section 3.06. Payments for Which Application Is Provided in
Other Documents. Except as otherwise provided in this Agreement, any payment
received by the Indenture Trustee for which provision as to the application
thereof is made in the Lease or the Participation Agreement shall be
distributed to the Person for whose benefit such payments were made in
accordance with, and subject to the terms, thereof and hereof. The Indenture
Trustee shall be obligated to distribute any Excluded Payments received by the
Indenture Trustee promptly upon receipt thereof by the Indenture Trustee to the
Person entitled thereto.
Section 3.07. Payments for Which No Application Is
Otherwise Provided. Except as otherwise provided in Section 3.05:
(a) any payment received by the Indenture Trustee for
which no provision as to the application thereof is made elsewhere in
this Agreement, and
(b) any payment received and amounts realized by the
Indenture Trustee with respect to the Aircraft to the extent received
or realized at any time after the conditions set forth in Article 10
for the satisfaction and discharge of this Agreement or for the
defeasance of the Certificates shall have been duly satisfied, as well
as any other amounts remaining as part of the Indenture Estate after
such satisfaction shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance, if any, of such aggregate amount
remaining thereafter shall be distributed to the Owner Trustee
to be held or distributed in accordance with the terms of the
Trust Agreement.
Section 3.08. Application of Payments. Each payment of
principal and interest or other amounts due hereunder to the Indenture Trustee
or any Holder or in respect of each Certificate shall, except as otherwise
expressly provided herein, be applied, first, to the payment of any amount
(other than the principal of or Premium, Break Amount or interest on such
Certificate) due hereunder or in respect of such Certificate, second, to the
payment of Premium or Break Amount, if any, and interest on such Certificate
(as well as any interest on overdue principal and, to the extent permitted by
law, interest and other amounts payable hereunder and thereunder) due
thereunder, third, to the
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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payment of the principal of such Certificate then due and fourth, the balance,
if any, remaining thereafter, to the payment of the principal of such
Certificate remaining unpaid (provided, that such Certificate shall not be
subject to prepayment or purchase without the consent of the affected Holder
except as expressly permitted hereby). The amounts paid pursuant to clause
fourth above shall be applied to the installments of principal of such
Certificate in inverse order of maturity.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
Section 4.01. Covenants of the Owner Trustee. The Owner
Trustee hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually
perform its obligations under the Lease and will duly and punctually
pay the principal of, Premium, if any, Break Amount, if any, and
interest on and other amounts due hereunder and under the Certificates
and all other amounts payable by it to the Holders under the
Participation Agreement and the other Operative Agreements;
(ii) the Owner Trustee will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it with respect to any of the properties or assets of
the Indenture Estate and shall, at its own cost and expense, promptly
take such action as may be necessary to discharge duly any such Lessor
Lien, and the Owner Trustee will cause restitution to be made to the
Indenture Estate in the amount of any diminution of the value thereof
as the result of any Lessor Liens attributable to it;
(iii) in the event a Responsible Officer of the
Owner Trustee shall have actual knowledge of an Indenture Event of
Default or Indenture Default or an Event of Loss, the Owner Trustee
will give prompt written notice of such Indenture Event of Default or
Indenture Default or Event of Loss to the Indenture Trustee, the Owner
Participant, the Company and, so long as the Series SWA 1995 Trust
N605SW-I Certificate shall be Outstanding, the Original Holder;
(iv) except as contemplated by the Operative
Agreements, the Owner Trustee will not contract for, create, incur,
assume or permit to exist any Debt, and will not guarantee (directly
or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so
doing, or otherwise), endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the Debt of any
other Person;
(v) the Owner Trustee will not enter into any
activity other than owning the Aircraft, the leasing thereof to the
Company and the carrying out of the transactions contemplated hereby
and by the Participation Agreement, the Trust Agreement and the other
Operative Agreements;
(vi) the Owner Trustee will furnish to the
Indenture Trustee, and the Indenture Trustee will furnish to each
Holder at the time outstanding, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial
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statements and other instruments furnished to the Owner Trustee under
the Lease, including, without limitation, a copy of each report or
notice received pursuant to Section 11 of the Lease, to the extent
that the same shall not have been furnished directly to such Holder or
the Indenture Trustee pursuant to the Lease;
(vii) the Owner Trustee will not (except as
permitted herein) assign or pledge or otherwise dispose of, so long as
this Indenture shall remain in effect and shall not have been
terminated pursuant to Section 10.01, any of its right, title or
interest hereby assigned to anyone other than the Indenture Trustee,
and, with respect to such right, title and interest hereby assigned,
will not, except as provided in this Indenture, (1) accept any payment
that is subjected to the Lien of this Indenture from the Lessee or any
sublessee, enter into any agreement amending or supplementing any of
the Indenture Documents, execute any waiver or modification of, or
consent under, the terms of any of the Indenture Documents, (2)
exercise any rights with respect to the Indenture Estate, (3) settle
or compromise any claim arising under any of the Indenture Documents,
or (4) submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Indenture
Documents to arbitration thereunder; and
(viii) in the event that the Company shall assign
any sublease to the Owner Trustee, the Owner Trustee shall deliver to
the Indenture Trustee a trust supplement confirming the Indenture
Trustee's security interest in such assignment and the sublease
assigned thereby.
Section 4.02. Covenants of Shawmut Bank Connecticut,
National Association. Shawmut Bank Connecticut, National Association, hereby
covenants and agrees that it will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Liens attributable to it with respect to
any of the properties or assets of the Indenture Estate and it shall, at its
own cost and expense, promptly take such action as may be necessary to
discharge duly any such Lessor Lien. Shawmut Bank Connecticut, National
Association, will cause restitution to be made to the Indenture Estate in the
amount of any diminution of the value thereof as the result of any Lessor Liens
thereon attributable to it.
ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
Section 5.01. Disposition, Substitution and Release of
Property Included in the Indenture Estate During Continuation of Lease. So
long as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the lien of this
Agreement and be leased to the Company under the Lease; provided, that
to the extent permitted by and as provided in the Lease, the Company
shall have the right, at any time and from time to time, without any
release from or consent by the Owner Trustee or the Indenture Trustee,
to remove, replace and pool Parts and to make alterations,
improvements and modifications in, and additions to, the Aircraft. The
Indenture Trustee
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agrees that, to the extent permitted by and as provided in the Lease,
title to any such Part shall vest in the Company. The Indenture
Trustee shall from time to time execute an appropriate written
instrument or instruments to confirm the release of the security
interest of the Indenture Trustee in any Part as provided in this
Section 5.01, in each case upon receipt by the Indenture Trustee of a
Company Request stating that said action was duly taken by the Company
in conformity with this Section 5.01 and that the execution of such
written instrument or instruments is appropriate to evidence such
release of a security interest under this Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
Occurring to Airframe or Engines or upon Voluntary Termination of
Lease with Respect to Engines. Upon (i) the occurrence of an Event of
Loss occurring to the Airframe or an Engine, or (ii) a voluntary
termination of the Lease with respect to an Engine, the Company, in
accordance with the Lease, may, in the case of an Event of Loss which
has occurred to the Airframe, or shall, except as provided in Section
10.2 of the Lease, in the case of an Event of Loss which has occurred
to or termination of the Lease with respect to an Engine, substitute
an airframe or engine, as the case may be, in which case, upon due
satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of
its right, interest and lien in and to the Airframe or such Engine in
accordance with the provisions of the following sentence. The
Indenture Trustee shall execute and deliver to the Owner Trustee an
instrument releasing its lien in and to the Airframe or such Engine
and shall execute for recording in public offices, at the expense of
the Owner Trustee (if requested by the Owner Trustee) or the Company
(if requested by the Company), such instruments in writing as the
Owner Trustee or the Company shall reasonably request and as shall be
reasonably acceptable to the Indenture Trustee in order to make clear
upon public records that such lien has been released under the laws of
the applicable jurisdiction.
Each of the Owner Trustee and the Company hereby waives and releases any and
all rights existing or that may be acquired to any penalties, forfeit or
damages from or against the Indenture Trustee for failure to execute and
deliver any document in connection with the release of a lien or to file any
certificate in compliance with any law or statute requiring the filing of the
same in connection with the release of a lien, except for failure by the
Indenture Trustee to execute and deliver any document or to file any
certificate as may be specifically requested in writing by the Owner Trustee or
the Company and with respect to which the Owner Trustee or the Company shall be
duly entitled.
Section 5.02. Certificates in Respect of Replacement
Aircraft and Engines. Upon the execution and delivery of a Trust Supplement
covering a Replacement Airframe and/or Replacement Engine, as provided in
Section 5.01(b), each Certificate shall be deemed to have been issued in
connection with such Replacement Airframe and/or Replacement Engine and each
Certificate issued thereafter upon a transfer or exchange of, or as a
replacement for, a Certificate, shall be designated as having been issued in
connection with such Replacement Airframe and/or Replacement Engine, but
without any other change therein.
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ARTICLE 6
REDEMPTION OF CERTIFICATES
Section 6.01. Redemption of Certificates upon Certain
Events. (a) If there shall be an Event of Loss to the Aircraft and the
Aircraft is not replaced pursuant to Section 10.1.2 of the Lease, each
Outstanding Certificate shall be redeemed in whole at a Redemption Price equal
to 100% of the outstanding principal amount of such Certificate plus accrued
and unpaid interest thereon to but excluding the applicable Redemption Date
plus, in the case of the Series SWA 1995 Trust N605SW-I Certificates, Break
Amount, if any, and all other amounts payable to the Holders hereunder or under
the Participation Agreement. The Redemption Date for Certificates to be
redeemed pursuant to this Section 6.01(a) shall be the Lease Loss Payment Date.
No Premium shall be paid in the case of a redemption pursuant to any provision
of this Section 6.01(a).
(b) The Certificates shall be redeemed on the Lease
Termination Date or upon the purchase of the Aircraft by the Company at its
option on the Special Purchase Option Date pursuant to Section 18.2(b) of the
Lease (unless the Company shall have elected to assume the rights and
obligations of the Owner Trustee hereunder to the extent and as provided for in
Section 7.03). In the case of any Series SWA 1995 Trust N605SW-I Certificate,
the Redemption Price therefor shall be equal to the unpaid principal amount of
such Certificate as at such date plus accrued and unpaid interest thereon to
but excluding the Redemption Date, the Break Amount, if any, and all other
amounts payable to the Holder thereof hereunder or under any other Operative
Agreement, but without any other premium or penalty. In the case of any Series
SWA 1995 Trust N605SW Certificate, such Redemption Price therefor shall be
equal to the unpaid principal amount of such Certificate as at such Redemption
Date together with an amount equal to the accrued but unpaid interest thereon
and, in the case of each Certificate redeemed prior to the Premium Termination
Date applicable to such Certificate, the Premium, if any. The Redemption Date
for Certificates to be redeemed shall be (A) in the case of a termination of
the Lease pursuant to Section 9 thereof, on the Lease Termination Date or (B)
in the case of purchase of the Aircraft by the Company pursuant to Section
18.2(b) of the Lease, on the Special Purchase Option Date.
(c) (i) The Series SWA 1995 Trust N605SW-I
Certificates may be refinanced in accordance with the provisions of Article 15
hereof and Sections 17 and 18 of the Participation Agreement and (ii) the
Series SWA 1995 Trust N605SW Certificates may be refinanced if all the
conditions to such refunding or refinancing set forth in Section 17 of the
Participation Agreement shall have been satisfied. In any such event, each
Outstanding Certificate may be so refinanced at a Redemption Price determined
in accordance with the procedures described above in Section 6.01(b); provided,
however, that the applicable Redemption Date for the Series SWA 1995 Trust
N605SW-I Certificates to be refinanced pursuant to clause (i) of this Section
6.01(c) shall be the applicable Refinancing Date under Section 17 of the
Participation Agreement or the Section 18 Refinancing Date under Section 18 of
the Participation Agreement, as the case may be, and the applicable Redemption
Date for Certificates to be redeemed pursuant to clause (ii) of this Section
6.01(c) shall be the applicable Refinancing Date under Section 17 of the
Participation Agreement.
Section 6.02. Redemption or Purchase of Certificates Upon
Certain Indenture Events of Default. If the Owner Trustee shall have given
notice of redemption or purchase to the Indenture Trustee pursuant to Section
8.03(e)(ii) each Outstanding Certificate shall be redeemed or purchased in
whole at a Redemption Price equal to 100% of its principal amount plus accrued
and unpaid
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interest thereon (including, without limitation, interest on overdue interest)
to but excluding the applicable Redemption Date as determined below and all
other amounts payable to the Holders hereunder or under the Participation
Agreement and, in the case of the Series SWA 1995 Trust N605SW-I Certificate,
the Break Amount, if any, and, in the case of the Series SWA 1995 Trust N605SW
Certificates, if to be purchased or redeemed pursuant to Section 8.03(e)(ii)(A)
prior to the 181st day after the first occurrence of the relevant Lease Event
of Default, the Premium, if any. The Redemption Date for Certificates to be
redeemed or purchased pursuant to this Section 6.02 shall be the date specified
in the notice given by the Owner Trustee to the Indenture Trustee pursuant to
Section 8.03(e)(ii) (provided, however, that in the case of the Series SWA 1995
Trust N605SW-I Certificates, if such date is the last day of the then current
Interest Period therefor, no Break Amount shall be payable). If the Owner
Trustee elects to purchase the Certificates under Section 8.03(e)(ii), nothing
herein, including use of the terms "Redemption Date" and "Redemption Price"
shall be deemed to result in a redemption of the Certificates.
Section 6.03. Notice of Redemption to Holders. (a) Notice
of redemption or purchase with respect to the Series SWA 1995 Trust N605SW
Certificates shall be given by first-class mail, postage prepaid, mailed not
less than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of such Certificates to be redeemed or purchased, at such Holder's address
appearing in the Register; provided, that in the case of a redemption pursuant
to Section 6.01(b) related to Lessee's exercise of its option pursuant to
Section 9 of the Lease, such notice shall be revocable and shall be deemed
revoked in the event the Lease does not in fact terminate on the related Lease
Termination Date.
All notices of redemption or purchase shall state:
(1) the Redemption Date,
(2) the applicable basis for determining the Redemption
Price,
(3) that on the Redemption Date, the Redemption Price
will become due and payable upon each such Certificate, and that
interest on Certificates shall cease to accrue on and after such
Redemption Date, and
(4) the place or places where such Certificates are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
(b) Notice of redemption of the Series SWA 1995 Trust
N605SW-I Certificate shall be given by the Owner Trustee (or by the Company on
behalf of the Owner Trustee) not less than three Business Days prior to the
Redemption Date, shall be irrevocable and shall be given by telephone, telex,
telecopy, cable or other customary means of communication by the Owner Trustee
or the Company, as the case may be, to the other and to the Indenture Trustee
and to each Original Holder at each such Person's address designated in Section
12.01(a). Notwithstanding any provision to the contrary contained in this
Article 6, the Series SWA 1995 Trust N605SW-I Certificate shall be redeemable
as set forth in this Article 6 and in Article 15 without any premium,
prepayment
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penalty or other cost or expense except for the Break Amount, if any, and the
payment of all other amounts payable to the Holders thereof hereunder and under
the Participation Agreement.
Section 6.04. Deposit of Redemption Price. On or before
the Redemption Date, the Owner Trustee (or any Person on behalf of the Owner
Trustee) shall, to the extent an amount equal to the Redemption Price for the
Certificates to be redeemed or purchased on the Redemption Date shall not then
be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 Noon in immediately available
funds (i) the Redemption Price of the Certificates to be redeemed, refinanced
or purchased, as the case may be, on the Redemption Date and (ii) all other
amounts due and payable hereunder, including any amounts payable to the
Indenture Trustee pursuant to Section 9.06.
Section 6.05. Certificates Payable on Redemption Date.
Notice of redemption, refinancing or purchase having been given as aforesaid
(and not deemed revoked as contemplated in the proviso to Section 6.03(a)), the
Certificates (or the purchase or refinancing price therefor) shall, on the
applicable Redemption Date, become due and payable at the Redemption Price
therefor at the principal corporate trust office of the Indenture Trustee or at
any office or agency maintained for such purposes pursuant to Section 2.03, and
from and after such Redemption Date (unless there shall be a default in the
payment of the Redemption Price) any Certificates then Outstanding shall cease
to bear interest. Unless payment prior to surrender is expressly provided for
herein or in the Participation Agreement, upon surrender of any such
Certificate for redemption or purchase in accordance with said notice such
Certificate shall be paid at the Redemption Price. The Certificates shall not
be subject to prepayment, redemption, refunding or refinancing except as
provided in this Article 6 and in Section 8.02 hereof.
If any Certificate called for redemption or purchase shall not
be so paid upon surrender thereof for redemption or purchase, the principal
amount thereof shall, until paid, continue to bear interest from the applicable
Redemption Date at the interest rate applicable to such Certificate.
ARTICLE 7
MATTERS CONCERNING THE COMPANY
Section 7.01. Repayment of Monies for Certificate Payments
Held by the Indenture Trustee. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Premium, if any, or
interest on any Series SWA 1995 Trust N605SW Certificate, including without
limitation any money deposited pursuant to Article 10 and remaining unclaimed
for two years and eleven months after the due date for such payment, shall be
paid to the Owner Trustee; and the Holders of any Outstanding Certificates
shall thereafter, as unsecured general creditors, look only to the Owner
Participant (to the extent the Owner Trustee distributed any such trust money
to the Owner Participant) and to the Company on behalf of the Owner Trustee for
payment thereof, and all liability of the Indenture Trustee or any such Paying
Agent with respect to such trust money shall thereupon cease; provided, that
the Indenture Trustee or such Paying Agent, before being required to make any
such repayment, may at the expense of the Company cause to be mailed to each
such Holder notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
mailing, any unclaimed balance of such money then remaining will be repaid to
the Owner Trustee as provided herein.
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Section 7.02. [Reserved for Potential Future Use]
Section 7.03. Assumption of Obligations of Owner Trustee by
the Company. In the event that the Company shall have elected to assume all of
the rights and obligations of the Owner Trustee under this Agreement in respect
of the Certificates pursuant to Section 8(r) of the Participation Agreement in
connection with the purchase by the Company of the Aircraft, and if on or prior
to the Special Purchase Option Date (the "Assumption Date") the Indenture
Trustee shall have received:
(a) an instrument of assumption (the "Assumption
Agreement") pursuant to which the Company irrevocably and unconditionally
assumes and undertakes, with full recourse to the Company, the Owner Trustee's
obligations with respect to principal, interest, Break Amount, Premium and all
other amounts payable to the Holders or the Indenture Trustee under the
Certificates then Outstanding, this Agreement, and the Participation Agreement
and which incorporates therein events of default substantially similar in scope
and effect to those set forth in the Lease and covenants substantially similar
to the covenants of the Company under the Lease and the Participation
Agreement;
(b) a supplement to this Agreement and/or such other
instruments and documents (including, without limitation, Uniform Commercial
Code financing statement(s)) covering all of the security interests created by
or pursuant to this Indenture that are not covered by the recording system
established by the Federal Aviation Act as may be necessary (or reasonably
requested by the Indenture Trustee) for the security interest of the Indenture
Trustee in the Aircraft and in the other rights, property and interests
included in the Indenture Estate (other than those rights, property and
interests that depend on the existence of the Trust Estate and the
participation of the Owner Trustee and Owner Participant in the transactions
contemplated by the Participation Agreement and this Indenture) to continue to
be perfected and duly recorded with the Federal Aviation Administration and in
all other places necessary or, in the reasonable opinion of the Indenture
Trustee, advisable under the Uniform Commercial Code;
(c) an insurance report dated the Assumption Date of the
independent insurance broker referred to in Section 11.5 of the Lease and the
certificates of insurance, each in form and substance reasonably satisfactory
to the Indenture Trustee as to the due compliance as of the Assumption Date
with the terms of Section 11 of the Lease (as it relates to the Holders and the
Indenture Trustee) relating to the insurance with respect to the Aircraft;
(d) evidence that as of the Assumption Date, and after
giving effect to the transactions contemplated hereby, the Company has good
title to the Aircraft free and clear of all Liens other than the Lien of, and
the security interest created by, this Indenture and other Permitted Liens
(other than Lessor Liens);
(e) a copy of the application that was filed with the FAA
on the Assumption Date regarding the registration of the Aircraft in the name
of the Company;
(f) a certificate from a Responsible Company Officer of
the Company that no Lease Default of the type referred to in Section 14.1 or
14.5 of the Lease or Lease Event of Default shall have occurred and be
continuing as of the Assumption Date;
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(g) an opinion of the General Counsel of the Company (or
other counsel reasonably satisfactory to the Indenture Trustee) in form and
substance reasonably satisfactory to the Indenture Trustee, addressed to the
Indenture Trustee and dated the Assumption Date, to the effect that (i) the
execution, delivery and performance of the Assumption Agreement and the
supplement to this Indenture referred to in paragraph (b) of this Section 7.03
(and all other instruments and documents the execution of which are necessary
for and directly related to the assumption of the obligations contemplated by
this Section 7.03 or the continued perfection of the security interests
referred to in paragraph (b) of this Section 7.03) have been duly authorized by
the Company by all necessary action; (ii) the Assumption Agreement, such
supplement to this Indenture, all such other documents and instruments referred
to above and the security interests arising therefrom are legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, and except as limited by
applicable laws which may affect the remedies provided for in this Indenture,
which laws, however, do not in the opinion of such counsel make the remedies
provided for in this Indenture inadequate for the practical realization of the
rights and benefits purported to be provided thereby; (iii) the Assumption
Agreement, such supplement and all such other documents and instruments
referred to above do not and will not contravene any provision of the Company's
articles of incorporation or by-laws or any law or regulation applicable to the
Company or any agreement, mortgage or instrument to which the Company is a
party or by which the Company is bound; and (iv) the Indenture Trustee (on
behalf of the Certificate Holders) should continue to be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft
upon and after the assumption of the obligations by the Company, provided, that
the opinion referred to in this clause (iv) need not be delivered to the extent
that the benefits of Section 1110 of the Bankruptcy Code were not, by reason of
a change of law or governmental interpretation thereof, available to the
Indenture Trustee with respect to the Aircraft immediately prior to such
assumption and provided, further, that such opinion may contain qualifications
of the tenor contained in the opinion relating to said Section 1110 delivered
pursuant to Section 4(a)(xi) of the Participation Agreement on the Delivery
Date;
(h) an opinion of Daugherty, Fowler & Peregrin special
counsel in Oklahoma City (or other counsel reasonably acceptable to the
Indenture Trustee) in form and substance reasonably satisfactory to the
Indenture Trustee, addressed to the Indenture Trustee and dated the Assumption
Date, (i) to the effect that all documents executed in connection with the
assumption of the obligations contemplated by this Section 7.03 and required to
be filed with the Federal Aviation Administration are in proper form, and all
steps necessary have been taken, for the Aircraft to be duly registered in the
name of the Company and for the Lien of this Agreement with respect to the
Aircraft and Engines to continue to be duly perfected and of first priority;
and
(i) such other documentation reasonably requested by the
Indenture Trustee (in form and substance reasonably satisfactory to the
Indenture Trustee) to amend the Operative Agreements to give effect to the
foregoing;
then, automatically and without the requirement of further action by any
Person, effective as of the Assumption Date, the Owner Trustee shall be
released from all of its obligations under this Agreement in respect of the
Certificates or otherwise (other than any obligations or liabilities of the
Owner Trustee in its individual capacity incurred on or prior to the Assumption
Date or arising out of or based upon events occurring on or prior to the
Assumption Date, which obligations and
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liabilities shall remain the sole responsibility of the Owner Trustee in its
individual capacity as aforesaid). Promptly upon the filing and recording of
the documents referred to in the opinion of counsel specified in Section (h)
above with the FAA, the Company shall cause such counsel to deliver to the
Indenture Trustee an opinion addressed to the Indenture Trustee, in form and
substance reasonably satisfactory to the Indenture Trustee, as to due recording
of said documents with the FAA.
ARTICLE 8
DEFAULTS AND REMEDIES
Section 8.01. Indenture Events of Default. The following
events shall constitute "Indenture Events of Default" under this Agreement
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and each such Indenture Event of Default
shall be deemed to exist so long as, but only so long as, it shall not be
remedied:
(a) the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any payment of principal
of or Premium or Break Amount, if any, or interest on any Certificate
and such failure shall have continued unremedied for seven Business
Days, or the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any other amount due and
payable hereunder, or under any Certificate, and such failure shall
have continued unremedied for 10 Business Days after notice thereof to
the Owner Trustee; or
(b) any Lessor Lien required to be discharged by Shawmut
Bank Connecticut, National Association, pursuant to Section 4.02 or
required to be discharged by the Owner Trustee pursuant to Section
4.01(ii) or required to be discharged or bonded (in a manner
reasonably satisfactory to the Indenture Trustee) by the Owner
Participant pursuant to Section 8(g) of the Participation Agreement
shall remain undischarged for a period of 30 calendar days after a
Responsible Officer or Responsible Company Officer, as the case may
be, of Shawmut Bank Connecticut, National Association, the Owner
Trustee or the Owner Participant, as the case may be, shall have
actual knowledge of such Lessor Lien; or
(c) any representation or warranty made by the Owner
Trustee or the Owner Participant herein or in the Participation
Agreement, or made by any Person guaranteeing or supporting the
obligations of the Owner Participant under the Operative Agreements in
its guarantee or support agreement, shall prove to have been false or
incorrect when made in any material respect to the Certificate
Holders, is material at the time of discovery and, if curable, is not
cured within 30 days of notice thereof to the Owner Participant and
the Owner Trustee from the Indenture Trustee; or
(d) [Intentionally omitted]
(e) any failure by the Owner Trustee to observe or perform
any other covenant or obligation of the Owner Trustee contained in
this Indenture or in the Participation Agreement or any failure by the
Owner Participant to observe or perform any other covenant or
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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obligation of the Owner Participant contained in the Participation
Agreement or any failure by any Person guaranteeing or supporting the
obligations of the Owner Participant under the Operative Agreements to
perform any covenant or obligation of such Person under its guarantee
or support agreement which, in any case, is not remedied within a
period of 30 calendar days after notice thereof has been given to the
Owner Trustee and the Owner Participant or such Person, as the case
may be; or
(f) there shall be a Lease Event of Default other than,
without the consent of the Owner Trustee in its sole discretion, a
Lease Event of Default arising by reason of nonpayment when due of any
Excluded Payments; or
(g) either the Trust Estate or the Owner Trustee with
respect thereto (and not in its individual capacity) or the Owner
Participant or any Person guaranteeing or supporting the obligations
of the Owner Participant under the Operative Agreements shall (i)
file, or consent by answer or otherwise to the filing against it of a
petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (ii) make an
assignment for the benefit of its creditors, or (iii) consent to the
appointment of a custodian, receiver, trustee or other officer with
similar powers of itself or any substantial part of its property;
provided, that an event referred to in this Section 8.01(g) with
respect to the Owner Participant shall not constitute an Indenture
Event of Default if (A) an order, judgment or decree shall be entered
in a proceeding by a court or a trustee, custodian, receiver or
liquidator which is either final and non-appealable or has not been
stayed pending any appeal, or (B) an opinion of counsel satisfactory
to the Indenture Trustee shall be provided by the Owner Participant,
in each case to the effect that no part of the Trust Estate created by
the Trust Agreement (except for the Owner Participant's beneficial
interest in such Trust Estate) and no right, title or interest under
the Indenture Estate shall be included in, or be subject to, any
declaration or adjudication of, or proceedings with respect to, the
bankruptcy, insolvency or liquidation of the Owner Participant
referred to in this Section 8.01(g); or
(h) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Trust Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant or any Person
guaranteeing or supporting the obligations of the Owner Participant
under the Operative Agreements, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Trust Estate or the
Owner Trustee with respect thereto (and not in its individual
capacity) or the Owner Participant or any Person guaranteeing or
supporting the obligations of the Owner Participant under the
Operative Agreements and any such order or petition is not dismissed
or stayed within 90 days after the earlier of the entering of any such
order or the approval of any such petition; provided, that an event
referred to in this Section 8.01(h) with respect to the Owner
Participant shall not constitute an Event of Default if (A) an order,
judgment or decree shall be entered in a proceeding by a court or a
trustee, custodian, receiver or liquidator which is either final and
non-appealable or has not been stayed pending any appeal, or (B) an
opinion of counsel satisfactory to the Indenture Trustee shall be
provided by the Owner Participant, in each case
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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to the effect that no part of the Trust Estate created by the Trust
Agreement (except for the Owner Participant's beneficial interest in
such Trust Estate) and no right, title or interest under the Indenture
Estate shall be included in, or be subject to, any declaration or
adjudication of, or proceedings with respect to, the bankruptcy,
insolvency or liquidation of the Owner Participant referred to in this
Section 8.01(h).
Section 8.02. Acceleration; Rescission and Annulment. If an
Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee and the Owner Trustee may declare the
principal of all the Certificates to be due and payable, whereupon the same
shall be accelerated and be and become due and payable; provided, that if an
Indenture Event of Default referred to in clause (g) or (h) of Section 8.01
shall have occurred or a Lease Event of Default of the type referred to in
clause (g) or (h) of said Section 8.01 shall have occurred with respect to the
Company, then and in every such case the unpaid principal of all Certificates
then Outstanding shall, unless the Indenture Trustee acting upon instructions
of at least 25% in aggregate principal amount of Outstanding Certificates shall
otherwise direct, immediately and without further act become due and payable,
without presentment, demand, protest or notice, all of which are hereby waived.
Upon such declaration (or automatic acceleration, as the case may be), the
principal of all Certificates together with accrued interest thereon from the
date in respect of which interest was last paid hereunder to the date payment
of such principal has been made or duly provided for, plus, in the case of the
Series SWA 1995 Trust N605SW-I Certificates, the Break Amount, if any, and all
other amounts payable to the Holders hereunder as at such date of payment shall
be immediately due and payable (but not including any Premium). At any time
after such declaration and prior to the sale or disposition of the Indenture
Estate, the Holders of a majority in aggregate principal amount of all of the
Outstanding Certificates, by notice to the Indenture Trustee, the Company and
the Owner Trustee, may rescind such a declaration and thereby annul its
consequences if (i) an amount sufficient to pay all principal of, and, in the
case of the Series SWA 1995 Trust N605SW-I Certificates, the Break Amount, if
any, on any Certificates which have become due otherwise than by such
declaration and any interest thereon and interest due or past due, if any, and
all sums due and payable to the Indenture Trustee have been deposited with the
Indenture Trustee, (ii) the rescission would not conflict with any judgment or
decree and (iii) all existing Indenture Defaults and Indenture Events of
Default under this Agreement have been cured or waived except nonpayment of
principal of, or interest on, the Certificates that has become due solely
because of such acceleration.
Section 8.03. Other Remedies Available to Indenture
Trustee. (a) After an Indenture Event of Default shall have occurred and so
long as such Indenture Event of Default shall be continuing, then and in every
such case the Indenture Trustee, as trustee of an express trust and as assignee
hereunder of the Lease or as holder of a security interest in the Aircraft or
Engines or otherwise, may, and when required pursuant to the provisions of
Article 9 shall, exercise, subject to Sections 8.03(b) and 8.03(e), any or all
of the rights and powers and pursue any and all of the remedies accorded to the
Owner Trustee pursuant to Section 15 of the Lease and this Article 8, may
recover judgment in its own name as Indenture Trustee against the Indenture
Estate and may take possession of all or any part of the Indenture Estate and
may exclude the Owner Trustee and the Owner Participant and all Persons
claiming under any of them wholly or partly therefrom. The Indenture Trustee
shall have and may exercise all of the rights and remedies of a secured party
under the Uniform Commercial Code as in effect in any applicable jurisdiction.
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(b) After an Indenture Event of Default, subject to
Section 8.03(e), the Indenture Trustee may, if at the time such action may be
lawful and always subject to compliance with any mandatory legal requirements,
either with or without taking possession, and either before or after taking
possession, and without instituting any legal proceedings whatsoever, and
having first given notice of such sale to the Owner Trustee, the Owner
Participant and the Company at least 10 days prior to the date of such sale,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public or private auction, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as the Indenture
Trustee may determine, and at any place (whether or not it be the location of
the Indenture Estate or any part thereof) and time designated in the notice
above referred to; provided, however, that notwithstanding any provision herein
to the contrary, the Indenture Trustee may not provide the notice provided for
above of its intention to sell any of the Indenture Estate or exercise other
remedies against the Indenture Estate seeking to deprive the Owner Trustee or
the Owner Participant of its rights therein unless a declaration of
acceleration has been made pursuant to Section 8.02 or the Certificates have
otherwise become due and payable through redemption or otherwise. Any such sale
or sales may be adjourned from time to time by announcement at the time and
place appointed for such sale or sales, or for any such adjourned sale or
sales, without further notice, and the Indenture Trustee and the Holder or
Holders of any Certificates, or any interest therein, may bid and become the
purchaser at any such sale, and each Holder shall be entitled, at any such
sale, to credit against the purchase price bid thereby all or any part of the
unpaid obligations owing to such Holder and secured by the Lien of this
Agreement. The Indenture Trustee may exercise such right without possession or
production of the Certificates or proof of ownership thereof, and as
representative of the Holders may exercise such right without notice to the
Holders or including the Holders as parties to any suit or proceeding relating
to foreclosure of any property in the Indenture Estate. The Owner Trustee
hereby irrevocably constitutes the Indenture Trustee the true and lawful
attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee or
otherwise) for the purpose of effectuating any sale, assignment, transfer or
delivery for enforcement of the Lien created under this Agreement, whether
pursuant to foreclosure or power of sale or otherwise, to execute and deliver
all such bills of sale, assignments and other instruments as the Indenture
Trustee may consider necessary or appropriate, with full power of substitution,
the Owner Trustee hereby ratifying and confirming all that such attorney or any
substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by
the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and
confirm any such sale, assignment, transfer or delivery, by executing and
delivering to the Indenture Trustee or such purchaser all bills of sale,
assignments, releases and other proper instruments to effect such ratification
and confirmation as may be designated in any such request.
(c) Subject to Sections 8.03(b) and 8.03(e), if an
Indenture Event of Default has occurred and is continuing, the Owner Trustee
shall, at the request of the Indenture Trustee, promptly execute and deliver to
the Indenture Trustee such instruments of title or other documents as the
Indenture Trustee may deem necessary or advisable to enable the Indenture
Trustee or an agent or representative designated by the Indenture Trustee, at
such time or times and place or places as the Indenture Trustee may specify, to
obtain possession of all or any part of the Indenture Estate. If the Owner
Trustee shall for any reason fail to execute and deliver such instruments and
documents after such request by the Indenture Trustee, the Indenture Trustee
shall be entitled to a judgment for specific performance of the covenants
contained in the foregoing sentence, conferring upon the Indenture Trustee the
right to immediate possession and requiring the Owner Trustee to execute and
deliver such instruments and documents to the Indenture Trustee. The Indenture
Trustee shall also be entitled to pursue all or any part of the Indenture
Estate wherever it may be found and may enter
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any of the premises of the Owner Trustee or any other Person wherever the
Indenture Estate may be or be supposed to be and search for the Indenture
Estate and take possession of any item of the Indenture Estate pursuant to this
Section 8.03(c). The Indenture Trustee may, from time to time, at the expense
of the Indenture Estate, make all such expenditures for maintenance, insurance,
repairs, replacements, alterations, additions and improvements to and of the
Indenture Estate, as it may deem proper. In each such case, the Indenture
Trustee shall have the right to use, operate, store, lease, control or manage
the Indenture Estate, and to exercise all rights and powers of the Owner
Trustee relating to the Indenture Estate as the Indenture Trustee shall deem
appropriate, including the right to enter into any and all such agreements with
respect to the use, operation, storage, leasing, control or management of the
Indenture Estate or any part thereof; and the Indenture Trustee shall be
entitled to collect and receive directly all tolls, rents (including Rent),
issues, profits, products, revenues and other income of the Indenture Estate
and every part thereof, without prejudice, however, to the right of the
Indenture Trustee under any provision of this Agreement to collect and receive
all cash held by, or required to be deposited with, the Indenture Trustee
hereunder. In accordance with the terms of this Section 8.03(c), such tolls,
rents (including Rent), issues, profits, products, revenues and other income
shall be applied to pay the expenses of using, operating, storing, leasing,
controlling or managing the Indenture Estate, and of all maintenance,
insurance, repairs, replacements, alterations, additions and improvements, and
to make all payments which the Indenture Trustee may be required or may elect
to make, if any, for taxes, assessments, insurance or other proper charges upon
the Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine, inspect and make reports upon the properties and
books and records of the Owner Trustee and, to the extent permitted by the
Lease, the Company), and all other payments which the Indenture Trustee may be
required or authorized to make under any provision of this Agreement, including
this Section 8.03(c), as well as just and reasonable compensation for the
services of the Indenture Trustee, and of all persons properly engaged and
employed by the Indenture Trustee.
If an Indenture Event of Default occurs and is continuing and
the Indenture Trustee shall have obtained possession of or title to the
Aircraft, the Indenture Trustee shall not be obligated to use or operate the
Aircraft or cause the Aircraft to be used or operated directly or indirectly by
itself or through agents or other representatives or to lease, license or
otherwise permit or provide for the use or operation of the Aircraft by any
other Person unless (i) the Indenture Trustee shall have been able to obtain
insurance in kinds, at rates and in amounts satisfactory to it in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all liability for loss or damage to
the Aircraft and for public liability and property damage resulting from use or
operation of the Aircraft and (ii) funds are available in the Indenture Estate
to pay for all such insurance or, in lieu of such insurance, the Indenture
Trustee is furnished with indemnification from the Holders or any other Person
upon terms and in amounts satisfactory to the Indenture Trustee in its
discretion to protect the Indenture Estate and the Indenture Trustee, as
trustee and individually, against any and all such liabilities.
(d) Subject to Sections 8.03(b) and 8.03(e), the
Indenture Trustee may proceed to protect and enforce this Agreement and the
Certificates by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Indenture Estate or any part thereof, or for the recovery of judgment
for the indebtedness secured by the Lien created under this Agreement or for
the enforcement of any other power, legal or equitable remedy available under
applicable law.
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(e) (i) If the Company shall fail to make any payment
of Basic Rent under the Lease and such failure shall have become a Lease Event
of Default then as long as no other Indenture Event of Default shall have
occurred and be continuing, the Owner Participant or the Owner Trustee may (but
need not) pay to the Indenture Trustee, at any time prior to the expiration of
a period of ten Business Days (the "10-Day Period") after such failure shall
have become a Lease Event of Default (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee) exercise any of the rights, powers or remedies pursuant to
Section 15 of the Lease or this Article 8), an amount equal to the full amount
of such payment of Basic Rent, together with any interest due thereon under the
Lease on account of the delayed payment thereof to the date of such payment,
and such payment by the Owner Participant or the Owner Trustee shall be deemed
to cure any Indenture Event of Default which arose from such failure of the
Company as of such date of payment (but such cure shall not relieve the Company
of any of its obligations). If the Company shall fail to perform or observe any
covenant, condition or agreement to be performed or observed by it under the
Lease (other than its obligation to pay Basic Rent), and if (but only if) the
performance or observance thereof can be effected by the payment of money alone
(it being understood that actions such as the obtaining of insurance and the
procurement of maintenance services can be so effected), then as long as no
other Indenture Event of Default (other than those arising from a Lease Event
of Default) shall have occurred and be continuing, the Owner Participant or the
Owner Trustee may (but need not) pay to the Indenture Trustee (or to such other
Person as may be entitled to receive the same), at any time prior to the
expiration of a period of ten Business Days after the expiration of the grace
period, if any, provided with respect to such failure on the part of the
Company in Section 14 of the Lease (prior to the expiration of which 10-Day
Period the Indenture Trustee shall not (without the prior written consent of
the Owner Trustee) exercise any of the rights, powers or remedies pursuant to
Section 15 of the Lease or this Article 8), all sums necessary to effect the
performance or observance of such covenant or agreement of the Company,
together with any interest due thereon under the Lease on account of the
delayed payment thereof to the date of such payment, and such payment by the
Owner Participant or the Owner Trustee shall be deemed to cure any Indenture
Event of Default which arose from such failure of the Company as of such date
of payment (but such cure shall not relieve the Company of any of its
obligations). If, on the basis specified in the preceding sentences, any Lease
Events of Default shall have been remedied, then any declaration pursuant to
this Indenture that the Certificates are due and payable or that an Indenture
Event of Default exists hereunder, based solely upon such Lease Events of
Default, shall be deemed to be rescinded, and, in the case of the first and
second sentences of this Section 8.03(e)(i), the Owner Participant or the Owner
Trustee shall (to the extent of any such payments made by it) be subrogated to
the rights of the Holders of the Certificates under Section 3.03, to receive
from the Indenture Trustee such payment of overdue Basic Rent or other amount
(and the payment of interest on account of such Basic Rent or other amount
being overdue) and shall be entitled, so long as no other Indenture Event of
Default or Indenture Default shall have occurred and be continuing or would
result therefrom, to receive, subject to the provisions of this Indenture, such
payment upon receipt thereof by the Indenture Trustee; provided, that the Owner
Participant shall not otherwise attempt to recover any such amount paid by it
on behalf of the Company pursuant to this Section 8.03(e)(i) except by
demanding of payment of such amount or by commencing an action at law against
the Company for the payment of such amount; and provided, further, that:
(x) this Section 8.03(e)(i) shall not apply with respect
to any default in the payment of Basic Rent due under the Lease if the
Lessee itself shall have theretofore failed to pay Basic Rent in the
manner required under the Lease (after giving effect to any
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applicable grace period) (i) due on each of the two Rent Payment Dates
immediately preceding the date of such default, or (ii) due on a total
of four Rent Payment Dates; and
(y) neither the Owner Trustee nor the Owner Participant
shall have the right to cure any Lease Event of Default except as
specified in this Section 8.03(e)(i).
(ii) In the event that (A) at any time one or more
Lease Events of Default shall have occurred and be continuing or (B) the
Certificates shall have been accelerated pursuant to Section 8.02, the Owner
Trustee or the Owner Participant may, at its option, give at least 30 days'
prior irrevocable notice to the Indenture Trustee that the Owner Trustee or the
Owner Participant will redeem (except subsequent to the establishment of the
Redemption Date in respect of the Certificates) or purchase all Certificates
then Outstanding on a date determined consistently with the applicable
provisions of Article 6 and, concurrently with such notice, the Owner Trustee
or the Owner Participant will deposit with the Indenture Trustee an amount
sufficient to redeem (except subsequent to the establishment of the Redemption
Date in respect of the Certificates) or purchase at the applicable Redemption
Price determined in accordance with Article 6 all Certificates then Outstanding
(including, when applicable, an estimate of the Premium to be paid on the
Redemption Date computed using the Treasury Yield determined as if the
Redemption Date were the date of such notice) and to pay the Indenture Trustee
all amounts then due it hereunder, which funds shall be held by the Indenture
Trustee as provided in Section 9.04. Subject to the subsequent satisfaction by
the Owner Trustee of its obligations pursuant to the next following sentence,
upon the giving of such notice and the receipt by the Indenture Trustee of such
deposit, the Indenture Trustee shall deem all instructions received from the
Owner Trustee as having been given by the Holders of 100% of the Outstanding
principal amount of Certificates for all purposes of this Indenture. If such
notice is given, the Owner Trustee further agrees that it will deposit or cause
to be deposited with the Indenture Trustee, on or prior to the applicable
Redemption Date, whether or not an Indenture Event of Default is then
continuing, funds sufficient, when added to the funds already held by the
Indenture Trustee for such purpose, to redeem or purchase at the applicable
Redemption Price (including the Break Amount or Premium (if the Redemption
Price includes Premium) actually payable in respect thereof, if any, and all
other amounts payable to the Holders hereunder or under any other Operative
Agreement on such Redemption Date) all Certificates then Outstanding and to pay
the Indenture Trustee all amounts then due it hereunder.
(iii) Anything in this Agreement to the contrary
notwithstanding, the Indenture Trustee shall not be entitled to exercise any
remedy hereunder as a result of an Indenture Event of Default which arises
solely by reason of one or more events or circumstances which constitute a
Lease Event of Default unless the Indenture Trustee as security assignee of the
Owner Trustee shall have exercised or concurrently be exercising one or more of
the remedies provided for in Section 15 of the Lease with respect to the
Aircraft, provided, that the requirement to exercise such remedies under the
Lease shall not apply in circumstances where the Indenture Trustee is
involuntarily stayed or otherwise prohibited by applicable law or court order
from exercising such remedies under the Lease after the Section 1110 Period.
The "Section 1110 Period" shall mean the period commencing on the date of such
stay or prohibition and ending on the earlier of (x) the 60th day thereafter
(or such longer period (A) as may be specified in Section 1110(a)(1) of the
Bankruptcy Code, (B) equal to the period of an extension with the consent of
the Indenture Trustee of the 60-day period specified therein pursuant to
Section 1110(b) of the Bankruptcy Code, or (C) resulting from the Indenture
Trustee's own failure to give any requisite notice to any Person) and (y) the
date of
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repossession of the Aircraft. References in this sentence to particular
sections of the Bankruptcy Code as in effect on the date hereof shall include
any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to
the contrary, including, without limitation, Sections 8.03(b), 8.03(c) and
8.03(d), as long as no Lease Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee shall take any
action in violation of the Company's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Company's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given
to the Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the
Indenture Trustee in the exercise of any right, remedy or power or in pursuing
any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of the Owner Trustee or the Company or to be
an acquiescence therein.
Section 8.04. Waiver of Owner Trustee. To the extent now
or at any time hereafter enforceable under applicable law, the Owner Trustee
covenants that it will not at any time insist upon or plead, or in any manner
whatsoever claim or take any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Indenture
Estate or any part thereof, prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or prior to any applicable decree,
judgment or order of any court of competent jurisdiction; nor, after such sale
or sales, claim or exercise any right under any statute now or hereafter made
or enacted by any state or otherwise to redeem the property so sold or any part
thereof, and hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of the Owner Trustee acquiring any
interest in or title to the Indenture Estate or any part thereof subsequent to
the date of this Agreement, all benefit and advantage of any such law or laws,
and covenants that it will not invoke or utilize any such law or laws, but will
suffer and permit the execution of every such power as though no such law or
laws had been made or enacted. Nothing in this Section 8.04 shall be deemed to
be a waiver by the Owner Trustee of its rights under Section 8.03(e).
The Indenture Trustee may maintain such a pleading, or in any
manner whatsoever claim or take any benefit or advantage of or from any law now
or hereafter in force even if it does not possess any of the Certificates or
does not produce any of them in the proceeding. A delay or omission by the
Indenture Trustee or any Holder in exercising any right or remedy accruing upon
an Indenture Event of Default under this Agreement shall not impair the right
or remedy or constitute a waiver of or acquiescence in such Indenture Event of
Default.
Section 8.05. Waiver of Existing Defaults. The Holders of
a majority in aggregate principal amount of the Outstanding Certificates by
notice to the Indenture Trustee may waive on behalf of the Holders an existing
Indenture Default or Indenture Event of Default and its consequences except (i)
an Indenture Default or Indenture Event of Default in the payment of the
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principal of or interest on any Certificate or (ii) in respect of a covenant or
provision hereof which pursuant to Section 11.02 cannot be amended or modified
without the consent of the Holder affected.
Section 8.06. Control by Majority. The Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee or exercising any trust or power conferred
on it by this Agreement. However, the Indenture Trustee may refuse to follow
any direction that conflicts with law or this Agreement, that is unduly
prejudicial to the rights of the Holders so affected, or that would, without
satisfactory indemnity from the Holders, subject the Indenture Trustee to
personal liability.
Section 8.07. Limitation on Suits by Holders. A Holder of
a Certificate may pursue a remedy under this Agreement or thereunder only if:
(1) the Holder gives to the Indenture Trustee written
notice of a continuing Indenture Event of Default under this
Agreement;
(2) the Holders of at least 25% in aggregate principal
amount of the Outstanding Certificates make a written request to the
Indenture Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss,
liability or expense to be, or which may be, incurred by the Indenture
Trustee in pursuing the remedy;
(4) the Indenture Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a majority
in aggregate principal amount of the Outstanding Certificates do not
give the Indenture Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Section 8.08. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Agreement the right of any Holder
to receive payment of principal of, Premium or Break Amount, if any, and
interest on such Certificate on or after the respective due dates expressed in
such Certificate, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
Section 8.09. Indenture Trustee May File Proofs of Claim.
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Holders allowed in any judicial proceedings
relating to any obligor on the Certificates, its creditors, or its property.
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ARTICLE 9
INDENTURE TRUSTEE
Section 9.01. Duties of Indenture Trustee.
(a) The Indenture Trustee will furnish to each
Certificate Holder promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and
other instruments furnished to the Indenture Trustee under any Operative
Agreement or received from the Owner Trustee pursuant to Section 4.01(vi) to
the extent the same shall not have been otherwise directly distributed to the
Holders pursuant to the express provision of any other Operative Agreement.
(b) Subject to the terms of Sections 8.02, 8.03(e), 8.05,
8.06, 9.01(c), 11.02 and 11.06, upon the written instructions at any time and
from time to time of Holders of a majority in aggregate principal amount of the
Outstanding Certificates, the Indenture Trustee shall take such of the
following actions as may be specified in such instructions: (i) exercise such
election or option, or make such decision or determination, or give such
notice, consent, waiver or approval or exercise such right, remedy or power or
take such other action hereunder or under any other Operative Agreement or in
respect of any part or all of the Indenture Estate as shall be specified in
such instructions; (ii) take such action with respect to, or to preserve or
protect, the Indenture Estate (including the discharge of Liens) as shall be
specified in such instructions and as are consistent with this Indenture; and
(iii) take such other action in respect of the subject matter of this Indenture
as is consistent with the terms hereof and the other Indenture Documents. The
Indenture Trustee will execute and the Owner Trustee will file or cause to be
filed such continuation statements with respect to financing statements
relating to the security interest created hereunder in the Indenture Estate as
may be specified from time to time in written instructions of Holders of a
majority in aggregate principal amount of the Outstanding Certificates (which
instructions may, by their terms, be operative only at a future date and which
shall be accompanied by the execution form of such continuation statement so to
be filed).
(c) The Indenture Trustee shall not be required to take
any action or refrain from taking any action under Sections 8.06 or 9.01(b)
unless the Indenture Trustee shall have been indemnified by the Holders against
any liability, cost or expense (including counsel fees) which may be incurred
in connection therewith. The Indenture Trustee shall not be under any
obligation to take any action under this Agreement and nothing in this
Agreement contained shall require the Indenture Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. The Indenture Trustee shall not be required to take any action under
Section 8.06 or 9.01(b), nor shall any other provision of this Indenture be
deemed to impose a duty on the Indenture Trustee to take any action, if the
Indenture Trustee shall have been advised by counsel that such action is
contrary to the terms hereof or is otherwise contrary to law.
(d) The Indenture Trustee shall not have any duty or
obligation to use, operate, store, lease, control, manage, sell, dispose of or
otherwise deal with the Aircraft or any other part of the Indenture Estate, or
to otherwise take or refrain from taking any action under, or in connection
with, this Indenture or any part of the Indenture Estate, except as expressly
provided by the terms of
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this Indenture or as expressly provided in written instructions from Holders as
provided in this Indenture; and no implied duties or obligations shall be read
into this Indenture against the Indenture Trustee.
(e) The Owner Trustee and the Indenture Trustee agree
that they will not use, operate, store, lease, control, manage, sell, dispose
of or otherwise deal with the Aircraft or any other part of the Indenture
Estate except (i) in accordance with the terms of the Lease or the
Participation Agreement, or (ii) in accordance with the powers granted or
reserved to, or the authority conferred upon, the Owner Trustee and the
Indenture Trustee pursuant to this Indenture and in accordance with the express
terms hereof.
(f) Subject to the provisions of Section 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Agreement. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to be
extent required by law.
Section 9.02. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may consult with counsel or require an Officer's Certificate or an
Opinion of Counsel from the Company or the Owner Trustee after which it will
take such action or refrain from acting as it deems appropriate. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith and in accordance herewith in reliance on a resolution of the Board of
Directors of the Company, the written advice of counsel reasonably acceptable
to the Owner Trustee, the Company and the Indenture Trustee, officer's
certificates or opinions of counsel provided by the Company or the Owner
Trustee.
(c) The Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care; provided, that so long as no Indenture Event of
Default shall have occurred and be continuing no such agents shall be appointed
by the Indenture Trustee without the consent of the Company and the Owner
Trustee, which consent shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) If an Indenture Event of Default under this Agreement
has occurred and is continuing, the Indenture Trustee shall exercise its rights
and powers under this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
Section 9.03. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates and may otherwise deal with the Owner Trustee, the
Company or an Affiliate of the Owner Trustee or the Company or a subsidiary of
the Owner Trustee or the Company with the same rights it would have if it were
not the Indenture Trustee. Any Agent may do the same with like rights.
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Section 9.04. Funds May Be Held by Indenture Trustee or
Paying Agent; Investments. Any monies (including without limitation for
purposes of this Section 9.04 Permitted Investments constituting the proceeds
of the maturity, sale or other disposition of any Permitted Investment) held by
the Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its account
with any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
States thereof having combined capital and surplus and retained earnings of at
least $100,000,000, and neither the Indenture Trustee nor the Paying Agent
shall have any liability for interest upon any such monies except as otherwise
agreed in writing or (ii) at any time and from time to time, so long as no
Lease Default (of the type described in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, at the request
(given directly by the Company to the Indenture Trustee) of the Company acting
as the agent of the Owner Trustee, shall be invested and reinvested in
Permitted Investments as specified in such request (if such investments are
reasonably available for purchase) and sold, in any case at such prices,
including accrued interest or its equivalent, as are set forth in such request,
and such Permitted Investments shall be held by the Indenture Trustee in trust
as part of the Indenture Estate until so sold; provided, that the Company, on
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity,
sale or other disposition of any such Permitted Investment and, so long as no
Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, be entitled to
receive from the Indenture Trustee, and the Indenture Trustee on behalf of the
Owner Trustee, shall promptly pay to the Company pursuant to Section 22.1 of
the Lease, any profit, income, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment. If any Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing, any net income, profit,
interest, dividend or gain realized upon maturity, sale or other disposition of
any Permitted Investment shall be held as part of the Indenture Estate and
shall be applied by the Indenture Trustee at the same time, on the same
conditions and in the same manner as the amounts in respect of which such
income, profit, interest, dividend or gain was realized are required to be
distributed in accordance with the provisions hereof or of the Lease pursuant
to which such amounts were required to be held. The Indenture Trustee shall not
be responsible for any losses on any investments or sales of Permitted
Investments made pursuant to the procedure specified in this Section 9.04.
Section 9.05. Notice of Defaults. If an Indenture Event of
Default under this Agreement occurs and is continuing and the Indenture Trustee
has actual knowledge of same, the Indenture Trustee shall (i) promptly send
written notice thereof to the Company, the Owner Trustee and the Owner
Participant and, so long as the Series SWA 1995 Trust N605SW-I Certificates
shall be Outstanding, the Holders thereof and (ii) within 90 days after it
occurs, mail to each other Holder notice of all uncured Indenture Events of
Default under this Agreement. Except in the case of a default in the payment of
the principal of, Premium, if any, or interest on any Certificates or during
any period when the Series SWA 1995 Trust N605SW-I Certificate shall be
Outstanding, Break Amount, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii) above if and so long as the
executive committee or trust committee of directors of the Indenture Trustee
and/or Responsible Officers thereof in good faith determines that withholding
such notice is in the interest of the Holders. In addition, if an Indenture
Default under this Agreement occurs and is continuing and if the Indenture
Trustee has actual knowledge of same, the Indenture Trustee shall
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promptly send written notice thereof to the Company, the Owner Trustee and the
Owner Participant and, so long as the Series SWA 1995 Trust N605SW-I
Certificates shall be Outstanding, the Holders thereof.
Section 9.06. Compensation and Indemnity. (a) The Owner
Trustee shall pay to the Indenture Trustee from time to time (i) reasonable
compensation for its services, which compensation shall not be limited by any
law on compensation of a trustee of an express trust, (ii) reimbursement for
all reasonable out-of-pocket expenses incurred by the Indenture Trustee in
connection with the performance of its duties under this Agreement (including
the reasonable compensation and expenses of the Indenture Trustee's counsel and
any agent appointed in accordance with Section 9.02(c)), and (iii)
indemnification against any loss or liability incurred by it arising out of or
in connection with its acceptance or administration of the trust or trusts
hereunder except (A) as such expenses or loss or liability might result from
the gross negligence or willful misconduct of the Indenture Trustee or the
inaccuracy of any representation or warranty of the Indenture Trustee in its
individual capacity in Section 8 of the Participation Agreement or failure by
the Indenture Trustee to perform its payment and investment obligations
hereunder, (B) as otherwise provided in Section 9.10 and (C) as otherwise
excluded by the terms of Sections 7(b) and 7(c) of the Participation Agreement
from the Company's indemnities under said Sections; provided, that the
Indenture Trustee shall not make any claim under this Section 9.06(a) for any
claim or expense indemnified against by the Company under the Participation
Agreement without first making demand on, and pursuing such demand on a
reasonable basis for a reasonable length of time, the Company for payment of
such claim or expense. The Indenture Trustee shall notify the Owner Trustee and
the Company promptly of any claim for which it is entitled to be indemnified
hereunder. Subject to the conditions and procedures equivalent to those set
forth in Sections 7(b) and 7(c) of the Participation Agreement, the Owner
Trustee shall defend the claim and the Indenture Trustee shall cooperate in the
defense. The Indenture Trustee may have separate counsel and the Owner Trustee
shall pay the reasonable fees and expenses of such counsel. The Owner Trustee
need not pay for any settlement made without its and the Company's consent.
(b) To secure the payment obligations of the Owner
Trustee pursuant to this Section 9.06, the Indenture Trustee shall have a lien
prior to that of the Holders of the Certificates on all money or property
constituting a part of the Indenture Estate held or collected by the Indenture
Trustee, except that held in trust to pay the principal of, and interest on,
the Certificates.
Section 9.07. Replacement of Indenture Trustee. (a) The
resignation or removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least
30 days' prior written notice to the Company, the Owner Trustee and the Holders
of a majority in aggregate principal amount of the Outstanding Certificates.
The Holders of a majority in aggregate principal amount of the Outstanding
Certificates may remove the Indenture Trustee by giving at least 30 days' prior
written notice to the Indenture Trustee, the Owner Trustee and the Company and
may appoint a successor Indenture Trustee with the Owner Trustee's and the
Company's consent, which will not be unreasonably withheld. At such time as
Series SWA 1995 Trust N605SW Certificates are Outstanding, the Owner Trustee
may remove the Indenture Trustee if:
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(1) the Indenture Trustee fails to comply with
Section 9.09, fails to perform its payment obligations hereunder or
otherwise fails to perform any of its material obligations hereunder;
(2) the Indenture Trustee is adjudged a bankrupt
or an insolvent;
(3) a receiver or public officer takes charge of
the Indenture Trustee or its property; or
(4) the Indenture Trustee becomes incapable of
acting.
(c) If the Indenture Trustee resigns or is removed, or if
a vacancy exists in the office of Indenture Trustee for any reason, Holders of
a majority in aggregate principal amount of the Certificates or, at such time
as Series SWA 1995 Trust N605SW Certificates are Outstanding, the Owner
Trustee, shall promptly appoint a successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Company, the Owner Trustee or the Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Holder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Company
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the lien provided for in Section 9.06. The Company shall
give notice of each appointment of a successor Indenture Trustee if there are
Certificates Outstanding, by mailing written notice of such event by
first-class mail to the Holders.
(g) All provisions of this Section 9.07 except
subparagraphs (b)(l) and (e) and the words "subject to the lien provided for in
Section 9.06" in subparagraph (f) shall apply also to any Paying Agent.
Section 9.08. Successor Indenture Trustee, Agents by
Merger, Etc. If the Indenture Trustee or any Agent consolidates with, merges
or converts into, or transfers all or substantially all of its corporate trust
business assets to, another corporation, the successor corporation, without any
further act, shall be the successor Indenture Trustee or Agent, as the case may
be.
Section 9.09. Eligibility; Disqualification. This
Agreement shall at all times have an Indenture Trustee which shall have a
combined capital and surplus of at least $100,000,000 and
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shall be a "citizen of the United States" as defined in Section 101(16) of the
Federal Aviation Act. If such corporation publishes reports of conditions at
least annually, pursuant to law or to the requirements of Federal, State,
Territorial, or District of Columbia supervising or examining authority, then
for the purposes of this Section 9.09, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of conditions so published.
In case at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.09, the Indenture
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.10. Trustee's Liens. The Indenture Trustee in
its individual capacity agrees that it will at its own cost and expense
promptly take such action as may be necessary to duly discharge and satisfy in
full all Liens ("Trustee's Liens") on the Indenture Estate which are either (i)
attributable to the Indenture Trustee in its individual capacity and which are
unrelated to the transactions contemplated by the Operative Agreements, or (ii)
which are attributable to the Indenture Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are not
expressly contemplated by this Agreement.
Section 9.11. Withholding Taxes; Information Reporting.
Without limitation of subsections 15.05(d) and 15.05(e), the Indenture Trustee
shall exclude and withhold from each distribution of principal, Premium, if
any, Break Amount, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect to the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders, that
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to
each Holder appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such Holders may reasonably
request from time to time. The Indenture Trustee agrees to file any other
information reports as it may be required to file under United States law. Such
withholding by the Indenture Trustee shall in no event give rise to an
Indenture Event of Default.
Section 9.12. [Reserved for Potential Future Use]
Section 9.13. Certain Rights of Owner Trustee and Owner
Participant. Notwithstanding any other provisions of this Indenture, including
the Granting Clause, the following rights shall be reserved to the Owner
Trustee or the Owner Participant, as the case may be (as separate and
independent rights) to the extent described herein:
(a) at all times the Owner Trustee and the Owner
Participant shall have the right, together with the Indenture Trustee,
to receive from the Lessee all notices, certificates, reports,
filings, opinions of counsel and other documents and all information
which the Company is permitted or required to give or furnish to the
Owner Trustee or the Lessor pursuant to any Indenture Document;
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(b) at all times (unless otherwise specified) the Owner
Trustee shall have the right (1) to the exclusion of the Indenture
Trustee but subject to and without affecting the provisions of Section
11.06, (i) to exercise the rights, elections and options of the Lessor
to make any decision or determination and to give any notice, consent,
waiver or approval with respect to any adjustments under Section 3.7
of the Lease and Sections 17 and 18 of the Participation Agreement,
(ii) to exercise the rights, elections and options of the Lessor with
respect to the termination of the Lease and solicitations of bids and
appraisals pursuant to Section 9 of the Lease, or with respect to
renewals or purchase options and terminations to take effect upon or
after the payment in full (or assumption by the Company) of the
obligations secured hereby, (iii) subject to the terms of Section
8.03(e)(i), to effect cures pursuant to Section 20 of the Lease, and
(iv) to maintain and exercise all rights regarding separate insurance
with respect to the Aircraft for its own account pursuant to Section
11.7 of the Lease (provided, that no such insurance impairs or reduces
coverage under any insurance required to be maintained by the Company
under Section 11 of the Lease) and (2) so long as no Indenture Event
of Default shall have occurred and be continuing, (x) during the
Floating Period, together with the Indenture Trustee (agreement of
both being required) and (y) during the Fixed Period, to the exclusion
of the Indenture Trustee (i) to approve as satisfactory any other
accountants, inspectors, engineers or counsel to render services for
or issue opinions to the Owner Trustee, together with the form of
address and contents of any certificates and opinions to be delivered
by such Persons, in each case pursuant to express provisions of the
Operative Agreements and (ii) to grant such consents, approvals and
waivers as may be requested under the Indenture Documents and (3)
together with the Indenture Trustee (each acting separately), to
request all certificates and documents of Lessee, to request the
assignment of any sublease of the Aircraft and to exercise inspection
rights pursuant to Section 12 of the Lease;
(c) at all times, the Owner Trustee shall have the
non-exclusive right, as Lessor, upon notice to the Indenture Trustee,
to seek specific performance of the covenants of the Company under the
Lease relating to the protection, insurance, maintenance, possession
and use of the Aircraft and to obtain performance by Lessee under
Sections 11(a) and (b) of the Participation Agreement; and
(d) at all times each of the Owner Trustee (as Owner
Trustee, individually and as Lessor) and the Owner Participant shall
have the right, to the exclusion of the Indenture Trustee, to demand,
collect, sue for or receive the payment of, and waive, modify or
otherwise deal with Excluded Payments due and payable to it, and, in
the case of the Owner Participant, to give the written notice referred
to in the proviso to Section 14.1 of the Lease.
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;
TERMINATION OF OBLIGATIONS
Section 10.01. Satisfaction and Discharge of Agreement;
Defeasance; Termination of Obligations. Subject to Section 10.02, this
Agreement shall cease to be of further effect, and the Owner Trustee and the
Indenture Trustee shall, except as herein provided, be deemed to have been
discharged from their respective obligations with respect to the Certificates
(and the Indenture Trustee,
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on demand and at the expense of the Owner Trustee, shall execute proper
instruments acknowledging satisfaction and discharge of this Agreement in
respect of the Certificates), when
(a) (i) all Certificates theretofore executed and
delivered (other than (A) Certificates which have been mutilated, destroyed,
lost or stolen and which have been replaced or exchanged as provided in Section
2.06 and (B) Certificates for the payment of which money held in trust
hereunder has been paid and discharged from such trust, as provided in Section
7.01) have been delivered to the Indenture Trustee for cancellation; or
(ii) all Certificates not theretofore delivered to
the Indenture Trustee for cancellation have become due and payable (whether
upon stated maturity or as a result of redemption or upon acceleration), or
will become due and payable (including as a result of redemption in respect of
which irrevocable notice has been given to the Indenture Trustee on or prior to
the date of such deposit) at maturity within one year, and there has been
deposited with the Indenture Trustee in trust for the purpose of paying and
discharging the entire indebtedness on the Certificates not theretofore
canceled by the Indenture Trustee or delivered to the Indenture Trustee for
cancellation, an amount sufficient to discharge such indebtedness, including
the principal of, Premium, if any, and interest on the Certificates to the date
of such deposit (in the case of Certificates which have become due and
payable), or to the maturity thereof, as the case may be and, in the case of
the Series SWA 1995 Trust N605SW-I Certificate, Break Amount, if any, and all
other amounts payable to the Original Holders hereunder and under any other
Operative Agreement; or
(iii) the Certificates shall have been defeased as
provided in Section 10.05; and provided, however, that upon the making of the
deposit referred to in subsection A of Section 10.05, the right of the Owner
Trustee or the Company to cause the redemption of Certificates (except a
redemption in respect of which irrevocable notice has theretofore been given)
shall terminate;
(b) all other amounts then due and payable hereunder have
been paid; and
(c) the Company on behalf of the Owner Trustee has
delivered to the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for or relating to
the satisfaction and discharge of this Agreement contemplated by this Section
10.01 have been complied with.
Section 10.02. Survival of Certain Obligations.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08, 2.10, Section 7.01,
Section 9.11, Section 10.03 and Section 10.04, and the rights, duties,
immunities and privileges hereunder of the Indenture Trustee shall survive.
Section 10.03. Monies to Be Held in Trust. All moneys and
Government Obligations deposited with the Indenture Trustee pursuant to Section
10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment in the case
of the Series SWA 1995 Trust N605SW-I Certificates, as provided for in Section
15.04 or, in the case of the Series SWA 1995 Trust N605SW Certificates, either
directly or through any Paying Agent as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, Premium,
if any, interest, and, in the case of the Series SWA 1995 Trust N605SW-I
Certificates, Break Amount, if any, and all other amounts payable to the
Holders
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hereunder or under any other Operative Agreement, but such money need not be
segregated from other funds except to the extent required by law.
Section 10.04. Monies to Be Returned to Owner Trustee. The
Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or Government
Obligations held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Certificates for which
money or Government Obligations have been deposited pursuant to Section 10.01.
Section 10.05. Defeasance. The Owner Trustee may, at any
time, defease the interest of the Indenture Trustee in the Indenture Estate in
whole, but not in part, through the deposit with the Defeasance Trustee, in
accordance with the provisions of this Section 10.05, of cash and/or Government
Obligations; provided, however, that such defeasance shall not be applicable in
respect of the Series SWA 1995 Trust N605SW-I Certificates. Such deposit shall
be made pursuant to a declaration or other appropriate instrument of trust
satisfactory in form and substance to the Defeasance Trustee and the Indenture
Trustee; such deposit shall be absolute and irrevocable and the instrument of
trust shall expressly provide that the Owner Trustee shall have no further
title to or interest in or power to direct the use or application of the cash
and/or Government Obligations so deposited or any of the proceeds arising
therefrom; such instrument shall state that the trust created thereby and the
cash and/or Government Obligations deposited pursuant thereto are for the sole
and exclusive benefit of the Holders and shall expressly provide that the
Defeasance Trustee shall apply such cash and payments of principal and/or
interest on such Government Obligations to, and only to, the punctual payment
of the principal and interest on the Certificates as and when such payments
become due (such declaration or instrument to contain appropriate provisions
for the recording of transfers of Certificates and the names and addresses of
the Holders); and the Owner Trustee shall agree to pay, as the same shall
become due and payable, all fees, costs and charges of the Defeasance Trustee
under such instrument of trust, including those which may become payable after
the date the conditions hereinbelow specified have been met. Upon compliance
with the following conditions, and provided, that no Indenture Event of Default
or Indenture Default shall have occurred and be continuing on a date 91 days
after the date of the deposit of Government Obligations and/or cash with the
Defeasance Trustee as provided in Subsection A below, the Owner Trustee's
obligations with respect to the Certificates will be discharged and this
Indenture shall terminate as provided in Section 10.01:
A. the Owner Trustee shall have deposited with the
Defeasance Trustee absolutely and irrevocably (irrespective of whether
the conditions in Subsections B, C, D and E of this Section 10.05 have
been satisfied) (1) cash and/or (2) Government Obligations which
through the payment of principal and interest in respect thereof in
accordance with their terms, without any reinvestment or further
investment of the principal of or interest earned on such Government
Obligations, will absolutely and unconditionally provide in any and
all circumstances not later than one day before each Payment Date an
amount sufficient to pay and discharge the payment of principal and
interest to be due and payable on such Payment Date;
B. no Indenture Event of Default or Indenture Default
shall have occurred and be continuing on the date of the deposit of
cash and/or Government Obligations as contemplated hereby;
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C. the Owner Trustee shall have delivered to the
Defeasance Trustee and to the Certificate Holders written confirmation
by a nationally recognized firm of independent public accountants
(other than the accounting firm then serving as Shawmut Bank
Connecticut, National Association's or the Owner Participant's regular
auditors) selected by the Owner Trustee, the form and substance of
which confirmation and the identity of such accounting firm shall be
satisfactory to the Indenture Trustee, that the Government Obligations
deposited for payment of the Certificates, together with any cash
deposited by the Owner Trustee, are sufficient to satisfy the
requirements of Subsection A hereof;
D. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate Holders
an opinion of counsel in form and substance satisfactory to the
Indenture Trustee to the effect that (1) the trust declaration or
other instrument, as the case may be, is legal, valid, binding and
enforceable in accordance with its terms for the sole benefit and use
of the Holders, is irrevocable and the Government Obligations and/or
cash deposited thereunder and the proceeds thereof and therefrom are
held by the Defeasance Trustee thereunder in trust solely for the
benefit of the Holders and will not be subject to any valid interest,
lien, claim or encumbrance of any other Person, including the Owner
Trustee or the Owner Participant or any Person claiming by, through,
under or in the name or on behalf of the Owner Trustee or the Owner
Participant or any creditor or beneficiary of the Owner Trustee or the
Owner Participant, or by any court or trustee in bankruptcy and (2)
such deposit will not constitute a preferential transfer or a
fraudulent conveyance under any bankruptcy or other similar law and
shall cover such other matters as the Indenture Trustee may reasonably
require in connection with such final deposit and matters relating
thereto;
E. the Owner Trustee shall have delivered to the Defeasance
Trustee, the Indenture Trustee and the Certificate Holders an
Officers' Certificate and an Opinion of Counsel to the effect that
there has been published by the Internal Revenue Service a ruling to
the effect that Holders will not recognize income, gain or loss for
Federal income tax purposes as a result of the exercise by the Owner
Trustee of its option under Section 10.01(a)(iii) and will be subject
to Federal income tax on the same amount and in the same manner and at
the same times, as would have been the case if such option had not
been exercised; and
F. the Owner Trustee shall have (1) taken such further action
and executed such further documents as may be reasonably required by
any Holder, the Indenture Trustee or the Defeasance Trustee and (2)
delivered to the Defeasance Trustee, the Indenture Trustee and to the
Holders a certificate of a Responsible Officer of the Owner Trustee
stating that all conditions precedent herein to the defeasance of the
Certificates contemplated by this Section 10.05 have been satisfied.
The Owner Participant will pay all expenses (including,
without limitation, reasonable legal fees) incident to the implementation of
the transactions contemplated by this Section 10.05.
For the purpose of this Article 10, the following terms have
the following definitions:
"Defeasance Trustee" shall mean an institution authorized to
transact in the State of New York the business of a trust company
selected by the Owner Trustee and approved by the Indenture Trustee;
provided, that at the time of the delivery of cash and/or Government
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Obligations pursuant to Section 10.05, the institution selected shall
have a combined capital and surplus of at least $500,000,000 and shall
not be an Affiliate of the Company, the Owner Participant or Shawmut
Bank Connecticut, National Association.
"Government Obligations" shall mean direct U.S. Dollar
obligations of the United States of America which are not callable,
redeemable or prepayable, directly or indirectly, by any Person.
ARTICLE 11
AMENDMENTS AND WAIVERS
Section 11.01. Amendments to this Agreement Without Consent
of Holders. The Owner Trustee and the Indenture Trustee may enter into one or
more agreements supplemental hereto without the consent of any Holder for any
of the following purposes:
(1) to correct any mistake or cure any ambiguity,
defect or inconsistency herein or in the Certificates or to make any
change not inconsistent with the provisions hereof; provided, that
such change does not adversely affect the interests of any Holder;
(2) to evidence the succession of another party
as the Owner Trustee in accordance with the terms of the Trust
Agreement or to evidence (in accordance with Article 9) the succession
of a new trustee hereunder, the removal of the trustee hereunder or
the appointment of any co-trustee or co-trustees or any separate or
additional trustee or trustees;
(3) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee or to make any
other provisions with respect to matters or questions arising
hereunder so long as such action shall not adversely affect the
interests of the Holders;
(4) to correct or amplify the description of any
property at any time subject to the Lien of this Agreement or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subject to the Lien of this Agreement or to
subject to the Lien of this Agreement the Airframe or Engines or
airframe or engines substituted for the Airframe or Engines in
accordance herewith or with the Lease; provided, that Trust
Supplements entered into for the purpose of subjecting to the Lien of
this Agreement the Airframe or Engines (or the Replacement Airframe or
any Replacement Engines) in accordance with the Lease need only be
executed by the Owner Trustee;
(5) to add to the covenants of the Owner Trustee,
for the benefit of the Holders, or to surrender any rights or power
herein conferred upon the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
(7) to provide for the assumption by the Company
of the obligations of the Owner Trustee hereunder in accordance with
the terms and conditions applicable thereto specified in Section 7.03;
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(8) to provide for the redemption of the Series
SWA 1995 Trust N605SW-I Certificate and the issuance of the Series SWA
1995 Trust N605SW Certificates in accordance with the terms and
conditions applicable thereto specified in Article 15; or
(9) to include on the Certificates any legend as
may be required by applicable law.
Section 11.02. Amendments to this Agreement with Consent of
Holders. (a) With the written consent of the Holders of a majority of the
aggregate principal amount of the Outstanding Certificates, the Owner Trustee
and the Indenture Trustee may enter into such supplemental agreements to add
any provisions to or to change or eliminate any provisions of this Agreement or
of any such supplemental agreements or to modify the rights of the Holders;
provided, however, that without the consent of each Holder affected thereby, an
amendment under this Section 11.02 may not:
(1) reduce the principal amount of, Premium or
Break Amount, if any, or any installment of interest on, any
Certificate; or
(2) change the date on which any principal amount
of, any Installment Payment Amount payable with respect to, Premium or
Break Amount, if any, or interest on any Certificate, is due or
payable; or
(3) create any Lien on the Indenture Estate prior to
orpari passu with the Lien thereon under this Agreement except such as
are permitted by this Agreement, or deprive any Holder of the benefit
of the Lien on the Indenture Estate created by this Agreement; or
(4) reduce the percentage in principal amount of
the Outstanding Certificates, the consent of whose holders is required
for any such supplemental agreement, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of
this Agreement or of certain defaults hereunder or their consequences)
provided for in this Agreement; or
(5) make any change in Section 8.05, 8.08, or
(but only for so long as the Series SWA 1995 Trust N605SW-I
Certificates shall be Outstanding) Article 15, or this Section
11.02(a).
(b) It is not necessary under this Section 11.02 for the
Holders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and
the Indenture Trustee of any supplemental agreement pursuant to the provisions
of this Section 11.02, the Indenture Trustee shall transmit by first-class mail
a notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of such Holders appear on
the Register. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental agreement.
Section 11.03. Revocation and Effect of Consents. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every
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subsequent Holder, even if notation of the consent is not made on any
Certificate. However, any such Holder or subsequent Holder may revoke the
consent as to his Certificate if the Indenture Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Holder affected by
such amendment or waiver.
Section 11.04. Notation on or Exchange of Certificates. The
Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Certificate thereafter executed. The Indenture Trustee in
exchange for such Certificates may execute new Certificates that reflect the
amendment or waiver.
Section 11.05. Indenture Trustee Protected. The Indenture
Trustee need not sign any supplemental agreement that adversely affects its
rights.
Section 11.06. Amendments, Waivers, Etc. of Other Operative
Agreements. (a) Subject to Section 11.01, without the consent of the Holders
of a majority in principal amount of Outstanding Certificates, the respective
parties to the Participation Agreement, the Lease and the Trust Agreement may
not modify, amend or supplement any of said agreements, or give any consent,
waiver, authorization or approval thereunder, for any purpose, including adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or modifying in any manner the rights of the respective
parties thereunder; provided, however, that the actions specified in subsection
(b) of this Section 11.06 may be taken without the consent of the Indenture
Trustee or any Holder.
(b) Subject to the provisions of subsection (c) of this
Section 11.06, the respective parties to the Participation Agreement, the Lease
and the Trust Agreement, at any time and from time to time without the consent
of the Indenture Trustee or of any Holder may:
(1) so long as no Indenture Event of Default
shall have occurred and be continuing, modify, amend or supplement the
Lease, or give any consent, waiver, authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 (except as specifically provided below) the parties
to the Lease shall not modify, amend or supplement, or give any
consent, waiver, authorization or approval for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions thereof or of modifying in any manner the rights of the
respective parties thereunder, with respect to the following
provisions of the Lease as originally executed: Sections 2, 3.1, 3.2
(if the result thereof would be to shorten the Term of the Lease to a
period shorter than the period ending with the final Principal Payment
Date, Installment Date or Maturity Date of the Certificates), 3.3,
3.4, 3.5 (except to the extent such Section relates to Excluded
Payments and amounts payable to the Indenture Trustee in its
individual capacity), 3.6 (except insofar as it relates to the address
or account information of the Owner Trustee or the Indenture Trustee),
the first sentence of Section 3.8 or any proviso in said Section, 4, 5
(but only insofar as it relates to return condition upon termination
of the Lease pursuant to Section 15), 6, 7 (except that further
restrictions may be imposed on the Company), 9, 10 (except that
additional requirements may be imposed on the Company), 11 (except for
Section 11.6 insofar as such Section relates to the Owner Participant
and the Lessor and except that additional insurance requirements may
be imposed on the Company), 12 (except in order to increase the
Company's liabilities or enhance the Lessor's rights thereunder), 13
(except in the case of an assignment by the Lessor in circumstances
where the
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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Aircraft shall remain registrable under the Federal Aviation Act), 14
(except to impose additional or more stringent Lease Events of
Default), 15 (except to impose additional remedies), 16, 17, 18.2(b)
(except to impose additional requirements on the Company), 19, 20, 21
and 22, and (i) any definition of terms used in the Lease, to the
extent that any modification of such definition would result in a
modification of the Lease not permitted pursuant to this subsection
(b) and (ii) any other provision of the Lease not hereinabove referred
to if the modification, amendment or supplement thereto, or consent,
waiver, authorization or approval in respect thereof would adversely
affect the Indenture Trustee's interest in the Trust Estate, reduce
Lessee's obligations in respect of maintaining the Aircraft or
otherwise impair the value of the Trust Estate; provided, that in the
event an Indenture Event of Default shall have occurred and be
continuing, the Indenture Trustee shall have all rights of the Owner
Trustee as Lessor under the Lease to modify, amend or supplement the
Lease or give any consent, waiver, authorization or approval
thereunder, for any purpose, including, adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or
of modifying in any manner the rights of the Lessor thereunder;
provided, further, that without the prior consent of the Owner
Trustee, and whether or not an Indenture Event of Default shall have
occurred and be continuing, no such action shall be taken with respect
to any of the provisions of Sections 1 (to the extent any modification
of a definition contained therein would result in a modification of
the Lease not permitted by this proviso), 3.7, 3.8, 4, 5 (to the
extent not related to return upon termination of the Lease pursuant to
Section 15 of the Lease), 6 (to the extent such action would reduce
the Company's obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16
(insofar as it relates to the Lessor), 18, 19, 20, 21 and 22 of the
Lease, or any other Section of the Lease to the extent such action
shall affect the amount or timing of any amounts payable by the
Company under the Lease as originally executed (or as subsequently
modified with the consent of the Owner Trustee) which, absent the
occurrence and continuance of an Indenture Event of Default, will be
distributable to the Owner Trustee under Article 3; and provided,
further, that the parties to the Lease may take any such action
without the consent of the Indenture Trustee or any Holder to the
extent such action relates to the payment of amounts constituting, or
the Owner Trustee's, the Owner Participant's or the Company's rights
or obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, in each case only to the extent any such action shall
not adversely affect the interests of the Holders;
(3) modify, amend or supplement the Participation
Agreement, or give any consent, waiver authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 the parties to the Participation Agreement shall
not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to the following provisions of the
Participation Agreement as originally executed: Sections 1(b), 7
(insofar as such Section 7 relates to the Indenture Trustee and the
Holders), 8, 11, 13, 15(f), 15(g), 15(h), 17, 18 and 19 and (i) any
definition of terms used in the Participation Agreement, to the extent
that any modification of such definition would result in a
modification of the Participation Agreement not permitted pursuant to
this subsection (b) and (ii) any other provision of the Participation
Agreement not
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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hereinabove referred to if the modification, amendment or supplement
thereto, or consent, authorization or approval in respect thereof
would adversely affect the Indenture Trustee's interest in the Trust
Estate or otherwise impair the value of the Trust Estate or adversely
affect the interests of the Holders; and
(4) modify, amend or supplement any of said
agreements in order to cure any ambiguity, to correct or supplement
any provisions thereof which may be defective or inconsistent with any
other provision thereof or of any provision of this Indenture, or to
make any other provision with respect to matters or questions arising
thereunder or under this Agreement which shall not be inconsistent
with the provisions of this Agreement, provided the making of any such
other provision shall not adversely affect the interests of the
Holders.
(c) No modification, amendment, supplement, consent,
waiver, authorization or approval with respect to the Lease or the
Participation Agreement, whether effected pursuant to subsection (a) or
pursuant to subsection (b) of this Section 11.06 and anything in such
subsections or elsewhere in this Agreement to the contrary notwithstanding,
shall, without the consent of the holder of each Outstanding Certificate
affected thereby,
(1) modify, amend or supplement the Lease in such
a way as to extend the time of, or the manner of making any, payment
of any Advance or Basic Rent, or Stipulated Loss Value or any other
amounts payable to the Indenture Trustee for its own account or for
the account of the Holders (subject in any event to the last paragraph
of Section 3.3 of the Lease) upon the occurrence of an Event of Loss
or Termination Value and any other amounts payable to the Indenture
Trustee for its own account or for the account of the Holders (subject
in any event to the last paragraph of Section 3.3 of the Lease upon
termination of the Lease with respect to the Aircraft, payable under,
or as provided in, the Lease as originally executed, or reduce the
amount of any installment of any Advance or Basic Rent or Supplemental
Rent so that the same is less than the payment of principal of,
Premium, if any, Break Amount, if any, and interest on the
Certificates, as the case may be, to be made from such installment of
any Advance or Basic Rent or Supplemental Rent, or reduce the
aggregate amount of Stipulated Loss Value, or any other amounts
payable under, or as provided in, the Lease as originally executed
upon the occurrence of an Event of Loss so that the same is less than
the accrued interest on and the principal as of the Lease Loss Payment
Date, and Break Amount, if any, of the Certificates at the time
Outstanding or reduce the amount of Termination Value or Special
Purchase Price and any other amounts payable under, or as provided in,
the Lease as originally executed upon termination of the Lease so that
the same is less than the accrued interest on and principal as of the
date of any such termination and Premium, if any, and Break Amount, if
any of Certificates at the time Outstanding, or
(2) modify, amend or supplement the Lease in such
a way as to, or consent to any assignment of the Lease or give any
consent, waiver, authorization or approval which would, release the
Company from its obligations in respect of payment of Basic Rent or
Supplemental Rent, or Stipulated Loss Value and any other amounts
payable to the Indenture Trustee for its own account or the account of
the Holders (subject in any event to the last paragraph of Section 3.3
of the Lease) upon the occurrence of any Event of Loss, or Termination
Value or Special Purchase Price and any other amounts payable to the
Indenture Trustee for its own account or the account of the Holders
(subject in any event to the last paragraph of Section 3.3 of the
Lease), payable under, or as provided in, the Lease as
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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originally executed, except for any such assignment pursuant to
Section 8(s) of the Participation Agreement, and except as provided in
the Lease as originally executed.
Section 11.07. Trust Supplement. The Owner Trustee and the
Indenture Trustee hereby confirm and agree that upon execution and delivery of
any Trust Supplement covering the Aircraft by the Owner Trustee substantially
in the form attached hereto as Exhibit C or any trust supplement covering a
sublease of the Aircraft, this Agreement shall be supplemented by such Trust
Supplement or such trust supplement without further action by the Owner Trustee
or Indenture Trustee.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. (a) Unless otherwise specifically
provided herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by courier service, telegram, telex, telemessage, telecopy, telefax, cable or
facsimile (confirmed by telephone or in writing in the case of notice by
telegram, telex, telemessage, telecopy, telefax, cable or facsimile) or any
other customary means of written communication, and any such notice shall be
effective when delivered,
if to the Indenture Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telex: 835437 WILM TR
Facsimile: (302) 651-8882
Telephone: (302) 651-1000
if to the Owner Trustee, to:
Shawmut Bank Connecticut, National Association
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telex: 221086 CTNB-HFD
Facsimile: (203) 240-7920
Telephone: (203) 722-9079
or if to any other Person, addressed to such Person as provided in the
Participation Agreement.
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(b) The Company, the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Original Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Holders of the Series
SWA 1995 Trust N605SW Certificates shall be mailed by first-class mail to the
addresses for Holders shown on the Register kept by the Registrar and to
addresses filed with the Indenture Trustee for other Holders. Failure so to
mail a notice or communication or any defect in such notice or communication
shall not affect its sufficiency with respect to other Holders of such
Certificates of that or any other series entitled to receive notice.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) Notwithstanding the foregoing, all communications or
notices to the Indenture Trustee shall be deemed to be given only when received
by a Responsible Officer of the Indenture Trustee.
Section 12.02. [Reserved for Potential Future Use]
Section 12.03. [Reserved for Potential Future Use]
Section 12.04. Rules by Indenture Trustee and Agents. The
Indenture Trustee may make reasonable rules for action by or a meeting of the
Holders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
Section 12.05. Non-Business Days. With respect to the
Series SWA 1995 Trust N605SW Certificates only, if a payment date is not a
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for
the intervening period.
Section 12.06. GOVERNING LAW. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
Section 12.07. No Recourse Against Others. No director,
officer, employee or stockholder, as such, of the Company, the Owner Trustee or
the Owner Participant, as the case may be, shall have any liability for any
obligations of the Company, the Owner Trustee or the Owner Participant, as the
case may be, under this Agreement or for any claim based on, in respect of or
by reason of such obligations or their creation. Each Holder by accepting a
Certificate waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Certificates.
Section 12.08. Execution in Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute but one instrument.
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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Section 12.09. Applicability Only to Original Holder.
Notwithstanding any provision to the contrary herein, Sections 15.03 through
15.05 shall only be applicable to the Holder of Series SWA Trust N605SW-I
Certificate.
Section 12.10. Severability. Any provision of this
Indenture which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
Section 13.01. Actions to Be Taken upon Termination of
Lease. Upon any of:
(a) the voluntary termination of the Lease by the Company
pursuant to Section 9 thereof on the Lease Termination Date, and upon payment
to the Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its
option pursuant to Section 18.2 of the Lease on the Special Purchase Option
Date (unless the Company shall have elected to assume all of the rights and
obligations of the Owner Trustee hereunder as provided for in Section 8(r) of
the Participation Agreement), and upon payment to the Indenture Trustee of an
amount equal to the Redemption Price as at the applicable Redemption Date of
all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss
Payment Date, following an Event of Loss suffered by the Airframe under
circumstances where the Company does not exercise its option to substitute a
Replacement Airframe therefor pursuant to Section 10.1.2 of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price as
at the Redemption Date of all Outstanding Certificates, or
(d) the satisfaction, discharge, defeasance and
termination of obligations under this Agreement in accordance with Section
10.01,
the Lien of this Agreement on the Indenture Estate shall terminate (except for
the Lien on funds held by the Indenture Trustee to pay the Certificates and the
Lien on amounts due from the Company under the Lease necessary to pay the
Certificates or the Indenture Trustee) and the Indenture Trustee shall execute
such instruments as may be requested by the Company or the Owner Trustee to
evidence such termination (at the Company's or the Owner Trustee's expense).
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE]
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ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1995 TRUST N605SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1995 TRUST N605SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1995 TRUST N605SW-I
CERTIFICATES
Section 15.01. Conditions Precedent to Issuance of Series
SWA 1995 Trust N605SW Certificates. The issuance of the Series SWA 1995 Trust
N605SW Certificates pursuant to Section 18 of the Participation Agreement is
subject to all conditions specified in such section.
Simultaneously with the satisfaction of such conditions, the
Owner Trustee shall deliver to the Indenture Trustee a completed version of
Exhibits B, B-l and B-2 with respect to the Series SWA 1995 Trust N605SW
Certificates, which completed Exhibits B, B-l and B-2 shall specify the
maturities and principal amounts of the Series SWA 1995 Trust N605SW
Certificates and the applicable interest rates, together with the reference
dates for purposes of determining the Owner Trustee's rights to redeem such
Certificates as provided for in the Operative Agreements. Such completed
Exhibits B, B-l and B-2 shall be deemed upon such delivery automatically to
have been incorporated herein without further action of the parties hereto.
Section 15.02. Payment upon Issuance of Series SWA 1995
Trust N605SW Certificates. Simultaneously with the receipt of the proceeds of
the issuance of the Series SWA 1995 Trust N605SW Certificates, the Indenture
Trustee, on behalf of the Owner Trustee, shall apply an amount equal to the
Redemption Price of the Series SWA 1995 Trust N605SW-I Certificates to the
redemption of the Series SWA 1995 Trust N605SW-I Certificates in accordance
with Section 15.03.
Section 15.03. Special Provision Governing Refinancing of
the Series SWA 1995 Trust N605SW-I Certificate. Notwithstanding any other
provision of this Agreement, as long as any Series SWA 1995 Trust N605SW-I
Certificate is Outstanding, if a refinancing shall be effected pursuant to
Section 17 or 18 of the Participation Agreement and if all the conditions to
such refinancing set forth herein and in such Section 17 or 18 shall have been
satisfied, the Series SWA 1995 Trust N605SW-I Certificates may be refinanced in
whole at a Redemption Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to, but excluding, the applicable
Redemption Date plus the Break Amount, if any, and any other amounts payable to
the Holders thereof hereunder or under the Participation Agreement, but without
any other premium or penalty; provided, however, that the applicable Redemption
Date for the redemption of the Series SWA 1995 Trust N605SW-I Certificates
pursuant to this Section 15.03 shall be the applicable Refinancing Date or
Section 18 Refinancing Date, as the case may be.
Section 15.04. Special Provision for Payments in Respect of
the Series SWA 1995 Trust N605SW-I Certificate. Notwithstanding any other
provision of this Agreement, all amounts payable in respect of each Series SWA
1995 Trust N605SW-I Certificate shall be paid by the Indenture Trustee to the
Holder of such Certificate to its account indicated in Schedule I to the
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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Participation Agreement, or to such other account maintained by such Holder
with any bank located in the United States and designated by such Holder to the
Indenture Trustee, in any case without presentment or surrender of any
Certificate, except that in the case of any final payment with respect to any
Series SWA 1995 Trust N605SW-I Certificate, such Certificate shall be
surrendered promptly thereafter to the Indenture Trustee by the Holder thereof
for cancellation. Such payment shall be made by the Indenture Trustee, in the
case of any such designated account in New York, New York, prior to 2:00 P.M.,
New York time, on the due date thereof if such payment is received by the
Indenture Trustee by 1:00 P.M., New York time, or by 12:00 Noon, New York time
on the next succeeding Business Day if such payment is received after 1:00
P.M., New York time. In the event the Indenture Trustee shall fail to make any
such payment as provided in the immediately foregoing sentence after its
receipt of funds at the place and prior to the time specified above, the
Indenture Trustee, in its individual capacity and not as trustee, agrees to
compensate the Certificate Holders for loss of use of funds in a commercially
reasonable manner.
Section 15.05. Increased Costs, Break Amount, Additional
Interest, Taxes, Etc. (a) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements which are provided for in subsection (c), below) after the
Delivery Date in any law or regulation or in the interpretation thereof by any
government or central bank or other governmental department, agency, board,
service or governmental body charged with responsibility for the administration
or interpretation thereof or (ii) the compliance with any guideline or request
made after the Delivery Date by any government or central bank or other
governmental department, agency, board, service or other governmental body
(whether or not having the force of law), there shall be any increase in the
cost to, or any reduction of the rate of return on assets or equity of, any
Holder (or any of its Affiliates) of the Series SWA 1995 Trust N605SW-I
Certificate of agreeing to make or making, funding or maintaining the loan
evidenced by its Series SWA 1995 Trust N605SW-I Certificate in respect of (x)
any period as to which the applicable Debt Rate is determined by reference to
the Offshore Rate and (y) capital adequacy requirements, then the Owner Trustee
shall from time to time pay to such Holder such amount as shall be necessary to
reimburse such Holder for such increase in cost within 10 Business Days after
delivery to the Owner Trustee, the Indenture Trustee and the Company of a
certificate of an officer of such Holder setting forth in reasonable detail the
event by reason of which it claims such increase in cost and the basis for the
determination of the amount of such increase in cost; provided, however, that
the Original Holder shall not be entitled to assert any claim under this
subsection 15.05(a) in respect of taxes (including Taxes (as defined in the
Participation Agreement) and the taxes referred to in subsections (d) and (e)
of this Section 15.05). Such certificate shall, in the absence of manifest
error, be binding and conclusive. Such Holder shall notify the Owner Trustee,
the Indenture Trustee and the Company as soon as possible of the occurrence of
any event by reason of which it is entitled to make a claim as described in
this subsection (a), but the failure to give such notice shall not affect the
obligations of the Owner Trustee hereunder.
(b) In the event that any Holder of the Series SWA 1995
Trust N605SW-I Certificate incurs any Break Amount (as defined below) in
connection with any payment, prepayment, acceleration, redemption, refinancing
or purchase, in whole or in part, of the principal of its Series SWA 1995 Trust
N605SW-I Certificate in accordance with the provisions of this Agreement or
otherwise on a date other than the last day of an Interest Period, then the
Owner Trustee shall pay to such Holder such Break Amount on the date of such
payment, prepayment, acceleration, redemption, refinancing or purchase, as the
case may be.
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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For the purposes hereof, "Break Amount" means an amount equal
to the net funding loss or additional expense which any Holder of a Series SWA
1995 Trust N605SW-I Certificate sustains or incurs or will sustain or incur as
a result of any payment, prepayment, acceleration, redemption, refinancing or
purchase (whether by mandatory or voluntary prepayment, optional purchase,
acceleration or otherwise) of any principal of its Series SWA 1995 Trust
N605SW-I Certificate on a date other than the last day of an Interest Period,
as reasonably determined by such Holder and set forth in a certificate of such
Holder which includes in reasonable detail the basis or the calculations of the
amount being claimed.
(c) The Owner Trustee agrees to pay to any Holder of a
Series SWA 1995 Trust N605SW-I Certificate, to the extent that such Holder
shall require, due to either (i) the introduction of or any change after the
Delivery Date in any law or regulation or in the interpretation thereof by the
Federal Reserve Board (or any governmental authority succeeding thereto) or
(ii) compliance with any guideline or request made after the Delivery Date by
the Federal Reserve Board (whether or not having the force of law), to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
the loan evidenced by its Series SWA 1995 Trust N605SW-I Certificate, in
respect of any period to which such reserve maintenance requirement is so
applicable and the applicable Debt Rate is determined by reference to the
Offshore Rate, in an amount as to any such period equal to the amount obtained
by applying to the outstanding principal amount of such loan during such period
an interest rate equal at all times to the remainder obtained by subtracting
(A) the applicable Offshore Rate from (B) the rate obtained by dividing such
Offshore Rate by a percentage equal to 100% minus the Eurocurrency Reserve
Percentage, if any, applicable from time to time to such Holder. Such
additional interest shall be paid by the Owner Trustee to any Holder of a
Series SWA 1995 Trust N605SW-I Certificate from time to time as and when
interest is payable under such Holder's Certificate, subject to receipt of
notice of the amount of such additional interest for such Holder.
(d) Should any Holder of a Series SWA 1995 Trust N605SW-I
Certificate fail to qualify for a complete exemption from withholding of United
States Federal income tax because of a change in the provisions of the Code or
other relevant laws from those in effect on the Delivery Date, and the
Indenture Trustee is required by law to deduct or withhold United States
Federal income tax from amounts paid to such Holder, the amounts payable
hereunder and under its Series SWA 1995 Trust N605SW-I Certificate shall be
increased as may be necessary so that, after all required deductions and
withholdings for United States Federal income tax resulting from any such
change in the Code, such Holder receives an amount equal to the excess of (i)
the amount it would have received had no such deduction or withholding been
made over (ii) the additional amount of United States Federal income tax that
would have been payable by it under Section 882 of the Code in the absence of
such change in the Code.
(e) Each Holder of a Series SWA 1995 Trust N605SW-I
Certificate by its acceptance of such Series SWA 1995 Trust N605SW-I
Certificate, agrees that it will, promptly after it becomes aware of any event
or the existence of a condition that would give rise to reimbursement or
payment pursuant to subsection 15.05(a), 15.05(c) or 15.05(d) or to increased
payment hereunder and under the Series SWA 1995 Trust N605SW-I Certificate
pursuant to subsection 15.05(d), to the extent not inconsistent with such
Holder's internal policies, use reasonable efforts to make, fund or maintain
the loan evidenced by the Series SWA 1995 Trust N605SW-I Certificate through a
different Lending Office if, as a result thereof, the amount of such
reimbursement or payment or increased payment, as the case may be, which would
otherwise be required to be made would be materially
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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reduced and if, as determined by such Holder in its reasonable discretion the
making, funding or maintaining of such loan through such different Lending
Office would not otherwise adversely affect such loan or such Holder. Each
Holder agrees that it will consult with the Owner Trustee in connection with
any relocation of its Lending Office. The Owner Trustee hereby agrees to pay
all reasonable expenses incurred by each such Holder in considering or taking
action pursuant to this subsection (e).
(f) Amounts payable to the Holder of any Series SWA 1995
Trust N605SW-I Certificate pursuant to this Article 15 that are not paid when
due shall bear interest from the due date thereof to, but excluding the date
paid, at the Past Due Rate.
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IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly provided herein and otherwise
solely as Owner Trustee
By: /s/ Michelle K. Blezard
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as otherwise expressly provided herein,
but solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services
Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
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Exhibit A
to Trust Indenture
and Security Agreement
Form of Series SWA 1995 Trust N605SW-I Certificate
THIS CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS CERTIFICATE MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
$________________ No. ________________
SERIES SWA 1995 TRUST N605SW-I CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but solely as Owner Trustee under a
Trust Agreement
Dated as of August 1, 1995
Issued in Connection with Aircraft N605SW
Leased to
SOUTHWEST AIRLINES CO.
Date: ______________, 1995 New York, New York
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement, dated as of August 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (such agreement as the same
may be modified, amended or supplemented being referred to herein as the "Trust
Agreement"), for value received hereby promises to pay to TEXAS COMMERCE BANK
NATIONAL ASSOCIATION (the "Original Loan Participant"), the principal sum of
________________ Dollars on or before ________________ (the "Maturity Date"),
together with interest on such principal amount remaining unpaid from time to
time from the date hereof until such principal amount is paid in full, all as
provided below. The principal amount of this Certificate shall be payable in
installments on the several dates (each a "Principal Payment Date") set forth
in Annex A hereto equal, in each case, to the corresponding percentage of the
original principal amount of this Certificate set forth with respect to each
such date in Annex A hereto. Interest on the principal amount remaining unpaid
from time to time from the date hereof until such principal amount is paid in
full shall be due and payable on each Interest Payment Date.
<PAGE> 70
Notwithstanding the foregoing, the final payment made on this
Certificate shall be in an amount sufficient to discharge in full the unpaid
principal amount and all accrued and unpaid interest on, and any other amounts
due under this Certificate or as provided for in the Trust Indenture and
Security Agreement, dated as of August 1, 1995 relating to the Aircraft (such
agreement as the same may be modified, amended or supplemented being referred
to herein as the "Indenture"; the defined terms used therein and not otherwise
defined herein being used herein with the same meanings), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder.
Interest on the principal amount of this Certificate shall
accrue at the applicable Debt Rate (as defined below). The "Debt Rate"
applicable in respect of any day in any Interest Period (as defined below)
selected by the Owner Trustee or Southwest Airlines Co. (the "Company") (acting
on behalf of the Owner Trustee) as provided for below, shall be the Offshore
Rate (as defined below) applicable to such Interest Period as selected by the
Owner Trustee or the Company (acting on behalf of the Owner Trustee) as
provided for below, plus in each case the margin applicable from time to time
determined pursuant to the following table:
<TABLE>
<CAPTION>
Interest Period:
--------------------------------------------------
Ending on Margin in Basis
Commencing On: And Including: Points Per Annum:
------------- ------------- ----------------
<S> <C> <C>
Delivery Date First anniversary 35
of the Delivery Date
First day subsequent to 18-month anniversary 50
first anniversary of the of the Delivery Date
Delivery Date
First day subsequent Second anniversary 75
to the 18-month anniversary of the Delivery Date
of the Delivery Date
First day subsequent to the Third anniversary of the 500
second anniversary of the Delivery Date
Delivery Date
First day subsequent to the Fourth anniversary of the 600
third anniversary of the Delivery Date
Delivery Date
First day subsequent to the Any date subsequent to the 700
fourth anniversary of the fourth anniversary of the
Delivery Date Delivery Date
</TABLE>
provided, however, for any Interest Period beginning after the second
anniversary of the issuance date, the Debt Rate shall never be less than the
Treasury Rate applicable to such Interest Period, plus in each case the margin
applicable from time to time determined pursuant to the foregoing table;
A-2
<PAGE> 71
provided, further, there shall not be more than one Interest Period applicable
at any time to this Certificate and all other Outstanding Certificates.
Interest accrued and unpaid on any Interest Payment Date shall
be paid on such Interest Payment Date; provided, however, that all interest
accrued and unpaid on this Certificate on the date this Certificate shall be
paid in full shall be paid on such date; provided, however, that if any
Interest Period Date (as defined below) is not also an Interest Payment Date,
all interest accrued during the Interest Period relevant thereto and unpaid as
at such Interest Period Date shall be added to the principal amount of this
Certificate until the next succeeding Interest Payment Date and bear interest
at the Debt Rate applicable to such principal from time to time hereunder
during the period from such Interest Period Date to the next succeeding
Interest Payment Date and all such interest so added to principal and the
interest thereon shall be due and payable on such next succeeding Interest
Payment Date; provided, finally, that any amount of principal or interest
payable hereunder which is not paid when due shall, to the maximum extent
permitted by law, bear interest, payable on demand, from the due date therefor
until the date of payment at an interest rate equal to the Debt Rate plus 2%
per annum. All computations of interest shall be made by the Agent on the basis
of a year of 360 days for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable.
Notwithstanding any provision hereof to the contrary, this
Certificate shall not constitute an obligation to pay nor shall the Original
Loan Participant be entitled hereunder to collect any amount of interest to the
extent not permitted by applicable law.
Notwithstanding anything to the contrary contained herein, if
any date on which a payment under this Certificate becomes due and payable is
not a Business Day, then such payment shall not be made on such scheduled date
but shall be made on the next succeeding Business Day.
For purposes of this Certificate, the following capitalized
terms used herein shall have the following meanings:
"Basis Point" means 1/100 of 1%.
"Interest Payment Date" shall mean each July 1 and January 1
commencing January 1, 1996.
"Interest Period" shall mean, with reference to the Offshore
Rate, a period of up to 30 consecutive days, as available, or one,
two, three or six months, as selected by the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) as provided for below,
and shall mean, with reference to the Treasury Rate, a period of 30,
60, 90 or 180 days, corresponding to the one, two, three or six month
Interest Period, as the case may be, which shall have been so selected
with reference to the Offshore Rate; provided, however, that (i) the
initial Interest Period shall commence with the Delivery Date; (ii)
each Interest Period immediately succeeding an Interest Period shall
commence on the last day of the preceding Interest Period; (iii) if
any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day; and (iv) notwithstanding anything to the contrary
contained herein, no Interest Period shall extend beyond a date which
is a Principal Payment Date.
A-3
<PAGE> 72
"Interest Period Date" shall mean each Business Day on which
an Interest Period expires.
"Offshore Rate" shall mean, as to any Interest Period, the
rate (rounded to the nearest 1/100 of 1% or, if there is no nearest
1/100 of 1%, the next higher 1/100 of 1%) at which deposits in United
States dollars approximately equal in principal amount to the sum of
the aggregate principal amount of all Certificates Outstanding on the
first day of such Interest Period plus all accrued and unpaid interest
which will be outstanding during such Interest Period are offered in
immediately available funds to the principal office of the Agent in
London, England (or if the Agent does not at the time any such
determination is made maintain an office in London, England, the
principal office of any Affiliate of the Agent in London, England) by
leading banks in the London Interbank Market for Eurodollars at
approximately 11:00 a.m. (London, England time) two Business Days
prior to the commencement of such Interest Period.
"Treasury Rate" shall mean, as to any Interest Period, the
yield to maturity (rounded to the nearest 1/100 of 1% or, if there is
no nearest 1/100 of 1%, to the next higher 1/100 of 1%) of the most
recently auctioned United States Treasury securities having maturities
most closely corresponding (linearly interpolating between the next
preceding and next succeeding maturities) to the Maturity Date, as
determined at 11 a.m. (New York City time) on the first day of such
Interest Period by reference to the Telerate Trading Assistant or, if
such Telerate Trading Assistant is not available to provide such data,
the average (rounded upwards to the nearest 1/100 of 1% or, if there
is no nearest 1/100 of 1%, to the next higher 1/100 of 1%), as
determined by the Agent, of quotes furnished at (or as proximately
thereto as is reasonably practicable) such time by two reputable
dealers in United States Treasury securities, which shall be selected
by the Agent.
The selection of the Offshore Rate and the duration of the
Interest Period related thereto shall be made by telephonic notice (followed by
telex, telecopy or other written confirmation) from the Owner Trustee or the
Company (acting on behalf of the Owner Trustee) to the Original Loan
Participant by not later than 11:00 A.M. (New York City time) on the second
Business Day preceding the first day of the relevant Interest Period, which
notice shall, in addition to specifying the Interest Period, also specify the
principal amount of the Certificates to be Outstanding during such Interest
Period indicating with specificity any amount of such principal representing
accrued and unpaid interest to be added to the then principal amount of the
Certificates and outstanding during such Interest Period; provided, however,
that the selection of the Offshore Rate for the initial Interest Period, which
shall be from and including the Delivery Date to but excluding the second
Business Day succeeding the Delivery Date, shall be made by telephonic notice
(followed by telex, telecopy or other written confirmation) from the Owner
Trustee or the Company (acting on behalf of the Owner Trustee) to the Original
Loan Participant by not later than 11:00 A.M. (New York City time) on the
Delivery Date, and that the Offshore Rate for such initial Interest Period
shall be determined as if such Interest Period were seven days in length
(without giving rise to any Break Amount for which the Owner Trustee or the
Company shall be responsible in connection therewith); provided, further, that
if a Lease Default shall have occurred or be continuing or no such notice shall
have been given, the Debt Rate will be deemed, effective upon the last day of
the then current Interest Period, to be determined by reference to the Offshore
Rate for an Interest Period of one month.
A-4
<PAGE> 73
Without in any way limiting the obligation of the Owner
Trustee or the Company (acting on behalf of the Owner Trustee) to confirm in
writing any telephonic notice, the Original Loan Participant may act without
liability upon the basis of a telephonic notice believed in good faith by the
Original Loan Participant to be from the Owner Trustee or the Company (acting
on behalf of the Owner Trustee). In each such case, the Owner Trustee waives
and the Company (acting on behalf of the Owner Trustee) shall be deemed to have
waived the right to dispute the Original Loan Participant's records of the
terms of such telephonic notice. The Original Loan Participant shall promptly
give the Indenture Trustee and the Original Loan Participant telephonic notice
(followed by telex, telecopy or other written notice) or written notice of the
contents of each notice received by the Original Loan Participant from the
Owner Trustee or the Company (acting on behalf of the Owner Trustee) and, not
later than the first Business Day of each Interest Period, the duration of and
the Offshore Rate to be applicable during such Interest Period.
All payments of principal, interest and other amounts, if any,
to be made by the Owner Trustee hereunder and under the Indenture shall be made
only from the income and proceeds from the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture and only to the extent
that the Indenture Trustee shall have sufficient income or proceeds from the
Indenture Estate and such other amounts to make such payments in accordance
with the terms of the Indenture, and the Original Loan Participant, by its
acceptance of this Certificate, agrees that it will look solely to the income
and proceeds from the Indenture Estate and the other amounts referred to in
Section 3.03 of the Indenture to the extent available for distribution to the
Holder hereof as above provided and that none of the Owner Participant, the
Owner Trustee or the Indenture Trustee is personally liable or liable in any
manner extending to any assets, other than the Indenture Estate, to the
Original Loan Participant for any amounts payable under this Certificate or the
Indenture or, except as provided in the Indenture, for any liability under the
Indenture; provided, however, that nothing herein contained shall limit,
restrict or impair the right of the Indenture Trustee, subject always to the
terms and provisions of the Indenture, to accelerate the maturity of this
Certificate upon an Indenture Event of Default, to bring suit and obtain a
judgment against the Owner Trustee on this Certificate for purposes of
realizing upon the Indenture Estate and to exercise all rights and remedies
provided under the Indenture or otherwise realized upon the Indenture Estate.
Both the original amount of principal due hereunder, any
amount of accrued and unpaid interest from time to time added thereto, and
interest and other amounts due hereunder shall be payable in United States
currency in immediately available funds pursuant to Section 15.04 of the
Indenture. Each such payment shall be made on the date such payment is due and
without any presentment or surrender of this Certificate, except that in the
case of any final payment with respect to this Certificate, the Certificate
shall be surrendered promptly thereafter to the Indenture Trustee by the
Original Loan Participant for cancellation.
The Original Loan Participant, by its acceptance of this
Certificate, agrees that each payment received by it hereunder shall be applied
in the manner provided in Section 3.08 of the Indenture.
This Certificate is one of the Series SWA 1995 Trust N605SW-I
Certificates referred to in the Indenture which has been or is to be issued by
the Owner Trustee pursuant to the terms of the Trust Agreement and the
Indenture. The Indenture Estate is held by the Indenture Trustee as security
for the Certificates. The rights of the Owner Trustee under the Indenture, as
well as the beneficial interest of the Owner Participant in and to the
properties of the Owner Trustee assigned,
A-5
<PAGE> 74
pledged or mortgaged as part of the Indenture Estate, are subject and
subordinate to the rights of the Holders of the Certificates to the extent
provided for in the Indenture. Reference is hereby made to the Indenture for a
statement of the rights of the Original Loan Participant in respect of, and the
nature and extent of the security for, this Certificate, and the rights of the
Owner Trustee, as well as for a statement of the terms and conditions of the
trusts created by the Indenture, to all of which terms and conditions in the
Indenture the Original Loan Participant agrees by its acceptance of this
Certificate.
Any Holder of this Certificate shall be deemed to have made
the following representation by its acquisition of this Certificate: either
that (a) no part of the funds used by it to acquire this Certificate
constitutes "plan assets" of any "employee benefit plan" within the meaning of
ERISA or any "plan" within the meaning of Section 4975(e)(1) of the Code, or
(b) its purchase or acquisition of this Certificate will not result in a
non-exempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA.
This Certificate is subject to redemption or purchase and to
acceleration as provided in Articles 6 and 15 of the Indenture.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant, the Original Loan
Participant nor the Company shall be affected by notice to the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK.
A-6
<PAGE> 75
IN WITNESS WHEREOF, the Owner Trustee has caused this
Certificate to be executed in its corporate name by its officer thereunto duly
authorized on the date hereof.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: ________________________________
Title:
<PAGE> 76
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: _________________________________
Title:
<PAGE> 77
Annex A to
Certificate
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
---------------------- ----------------------
<S> <C>
</TABLE>
A-9
<PAGE> 78
Exhibit A-1 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N605SW Installment Certificates
$________________ No. ________________
Dated as of ______________ __, 199_
SERIES SWA 1995 TRUST N605SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1995
Issued in connection with Aircraft N605SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- ------------- -------------
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars in
installments on each Installment Payment Date as set forth herein with the
final installment due and payable on the Maturity Date specified above and to
pay interest on the principal amount remaining unpaid from time to time at the
rate per annum specified above from ________________, 1995 or from the most
recent date to which interest has been paid or duly provided for, semiannually,
on _____________ and _______ in each year, commencing ____________________,
1995, until the principal hereof is paid or made available for payment in full.
All amounts payable by the Owner Trustee hereunder and under the Trust
Indenture and Security Agreement dated as of August 1, 1995, as supplemented
(as amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and the other amounts referred to in Section
3.03 of the Indenture for payment of such amounts, to the extent available for
distribution to the Holder hereof as provided in the Indenture and (b) neither
<PAGE> 79
the Owner Trustee, the Owner Participant nor the Indenture Trustee is or shall
be personally liable to the Holder hereof for any amount payable hereunder or
under the Indenture or, except as provided in the Indenture, for any liability
under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payments Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more
A-1-2
<PAGE> 80
complete statement of the terms and provisions thereof, including a statement
of the properties thereby conveyed, pledged and assigned, the nature and extent
of the security, the respective rights thereunder of the Owner Trustee, the
Indenture Trustee and the Holders of the Certificates, the terms upon which the
Certificates are, and are to be, executed and delivered, the terms upon which
the Certificates may be redeemed, as well as for a statement of the terms and
conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein.
<TABLE>
<CAPTION>
Installment Installment
Payment Payment
Date Percentage
----------- -----------
<S> <C>
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
___________, _____ ______%
</TABLE>
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal amount remaining unpaid of the Certificates may be
declared due and payable in the manner and with the effect provided in the
Indenture. If, and only if, such an Indenture Event of Default constitutes a
Lease Event of Default by the Company under the Lease, the Indenture Trustee
may, to the exclusion of the Owner Trustee, exercise one or more of the
remedies of the Owner Trustee provided in the Lease. Such remedies include (but
are not limited to) the right to repossess and use or operate the Aircraft, to
sell or relet the Aircraft free and clear of the Company's rights and retain
the proceeds and to require the Company to pay as liquidated damages (i) any
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
Value of the Aircraft over the aggregate fair market rental value thereof for
the remainder of the term for the Aircraft, (ii) any unpaid Basic Rent plus the
excess of the Stipulated Loss Value of the Aircraft over the fair market sales
value thereof or (iii) if the Aircraft has been sold, any unpaid Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under
A-1-3
<PAGE> 81
the Lease, provided, that such failure of the Company is not the third
consecutive such failure, or the fifth or subsequent cumulative such failure.
The Owner Trustee or the Owner Participant may (but need not) cure any other
default by the Company in the performance of its obligations under the Lease
which can be cured by the payment of money, by making such payment on behalf of
the Company, subject, however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the
A-1-4
<PAGE> 82
Owner Trustee, the Indenture Trustee, the Paying Agent, the Registrar, the
Owner Participant nor the Company shall be affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-1-5
<PAGE> 83
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:
Issue Date:
A-1-6
<PAGE> 84
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: _________________________________
Authorized officer or signatory
A-1-7
<PAGE> 85
Exhibit A-2 to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N605SW Serial Certificates
$________________ No. ________________
Dated as of __________________ __, 199_
SERIES SWA 1995 TRUST N605SW CERTIFICATE
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1995
Issued in connection with Aircraft N605SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- ------------- -------------
________________ ________________, 2___
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1995 between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ________________ or
registered assigns the principal sum of ________________ Dollars on the
Maturity Date specified above and to pay interest thereon at the rate per annum
specified above from ________________, 1995 or from the most recent date to
which interest has been paid or duly provided for, semiannually, on
_______________________ and ___________________ in each year, commencing
______________________, 1995, until the principal hereof is paid or made
available for payment. All amounts payable by the Owner Trustee hereunder and
under the Trust Indenture and Security Agreement dated as of August 1, 1995, as
supplemented (as amended or supplemented from time to time referred to herein
as the "Indenture", the defined terms therein not otherwise defined herein
being used herein with the same meanings), by and among the Owner Trustee and
Wilmington Trust Company, as Indenture Trustee thereunder, shall be made only
from the income and proceeds of the Indenture Estate and the other amounts
referred to in Section 3.03 of the Indenture. Each Holder hereof, by its
acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for any amount
payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
<PAGE> 86
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, the terms upon which the Certificates may be
redeemed, as well as for a statement of the terms and conditions of the trust
created by the Indenture, to all of which terms and conditions in the Indenture
each Holder hereof agrees by its acceptance of this Certificate.
A-2-2
<PAGE> 87
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the right
to repossess and use or operate the Aircraft, to sell or relet the Aircraft
free and clear of the Company's rights and retain the proceeds and to require
the Company to pay as liquidated damages (i) any unpaid Basic Rent plus an
amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
A-2-3
<PAGE> 88
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
CertifiCate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
OF THE STATE OF NEW YORK.
* * *
A-2-4
<PAGE> 89
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:
Issue Date:
A-2-5
<PAGE> 90
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: _________________________________
Authorized officer or signatory
A-2-6
<PAGE> 91
Exhibit B to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts and
Interest Rates of Series SWA 1995 Trust N605SW Certificates
<TABLE>
<CAPTION>
Premium
Principal Termination
Maturity Date Amount Interest Rate Date
- ------------- -------- ------------- ------------
<S> <C> <C> <C>
</TABLE>
[To be completed at time of issuance of Series SWA 1995 Trust N605SW
Certificates, if any shall be issued hereunder.]
<PAGE> 92
Exhibit B-1 to
Trust Indenture and
Security Agreement
Installment Payment Dates and Installment Payment Percentages
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N605SW Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
Installment Certificate No. 2 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
[To be completed at time of issuance of Series SWA 1995 Trust N605SW
Certificates, if any shall be issued hereunder.]
TOTAL 100.00000000 ________________
</TABLE>
<PAGE> 93
Exhibit B-2 to
Trust Indenture and
Security Agreement
Issuance of Series SWA 1995 Trust N605SW Certificates
The Series SWA 1995 Trust N605SW Certificates issued hereunder
shall be issued to and shall be payable to _________ under the __________ with
respect to the [grantor trusts created thereby], in each case as set forth
below:
<PAGE> 94
Exhibit C to
Trust Indenture and
Security Agreement
[FORM OF]
TRUST AGREEMENT AND TRUST INDENTURE AND
SECURITY AGREEMENT SUPPLEMENT
This TRUST AGREEMENT AND TRUST INDENTURE AND SECURITY
AGREEMENT SUPPLEMENT, is dated ______ __, 1995 (herein called the "Supplement")
of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee (herein called the "Owner Trustee"),
under the Trust Agreement, dated as of August 1, 1995 (herein called the "Trust
Agreement"), between the Owner Trustee and the Owner Participant named therein,
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and
delivery of one or more supplements thereto substantially in the form hereof,
which shall particularly describe the Aircraft (such term and other terms
defined in the Trust Indenture referred to below, or in the Lease therein
referred to, being used herein as therein defined) included in the property
covered by the Trust Agreement;
WHEREAS, the Trust Indenture and Security Agreement, dated as
of August 1, 1995 (herein called the "Trust Indenture"), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee (herein called the
"Indenture Trustee"), provides for the execution and delivery of a supplement
thereto substantially in the form hereof, which shall particularly describe the
Aircraft, and shall specifically mortgage such Aircraft to the Indenture
Trustee; and
WHEREAS, each of the Trust Agreement and Trust Indenture
relates to the Airframe and Engines described below, and a counterpart of the
Trust Indenture is attached hereto and made a part hereof and this Supplement,
together with such counterpart of the Trust Indenture, is being filed for
recordation on the date hereof with the Federal Aviation Administration as one
document;
NOW, THEREFORE, This Supplement Witnesseth, that, to secure
the prompt payment of the principal of, Break Amount, if any, Premium, if any,
and interest on, and all other amounts due with respect to, all Certificates
from time to time Outstanding and all other amounts due to the Holders under
the Trust Indenture and the Participation Agreement and the performance and
observance by each of the Company and the Owner Trustee of all the agreements,
covenants and provisions in the Trust Indenture and in the other Operative
Agreements for the benefit of the Indenture Trustee and the Holders of the
Certificates and in the Certificates contained, and the prompt payment of all
amounts from time to time owing under the Operative Agreements to the Holders
of the Certificates, and for the uses and purposes of the Trust Indenture, and
in consideration of the premises and of the covenants contained in the Trust
Indenture, and of the acceptance of the Certificates by the Holders thereof,
and of the sum of $1.00 paid to the Owner Trustee by the Indenture Trustee at
or before the delivery hereof, the receipt whereof is hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm unto the Indenture Trustee, its
successors and assigns, for the security and benefit of the
<PAGE> 95
Holders from time to time of the Certificates, upon the trusts created by the
Trust Indenture, all right, title and interest of the Owner Trustee in, to and
under the following described property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ ---------------
<S> <C> <C> <C>
The Boeing Company 737-3H4 N605SW 27956
</TABLE>
together with all Parts relating to such airframe.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more
rated take-off horsepower or the equivalent thereof, whether or not such
engines shall be installed in or attached to the Airframe or any other
airframe, identified as follows:
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Serial Number
------------ ----- ---------------
<S> <C> <C>
CFM International CFM56-3-B1 858188
CFM International CFM56-3-B1 858207
</TABLE>
together with all Parts relating to such engines.
Together with all substitutions or replacements of and
additions, improvements, accessories and accumulations to the property above
described for which title vests in the Owner Trustee under the Operative
Agreements and all property which shall hereafter become physically attached to
or incorporated in the property above described, whether the same are now owned
by the Owner Trustee or shall hereafter be acquired by it for which title vests
in the Owner Trustee under the Operative Agreements.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, in the trust created by the Trust Indenture, all of the right,
title and interest of the Owner Trustee in, to and under the Lease Supplement
of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment
shall constitute security for any of the aforementioned obligations.
C-2
<PAGE> 96
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Holders from time to time of the Certificates for
the uses and purposes and subject to the terms and provisions set forth in the
Trust Indenture.
This Supplement shall be construed as supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
AND, FURTHER, the Owner Trustee hereby acknowledges that the
Aircraft referred to in this Supplement and the aforesaid Lease Supplement has
been delivered to the Owner Trustee and is included in the property of the
Owner Trustee covered by all the terms and conditions of the Trust Agreement,
subject to the pledge and mortgage thereof under the Trust Indenture.
THIS SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
C-3
<PAGE> 97
IN WITNESS WHEREOF, the Owner Trustee has caused this
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee
By: _________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT SUPPLEMENT [N605SW]
<PAGE> 1
EXHIBIT 4.43
________________________________________________________________________________
FIRST AMENDMENT
TO
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity only as
expressly set forth herein and
otherwise solely as Owner Trustee
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
One Boeing 737-3H4 Aircraft N605SW
Southwest Airlines Co.
Series 1995 Trust N605SW Certificates
(Southwest Airlines 1995 Trust N605SW)
________________________________________________________________________________
<PAGE> 2
FIRST AMENDMENT TO
TRUST INDENTURE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO TRUST INDENTURE AND SECURITY AGREEMENT dated
as of October 1, 1995 (this "Amendment") between SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual capacity only as expressly set forth
herein and otherwise solely as Owner Trustee under that certain Trust Agreement
establishing the Southwest Airlines 1995 Trust N605SW and dated as of August 1,
1995 (in such capacity, the "Owner Trustee") and WILMINGTON TRUST COMPANY, as
Indenture Trustee (the "Indenture Trustee"), amends that certain related Trust
Indenture and Security Agreement dated as of August 1, 1995 (the "Original
Indenture") between the Owner Trustee and the Indenture Trustee (the Original
Indenture, as supplemented by Trust Agreement and Trust Indenture and Security
Agreement Supplement dated August 25, 1995 by the Owner Trustee, relating to
the aircraft having U.S. registration number N605SW, being referred to herein
as the "Indenture"),
W I T N E S S E T H :
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Indenture;
WHEREAS, a counterpart to the Indenture was recorded by the Federal
Aviation Administration on September 14, 1995 and assigned Conveyance No.
Z96920;
WHEREAS, the Owner Trustee has agreed to refinance the Series SWA 1995
Trust N605SW-I Certificates with Series 1995 Trust N605SW Certificates; and
WHEREAS, in order to effect such refinancing, the Owner Trustee and
the Indenture Trustee have agreed to amend the Indenture as provided for below;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to the Indenture. The Indenture is, effective
as of the date hereof, hereby amended as follows:
(a) The definitions of "Business Day" and "Holder" in
Section 1.01(b) of the Indenture are amended in their entirety to read
as follows:
"Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or
authorized to close in the City of Dallas, Texas; New York,
New York; or the city and state in which (i) so long as any
Certificates shall be Outstanding, each of the Indenture
Trustee and the Pass Through Trustee and (ii) thereafter, the
Owner Trustee, has its principal place of business; or the
city and state in which the Indenture
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
-1-
<PAGE> 3
Trustee, the Pass Through Trustee or the Owner Trustee, as the
case may be, receives and disburses funds.
"Holder" or "Certificate Holder" means a Person in
whose name a Certificate is registered on the Register
including, so long as it holds a Series SWA 1995 Trust N605SW
Certificate, the Pass Through Trustee.
(b) The following new definitions are inserted in Section
1.01(b) of the Indenture after the definition of "Owner Trustee":
"Pass Through Certificates" means any of the Pass
Through Certificates issued pursuant to the Pass Through Trust
Agreements.
"Pass Through Trust" means each pass through trust
created pursuant to the Pass Through Trust Agreements.
"Pass Through Trust Agreements" means the Pass
Through Trust Agreement dated as of February 1, 1993, between
the Company and the Pass Through Trustee, as supplemented by
the two Trust Supplements Nos. 1995-A3 and 1995-A4 each dated
as of October 1, 1995, as the same may from time to time be
further amended, supplemented or otherwise modified.
"Pass Through Trustee" means Wilmington Trust Company
in its capacity as trustee under each Pass Through Trust
Agreement, and such other Person that may from time to time be
acting as successor trustee under any such Pass Through Trust
Agreement.
(c) The first sentence of Section 6.02 of the Indenture
is amended by adding at the end thereof ", in respect of any
Certificate, if such purchase or redemption is effected prior to the
Premium Termination Date in respect of such Certificate".
(d) The first sentence of Section 9.09 of the Indenture
is amended by substituting the reference "49 U.S.C. Section
40102(a)(15)(C)" for the words "Section 101(16) of the Federal
Aviation Act" at the end of such sentence.
(e) Subparagraph (ii) of Section 10.01(a) of the
Indenture is amended by inserting the words "of cash and/or Government
Obligations" between the words "an amount" and "sufficient to
discharge such indebtedness" therein.
(f) Subparagraph E of Section 10.05 of the Indenture is
amended in its entirety to read as follows:
"E. the Owner Trustee shall have delivered to the
Defeasance Trustee, the Indenture Trustee and the Certificate
Holders an Officers' Certificate and an Opinion of Counsel (1)
to the effect that there has been published by the
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
-2-
<PAGE> 4
Internal Revenue Service a ruling, or (2) since the date of
this Agreement that there has been a change in or
clarification of the applicable Federal income tax law, in
either case to the effect that Holders will not recognize
income, gain or loss for Federal income tax purposes as a
result of the exercise by the Owner Trustee of its option
under Section 10.01(a)(iii) and will be subject to Federal
income tax on the same amount and in the same manner and at
the same times, as would have been the case if such option had
not been exercised; and".
(g) Subparagraph (3) of Section 11.06(b) is amended by
deleting therefrom the reference to "15(f), 15(g), 15(h)."
(h) Inasmuch as Break Amount is relevant only with
respect to the Series SWA 1995 Trust N605SW-I Certificates, which are
to be refinanced, the second paragraph of Section 15.05(b) (containing
the definition of Break Amount) is hereby deleted, and all other
references to Break Amount in the Indenture or any other Operative
Agreement shall have no further force or effect.
(i) Exhibits A-1, A-2, B, B-1 and B-2 to the Indenture
are replaced in their entirety by Exhibits A-1, A-2, B, B-1 and B-2
hereto. Said revised Exhibits B, B-1 and B-2 shall, for all purposes,
be deemed to have been, and are, completed in accordance with Article
15 of the Indenture.
Section 2. Lease Amendment. As of the date hereof, the Lessee
and the Owner Trustee are entering into First Amendment to Sale and Lease
Agreement (the "Lease Amendment") to the Sale and Lease Agreement dated as of
August 1, 1995 relating to the Aircraft, which Sale and Lease Agreement
(together with Sale and Lease Agreement Supplement No. One, dated August 25,
1995 thereto) was recorded with the Federal Aviation Administration on
September 14, 1995 and assigned Conveyance No. Z96921. The Lease Amendment is
attached hereto and, without limiting the generality of the Granting Clause of
the Indenture, is covered by the Lien of the Indenture and is made part of the
Indenture Estate.
Section 3. Amendment and Incorporation by Reference. This
Amendment is and shall be construed as an amendment and supplement to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated herein by reference and is hereby ratified, approved and
confirmed.
Section 4. GOVERNING LAW. THIS AMENDMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 5. Execution in Counterparts. This Amendment may be
executed by the Owner Trustee and the Indenture Trustee in separate
counterparts, each of which when so
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
-3-
<PAGE> 5
executed and delivered is an original, but all such counterparts shall together
constitute but one and the same instrument.
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
-4-
<PAGE> 6
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
in its individual capacity
only as expressly set forth
herein and otherwise solely as
Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Corporate Trust Officer
WILMINGTON TRUST COMPANY,
not in its individual
capacity, except as otherwise
expressly provided herein,
but solely as Indenture Trustee
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
-5-
<PAGE> 7
Exhibit A-1 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N605SW Installment Certificates
$______________ No._____________
Dated as of August 25, 1995
SERIES SWA 1995 TRUST N605SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1995
Issued in connection with Aircraft N605SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, _____
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to _______________ or
registered assigns the principal sum of ______________ Dollars in installments
on each Installment Payment Date as set forth herein with the final installment
due and payable on the Maturity Date specified above and to pay interest on the
principal amount remaining unpaid from time to time at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment in full. All amounts payable by the Owner
Trustee hereunder and under the related Trust Indenture and
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-1-1
<PAGE> 8
Security Agreement dated as of August 1, 1995, as supplemented and amended by
Trust Agreement and Trust Indenture and Security Agreement Supplement dated
August 25, 1995 and First Amendment to Trust Indenture and Security Agreement
dated as of October 1, 1995 (as further amended or supplemented from time to
time referred to herein as the "Indenture", the defined terms therein not
otherwise defined herein being used herein with the same meanings), by and
among the Owner Trustee and Wilmington Trust Company, as Indenture Trustee
thereunder, shall be made only from the income and proceeds of the Indenture
Estate and the other amounts referred to in Section 3.03 of the Indenture.
Each Holder hereof, by its acceptance of this Certificate, agrees that (a) it
will look solely to the income and proceeds of the Indenture Estate and the
other amounts referred to in Section 3.03 of the Indenture for payment of such
amounts, to the extent available for distribution to the Holder hereof as
provided in the Indenture and (b) neither the Owner Trustee, the Owner
Participant nor the Indenture Trustee is or shall be personally liable to the
Holder hereof for any amount payable hereunder or under the Indenture or,
except as provided in the Indenture, for any liability under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-1-2
<PAGE> 9
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payment Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of any authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein, all as shown on Exhibit A hereto.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-1-3
<PAGE> 10
Company's rights and retain the proceeds and to require the Company to pay as
liquidated damages (i) any unpaid Interim Rent or Basic Rent plus an amount
equal to the excess of the Stipulated Loss Value of the Aircraft over the
aggregate fair market rental value thereof for the remainder of the term for
the Aircraft, (ii) any unpaid Interim Rent or Basic Rent plus the excess of the
Stipulated Loss Value of the Aircraft over the fair market sales value thereof
or (iii) if the Aircraft has been sold, any unpaid Interim Rent or Basic Rent
plus the excess of the Stipulated Loss Value thereof over the net sales
proceeds.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Interim Rent or Basic Rent under the Lease, provided
that such failure of the Company is not the third consecutive such failure, or
the fifth or subsequent cumulative such failure. The Owner Trustee or the
Owner Participant may (but need not) cure any other default by the Company in
the performance of its obligations under the Lease which can be cured by the
payment of money, by making such payment on behalf of the Company, subject,
however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-1-4
<PAGE> 11
of authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration or
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-1-5
<PAGE> 12
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in
its individual capacity but solely as
Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-1-6
<PAGE> 13
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: ___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-1-7
<PAGE> 14
Exhibit A-2 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1995 Trust N605SW Serial Certificates
$___________________ No._______________
Dated as of August 25, 1995
SERIES SWA 1995 TRUST N605SW CERTIFICATE
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1995
Issued in connection with Aircraft N605SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_______________ _______________, ______
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1995, between the Owner
Trustee in its individual capacity and the institution referred to therein as
the "Owner Participant" relating to the Aircraft (herein as such Trust
Agreement may be amended or supplemented from time to time called the "Trust
Agreement"), for value received, hereby promises to pay to ___________ or
registered assigns the principal sum of ___________ Dollars on the Maturity
Date specified above and to pay interest thereon at the rate per annum
specified above from October 4, 1995 or from the most recent date to which
interest has been paid or duly provided for, semiannually, on January 1 and
July 1 in each year, commencing January 1, 1996, until the principal hereof is
paid or made available for payment. All amounts payable by the Owner Trustee
hereunder and under the related Trust Indenture and Security Agreement dated as
of August 1, 1995, as supplemented and amended by Trust Agreement and Trust
Indenture and Security Agreement Supplement dated August 25, 1995 and First
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-2-1
<PAGE> 15
Amendment to Trust Indenture and Security Agreement dated as of October 1, 1995
(as further amended or supplemented from time to time referred to herein as the
"Indenture", the defined terms therein not otherwise defined herein being used
herein with the same meanings), by and among the Owner Trustee and Wilmington
Trust Company, as Indenture Trustee thereunder, shall be made only from the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture. Each Holder hereof, by its acceptance of
this Certificate, agrees that (a) it will look solely to the income and
proceeds of the Indenture Estate and other amounts referred to in Section 3.03
of the Indenture for payment of such amounts, to the extent available for
distribution to the Holder hereof as provided in the Indenture and (b) neither
the Owner Trustee, the Owner Participant nor the Indenture Trustee is or shall
be personally liable to the Holder hereof for any amount payable hereunder or
under the Indenture or, except as provided in the Indenture, for any liability
under the Indenture.
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-2-2
<PAGE> 16
date to the address of the Holder entitled thereto as such address shall appear
on the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Interim Rent or
Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of
the Aircraft over the aggregate fair market rental value thereof for the
remainder of the term for the Aircraft, (ii) any unpaid Interim Rent or Basic
Rent plus the excess of the Stipulated Loss Value of the Aircraft over the fair
market sales value thereof or (iii) if the Aircraft has been sold, any unpaid
Interim Rent or Basic Rent plus the excess of the Stipulated Loss Value thereof
over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Interim Rent or Basic Rent under the Lease, provided
that such failure of the Company is not the third consecutive such failure, or
the fifth or subsequent cumulative such failure.
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-2-3
<PAGE> 17
The Owner Trustee or the Owner Participant may (but need not) cure any other
default by the Company in the performance of its obligations under the Lease
which can be cured by the payment of money, by making such payment on behalf of
the Company, subject, however, to certain limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-2-4
<PAGE> 18
No service charge shall be made for any such registration of
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-2-5
<PAGE> 19
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By: ___________________________________
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-2-6
<PAGE> 20
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By: ___________________________________
Title:
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
A-2-7
<PAGE> 21
Exhibit B to
First Amendment to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N605SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A3 January 1, 2013 $15,250,103.00 7.22% October 4, 2007 Installment
1995-A4 January 1, 2018 $9,423,153.00 7.64% January 4, 2016 Installment
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
B-1
<PAGE> 22
Exhibit B-1 to
First Amendment to
Trust Indenture and
Security Agreement
INSTALLMENT PAYMENT DATES AND INSTALLMENT PAYMENT PERCENTAGES AND AMOUNTS
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
B-1-1
<PAGE> 23
Exhibit B-2 to
First Amendment to
Trust Indenture and
Security Agreement
ISSUANCE OF SERIES SWA 1995 TRUST N605SW CERTIFICATES
The Series SWA 1995 Trust N605SW Certificates issued hereunder
shall be issued to and shall be payable to the Pass Through Trustee under each
Pass Through Trust Agreement with respect to the grantor trust created thereby,
in each case as set forth below:
1995-A3 Trust:
7.22% Certificate due January 1, 2013
1995-A4 Trust:
7.64% Certificate due January 1, 2018
TRUST INDENTURE AND SECURITY AGREEMENT [N605SW]
B-2-1
<PAGE> 1
EXHIBIT 4.45
________________________________________________________________________________
PARTICIPATION AGREEMENT
dated as of August 1, 1995
among
SOUTHWEST AIRLINES CO.,
Lessee,
BOT FINANCIAL & LEASING CORPORATION B-4,
Owner Participant,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Original Loan Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N605SW
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Certain Definitions; Participations in Lessor's Cost of the Aircraft . . . . . . . . . . . . 2
SECTION 2. Lessee's Notice of Delivery Date; Closing Procedures . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee . . . . . . . . . . . . . . . . . . . 5
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the Aircraft . . . . . . . . . . . . . . . 6
(i) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ii) No Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(iii) Original Loan Participant's Commitment . . . . . . . . . . . . . . . . . . . 6
(iv) Owner Participant's Commitment . . . . . . . . . . . . . . . . . . . . . . . 7
(v) Authorization, Execution and Delivery of Documents . . . . . . . . . . . . . 7
(vi) UCC-1's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(vii) Proof of Corporate Action, Etc . . . . . . . . . . . . . . . . . . . . . . . 8
(viii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . 9
(x) Representations and Warranties Accurate; No Event of
Default; No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xi) Opinions of Lessee's Counsel . . . . . . . . . . . . . . . . . . . . . . . . 10
(xii) [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xiii) Opinion of Owner Trustee's Counsel . . . . . . . . . . . . . . . . . . . . . 10
(xiv) Opinions of Owner Participant's Counsel . . . . . . . . . . . . . . . . . . . 10
(xv) Opinion of Oklahoma City Counsel . . . . . . . . . . . . . . . . . . . . . . 10
(xvi) Opinion of Indenture Trustee's Counsel . . . . . . . . . . . . . . . . . . . 10
(xvii) Opinion of Original Loan Participant's Counsel . . . . . . . . . . . . . . . 11
(xviii) Lessee's Bringdown Certificate . . . . . . . . . . . . . . . . . . . . . . . 11
(xix) Guarantor's Financial Statements . . . . . . . . . . . . . . . . . . . . . . 11
(xx) Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) No Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiii) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiv) Bringdown of Other Parties' Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxv) Opinion of Owner Participant's Tax Counsel . . . . . . . . . . . . . . . . . 12
(xxvi) No Tax Law Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxvii) Lender Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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(xxviii) Withholding Tax Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Conditions Precedent to the Obligations of Lessee . . . . . . . . . . . . . . . . . . 13
SECTION 5. Confidentiality of Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6. Extent of Interest of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . 15
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . 15
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 15
(iii) Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(iv) Valid Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(v) No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vi) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(vii) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(viii) Registration and Recordation . . . . . . . . . . . . . . . . . . . . . . . . 16
(ix) Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(x) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xi) No Misstatement or Omission . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xii) Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xiv) Effective Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xv) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xvii) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xviii) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xix) No Federal Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(xx) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(iii) Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(iv) Notice and Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(v) Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(ii) Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iii) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(iv) Right to Defend; Subrogation; Fees and Expenses of
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Owner Participant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
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SECTION 8. Other Representations, Warranties, Covenants and Indemnities . . . . . . . . . . . . . . . . 28
(a) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Chief Executive Office of SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(e) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Owner Participant's Representations and Warranties . . . . . . . . . . . . . . . . . . 30
(g) Lessor Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Indenture Trustee Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) Termination Instructions to Owner Trustee . . . . . . . . . . . . . . . . . . . . . . 31
(j) Excess Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(k) Representations and Warranties of Indenture Trustee in Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(l) Transfers of Equity Interests; Rights of Owner Participant and
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(m) Obligations of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(n) Compliance with Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(o) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(p) SBC's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 35
(q) Owner Participant's Lease Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(r) Lessee's Assumption of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(s) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(t) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(u) Lease Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(v) Revocation of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(w) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(x) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(y) Discharge of Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(z) Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(aa) Special Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(cc) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(dd) Deferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(ee) Lessee as Pricing Agent for Certificate . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9. Payments to Lessee of Trust Indenture Monies . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10. Other Documents; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 11. Certain Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) FAA Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(e) Engine Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
PARTICIPATION AGREEMENT [N605SW]
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(f) Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(h) Certificate Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(i) No Certificate Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 12. Ownership of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 13. Notices; Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 14. Change of Situs of Owner Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) Consents under Lease and Trust Indenture . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Counterparts; Waivers; Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 46
(d) No Recourse Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(e) Duties Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Binding on Parties and Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) Enforceability Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(h) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 16. Transaction Costs; Invoices and Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 48
SECTION 17. Optional Redemption of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 18. Interim Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 19. Section 1110 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
EXHIBIT A
Form of Guaranty
</TABLE>
PARTICIPATION AGREEMENT [N605SW]
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of August 1, 1995 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) BOT FINANCIAL & LEASING CORPORATION B-4, a Massachusetts
corporation (the "Owner Participant"), (iii) TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association (the "Original Loan Participant"),
(iv) SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association, in its individual capacity, only as expressly provided herein (in
such capacity, "SBC") and otherwise, solely as Owner Trustee under the Trust
Agreement (in such capacity, the "Owner Trustee"), and (v) WILMINGTON TRUST
COMPANY, a Delaware banking corporation, in its individual capacity and as
Indenture Trustee under the Trust Indenture (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, one of which having U.S. Registration No. N605SW and Manufacturer's
serial number 27956 has been recently purchased by Lessee and is the subject of
this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
(i) Lessee and the Owner Trustee are
entering into the Purchase Agreement Assignment whereby Lessee agrees
to assign to the Owner Trustee certain rights and interests of Lessee
under the Purchase Agreement with respect to the Aircraft; and
(ii) the Manufacturer has executed the
Manufacturer's Consent with respect to the Purchase Agreement
Assignment; and
WHEREAS, the Indenture Trustee and the Owner Trustee
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
PARTICIPATION AGREEMENT [N605SW]
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WHEREAS, as described in Section 2 hereof, the Owner Trustee
and Lessee are entering into the Lease whereby, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to purchase the Aircraft
from Lessee and to lease the same back to Lessee, and Lessee agrees to sell the
Aircraft to the Owner Trustee and to lease the same back from the Owner
Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "Owner Trustee" and "Indenture Trustee" shall have
the further meanings attributed thereto in the Sale and Lease Agreement dated
as of the date hereof (the "Lease") between the Owner Trustee and Lessee
relating to the Aircraft referred to in the first recital herein, and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease or the Trust Indenture.
The term "Trust Supplement" has the meaning attributed to the term "Indenture
and Trust Supplement" in the Lease and to the term "Trust Supplement" in the
Trust Indenture. The terms "Indenture Estate," "Outstanding," "Permitted
Investments," "Register" and "Trust Office" shall have the meanings set forth
in the Trust Indenture, and the term "Trust Estate" shall have the meaning set
forth in the Trust Agreement. Unless the context otherwise requires, any
reference herein to any of the Operative Agreements refers to such document as
it may be amended from time to time in accordance with its terms and the terms
of each other agreement restricting the amendment thereof.
(b) Subject to the terms and conditions of this
Agreement, (i) the Original Loan Participant agrees to finance, in part, the
Owner Trustee's payment of Lessor's Cost for the Aircraft by making a secured
loan to the Owner Trustee (herein called the "Loan") on a date to be designated
pursuant to Section 2 hereof, but in no event later than September 30, 1995, in
the amount in Dollars equal to the percentage of Lessor's Cost set forth
opposite its name on Schedule II hereto and (ii) the Owner Participant hereby
agrees, in connection with its equity investment in the beneficial ownership of
the Aircraft and the sale of the Aircraft by Lessee to the Owner Trustee
pursuant to the Lessee FAA Bill of Sale and Lessee Warranty Bill of Sale, as
contemplated hereby, to make its equity investment in the beneficial ownership
of the Aircraft on a date to be designated pursuant to Section 2 hereof, but in
no event later than September 30, 1995, in an amount in Dollars equal to the
percentage of Lessor's Cost set forth opposite its name on Schedule II hereto.
In the case of the Owner Participant, the amount of its participation to be
made as provided above in the payment of Lessor's Cost and, in the case of the
Original Loan Participant, the aggregate principal amount of the Series SWA
1995 Trust N605SW-I Certificate to be simultaneously issued to it, is
hereinafter called such Participant's "Commitment" for the Aircraft. In case
either Participant shall default in its obligation to make the amount of its
Commitment available pursuant to Section 2 hereof in respect of the Aircraft,
the other Participant shall have no obligation to make any portion of such
Commitment available or to increase the amount of its Commitment and the
obligation of the nondefaulting Participant shall remain subject to the terms
and conditions set forth in this Agreement.
(c) In the event that either Participant shall for any
reason fail or refuse to make the full amount of its Commitment available to
the Owner Trustee in accordance with the terms of paragraph (b) of this Section
1 (such Participant, for the purpose of this Agreement, being called a
"Defaulting Participant"), the Owner Trustee shall give, at the earliest
practicable time (which may
PARTICIPATION AGREEMENT [N605SW]
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be the next Business Day), each party hereto telephonic notice (to be confirmed
promptly in writing) of such failure or refusal and the funds received by the
Owner Trustee in connection with the Aircraft will be held in accordance with
the terms of, and for the period provided in, paragraph (b) of Section 2. In
such event the Defaulting Participant will have no further right to participate
in, or make a loan for, as the case may be, the payment of Lessor's Cost for
the Aircraft. Lessee shall have the right to designate a financial institution
(which term, as used in this paragraph (c), shall mean any banking or financial
institution, institutional investor or fund which is not affiliated with Lessee
or with Owner Participant) to be substituted for the Defaulting Participant;
provided, however, that (i) such substituted financial institution shall sign
and deliver an amendment to this Agreement, in form and substance satisfactory
to the Owner Trustee, the Indenture Trustee and the remaining Participant,
whereby such financial institution agrees to be a party to this Agreement, to
be bound by all the terms hereof and to undertake all the obligations of the
Defaulting Participant contained herein, other than obligations, if any,
arising from the aforesaid failure or refusal by such Defaulting Participant,
(ii) if the Defaulting Participant is Owner Participant (A) such substituted
financial institution shall have been approved by the Original Loan
Participant, (B) each such substituted financial institution shall be domiciled
in the United States and shall be a citizen of the United States within the
meaning of the Act and shall have the requisite power and authority to enter
into and carry out the transactions contemplated by this Agreement and the
Trust Agreement, (C) such substituted financial institution shall enter into
amendments to the Trust Agreement, in form and substance satisfactory to the
Owner Trustee, the Indenture Trustee and the Original Loan Participant, whereby
such substituted financial institution agrees to be a party to the Trust
Agreement, to be bound by all the terms thereof and to undertake all the
obligations of the Defaulting Participant contained therein, and (D) the
substitution of such substituted financial institution as above provided shall
not violate any provisions of the Act or the regulations promulgated
thereunder, or create a relationship which would be in violation thereof and
such substituted financial institution shall so represent in writing to each
other party hereto, and (iii) if the Defaulting Participant is the Original
Loan Participant, such substituted financial institution shall be approved in
writing by Owner Participant. No action by Lessee in finding a financial
institution to be substituted as above provided shall be deemed to constitute a
waiver or release of any right which Lessee may have against the Defaulting
Participant. Each financial institution substituted for the Original Loan
Participant pursuant to this paragraph (c) shall be deemed the Original Loan
Participant for all purposes of this Agreement; and each financial institution
substituted for the Owner Participant pursuant to this paragraph (c) shall
(collectively, if more than one) be deemed the Owner Participant for all
purposes of this Agreement.
SECTION 2. Lessee's Notice of Delivery Date;
Closing Procedures. (a) Lessee agrees to give the Owner Participant, the Owner
Trustee, the Original Loan Participant and the Indenture Trustee at least three
(3) Business Days' written notice of the Delivery Date for the Aircraft, which
Delivery Date shall be a Business Day not later than September 30, 1995, which
notice shall specify (i) the amount of Lessor's Cost, (ii) the amount of each
Participant's Commitment for the Aircraft, and (iii) the model and FAA
registration number of the Aircraft and the manufacturer's serial numbers of
the Airframe and each Engine. As to each Participant, the making of its
Commitment for such Aircraft available in the manner required by this Section 2
shall constitute a waiver of such notice. The Owner Trustee and the Indenture
Trustee shall be deemed to have waived such notice if the Owner Trustee shall
have received from the Owner Participant funds in the full amount of the Owner
Participant's Commitment and the proceeds of the sale of the Series SWA 1995
Trust N605SW-I Certificate in the full amount of the Original Loan
Participant's Commitment.
PARTICIPATION AGREEMENT [N605SW]
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Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue and the Indenture Trustee shall
authenticate the Series SWA 1995 Trust N605SW-I Certificates which shall be
delivered simultaneously to the Original Loan Participant. On the Delivery
Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. 98120109 at Bank One, Dallas, N.A., ABA No. 111000614,
1717 Main Street, Dallas, Texas.
The Original Loan Participant and the Owner Participant each
agree to make its Commitment available to Shawmut Bank Connecticut, National
Association, Hartford, Connecticut, Account No. 0067548290, ABA No.
011-900-445, Reference: Southwest Airlines 1995 Trust N605SW, at or before
10:00 a.m. Dallas time, on the Delivery Date specified in Lessee's notice
referred to in the first paragraph of this Section 2 (such specified Delivery
Date being herein called the "Scheduled Delivery Date").
(b) If for any reason whatsoever the closing of the
transactions contemplated hereby is not consummated on the Scheduled Delivery
Date, Lessee may by telephonic notice given by 4:30 p.m., New York City time,
on the Scheduled Delivery Date to each Participant, the Owner Trustee and the
Indenture Trustee designate a delayed date for such closing (the "Delayed
Delivery Date"), not later than the fifth Business Day after the Scheduled
Delivery Date and in no event later than September 30, 1995. In the event that
no Delayed Delivery Date is designated or, if designated, such closing does not
occur on the Delayed Delivery Date, or if any Participant shall so request,
such funds of each Participant shall be promptly returned to it by the Owner
Trustee or the Indenture Trustee, as the case may be.
If the closing of the transactions contemplated hereby is not
consummated on the Scheduled Delivery Date, Lessee will reimburse each
Participant which has made its funds available pursuant to this Section 2 for
the loss of the use of its funds by paying to such Participant a sum equal to
interest on such funds at the Applicable Rate (as defined below) on the amount
for the period from and including the Scheduled Delivery Date to but excluding
the Delayed Delivery Date, or, as the case may be, to but excluding the
Business Day on which such Participant's funds are returned if such return is
made by 10:00 a.m. (New York City time) or to but excluding the next following
Business Day if such return is not made by such time and, in the case of the
Original Loan Participant, for the Break Amount, if any, applicable to the
Series SWA 1995 Trust N605SW-I Certificate.
"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Original
Loan Participant, the rate per annum borne by the Series SWA 1995 Trust
N605SW-I Certificates in respect of which such Original Loan Participant's
Commitment is made available. "Federal Funds Effective Rate" means, for any
period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
PARTICIPATION AGREEMENT [N605SW]
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federal funds brokers, as published on the succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for the day of such
transactions received by the Owner Participant from three federal funds brokers
of recognized standing selected by it; provided, that the "Federal Funds
Effective Rate" for any non-Business Day shall be the "Federal Funds Effective
Rate" for the previous Business Day.
SBC agrees that in the event it has received telephonic notice
(to be confirmed promptly in writing) from Lessee on the Scheduled Delivery
Date that the closing of the transactions contemplated hereby will not be
consummated on the Scheduled Delivery Date, it will, if instructed in the
notice from Lessee in regard to the funds received by it from the Participants,
use reasonable efforts to invest, at the risk, expense and direction of Lessee,
the funds received by it from the Participants in marketable direct obligations
of the United States of America or obligations of any of its agencies that are
guaranteed as to principal and interest by the United States of America, in any
such case having a stated maturity not later than 91 days from the date of
acquisition. Any such investment may be made through a repurchase agreement in
commercially reasonable form with SBC or a bank or other financial institution
having capital, surplus and undivided profits of at least $100,000,000;
provided, that title to the underlying obligations shall pass to SBC and that
such underlying securities shall be segregated in a custodial or trust account.
Any such obligations purchased by SBC, whether directly or through a repurchase
agreement, shall be so held in trust by SBC (but not as part of the Trust
Estate or Trust Indenture Estate) for the benefit of the respective
Participant. Lessee shall, on the Delayed Delivery Date or the date the funds
furnished by the Participants are required to be returned to the Participants,
as the case may be, reimburse SBC for the benefit of the respective
Participant, for any losses incurred on such investments.
All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the respective accounts of the
Participants (such income and profits to be credited against Lessee's
obligation to reimburse the Participants for the loss of use of funds made
available to SBC) and all other income and profits and all losses on the
investment of such funds shall be for the account of Lessee; and SBC shall not
be liable for failure to invest such funds or for any losses incurred on such
investments except for its own willful misconduct or negligence.
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee. Subject to the terms and conditions of this Agreement, the
Owner Trustee, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with instructions from such Participant or its special
counsel to release such funds to Lessee, shall transfer such funds to Lessee
and the Owner Trustee shall purchase the Aircraft from Lessee and lease the
Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
(a) to pay to Lessee (on behalf of the Owner Trustee) the
Lessor's Cost in the manner set forth in Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
PARTICIPATION AGREEMENT [N605SW]
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(c) to accept from Lessee the Lessee Warranty Bill of
Sale and the Lessee FAA Bill of Sale and the invoice with respect to the
Aircraft;
(d) to execute an aircraft registration application, a
Lease Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow the Loan from the Original Loan Participant
to finance a portion of Lessor's Cost and to issue to the Original Loan
Participant a Series SWA 1995 Trust N605SW-I Certificate in a principal amount
equal to the amount borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be
taken by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. Conditions. (a) Conditions Precedent to
the Participations in the Aircraft. It is agreed that the respective
obligations of the Participants to participate in the payments of Lessor's Cost
are subject to the satisfaction prior to or on the Delivery Date of the
following conditions precedent, except that paragraphs (iii), (xx), (xxiv)
(insofar as it relates to the Original Loan Participant), (xxv) and (xxvi)
shall not be a condition precedent to the obligation of the Original Loan
Participant, and paragraphs (iv), (x) (insofar as it relates to the Owner
Participant), (xiv), (xvii), (xix), (xxiv) (insofar as it relates to the Owner
Participant) and (xxvii) shall not be a condition precedent to the obligation
of the Owner Participant:
(i) Notice. Each Participant shall have
received due notice with respect to such participation pursuant to
Section 2 hereof (or shall have waived such notice either in writing
or as provided in Section 2).
(ii) No Change in Law. No change shall have
occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is a party or (y) the
Original Loan Participant or the Owner Participant to make its
Commitment available or, in the case of the Original Loan Participant,
to acquire the Series SWA 1995 Trust N605SW-I Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
(iii) Original Loan Participant's Commitment.
In the case of the Owner Participant, the Original Loan Participant
shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
(iv) Owner Participant's Commitment. In the
case of the Original Loan Participant, the Owner Participant shall
have made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(v) Authorization, Execution and Delivery of
Documents. The following documents shall have been duly authorized,
executed and delivered by the
PARTICIPATION AGREEMENT [N605SW]
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respective party or parties thereto, shall each be satisfactory in
form and substance to the Participants and shall be in full force and
effect and executed counterparts shall have been delivered to each
Participant and its respective counsel; provided, that only the
Original Loan Participant shall receive an executed original of the
Series SWA 1995 Trust N605SW-I Certificate, only the Indenture
Trustee, acting on behalf of the Holders, shall receive the original
counterpart of the Lease and the initial Lease Supplement, and only
Lessee and the Owner Participant shall receive copies of the Tax
Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering
the Aircraft and dated the Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering
the Aircraft and dated the Delivery Date;
(6) the Bills of Sale and an
invoice from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement
Assignment;
(8) an acceptance certificate
covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate") duly
completed and executed by the Owner Trustee or its agent,
which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1995 Trust
N605SW-I Certificate;
(11) the Manufacturer's Consent;
and
(12) the Guaranty.
(vi) UCC-1's. Uniform Commercial Code
financing statement or statements covering all of the security
interests created by or pursuant to the Granting Clause of the Trust
Indenture and precautionary Uniform Commercial Code financing
statement or statements with respect to the Lease shall have been
executed and delivered, and all such financing statement or statements
shall have been duly filed in all places necessary or advisable, and
any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Original Loan Participant
shall have been executed and delivered by Lessee, the Indenture
Trustee or the Owner Trustee and duly filed.
PARTICIPATION AGREEMENT [N605SW]
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(vii) Proof of Corporate Action, Etc. Each
Participant and the Indenture Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(1) a certified copy of the
Restated Articles of Incorporation and Bylaws of Lessee and a
copy of resolutions of the board of directors of Lessee or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of Lessee, duly authorizing the execution,
delivery and performance by Lessee of this Agreement, the
Lease, the Purchase Agreement Assignment, the Lessee Warranty
Bill of Sale, the Lessee FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with
the provisions hereof and thereof;
(2) such other documents and
evidence with respect to Lessee, the Manufacturer, the Owner
Trustee, the Indenture Trustee and the Participants, as the
Original Loan Participant or the Owner Participant, or their
respective counsel, may reasonably request in order to
establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the
compliance with the conditions herein set forth;
(3) a certificate of Lessee as
to the person or persons authorized to execute and deliver
this Agreement, the other Lessee Documents, and any other
documents to be executed on behalf of Lessee in connection
with the transactions contemplated hereby and as to the
signature of such person or persons;
(4) a copy of the Purchase
Agreement (to the Owner Participant and the Indenture Trustee
only) certified by the Treasurer, the Assistant Treasurer or
an Assistant Secretary of Lessee as being a true and accurate
copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations
or any right in such Agreement assigned by Lessee to the Owner
Trustee pursuant to the Purchase Agreement Assignment; and
(5) a copy of the general
authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of
authorization of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, certified as of the
Delivery Date by the Secretary or an Assistant Secretary of
the Indenture Trustee (in its individual capacity), SBC and
the Owner Participant, respectively, which authorize the
execution, delivery and performance by the Indenture Trustee
(in its individual capacity), SBC and the Owner Participant,
respectively, of all of the Operative Agreements to which it
is a party, together with such other documents and evidence
with respect to the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant as either the
Original Loan Participant (or its counsel) or the Owner
Participant (or its counsel) may reasonably request in order
to establish the consummation of the transactions contemplated
by this Agreement, the taking of all corporate proceedings in
connection therewith and compliance with the conditions herein
set forth; provided, this clause shall not be a
PARTICIPATION AGREEMENT [N605SW]
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condition precedent as to any Participant as to documents to be
provided by that Participant.
(viii) Governmental Approvals. All appropriate
action required to have been taken by the Federal Aviation
Administration, or any other governmental or political agency,
subdivision or instrumentality of the United States, prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders, permits, waivers, authorizations, exemptions and approvals
shall be in full force and effect on the Delivery Date.
(ix) Title, Registration, Airworthiness, Etc.
On the Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:
(1) the Owner Trustee has good
and marketable title (subject to filing and recording of the
Lessee FAA Bill of Sale with the Federal Aviation
Administration in accordance with the Act) to the Aircraft,
free and clear of Liens other than the rights of Lessee under
the Lease and Lease Supplement covering the Aircraft, the
mortgage and security interest created by the Trust Indenture,
the rights of the Owner Participant under the Trust Agreement
and the Trust Supplement and Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the
Lease;
(2) application for registration
of the Aircraft in the name of the Owner Trustee (together
with any required affidavits), the FAA Bill of Sale and the
Lessee FAA Bill of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the
Trust Indenture and the Trust Supplement and the Lease and the
Lease Supplement have been duly filed with the FAA for
recordation pursuant to the Act;
(4) each of the Owner Trustee,
as lessor under the Lease, and the Indenture Trustee, as
assignee thereof, is entitled to the protection of Section
1110 of the United States Bankruptcy Code in connection with
its right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor; and
(5) the Aircraft has been duly
certificated by the FAA as to type and airworthiness in
accordance with the terms of the Lease and has a current,
valid U.S. standard certificate of airworthiness issued by the
FAA.
(x) Representations and Warranties Accurate;
No Event of Default; No Adverse Change. On the Delivery Date, (A) the
representations and warranties of Lessee contained in Section 7 hereof
and in the Tax Indemnity Agreement shall be true and accurate as
though made on and as of such date except to the extent that such
representations and
PARTICIPATION AGREEMENT [N605SW]
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warranties relate solely to an earlier date (in which case such
representations and warranties shall be true and accurate on and as of
such earlier date), (B) no event shall have occurred and be
continuing, or would result from the purchase, sale, lease or mortgage
of the Aircraft, which constitutes (or would, with the passage of time
or the giving of notice or both, constitute) a Lease Event of Default
or an Indenture Event of Default, and (C) no material adverse change
shall have occurred in the consolidated financial condition of Lessee
and its subsidiaries from that shown in the consolidated financial
statements of Lessee and its subsidiaries as of June 30, 1995.
(xi) Opinions of Lessee's Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee and the Owner Trustee from Deborah Ackerman,
Associate General Counsel for Lessee.
(xii) [Intentionally omitted.]
(xiii) Opinion of Owner Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Shipman &
Goodwin, counsel for the Owner Trustee.
(xiv) Opinions of Owner Participant's Counsel.
The Original Loan Participant shall have received a favorable opinion,
in form and substance satisfactory to it, addressed to the Indenture
Trustee, the Original Loan Participant, the Owner Trustee and Lessee
from (a) Chadbourne & Parke LLP, special counsel to the Owner
Participant, and (b) in-house or other counsel for the Owner
Participant in a position to address the Owner Participant's due
incorporation and due authorization and execution of the Operative
Agreements to which the Owner Participant is a party.
(xv) Opinion of Oklahoma City Counsel. Each
Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the
Indenture Trustee, the Owner Trustee and Lessee, from Daugherty,
Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma.
(xvi) Opinion of Indenture Trustee's Counsel.
Each Participant shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Participants, the Owner
Trustee and Lessee from Potter Anderson & Corroon, special counsel for
the Indenture Trustee.
(xvii) Opinion of Original Loan Participant's
Counsel. The Original Loan Participant shall have received a
favorable opinion, in form and substance satisfactory to it, addressed
to it from Winstead Sechrest & Minick P.C., special counsel to the
Original Loan Participant.
(xviii) Lessee's Bringdown Certificate. Each
Participant, and the Indenture Trustee shall have received a
certificate signed by the President, any Vice President, the Treasurer
or the Assistant Treasurer of Lessee, dated the Delivery Date,
certifying as to
PARTICIPATION AGREEMENT [N605SW]
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the fulfillment of all conditions in this Section 4(a) insofar as they
relate to Lessee and as to the matters stated in paragraphs (x)
(insofar as it relates to Lessee), (xxii) and (xxiii) (to the
knowledge of Lessee, except in regard to matters relating to the
Participants, the Indenture Trustee or the Owner Trustee, in which
event such representation shall be to the knowledge of Lessee without
any investigation whatsoever) of this Section 4(a).
(xix) Guarantor's Financial Statements.
Lessee, the Original Loan Participant, and the Indenture Trustee shall
have received copies of the most recent audited financial statements
of The Bank of Tokyo Trust Company, the parent of the Owner
Participant.
(xx) Appraisal. The Owner Participant shall
have received an opinion, in form and substance reasonably
satisfactory to the Owner Participant, from Aero Economics, Inc.,
independent aircraft appraisers, or such other recognized aircraft
appraiser selected by the Owner Participant.
(xxi) Insurance Certificates. Each
Participant, the Owner Trustee and the Indenture Trustee shall have
received an independent insurance broker's report and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of
the Lease relating to insurance with respect to the Aircraft.
(xxii) No Event of Loss. On the Delivery Date,
it shall be true that no Event of Loss (or event which with the
passage of time would become an Event of Loss) with respect to the
Airframe or any Engine has occurred.
(xxiii) No Proceedings. No action or proceeding
shall have been instituted, nor shall action or proceeding be
threatened before any court or governmental agency, nor shall any
order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency at the time of the Delivery Date to
set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) Bringdown of Other Parties'
Representations and Warranties. The respective representations and
warranties of each Participant, the Indenture Trustee and the Owner
Trustee contained in Section 8 hereof shall be true and accurate as of
the Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date) and (a)
each Participant shall, by making its Commitment available as provided
in Section 1(b) of this Agreement, (b) the Indenture Trustee shall, by
authenticating the Series SWA 1995 Trust N605SW-I Certificate issued
on the Delivery Date, and (c) the Owner Trustee shall, by accepting
the Lessee Warranty Bill of Sale and the Lessee FAA Bill of Sale, be
respectively deemed to have reaffirmed as of the Delivery Date the
representations and warranties made by it (individually or in its
trust capacities, as the case may be) in Section 8 of this Agreement.
PARTICIPATION AGREEMENT [N605SW]
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(xxv) Opinion of Owner Participant's Tax
Counsel. The Owner Participant shall have received from Chadbourne &
Parke LLP, special counsel to the Owner Participant, a favorable
opinion, in form and substance satisfactory to the Owner Participant,
with respect to income tax aspects of the transactions contemplated by
the Operative Agreements.
(xxvi) No Tax Law Change. In the opinion of
the Owner Participant and its special counsel, no amendment,
modification, addition or change in or to the provisions of the Code
(including for this purpose, any non-Code provisions of legislation
affecting the Code such as transition rules or effective date
provisions), the regulations promulgated under the Code (including
temporary or proposed regulations), Internal Revenue Service Revenue
Procedures or Revenue Rulings, or other administrative
interpretations, applicable judicial precedents or Executive Orders of
the President of the United States shall have been made or proposed
after August 10, 1995 which might adversely affect the accuracy of the
Tax Assumptions set forth in Section 2 of the Tax Indemnity Agreement
or which might otherwise adversely affect the Owner Participant.
(xxvii) Lender Appraisal. The Original Loan
Participant shall have received an opinion from the Appraiser referred
to in paragraph (xx) above (without any tax-sensitive provisions) in
form and substance reasonably satisfactory to the Original Loan
Participant to the effect that the fair market value of the Aircraft
on the Delivery Date is at least equal to Lessor's Cost.
(xxviii) Withholding Tax Forms. If the Original
Loan Participant is required to execute any form or document in order
for payments to it to qualify for exemption from, or reduction of,
withholding tax imposed by the Government, in respect to such
payments, such Original Loan Participant shall have executed such form
or document (including, without limitation, United States Internal
Revenue Forms 1001, W-8 and/or 4224) and delivered it to the Indenture
Trustee in accordance with applicable regulations to qualify for such
exemption or reduction.
Promptly upon the registration of the Aircraft and the
recording of the Lease, the Trust Indenture, the Trust Agreement, the Lease
Supplement and the Trust Supplement covering the Aircraft pursuant to the
Federal Aviation Act, Lessee will request Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, to deliver to the Owner Participant, the
Indenture Trustee, the Original Loan Participant, the Owner Trustee and Lessee
an opinion as to the due and valid registration of the Aircraft in the name of
the Owner Trustee, the due recording of the FAA Bill of Sale, the Lessee FAA
Bill of Sale, the Trust Indenture, the Lease Supplement, the Trust Supplement,
the Lease and the Trust Agreement and the lack of filing of any intervening
documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee.
It is agreed that the obligations of Lessee (A) to sell the Aircraft to the
Owner Trustee, (B) to accept delivery of the Aircraft under the Lease, and (C)
to enter into its other Operative Agreements, are all subject to the
fulfillment to the satisfaction of Lessee prior to or on the Delivery Date of
the following conditions precedent:
PARTICIPATION AGREEMENT [N605SW]
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(i) The conditions specified in Sections
4(a)(iii), 4(a)(iv), 4(a)(viii), 4(a)(xxii), 4(a)(xxiii) and
4(a)(xxviii) hereof shall have been satisfied, unless such
nonsatisfaction is the result of the actions of Lessee.
(ii) Those documents described in Section
4(a)(v) shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Lessee) in the manner
specified in Section 4(a)(v), shall each be satisfactory in form and
substance to Lessee, shall be in full force and effect on the Delivery
Date, and an executed counterpart of each thereof (other than the
Series SWA 1995 Trust N605SW-I Certificate) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of the Indenture Trustee (in its individual capacity), SBC and the
Owner Participant, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee (in its individual
capacity), SBC and the Owner Participant, respectively, which
authorize the execution, delivery and performance by the Indenture
Trustee (in its individual capacity), SBC and the Owner Participant,
respectively, of all the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to the
Indenture Trustee (in its individual capacity), SBC and the Owner
Participant as Lessee or its counsel may reasonably request in order
to establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate proceedings in connection
therewith and compliance with the conditions herein set forth.
(iv) The representations and warranties of
each Participant, the Indenture Trustee and the Owner Trustee
contained in Section 8 hereof shall be true and accurate as of the
Delivery Date as though made on and as of such date except to the
extent that such representations and warranties relate solely to an
earlier date (in which event such representations and warranties shall
have been true and accurate on and as of such earlier date).
(v) Lessee shall have received the opinions
set forth in Sections 4(a)(xiii), 4(a)(xiv), 4(a)(xv) and 4(a)(xvi),
in each case addressed to Lessee and dated the Delivery Date.
(vi) No change shall have occurred after the
date of the execution and delivery of this Agreement in applicable law
or regulations thereunder or interpretations thereof by appropriate
regulatory or judicial authorities which, in the opinion of Lessee,
would make it a violation of law or regulations for Lessee to execute,
deliver or perform the Operative Agreements to which it is a party.
(vii) In the opinion of Lessee and its
counsel, there shall have been, since August 1, 1995, no amendment,
modification, addition or change in or to the Code (including for this
purpose, any non-Code provisions of legislation affecting the Code
such as transition rules or effective date provisions), the
regulations promulgated under the Code (including temporary or
proposed regulations), Internal Revenue Service Revenue Procedures
PARTICIPATION AGREEMENT [N605SW]
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or Revenue Rulings, or other administrative interpretations,
applicable judicial precedents or Executive Orders of the President of
the United States which might give rise to an indemnity obligation
under any of the Operative Agreements, or as a result of which any
adjustments to the Lease payments are requested by the Owner
Participant which would adversely affect the accuracy of the Tax
Assumptions set forth in Section 2 of the Tax Indemnity Agreement.
SECTION 5. Confidentiality of Purchase Agreement.
The Owner Trustee, the Participants and the Indenture Trustee shall keep the
Purchase Agreement confidential and shall not disclose the same to any Person,
except (A) to prospective and permitted transferees of the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
interest who agree to hold such information confidential, (B) to the
aforementioned prospective and permitted transferees', the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
counsel or special counsel, independent insurance brokers or other agents who
agree to hold such information confidential, (C) as may be required by any
statute, court or administrative order or decree or governmental ruling or
regulation, or as may be necessary or reasonable in connection with matters
involving federal or state banking examiners, tax auditors or taxing
authorities, or (D) as may be necessary or desirable for purposes of protecting
the interest of any such Person or for enforcement of any Operative Agreement
by the Owner Trustee, the Original Loan Participant, the Owner Participant or
the Indenture Trustee; provided, however, that any disclosures of any part of
the Purchase Agreement which are permitted by clause (C) or (D) above shall be
made only to the extent necessary to meet the specific requirements or needs of
the Persons to whom such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Holders. No
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
outstanding principal amount of, Break Amount, if any, Premium, if any, and
interest on all Certificates held by such Holder and all other sums payable to
such Holder hereunder, under the Trust Indenture and under such Certificates
shall have been paid in full. Each Holder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to such Holder as
provided in Section 2.09 of the Trust Indenture and that neither the Owner
Participant nor the Owner Trustee shall be personally liable to any Holder for
any amounts payable under the Certificates, the Trust Indenture, hereunder, or
under any other Operative Agreement (including, without limitation, amounts
payable as Premium or Break Amount), except as expressly provided in this
Agreement or (in the case of the Owner Trustee) in the Trust Indenture.
SECTION 7. Lessee's Representations and Warranties;
Indemnities. (a) In General. Lessee represents warrants, covenants and agrees
that:
(i) Organization, Citizenship, Etc. Lessee
(A) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, (B) is a "citizen of
the United States" (as defined in Section 40102 of Title 49, U.S.C.)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) has the corporate power and authority to carry on
its business as now conducted, to own or hold under lease its
properties and to enter into and perform its
PARTICIPATION AGREEMENT [N605SW]
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obligations under this Agreement and the other Operative Agreements to
which Lessee is or will be a party, and (D) is duly qualified to do
business as a foreign corporation in good standing in each state in
which the nature of its business makes such qualification necessary or
the failure to be so qualified or so to be in good standing would have
a material adverse effect on its business or operations or would
impair its ability to perform its obligations under the Operative
Agreements.
(ii) Corporate Authorization, Etc. The
execution, delivery and performance of this Agreement and the other
Operative Agreements to which Lessee is or will be a party (A) have
been duly authorized by all necessary corporate action on the part of
Lessee, (B) do not require any shareholder approval, or approval or
consent of any trustee or holders of indebtedness or obligations of
Lessee or of any lessor under any lease to Lessee except such as have
been duly obtained, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) Governmental Approvals. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
and 4(a)(ix)(3), and (C) such federal and state securities law
approvals or filings that will be required in connection with the
public offering, if any, of the Certificates.
(iv) Valid Agreements. This Agreement and
the other Operative Agreements to which Lessee is or will be a party,
as and when entered into, do or will, assuming due authorization,
execution and delivery by the party or parties thereto other than
Lessee, constitute legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
(v) No Proceedings. There are no pending
or, to Lessee's knowledge, threatened actions or proceedings before
any court or administrative agency which, having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to materially adversely affect the consolidated financial
condition of Lessee and its subsidiaries, or the ability of Lessee to
perform its obligations under this Agreement and the other Operative
Agreements to which Lessee is or will be a party.
PARTICIPATION AGREEMENT [N605SW]
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(vi) Taxes. Lessee and its subsidiaries have
filed or caused to be filed all federal, state, local and foreign tax
returns which are required to be filed and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any
assessment received by Lessee or any of its subsidiaries to the extent
that such taxes have become due and payable (except to the extent
being contested in good faith and by appropriate proceedings and for
the payment of which adequate provisions have been made).
(vii) Financial Condition. The audited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Annual Report to Shareholders for the year ended
December 31, 1994 and the unaudited consolidated financial statements
of Lessee and its subsidiaries contained in Lessee's Quarterly Report
on Form 10-Q for the period ended June 30, 1995 (copies of each of
which have been furnished to each Participant) have been prepared in
accordance with generally accepted accounting principles, present
fairly, in all material respects, the consolidated financial position
of Lessee and its subsidiaries as of such dates and the consolidated
results of their operations and their cash flows for the periods then
ended, and since June 30, 1995, there has been no material adverse
change in such consolidated financial position.
(viii) Registration and Recordation. Except
for (A) the registration of the Aircraft with the FAA pursuant to the
Act in the name of Owner Trustee, (B) the filing for recordation of
the instruments referred to in Section 4(a)(ix)(2) and (3) and this
Agreement, if deemed necessary due to the incorporation by reference
in such other instruments of terms defined herein, (C) the filing of
the UCC financing statements referred to in Section 4(a)(vi) and
continuation statements at periodic intervals, (D) the taking of
possession by the Indenture Trustee of the original counterparts of
the Lease and the initial Lease Supplement, and (E) the affixation of
the nameplate referred to in Section 7.1.2 of the Lease, no further
action, including any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the
Uniform Commercial Code of any applicable jurisdiction), is necessary
or advisable in order to establish and perfect the right, title or
interest of Owner Trustee in the property constituting the Trust
Estate, or of Indenture Trustee in the property constituting the Trust
Indenture Estate, in any applicable jurisdiction within the United
States of America.
(ix) Chief Executive Office. The chief
executive office (as such term is defined in Article 9 of the UCC) of
Lessee is 2702 Love Field Drive, Dallas, Texas 75235, and Lessee
agrees to give the Participants, Owner Trustee and Indenture Trustee
10 days' prior written notice of any relocation of said chief
executive office from its present location.
(x) Securities Laws. Neither Lessee nor
anyone acting on behalf of Lessee has directly or indirectly offered
any beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, or any similar interest or
security, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security
to, any Person other than the Participants and not more than 27 other
leasing companies or other institutional investors (in the case of
such beneficial interest or securities), or six other institutional
PARTICIPATION AGREEMENT [N605SW]
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investors (in the case of the Certificates and other similar interests
and securities) or (assuming the accuracy of the representations in
Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii)) to any Person in
violation of the Securities Act or applicable state securities laws,
or both, and Lessee will take no action which would constitute or
cause such violation.
(xi) No Misstatement or Omission. Neither
the financial statements referred to in Section 7(a)(vii) nor any
other documents furnished by Lessee to Owner Trustee, Indenture
Trustee, or any Participant in connection with the transactions
contemplated by this Agreement or the other Operative Agreements
contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein (in the case
of statements referred to in Section 7(a)(vii), as of the date made)
not misleading; there is no fact known by Lessee which Lessee has not
disclosed to such parties in writing which materially adversely
affects or, so far as Lessee can now reasonably foresee, will
materially adversely affect the ability of Lessee to carry on its
business and perform its obligations under this Agreement or the other
Operative Agreements to which it is a party.
(xii) Investment Company. Neither Lessee nor
any subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) No Event of Default. No Lease Event of
Default or Lease Default has occurred and is continuing under the
Lease.
(xiv) Effective Sale. On the Delivery Date,
the Aircraft will be situated in Texas and the sale of the Aircraft by
Lessee to Owner Trustee shall be complete and effective and not
voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (in reliance upon the
Participants' representations in Section 8(o)) the transactions
contemplated by this Agreement do not constitute a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code for which an exemption is not available by statute,
regulation or class exemption. The execution and delivery of this
Agreement and the other Operative Agreements and the consummation of
the transactions contemplated hereby and thereby will not involve any
non-exempt prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code (such representation being made
solely in reliance upon and subject to the accuracy of the
representations contained in Section 8(o)).
(xvi) Title to Aircraft, etc. Good and
marketable title to the Aircraft will be at the time of delivery to
Owner Trustee vested in Lessee free and clear of all Liens other than
the rights of Lessee under the Lease and the Lease Supplement covering
the Aircraft, the Lien of the Trust Indenture, the beneficial interest
of the Owner Participant in the Aircraft and the Liens permitted by
clause (d) (solely for taxes not yet due) or (e) of Section 6 of the
Lease; and, subject to the filing for recordation of the Lessee FAA
Bill of Sale in accordance with the Act, good and marketable title to
the Aircraft will have been duly
PARTICIPATION AGREEMENT [N605SW]
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conveyed by Lessee to Owner Trustee, free and clear of all Liens other
than the rights of Lessee under the Lease and the Lease Supplement
covering the Aircraft, the Lien of the Trust Indenture, the beneficial
interest of the Owner Participant in the Aircraft, and the Liens
permitted by clause (d) (solely for taxes not yet due) or (e) of
Section 6 of the Lease.
(xvii) Condition of Aircraft. The Aircraft has
been duly certificated by the FAA as to type and airworthiness, is
fully equipped to operate in commercial service and complies with all
material governmental requirements governing such service; the
Aircraft has been continuously operated and maintained by Lessee (in a
manner that would satisfy the provisions of Sections 7.1.3 and 8.1 of
the Lease) since its delivery to Lessee by Manufacturer, Lessee is
unaware of any material mechanical or structural defects in or damage
to the Aircraft since its delivery to Lessee by Manufacturer and there
has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event
of Loss.
(xviii) Use of Proceeds. None of the proceeds
from the issuance of the Certificates or from the acquisition by the
Owner Participant of its beneficial interest in the Trust Estate will
be used directly or indirectly by Lessee so as to result in a
violation of Regulation G or U of the Board of Governors of the
Federal Reserve System.
(xix) No Federal Approvals. No governmental
approval in the United States of any kind is required of the Owner
Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance
under this Agreement or any agreement contemplated hereby solely by
reason of any fact or circumstance peculiar to: (a) Lessee (as
contrasted to other airlines), (b) the nature of the Aircraft, or (c)
Lessee's proposed operations or use of the Aircraft.
(xx) Section 1110. Owner Trustee, as lessor
under the Lease, and the Indenture Trustee, as assignee thereof, are
entitled to the protection of Section 1110 of the United States
Bankruptcy Code in connection with their right to take possession of
the Airframe and Engines in the event of a case under Chapter 11 of
the United States Bankruptcy Code in which Lessee is a debtor. Lessee
acquired the Aircraft new from the Manufacturer after October 22,
1994, and Lessee first placed the Aircraft in service after such date.
(b) General Tax Indemnity.
(i) Indemnity. Lessee hereby agrees to pay,
to indemnify, and, on written demand, reimburse and hold each
Indemnified Party (which, unless otherwise indicated herein, for
purposes of this Section 7(b) shall include any Affiliate of any
Participant, and all entities which are included in a consolidated,
combined or unitary return with such Indemnified Party) harmless from,
any and all license, documentation, recording and registration fees
and any and all taxes (including, without limitation, sales, use,
turnover, value-added, property (tangible and intangible), ad valorem,
consumption, rental, license, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature
whatsoever together with any and all penalties, fines, additions to
tax or interest
PARTICIPATION AGREEMENT [N605SW]
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thereon or computed with reference thereto (collectively "Taxes"),
howsoever imposed by any federal, state or local government or
governmental subdivision or taxing authority in or of the United
States of America (including any possession or territory of the United
States of America), or by any foreign government, taxing authority or
governmental subdivision of a foreign country, upon, against, or with
respect to any Indemnified Party, Lessee, the Aircraft, Airframe, any
Engine, any other engine installed on the Airframe, Part or any other
part thereof or interest therein or upon or with respect to the
purchase, acquisition, acceptance, rejection, mortgaging, financing,
refinancing, manufacture, sale, transfer of title, ownership,
delivery, nondelivery, insuring, inspection, leasing, possession, use,
registration, reregistration, deregistration, operation, repair,
replacement, abandonment, redelivery, modification, rebuilding,
importation, exportation, return or other disposition thereof, or the
imposition of any Lien (or the occurrence of any liability to refund
or pay over any amount as a result of any Lien) thereon, or upon or
with respect to the rentals, receipts or earnings arising therefrom,
or upon or with respect to this Agreement, the Trust Agreement, the
Trust Indenture, the Lease, a Lease Supplement, the Purchase
Agreement, the Purchase Agreement Assignment, the Certificates or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture, or the
beneficial interest in the Trust Estate or the creation thereof, or
any payment made pursuant to any such agreement or instrument or upon
or with respect to the property, held by Owner Participant or by the
Trust Estate or by Indenture Trustee under the Trust Indenture, or
otherwise with respect to or in connection with the transactions
contemplated by the Operative Agreements.
(ii) Exceptions. The indemnity set forth in
Section 7(b)(i) shall not extend in the case of any Indemnified Party
to Taxes (1) on, based on, or measured by, the receipts, gross or net
income, capital or net worth of such Indemnified Party (whether
denominated as franchise, excess profits, conduct of business, capital
gains, minimum and/or alternative minimum taxes) or accumulated
earnings, personal holding company, succession taxes and estate or
franchise taxes (other than taxes which are in the nature of sales or
use taxes, value-added taxes, rental taxes, license taxes, consumption
taxes, ad valorem taxes or property taxes) imposed by (A) the federal
government of the United States (including without limitation any
taxes collected by withholding) (but specifically excluding any excise
taxes imposed in connection with the occurrence of a "prohibited
transaction," within the meaning of Section 406 of ERISA or Section
4975 of the Code, for which an exemption is not available by statute,
regulation or class exemption) or (B) any state or local government or
governmental subdivision or state or local taxing authority in the
United States of America other than in the case of (B) any such tax
which is a Covered Income Tax, as defined below; (2) on, based on, or
measured by, any fees or compensation received by Owner Trustee or
Indenture Trustee in its individual capacity for services rendered in
connection with the transactions contemplated hereby; (3) relating to
the Aircraft for any period after the later of (A) the expiration or
early termination of the Lease and the return of the Aircraft in
connection therewith in accordance with the terms thereof and (B)
payment in full of Stipulated Loss Value or Termination Value, as the
case may be, and all Rent due and owing in accordance with the Lease;
(4) arising out of or caused by the wilful misconduct or gross
negligence of such Indemnified Party (other then willful misconduct or
gross negligence imputed to such Indemnified Party solely by reason of
its interest in the Aircraft) or the inaccuracy or breach of any
representation, warranty or covenant of such Indemnified Party
PARTICIPATION AGREEMENT [N605SW]
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contained in any Operative Agreement; (5) imposed on the income of
such Indemnified Party by a foreign government or taxing authority or
a possession or territory of the United States or any tax authority
therein, except to the extent such Taxes are imposed by reason of the
location, operation, registration, use or rental of the Aircraft or
any Part thereof in such jurisdiction or the presence, incorporation
or other organization of Lessee or Sublessee or other user or an
Affiliate of any thereof in such jurisdiction or the making of
payments from such jurisdiction; (6) which may become payable in
connection with the occurrence of a "prohibited transaction," within
the meaning of Section 406(b) of ERISA or Section 4975(c)(1)(E) or (F)
of the Code, involving the assets of any "employee benefit plan"
within the meaning of Section 3(3) of ERISA, or of any "plan" within
the meaning of Section 4975(e)(1) of the Code, with respect to which
the Owner Participant is the "plan sponsor" within the meaning of
Section 3(16)(B) of ERISA; and (7) which become payable as a result of
any involuntary disposition attributable to the bankruptcy of the
Owner Participant or Owner Trustee or any voluntary sale, transfer,
mortgaging, pledging or financing by such Indemnified Party of all or
a portion of its interest in the Aircraft, the Trust Estate, the Trust
Indenture Estate, the Lease, or any other Operative Agreement in a
transaction not contemplated by the Operative Agreements. As used in
clause (1)(B) of this Section 7(b)(ii), the term "Covered Income Tax"
means a Tax described in said clause (1)(B) imposed on an Indemnified
Party by any taxing authority (A) in whose jurisdiction such
Indemnified Party (including for this purpose all entities with which
it is combined, integrated or consolidated in such taxing authority's
jurisdiction) did not engage in business, did not maintain an office
or other place of business and was not otherwise located, if such Tax
resulted from the operation of the Aircraft or any Engine in such
jurisdiction or the transactions contemplated by the Operative
Agreements, or (B) in whose jurisdiction such Indemnified Party in
fact is doing business, maintaining an office or other place of
business or is otherwise located, if such circumstance was no factor
in the imposition of such Tax.
(iii) Calculation. Lessee agrees that, with
respect to any payment or indemnity pursuant to Section 7(b)(i)
hereof, such payment or indemnity shall include an amount payable to
the Indemnified Party sufficient to hold such Indemnified Party
harmless on an after-tax basis from all Taxes required to be paid by
such Indemnified Party with respect to such payment or indemnity under
the laws of any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America,
including any possession or territory of the United States, or under
the laws of any foreign government, taxing authority or governmental
subdivision of a foreign country; provided, that if any Indemnified
Party realizes a reduction in Taxes not subject to indemnification
hereunder (a "tax benefit") by reason of such payment or indemnity
(whether such tax benefit shall be by means of investment tax credit,
foreign tax credit, depreciation deduction or otherwise), such
Indemnified Party shall, so long as no Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred or be continuing, pay Lessee (but not
before Lessee shall have made all payments or indemnities to such
Indemnified Party then due under the Operative Agreements) an amount
equal to the sum of such tax benefit plus any other tax benefit
realized by such Indemnified Party as the result of any payment made
pursuant to this proviso; provided, however, that such payment by an
Indemnified Party shall not exceed the aggregate payments by Lessee to
such Indemnified Party under Section 7(b)(i) hereof (but any such
excess shall be carried forward
PARTICIPATION AGREEMENT [N605SW]
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and shall reduce Lessee's obligation to make any subsequent payments
to such Indemnified Party pursuant to Section 7(b) or 7(c) hereof).
Each such Indemnified Party shall in good faith use reasonable efforts
in filing its tax returns and in dealing with taxing authorities to
seek and claim any such tax benefit of which it is actually aware or
of which it has been given notice. Any Taxes that are imposed on any
Indemnified Party as a result of the disallowance or reduction of such
tax benefit referred to in the next preceding sentence in a taxable
year subsequent to the year of allowance and utilization by such
Indemnified Party (including the expiration of any tax credit
carryovers or carrybacks of such Indemnified Party that would not
otherwise have expired) shall be indemnifiable pursuant to the
provisions of Section 7(b)(i) without regard to Section 7(b)(ii). In
determining the amount of any net reduction in Taxes which is
attributable to more than one transaction, an Indemnified Party shall
be deemed to have utilized its deductions and credits attributable
first, to all transactions other than leveraged equipment leasing
transactions and then to this transaction and to all such other
leveraged equipment leasing transactions on a pari passu basis.
If as a result of any Advance (as hereinafter
defined) to an Indemnified Party the aggregate taxes paid or accrued
by such Indemnified Party for any taxable year shall be more than the
amount of such taxes which would have been payable by the Indemnified
Party had no such Advance been made, and if such increase in taxes was
not taken into account in determining the amount of the Advance, then
such increase in taxes will be treated as Taxes for which Lessee must
indemnify the Indemnified Party pursuant to this Section 7(b). Upon
the final determination of any contest pursuant to Section 7(b)(iv)
hereof in respect of any Taxes for which Lessee has made an Advance,
the amount of Lessee's obligation shall be determined under this
Section 7(b)(iii) as if such Advance had not been made. Any
obligation of Lessee under this Section 7(b) and the Indemnified
Party's obligation to repay the Advance will be satisfied first by set
off against each other and any difference owing by either party will
be paid within 10 days of such final determination.
(iv) Notice and Contest. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 15 days after its receipt; provided, that failure to provide
such notice within 15 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of Vinson & Elkins L.L.P. or other independent counsel selected by
Lessee and reasonably satisfactory to Indemnified Party to the effect
that a reasonable basis in law and fact exists under ABA opinion
85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or permit Lessee, if desired by Lessee, to contest in
the name of Lessee) if permissible under applicable laws, the
validity, applicability or amount of such
PARTICIPATION AGREEMENT [N605SW]
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Taxes by (i) resisting payment thereof if practicable, (ii) not paying
the same except under protest, if protest shall be necessary and
proper, (iii) if payment shall be made, using reasonable efforts to
obtain a refund thereof in appropriate administrative or judicial
proceedings, and (iv) taking such other action as is reasonably
requested by Lessee from time to time. The Indemnified Party shall
determine the method of any contest and (in good faith consultation
with Lessee) control the conduct thereof. Notwithstanding anything
contained in this Section 7(b)(iv), an Indemnified Party will not be
required to contest, or to continue to contest, the validity,
applicability or amount of any Tax (or portion thereof) (w) unless
Lessee shall have acknowledged in writing its obligation to indemnify
the Indemnified Party hereunder in the event the Indemnified Party
does not prevail in such contest, (x) if such contest would result in
any material risk of criminal penalties or any material risk of sale,
forfeiture or loss (or loss of use) of the Aircraft, the Airframe or
any Engine or any Part or any interest therein, (y) if a Lease Event
of Default has occurred and is continuing or (z) if the claim (when
aggregated with related or correlative adjustments with respect to
such Indemnified Party) will not exceed $10,000. The Owner
Participant shall not be required to appeal, or seek leave to appeal,
an adverse judicial determination with respect to such Taxes to the
United States Supreme Court. If an Indemnified Party contests a Tax
by making a payment and seeking a refund thereof, then Lessee shall
advance to such Indemnified Party, on an interest-free basis, an
amount equal to the Taxes and any penalties, additions to tax, fines
and interest thereon (which shall collectively be known, only for the
purpose of this Section 7(b), as an "Advance") that are paid by such
Indemnified Party in connection with such contest. Such Advance shall
be repayable to Lessee at the time and in the manner specified in the
last paragraph of Section 7(b)(iii). If any Indemnified Party shall
obtain a refund of all or any part of such Taxes for which an
indemnity was paid by Lessee, such Indemnified Party shall pay Lessee
the amount of such refund as is attributable to the Taxes for which
such indemnity was paid; provided, however, that such amount shall not
be payable before such time as Lessee shall have made all payments or
indemnities to such Indemnified Party then due under this Section 7(b)
and under the Lease. If in addition to such refund such Indemnified
Party shall receive an amount representing interest on the amount of
such refund, Lessee shall be paid that proportion of such interest
which is fairly attributable to Taxes paid with an indemnity payment
or Advance by Lessee prior to the receipt of such refund, reduced by
taxes imposed on such Indemnified Party on receipt of such refund or
interest and increased by any taxes saved by reason of the
deductibility of such payment by the Indemnified Party. Any
subsequent determination that such Indemnified Party was not entitled
to all or any portion of any refund paid to Lessee shall be treated as
a Tax indemnifiable under Section 7(b)(i) without regard to Section
7(b)(ii). Lessee shall not be deemed to be in default under any of
the indemnification provisions under this Section 7(b) so long as it
or any Indemnified Party shall diligently prosecute such contest;
provided, that Lessee shall nonetheless be required to pay all
Advances and expenses required hereunder. In case any report or
return is required to be made with respect to any obligation of Lessee
under this Section 7(b) or arising out of this Section 7(b), Lessee
will either timely make such report or return in such manner as will
show the ownership of the Aircraft in Owner Trustee, and send a copy
of such report or return to Owner Trustee (except for any report or
return that an Indemnified Party has notified Lessee that the
Indemnified Party intends to file or that the Indemnified Party is
required by law to file), or will notify Owner Trustee of such
PARTICIPATION AGREEMENT [N605SW]
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requirement and prepare and deliver such report or return to the
Indemnified Party in such manner as shall be satisfactory to such
Indemnified Party and Owner Trustee.
Notwithstanding the above provisions of this Section
7(b), any Indemnified Party in its sole discretion (by written notice
to Lessee) may unconditionally waive its rights to the indemnities
provided for in this Section 7(b) with respect to any Taxes, and
refrain from contesting, or continuing the contest of such Taxes, in
which event Lessee shall have no liability to such Indemnified Party
hereunder with respect to such Taxes. In addition, if an Indemnified
Party shall agree to a settlement of any contest under this Section
7(b) without the prior written consent of Lessee, then the Indemnified
Party shall be deemed to have waived its rights to the indemnities
provided in this Section 7(b) with respect to the subject matter of
such settlement. Lessee agrees to consider in good faith any
settlement proposal made with respect to any contest under this
Section 7(b).
(v) Withholdings. Notwithstanding the
exceptions in Section 7(b)(ii), Lessee agrees that each payment of
Rent and any amount payable on the Certificates shall be free of all
withholdings (other than a U.S. withholding tax, except to the extent
described in Section 15.05(d) of the Trust Indenture) of any nature
whatsoever except to the extent otherwise required by law, and in the
event that any such withholding is so required, Lessee shall pay an
additional amount of Rent such that after the deduction of all amounts
required to be withheld, the net amount actually received by each
Indemnified Party will equal the amount that would be due absent such
withholding. In the event additional Rent is paid by Lessee to
provide for withholdings pursuant to the preceding sentence in respect
of Taxes that are excepted from indemnification hereunder pursuant to
Section 7(b)(ii)(2)-(7), the Indemnified Party on whom the Tax is
imposed by way of withholding on payments to such person shall,
promptly upon receipt of notice from Lessee, reimburse Lessee for such
additional Rent. As used in this Section 7(b)(v), a "U.S. withholding
tax" shall mean any withholding tax imposed by the United States of
America (A) with respect to any Certificate pursuant to treaty or
federal law imposing withholding tax generally on payments to Persons
not organized or resident in the United States or (B) in the nature of
backup withholding under section 3406 of the Code and the regulations
thereunder, or any successor or similar provision of the Code, federal
tax law or regulations thereunder. All U.S. withholding taxes with
respect to any Certificate shall be borne by the Holder of the
relevant Certificate and none of Lessee, Owner Participant, Indenture
Trustee or Owner Trustee shall be responsible for any U.S. withholding
tax with respect to such Certificate, except that Lessee shall be
responsible to pay any such withholding taxes, at no after-tax cost to
Owner Participant, Lessor or the Estate, to the extent described in
Section 15.05(d) of the Trust Indenture. Owner Trustee may (or, if
Lessee is making any payment directly to the Holder of any Certificate
or to the Indenture Trustee, Lessee shall) or Indenture Trustee shall
withhold any applicable U.S. withholding tax from the amount then due
and pay (and, if Lessee is making any payment to the Holder or the
Indenture Trustee, Lessee shall pay) any amount withheld to the
appropriate federal taxing authority; provided, that Lessee shall
indemnify and hold the Owner Trustee and the Owner Participant
harmless on an after-tax basis from and against any and all liability
arising from any failure by any Person to withhold any U.S.
withholding taxes with respect to payments required to be made with
respect to the Certificates, and Lessee shall timely prepare and file,
or, if required by applicable law, present to the Owner Trustee for
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filing, all information returns required to be prepared with respect
to any such withholding tax payments or otherwise with respect to
payments under the Certificates.
(c) General Indemnity.
(i) Indemnity. Lessee hereby agrees,
whether or not any of the transactions contemplated hereby shall be
consummated, to pay, assume liability for and indemnify, protect,
defend, save and keep harmless each Indemnified Party from and
against, on a net after-tax basis as provided in Section 7(b)(iii),
any and all liabilities, obligations, losses, damages, settlements,
claims, actions, suits, penalties, costs, expenses and disbursements
(including but not limited to reasonable legal and investigative fees
and expenses and Transaction Costs to the extent not required to be
paid by Owner Participant pursuant to Section 16 hereof, and all costs
and expenses relating to amendments, supplements, waivers and consents
to and under the Operative Agreements, but excluding internal overhead
costs and expenses such as salaries) of whatsoever kind and nature,
including but not limited to negligence, liability of an owner, strict
or absolute liability, liability without fault and liability in tort
(any of the foregoing being called a "Loss") which may from time to
time be imposed on, incurred by or asserted against any Indemnified
Party or the Aircraft, Airframe, any Engine or any Part or any portion
of the Trust Estate or the Trust Indenture Estate (whether or not any
such Loss is also indemnified or insured against by any other Person
or such Indemnified Party has also indemnified any other Person
against such Loss) in any way relating to or arising out of (a) any
Operative Agreement, the enforcement thereof or any of the
transactions contemplated thereby (including, without limitation, the
performance or observance of all obligations and conditions of Lessee
thereunder, or the falsity of any representations or warranties of
Lessee therein or thereunder or in any document or certificate
delivered pursuant thereto), (b) the purchase, acceptance or rejection
of the Aircraft, (c) the Aircraft, the Airframe, any Engine, any
engine or any Part, any data or any other thing delivered or to be
delivered under an Operative Agreement, including without limitation,
the ownership, financing, refinancing, delivery, nondelivery, lease,
sublease, assignment, registration, reregistration, deregistration,
possession, use, non- use, presence, operation, condition, storage,
preparation, installation, testing, manufacture, design, fitness for
use, merchantability, modification, replacement, substitution,
alteration, maintenance, repair, re-lease, sale, return,
transportation, transfer, abandonment or other disposition thereof or
any portion thereof (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent,
trademark or copyright infringement, or arising under environmental
control, noise or pollution laws or regulations, and loss of or damage
to any property or the environment or death or injury to any person),
or (d) the offer, sale or delivery of the Certificates, whether before
or after the Delivery Date (the indemnity in this clause (d) to extend
also to any Person who controls an Indemnified Party, its successors,
assigns, employees, servants and agents within the meaning of Section
15 of the Securities Act).
(ii) Exceptions. The indemnity set forth in
Section 7(c)(i) shall not extend to any Loss with respect to such
Indemnified Party (A) to the extent that such Loss is caused by acts,
omissions or events which occur after full and final compliance by
Lessee with all the terms of the Operative Agreements, (B) to the
extent such Loss is caused by acts,
PARTICIPATION AGREEMENT [N605SW]
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omissions or events which occur following the earlier of: (I)
acceptance of possession of the Airframe or any Engine or Part by
Lessor or its designee pursuant to the terms of the Lease (other than
pursuant to Section 15 thereof, in which case Lessee's liability under
this Section 7(c) shall survive for so long as Lessor shall be
entitled to exercise remedies under such Section 15), (II) the
termination of the Term in accordance with Section 9 of the Lease, or
(III) the transfer of title to the Aircraft to Lessee (or its
designee) pursuant to Section 10.1.4 or Section 18.2 of the Lease, (C)
to the extent that such Loss is a Tax or a loss of tax benefits,
whether or not Lessee is required to indemnify therefor pursuant to
Section 7(b) hereof, (D) to the extent that such Loss is caused by the
willful misconduct or gross negligence of such Indemnified Party
(other than willful misconduct or gross negligence imputed to such
Indemnified Party solely by reason of its interest in the Aircraft) or
any material misrepresentation or violation or breach of any
obligations of such Indemnified Party contained in the Operative
Agreements then in force unless such misrepresentation, violation or
breach is a result of Lessee's failure to comply with the terms of any
Operative Agreement to which it is a party, or (E) to the extent such
Loss is associated with a sale, assignment or transfer by such
Indemnified Party of its respective interest in the Aircraft, the
Certificates or the transactions contemplated hereby (other than (1)
as required by the Operative Agreements and (2) during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of
the Lease) or a Lease Event of Default or the exercise of remedies
under the Lease). This Section 7(c) does not constitute a guarantee
of the useful life or residual value of the Aircraft or a guarantee
that the Certificates will be paid.
(iii) Notice. If any Indemnified Party or
Lessee has knowledge of any Loss for which Lessee is obligated to
indemnify under this Section 7(c), it shall give prompt written notice
thereof to Lessee or such Indemnified Party, as the case may be, but
failure to give such notice shall not relieve Lessee of its
obligations hereunder or from any other obligation that Lessee may
have to such Indemnified Party at law or in equity, and no payment by
Lessee to an Indemnified Party pursuant to this Section 7(c) shall be
deemed to constitute a waiver or release of any right or remedy which
Lessee may have against such Indemnified Party for any actual damages
as a result of the failure by such Indemnified Party to give Lessee
such notice.
(iv) Right to Defend; Subrogation; Fees and
Expenses of Trustees. Lessee shall be entitled (and, at the
Indemnified Party's election, shall be obligated), at its sole cost
and expense, acting through counsel selected by Lessee reasonably
acceptable to the respective Indemnified Party, (A) in any judicial or
administrative proceeding that involves solely a claim for which
payment or indemnity is sought under this Section 7(c), to assume
responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for which payment or
indemnity is sought under this Section 7(c), and other claims related
or unrelated to the transactions contemplated by the Operative
Agreements, to assume responsibility for and the control of such claim
for which payment or indemnity is sought under this Section 7(c) to
the extent that the same may be and is severed from such other claims
(and such Indemnified Party shall use its reasonable best efforts to
obtain such severance), and (C) in any other case, to be consulted by
such Indemnified Party with respect to judicial proceedings subject to
the control of such Indemnified Party. Notwithstanding any of the
foregoing to the contrary, Lessee shall not be entitled to assume
responsibility for and control of any such judicial or administrative
proceedings (1) while any Lease Default (of the
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type described in Section 14.1 or 14.5 of the Lease) or Lease Event of
Default shall have occurred and be continuing, (2) if such proceedings
will involve a material risk of the sale, forfeiture or loss of, or
the creation of any Lien (other than a Permitted Lien) on, the
Aircraft or the Trust Estate or the Trust Indenture Estate or any part
thereof or the loss or impairment of the Lien of the Trust Indenture
on all or any part of the Trust Indenture Estate, (3) if such
proceedings could, in the good faith opinion of the Indemnified Party,
entail any risk of material criminal liability or material civil
penalty or (4) if in the written opinion of counsel to such
Indemnified Party an actual or potential material conflict of interest
exists making it advisable for such Indemnified Party to be
represented by separate counsel. The Indemnified Party may
participate at its own expense and with its own counsel in any
judicial proceeding controlled by Lessee pursuant to the preceding
provisions.
The Indemnified Party shall supply Lessee, at Lessee's
expense, with such information within its possession reasonably requested by
Lessee as is necessary or advisable for Lessee to control or participate in any
proceeding to the extent permitted by this Section 7(c). Such Indemnified
Party shall not enter into a settlement or other compromise with respect to any
Loss without the prior written consent of Lessee (except during the continuance
of a Lease Default (of the type described in Section 14.1 or 14.5 of the Lease)
or Lease Event of Default when such consent shall not be required if such
Indemnified Party gives 10 days' prior written notice to Lessee describing the
proposed settlement or other compromise), which consent shall not be
unreasonably withheld or delayed, unless such Indemnified Party waives its
right to be indemnified with respect to such Loss under this Section 7(c).
Lessee shall supply the Indemnified Party with such
information reasonably requested by the Indemnified Party as is necessary or
advisable for the Indemnified Party to control or participate in any proceeding
to the extent permitted by this Section 7(c).
Upon payment or indemnification of any amount pursuant to this
Section 7(c), Lessee, without any further action, shall be subrogated to any
claims the Indemnified Party may have relating thereto other than claims under
Section 5.03 or 7.01 of the Trust Agreement or Section 9.06 of the Trust
Indenture, comparable claims arising in favor of the Owner Trustee or the
Indenture Trustee as a matter of trust law and claims under any insurance
maintained by any Indemnified Party or any of its Affiliates. The Indemnified
Party agrees to give such further assurances or agreements and to cooperate in
all reasonable respects with Lessee and its insurers to permit Lessee to pursue
such claims.
In the event that Lessee shall have paid an amount to an
Indemnified Party pursuant to this Section 7(c), and such Indemnified Party
subsequently shall be reimbursed in respect of such indemnified amount by any
other Person, such Indemnified Party shall (provided no Lease Default or Lease
Event of Default shall have occurred and be continuing) promptly pay (but not
before Lessee shall have made all payments then due to such Indemnified Party
pursuant to this Section 7(c) and any other payments then due under the
Operative Agreements) an amount equal to the amount of such reimbursement
(adjusted for any net tax impact of such receipt and payment, but in no event
more than such indemnified amount previously paid to such Person) to Lessee.
Subject to the provisions of the preceding sentence, Lessee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor, whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of any other document or instrument,
and the Person
PARTICIPATION AGREEMENT [N605SW]
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seeking indemnification from Lessee pursuant to any provision of this Agreement
may proceed directly against Lessee without first seeking to enforce any other
right of indemnification.
Lessee agrees to pay the reasonable and continuing fees and
expenses of the Indenture Trustee (including the reasonable fees and expenses
of its counsel and any agent appointed in accordance with Section 9.02(c) of
the Trust Indenture) and, as provided in Section 6.07 of the Trust Agreement,
the Owner Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel), without cost, on a net after-tax basis, to the Owner
Participant, for acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay the reasonable
fees and expenses of any separate owner trustee or co-trustee appointed
pursuant to Section 9.02 of the Trust Agreement as a result of any requirement
of law or if otherwise required by any Operative Agreement or if requested, or
consented to, by the Lessee.
(d) Owner Participant's Indemnity. Owner Participant
covenants and agrees that if (i) Lessee has elected pursuant to Section 9.1 of
the Lease to terminate the Lease by causing the Aircraft to be sold pursuant to
Section 9.2 of the Lease and (ii) Owner Trustee has, pursuant to Section 9.3 of
the Lease, given to Lessee written notice of Lessor's election to retain title
to the Aircraft, and (iii) Owner Trustee has failed to make, on or before the
proposed termination date, any payment required to be made by Owner Trustee
pursuant to Section 9.3 in connection with its retention of title to the
Aircraft, Owner Participant will indemnify Lessee for any losses, damages,
costs or expenses of any kind (including any excess of the highest bid received
on or before the proposed termination date over the price for which the
Aircraft may subsequently be sold (but disregarding any portion of such bid or
such price in excess of the applicable Termination Value), any additional Rent
paid by Lessee (less an amount representing the fair value to Lessee of its use
of the Aircraft for the period of time in respect of which such Rent was paid)
and any reasonable fees and expenses of lawyers, appraisers, brokers or
accountants) incurred as a consequence of such failure by Owner Trustee.
(e) Payments. Any payments made pursuant to this Section
7 shall be made directly to the Person entitled thereto within 10 Business Days
of demand therefor in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the
order of the payee and mailed to the payee by certified mail, postage prepaid
at its address as set forth in this Agreement.
(f) Interest on Overdue Amounts. If any amount payable
by Lessee or any Indemnified Party, as the case may be, under this Section 7 is
not paid when due, Lessee or such Indemnified Party, as the case may be, shall
pay an additional amount equal to interest at the Overdue Rate on the overdue
amount for the period from and including the due date for the overdue payment
to but excluding the date of payment of the overdue amount.
(g) Survival. All indemnities, obligations, adjustments
and payments provided for in this Section 7 shall survive, and remain in full
force and effect, notwithstanding the expiration or other termination of this
Agreement, the Lease or any other Operative Agreement. The obligations of
Lessee in respect of all such indemnities, obligations, adjustments and
payments are expressly made for the benefit of, and shall be enforceable by,
each Indemnified Party or other indemnitee entitled thereto, without taking any
action under the Lease.
PARTICIPATION AGREEMENT [N605SW]
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SECTION 8. Other Representations, Warranties,
Covenants and Indemnities. (a) Securities Laws. The Owner Participant
represents that it is acquiring its interest in the Trust Estate for investment
purposes only and not with a present intent as to any resale or distribution
thereof (subject nonetheless to any requirement of law that the disposition of
its properties shall at all times be and remain within its control) and that
neither it nor anyone acting on its behalf has directly or indirectly offered
any interest in the Trust Estate or any Certificates or any similar securities
for sale to, or solicited any offer to acquire any of the same from, anyone in
a manner which would result in a violation of the Securities Act or the
securities laws, rules and regulations of any state.
(b) Citizenship. (a) Although the Owner Participant is
not a "citizen of the United States" within the meaning of 49 U.S.C.
40102(a)(15)(C), it has, however, concurrently with the execution hereof,
entered into the Trust Agreement, pursuant to Article XII of which it has
transferred to the Owner Trustee the Control Rights (as such term is defined in
the Trust Agreement) to assure that such Control Rights will be controlled by a
"citizen of the United States" within the meaning of 49 U.S.C. 40102(a)(15)(C),
and that the Owner Participant shall have no power to influence or limit the
exercise of the Owner Trustee's authority in respect thereof under the Trust
Agreement; (b) Article XII of the Trust Agreement complies with the provisions
of Section 47.7(c) of the FAA Regulations and the affidavit of the Owner
Trustee in the form attached as Exhibit 1 to the Trust Agreement and submitted
to the FAA in connection therewith is true and correct in all material
respects; (c) the Owner Participant will fully and faithfully comply with the
provisions of Article XII of the Trust Agreement so long as the Trust Agreement
shall remain in effect and in furtherance thereof will maintain the Trust
Agreement in effect with a trustee that is a "citizen of the United States";
(d) at such time as the Owner Participant shall become a "citizen of the United
States", its obligation to maintain the provisions of Article XII of the Trust
Agreement shall cease, except that so long as the Trust Indenture shall remain
in effect, the Trust Agreement shall not be amended to remove the provisions of
Article XII thereof unless prior thereto Lessee and the Indenture Trustee shall
have received such opinions of counsel and such amendments of documents and
such other things as such parties shall reasonably request in connection with
maintaining the validity, perfection and priority of the lien of the Trust
Indenture and the valid and continued registration of the Aircraft pursuant to
49 U.S.C. 44102(a)(1)(B) and (e) if the Owner Participant shall fail to
maintain in effect the Trust Agreement with a trustee that is a "citizen of the
United States" and, as a result of such failure, the Aircraft shall be, or
would therefore become (or if the Owner Participant shall have received an
opinion of counsel to the effect that the Aircraft may or will for any other
reason become), ineligible for registration in the name of the Owner Trustee
under the Act and regulations then applicable thereunder (it being understood
that the effect of any such status shall be determined without giving
consideration to any provision of the Act (or any superseding statute) which
permits United States registration of an aircraft based on conditions which
impose restrictions on the location and use of such aircraft or otherwise
restrict the ability of an air carrier to operate an aircraft in the ordinary
course of its business), then the Owner Participant shall (at its own expense
and without any reimbursement or indemnification from Lessee) as soon as is
reasonably practicable but in any event within 30 days after obtaining actual
knowledge of such loss of citizenship (A) take any action as may be necessary
to prevent any deregistration or to maintain the United States registration of
the Aircraft and (to the extent such recordation is dependent on the U.S.
registration of the Aircraft) the recordation with the FAA of the Trust
Indenture and the Lease, or (B) transfer its beneficial interest in the Trust
Estate in accordance with Section 8(l) hereof, provided, that with the consent
of the Indenture Trustee, upon the occurrence and continuation of a Lease
Default or a Lease Event of
PARTICIPATION AGREEMENT [N605SW]
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Default and upon obtaining registration of the Aircraft pursuant to the
provisions of 49 U.S.C. 44102(a)(1)(C)the Owner Participant may amend the Trust
Agreement in accordance with the terms thereof to remove the provisions of
Article XII thereof; provided, further, that upon the request of Lessee and the
Indenture Trustee, the Owner Participant shall cooperate with Lessee in causing
the Aircraft to be registered in accordance with 49 U.S.C. 44102(a)(1)(C).
Amendment of the Trust Agreement to remove the provisions of Article XII
thereof pursuant to either of the provisos to the immediately preceding
sentence shall, so long as the Trust Indenture shall be in effect, be permitted
only if such amendments to the Operative Agreements shall have been entered
into, and such other things shall have been done, as Lessee and Indenture
Trustee may reasonably request in connection with maintaining the valid and
continued registration of the Aircraft pursuant to 49 U.S.C. 44102(a)(1)(C).
It is understood that: (1) the Owner Participant shall be liable to any of the
other parties hereto for any damages suffered by any such other party as the
result of the representations and warranties of the Owner Participant in
clauses (a) and (b) of this Section 8(b) proving to be untrue as of the
Delivery Date; and (2) the Owner Participant shall be liable to Lessee, any
Sublessee and any Holder for any damages which may be incurred by Lessee, any
Sublessee or such Holder as a result of such loss of citizenship by the Owner
Participant and the inability to register (or maintain the registration of) the
Aircraft in the name of the Owner Trustee under the Act and regulations then
applicable thereunder as a result of such loss of citizenship. Each of Lessee
(as provided in Section 11(b)), the Original Loan Participant, the Owner
Trustee and the Indenture Trustee agrees, upon the request and at the sole
expense of the Owner Participant, to take all reasonable acts requested by the
Owner Participant in complying with its obligations under clause (A) or (B) of
clause (e) of this Section 8(b). SBC, in its individual capacity, represents
and warrants to the other parties to this Agreement that it is a "citizen of
the United States" as defined in 49 U.S.C. Section 40102(a)(15)(C) and agrees
that if at any time a responsible officer of SBC shall obtain actual knowledge
that SBC has ceased to be a "citizen of the United States" within the meaning
of 49 U.S.C. Section 40102(a)(15)(C) it will promptly resign as Owner Trustee
(if and so long as such citizenship is necessary under the Act as in effect at
such time or, if it is not necessary, if and so long as the Owner Trustee's
citizenship would have any adverse effect on a Holder, Lessee, a Sublessee or
the Owner Participant), effective upon the appointment of a successor Owner
Trustee in accordance with Section 9.01 of the Trust Agreement.
(c) Chief Executive Office of SBC. SBC in its individual
capacity represents and warrants that both the principal place of business of
the Owner Trustee and the place where its records concerning the Aircraft and
all of its interest in, to and under the Operative Agreements to which it is a
party are or will be kept is Hartford, Connecticut (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture)
and has its chief executive office (as such term is used in Article 9 of the
Uniform Commercial Code) in Hartford, Connecticut. SBC in its individual
capacity agrees that it will not change the location of such office to a
location outside of Hartford, Connecticut, without 10 days' prior written
notice to Lessee, Indenture Trustee and the Owner Participant.
(d) Securities Laws. The Original Loan Participant
represents and warrants that the Series SWA 1995 Trust N605SW-I Certificate to
be issued to it pursuant to the Trust Indenture is being acquired by it with no
present intent to make any resale or distribution thereof which would require
registration under the Securities Act and it will not offer or sell any
Certificate in violation of the Securities Act; provided, that the disposition
of its property shall at all times be and remain within its control, and that
neither it nor anyone acting on its behalf has offered any Certificates or
PARTICIPATION AGREEMENT [N605SW]
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any similar securities relating to the Aircraft for sale to, or solicited any
offer to buy any Certificates or any similar securities relating to the
Aircraft from, any person or entity other than in a manner required by the
Securities Act and the rules and regulations thereunder and the securities
laws, rules and regulations of any state.
(e) [Intentionally Reserved].
(f) Owner Participant's Representations and Warranties.
The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation
duly organized and validly existing in good standing under the laws of
the State of Massachusetts, and has the corporate power and authority
to carry on its business as now conducted, to own or hold under lease
its properties and to enter into and perform its obligations under the
Owner Participant Agreements;
(ii) the Owner Participant Agreements have
been duly authorized by all necessary corporate action on the part of
the Owner Participant, do not require any approval not already
obtained of stockholders of the Owner Participant or any approval or
consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been
duly executed and delivered by the Owner Participant, and, subject to
and in reliance upon the representations made by the Original Loan
Participant and Lessee in Sections 8(o) and 7(a)(xv), respectively,
and compliance with the covenants of Section 8(d), neither the
execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions contemplated thereby by the Owner
Participant, nor compliance by the Owner Participant with any of the
terms and provisions thereof will contravene any United States federal
or state law, judgment, governmental rule, regulation or order
applicable to or binding on the Owner Participant (it being understood
that no representation or warranty is made with respect to laws, rules
or regulations relating to aviation or to the nature of the equipment
owned by the Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of the Owner Participant
under applicable aviation law) or contravene or result in any breach
of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a)
of the definition thereof) upon the Trust Estate under, any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement, corporate charter, by-law or other
agreement or instrument to which the Owner Participant is a party or
by which it or its properties may be bound or affected;
(iii) assuming that each such agreement is the
legal, valid and binding obligation of each other party thereto, each
of the Owner Participant Agreements constitutes a legal, valid and
binding obligation of the Owner Participant enforceable against the
Owner Participant in accordance with the terms thereof;
(iv) there are no pending or, to the
knowledge of the Owner Participant, threatened actions or proceedings
against the Owner Participant before any court or administrative
agency which, if determined adversely to the Owner Participant, would
PARTICIPATION AGREEMENT [N605SW]
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materially adversely affect the financial condition of the Owner
Participant or the ability of the Owner Participant to perform its
obligations under the Owner Participant Agreements; and
(v) on the Delivery Date, there will be no
Lessor Liens attributable to the Owner Participant.
(g) Lessor Liens. Each of SBC in its individual capacity
and the Owner Participant severally covenants and agrees (i) that it shall not
cause or permit to exist a Lessor Lien attributable to it with respect to the
Aircraft or any other portion of the Trust Estate, (ii) that it will promptly,
at its own expense, take such action as may be necessary duly to discharge such
Lessor Lien attributable to it, and (iii) that it will make restitution to the
Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it.
(h) Indenture Trustee Liens. Wilmington Trust Company in
its individual capacity covenants and agrees that it shall not cause or permit
to exist any Lien, arising as a result of (i) claims against the Indenture
Trustee not related to its interest in the Aircraft or the administration of
the Trust Estate pursuant to the Trust Indenture, (ii) acts of the Indenture
Trustee not permitted by, or failure of the Indenture Trustee to take any
action required by, the Operative Agreements to the extent such acts arise or
such failure arises from or constitutes gross negligence or willful misconduct,
(iii) claims against the Indenture Trustee relating to Taxes or Losses which
are excluded from the indemnification provided by Section 7 hereof pursuant to
said Section 7, or (iv) claims against the Indenture Trustee arising out of the
transfer by the Indenture Trustee of all or any portion of its interest in the
Aircraft, the Trust Estate, the Trust Indenture Estate or the Operative
Agreements other than (A) a transfer of the Aircraft pursuant to Section 9, 10
or 18 of the Lease or Article 5 or 8 of the Trust Indenture, (B) any borrowing
pursuant to Section 17 hereof, or (C) a transfer of the Aircraft pursuant to
Section 15 of the Lease while a Lease Event of Default is continuing and prior
to the time that the Indenture Trustee has received all amounts due pursuant to
the Trust Indenture.
(i) Termination Instructions to Owner Trustee. The Owner
Participant will not instruct the Owner Trustee to terminate any Operative
Agreement in violation of the terms thereof.
(j) Excess Payment. If (i) all or any part of the Trust
Estate becomes the property of, or the Owner Participant becomes, a debtor
subject to the reorganization provisions of the Bankruptcy Reform Act of 1978
or any successor provision, (ii) pursuant to such reorganization provisions the
Owner Trustee (in its individual capacity) or the Owner Participant is
required, by reason of the Owner Trustee (in its individual capacity) or the
Owner Participant being held to have recourse liability to any Holder or the
Indenture Trustee, directly or indirectly (other than the recourse liability of
the Owner Participant under this Agreement), to make payment on account of any
amount payable as principal, Break Amount, if any, Premium, if any, or interest
on the Certificates, and (iii) any such Holder or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects
any payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Holder or the Indenture
Trustee shall promptly refund to the Owner Trustee or the Owner Participant
(whichever shall have made such payment) such Excess Payment. For purposes of
this Section 8(j), "Excess Payment" means the amount by which such payment
exceeds the amount which would have been received by such Holder or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the
Owner Participant had not become subject to the recourse liability referred to
in clause (ii) above. Nothing contained in this
PARTICIPATION AGREEMENT [N605SW]
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Section 8(j) shall prevent such Holder or the Indenture Trustee from enforcing
any personal recourse obligation (and retaining the proceeds thereof) of the
Owner Trustee (in its individual capacity) or the Owner Participant under this
Agreement or the Trust Indenture (and any exhibits or annexes thereto).
(k) Representations and Warranties of Indenture Trustee
in Individual Capacity. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States"
as defined in 49 U.S.C. Section 40102(a)(15)(C) that it will notify
promptly all parties to this Agreement if in its reasonable opinion
its status as a "citizen of the United States" is likely to change and
that it will resign as Indenture Trustee as provided in Section 9.07
of the Trust Indenture if it should cease to be a "citizen of the
United States";
(ii) it is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and
the authentication of the Certificates have been duly authorized by
all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation governing its banking or trust powers or any judgment or
order binding on it or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it or its properties may be bound or affected;
(iv) each of the Indenture Trustee Agreements
has been duly executed and delivered by it and, assuming that each
such agreement is the legal, valid and binding obligation of each
other party thereto, is the legal, valid and binding obligation of the
Indenture Trustee, enforceable against it in accordance with its
terms;
(v) neither the execution and delivery by
it, in its individual capacity or as Indenture Trustee, as the case
may be, of this Agreement or the Trust Indenture nor the consummation
of any of the transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, or the registration
with, any governmental authority or agency pursuant to any law of the
State of Delaware or the United States governing the banking or trust
powers of the Indenture Trustee; and
(vi) neither it nor anyone authorized to act
on its behalf has directly or indirectly offered any beneficial
interest or security relating to the ownership of the Aircraft or the
Lease or any interest in the Trust Estate or the Trust Indenture
Estate, or any of the Certificates or any other interest in or
security under the Trust Indenture, for sale to, or solicited any
offer to acquire any such interest or security from, or has sold any
interest or security to, any Person, and it will not directly or
indirectly make any such offer, solicitation or sale.
PARTICIPATION AGREEMENT [N605SW]
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(l) Transfers of Equity Interests; Rights of Owner
Participant and Owner Trustee. So long as the Aircraft shall be leased to
Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion (in
form, scope and substance reasonably satisfactory to the Indenture Trustee and
Lessee) of counsel reasonably satisfactory to the Indenture Trustee and Lessee
to the effect that the agreement referred to in clause (O) below and any
guaranty required by clause (B) or (C) below, are the legal, valid, binding and
enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital, surplus and undivided profits of
at least $75,000,000 or a limited partnership or corporation whose net worth is
at least $75,000,000, (B) any subsidiary of such a bank, financial institution,
limited partnership or corporation; provided, that such bank, financial
institution, limited partnership or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty in the form attached as Exhibit A
hereto with respect to the Owner Participant's obligations, in the case of the
Owner Trustee, under the Trust Agreement and, in the case of the Indenture
Trustee and Lessee, the Owner Participant's obligations hereunder, or (C) any
other corporation or limited partnership, provided such obligations are
guaranteed by the transferor Owner Participant; provided, however, that unless
otherwise consented to by Lessee any Transferee shall not be an air carrier, an
air freight forwarder or other similar Person or a corporation controlling,
controlled by or under common control with such an air carrier, an air freight
forwarder or other similar Person. Each such transfer to a Transferee shall be
subject to the conditions that (M) upon giving effect to such transfer, the
Transferee is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) or the Transferee, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), shall
have entered into a voting trust or similar arrangement which permits the
registration of the Aircraft under the Act in the name of the Owner Trustee
without any restriction on the operation of the Aircraft, (N) the Transferee
has the full power and authority to enter into and carry out the transactions
contemplated hereby, (O) the Transferee enters into an agreement or agreements,
in form and substance reasonably satisfactory to the Owner Trustee, Lessee and
the Indenture Trustee, whereby the Transferee confirms that it shall be deemed
a party to this Agreement and a party to the Trust Agreement and agrees to be
bound by all of the terms of, and to undertake all of the obligations of the
transferor Owner Participant contained in the Owner Participant Agreements and
makes representations of the scope provided for as to the Owner Participant in
each of the Operative Agreements, (P) such transfer does not result in a
nonexempt prohibited transaction under Section 4975 of the Code or Section 406
of ERISA with respect to such Holders about which the Owner Participant shall
have received such information as may be reasonably necessary in making such
determination (and Owner Participant shall request such information and each of
Lessee, the Original Loan Participant and the Indenture Trustee shall cooperate
in providing such information as may be available), (Q) such transfer does not
violate any applicable law including, without limitation, the Act, or any rules
or regulations promulgated thereunder, the Securities Act or the Trust
Indenture Act of 1939, (R) after giving effect to such transfer, there shall be
no more than one Owner Participant of record at that time, and (S) such
transfer will not give rise to an Indenture Default or Indenture Event of
Default; and Lessee or the Indenture Trustee may request such Transferee to
provide an opinion of counsel (who shall be reasonably satisfactory to Lessee
and the Indenture Trustee) in form, scope and substance reasonably satisfactory
to Lessee and the Indenture Trustee as to any matter set forth in clause (Q)
and as to such other matters as Lessee or the Indenture Trustee
PARTICIPATION AGREEMENT [N605SW]
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may reasonably request. Upon any such transfer by the Owner Participant as
above provided, the Transferee shall be deemed the Owner Participant for all
purposes hereof and of the other Operative Agreements and each reference herein
to the transferor Owner Participant shall be deemed for all purposes, with
respect to circumstances existing and requirements arising thereafter, to be to
the Transferee and the transferor Owner Participant shall be relieved of all
obligations of the transferring Owner Participant under the Owner Participant
Agreements arising after the date of such transfer except to the extent fairly
attributable to acts or events occurring prior thereto and not assumed by the
transferee Owner Participant. If the Owner Participant intends to transfer its
interests hereunder, it shall give prior written notice thereof as soon as
practicable, but in no event less than ten (10) Business Days prior thereto, to
the Indenture Trustee, the Owner Trustee and Lessee, specifying the name and
address of the proposed Transferee and the facts necessary to determine whether
or not the requirements for a Transferee, as set forth herein, are satisfied.
The Owner Participant shall pay, or shall cause the transferee Owner
Participant to pay, all of the reasonable costs and expenses (including,
without limitation, legal fees and expenses) of the Original Loan Participant
and the other parties hereto (except the costs and expenses of Lessee if such
transfer is effected during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default or
in connection with the exercise of remedies under the Lease), on a net
after-tax basis, of any such transfer. For purposes of this Agreement, "net
worth" shall mean the excess of total tangible assets over total liabilities,
each to be determined in accordance with generally accepted accounting
principles consistently applied.
(m) Obligations of Trustees. The Indenture Trustee shall
be responsible for the payment, performance and discharge of, and shall fully
and completely pay, perform and discharge, all of its obligations under the
Trust Indenture in accordance with the terms thereof. Subject to the terms and
provisions of the Trust Agreement, the Owner Trustee shall be responsible for
the payment, performance and discharge of, and shall fully and completely pay,
perform and discharge, all of its obligations under the Lease in accordance
with the terms thereof.
(n) Compliance with Trust Indenture. SBC and Wilmington
Trust Company, each in its individual capacity, agrees for the benefit of
Lessee to comply with the terms of the Trust Indenture which it is required to
comply with in its individual capacity.
(o) ERISA. The Owner Participant represents and warrants
that no part of the funds used by it to acquire its interest in the Trust
Estate constitutes "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4975(e)(1) of
the Code, as interpreted by the Department of Labor. The Original Loan
Participant represents and warrants that no part of the funds used by it to
acquire the Certificates or any interest therein (including any participation
in such Certificates) constitutes "plan assets" of any "employee benefit plan"
within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code.
(p) SBC's Representations and Warranties. SBC, in its
individual capacity, represents, warrants and covenants that:
(i) each of the Owner Trustee Documents has
been duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such instruments on behalf of the
Owner Trustee or SBC, as the case may be;
PARTICIPATION AGREEMENT [N605SW]
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(ii) the Trust Estate is free and clear of
Lessor Liens attributable to SBC in its individual capacity, and there
are no Liens affecting the title of the Owner Trustee to the Aircraft
or resulting from any act or claim against SBC in its individual
capacity arising out of any event or condition not related to the
ownership, leasing, use or operation of the Aircraft or to any other
transaction contemplated by this Agreement or any of the other
Operative Agreements, including any Lien resulting from the nonpayment
by SBC in its individual capacity of any Taxes imposed or measured by
its net income;
(iii) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the passage
of time or the giving of notice or both, constitute) an Indenture
Event of Default which has been caused by or relates to SBC in its
individual capacity and which is presently continuing;
(iv) it is a national banking association
duly organized, validly existing and in good standing under the laws
of the United States and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has the
corporate power and authority to enter into and perform its
obligations under the Trust Agreement and this Agreement (in its
individual capacity), and (assuming due authorization, execution and
delivery of the Trust Agreement by the Owner Participant) has full
right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the
other Owner Trustee Documents;
(v) each of the Trust Agreement and this
Agreement (in its individual capacity) and the Owner Trustee Documents
(in its trust capacity) has been duly authorized by all necessary
corporate action on its part, and neither the execution and delivery
thereof nor its performance of any of the terms and provisions thereof
will violate any federal or Connecticut law or regulation relating to
its banking or trust powers or contravene or result in any breach of,
or constitute any default under, its charter or by-laws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution
and delivery of the Trust Agreement by the Owner Participant, each of
the Owner Trustee Documents has been duly executed and delivered by it
and, each of the Trust Agreement and this Agreement (to the extent
executed by the Owner Trustee in its individual capacity) is a legal,
valid and binding obligation of SBC in its individual capacity and as
Owner Trustee, as the case may be, enforceable against such party in
accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee
shall have received whatever title to the Aircraft as was conveyed to
it by Lessee;
(viii) neither it nor anyone acting on its
behalf has offered any interest in the Trust Estate or any
Certificates or any similar securities for sale to, or solicited any
offer to acquire the same from, anyone, and no responsible officer or
responsible employee of SBC has knowledge of any such offer or
solicitation, except as set forth in Section 7(a)(x) hereof;
PARTICIPATION AGREEMENT [N605SW]
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(ix) assuming due authorization, execution
and delivery of each of the Owner Trustee Documents by each of the
parties thereto (other than the Owner Trustee), each of the Owner
Trustee Documents is a legal, valid and binding obligation of the
Owner Trustee, enforceable against the Owner Trustee in accordance
with its respective terms;
(x) there are no proceedings pending or, to
the best knowledge of SBC, threatened, against SBC in any court or
before any governmental authority or arbitration board or tribunal
which, if adversely determined, would materially and adversely affect
the right, power and authority of SBC to enter into or perform its
obligations under the Owner Trustee Documents;
(xi) neither the due execution and delivery
of the Owner Trustee Documents by SBC, in its individual capacity or
as Owner Trustee under the Trust Agreement, as the case may be, nor
the consummation by it of any of the transactions contemplated thereby
require the consent or approval of, the giving of notice to, or the
registration with, any federal or Connecticut governmental authority
or agency pursuant to any federal or Connecticut law governing the
banking or trust powers of SBC; and
(xii) no later than sixty (60) days after
Lessee shall so request in writing, Owner Trustee shall execute and
deliver to Lessee (on a form to be supplied by Lessee) a Texas Sales
and Use Tax Certificate of Resale reflecting Owner Trustee's Texas or
Connecticut sales tax permit number and Owner Trustee's purchase of
the Aircraft pursuant to the Lease for lease to Lessee thereunder,
and, if necessary to permit Owner Trustee to issue such Certificate,
Owner Trustee shall apply for (on a form to be supplied by Lessee) a
Texas sales tax permit.
(q) Owner Participant's Lease Expenses. The Owner
Participant covenants and agrees to pay or cause the Owner Trustee to pay those
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) Lessee's Assumption of Debt. Subject to compliance
by Lessee with all of its obligations under the Operative Agreements and
provided that the Series SWA 1995 Trust N605SW-I Certificates are no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense at no net after-tax
cost to any of such parties (including, without limitation, reasonable
attorneys' fees and expenses of each of such parties), (i) if Lessee elects to
terminate the Lease and to purchase the Aircraft pursuant to Section 18.2(b) of
the Lease, each of such parties will, subject to due compliance by Lessee with
the provisions of said Section 18.2(b), execute and deliver appropriate
documentation to Transfer to Lessee the Aircraft, and (ii) Lessee, in
connection with such purchase, may (if no Lease Event of Default shall have
occurred and be continuing, unless such Lease Event of Default is waived by the
Indenture Trustee) assume (and, as set forth in Section 18.2(c) of the Lease,
receive a credit in an amount equal to the principal amount of the debt
assumed, against the purchase price payable by Lessee pursuant to Section
18.2(b) of the Lease) the obligations of the Owner Trustee pursuant to Section
7.03 of the Trust Indenture and the Certificates (and the Lease, to the extent
that the Owner Trustee's obligations thereunder are incorporated into the Trust
Indenture or the Certificates), and in such event each of the parties shall
execute and deliver appropriate documentation as contemplated by Section 7.03
of the Trust Indenture.
PARTICIPATION AGREEMENT [N605SW]
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(s) [Intentionally Reserved].
(t) [Intentionally Reserved].
(u) Lease Adjustments. Section 3.7 of the Lease
contemplates that, under certain circumstances, the Owner Participant will make
certain recalculations and the Owner Participant hereby agrees to promptly take
such actions as may be necessary or desirable to give effect to and to cause
the Owner Trustee to give effect to the provisions of Section 3.7 of the Lease.
(v) Revocation of Trust Agreement. The Owner Participant
agrees, notwithstanding anything to the contrary contained in the Trust
Agreement, (i) solely for the benefit of the Indenture Trustee and the Holders
that it will not revoke or otherwise terminate the Trust Agreement as long as
the Trust Indenture is in effect, and (ii) solely for the benefit of Lessee
that it will not revoke or otherwise terminate the Trust Agreement during the
Term without the prior written consent of Lessee, except that, notwithstanding
the foregoing clauses (i) and (ii), or any other provision of the Operative
Agreements to the contrary, the Owner Participant shall have the right to
terminate the trusts set forth in the Trust Agreement without the consent of
any other party to the Operative Agreements, at any time, if in connection
therewith the Owner Participant shall simultaneously create a new trust upon
substantially the same terms and conditions as the trusts so terminated and
shall cause the Trust Estate to be vested in the Owner Trustee under the new
trust upon the same terms and conditions so applied to such terminated trust;
provided, however, that in connection with any such termination (A) none of the
creation of such new trust, the termination of the trust set forth in the Trust
Agreement or the transactions consummated in connection therewith will have any
adverse impact on any of Lessee's rights or the Indenture Trustee's rights
under the Operative Agreements (including the first priority lien status of the
Lien of the Trust Indenture), (B) Lessee shall have no responsibility to
indemnify any Indemnified Party under any provision of any Operative Agreement
for any Taxes or other consequences that in either case would not have been
incurred but for such termination and transfer, (C) the Owner Participant shall
indemnify Lessee and the Indenture Trustee for any costs, expenses, taxes or
other consequences that in either case would not have been incurred but for
such termination and transfer, (D) the Owner Participant shall provide Lessee
and the Indenture Trustee with an opinion in form and substance reasonably
satisfactory to them as to the effect of such termination and transfer, and (E)
immediately after such transfer, the beneficiary of the new trust shall be the
same as the beneficiary of the trust set forth in the Trust Agreement. The
Owner Participant further agrees (x) promptly to provide instructions to the
Owner Trustee, upon the request of the Owner Trustee and as otherwise required
or permitted under the Trust Agreement, so as to enable the Owner Trustee to
perform its duties and obligations under the Operative Agreements in accordance
with the terms and provisions thereof and (y) not to remove the institution
acting as Owner Trustee, and not to replace the institution acting as Owner
Trustee in the event that such institution resigns as Owner Trustee, unless the
Owner Participant shall have consulted in good faith with Lessee prior to such
removal or replacement; provided, that no such consultation shall be required
if a Lease Event of Default shall have occurred and be continuing.
(w) [Intentionally Reserved].
(x) Withholding Taxes. The Original Loan Participant
represents that it is exempt from United States withholding taxes, and
covenants that, if required to obtain or renew such exemption, it will properly
prepare and promptly furnish to each of the Owner Trustee, the Indenture
PARTICIPATION AGREEMENT [N605SW]
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Trustee, and Lessee Internal Revenue Service Form 1001, Form 4224 (with respect
to each tax year) or Form W-8, whichever is applicable. The Original Loan
Participant represents, warrants and covenants that it will promptly notify the
Owner Trustee, the Indenture Trustee and Lessee if it transfers any interest in
its Series SWA 1995 Trust N605SW-I Certificate to any Person, other than
pursuant to Section 17 or 18 hereof or Section 8.03(e)(ii) of the Indenture.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee, Lessee and
the Owner Participant against any United States withholding taxes (and related
interest and penalties) which the Indenture Trustee fails to withhold on
payments to it as a result of its failure to provide the required certificate
or form or the invalidity of any certificate or form provided by it pursuant to
this Section 8(x) or as a result of any inaccuracy of the representations set
forth in the immediately preceding paragraph. Any amount payable hereunder
shall be paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor and shall include interest at the Overdue Rate from
the date any withholding tax has been paid by such party until the date
indemnified by the Original Loan Participant.
(y) Discharge of Trust Indenture. The Owner Participant
agrees that, at Lessee's expense (including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses of the Owner Trustee and Owner
Participant), upon request of Lessee, the Owner Participant will negotiate
promptly in good faith with respect to any arrangements pursuant to which the
Trust Indenture may be satisfied and discharged in respect of the Certificates
in accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that it will
not, and the Owner Participant agrees that during such time as a Lease Event of
Default has not occurred it will not cause the Owner Trustee to, take any
action to effect such satisfaction and discharge except upon the request of
Lessee made pursuant to this Section 8(y).
(z) Permitted Investments. The Owner Trustee agrees that
(i) so long as the Trust Indenture has not been duly discharged, any profit,
income, interest, dividend or gain realized upon the maturity, sale or other
disposition of any Permitted Investment made by the Indenture Trustee pursuant
to Section 9.04 of the Trust Indenture, and paid to Lessee on behalf of the
Owner Trustee by the Indenture Trustee in accordance with the terms of such
Section 9.04, shall be entirely for the account of, and the sole property of,
Lessee who, for such purposes, shall not be deemed to be acting as agent of the
Owner Trustee, and Lessee shall have no obligation to pay over such profit,
income, interest, dividend or gain to the Owner Trustee, (ii) any such profit,
income, interest, dividend or gain not theretofore distributed shall, upon
discharge of the Trust Indenture, be paid by the Indenture Trustee to Lessee,
unless instructed by the Owner Participant to distribute such funds to the
Owner Participant or the Owner Trustee to the extent the Owner Participant or
the Owner Trustee is owed any amounts under the Operative Agreements that have
not been paid when due, and (iii) except to the extent the Owner Trustee or
Owner Participant is owed any amounts under the Operative Agreements by Lessee
and such amounts are not paid when due, the Owner Participant may cause the
Indenture Trustee to distribute and apply such profit, income, interest,
dividend or gain realized upon the maturity, sale or other disposition of
investment of funds pursuant to Section 22.1 of the Lease, in satisfaction or
partial satisfaction of the amounts so due.
PARTICIPATION AGREEMENT [N605SW]
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(aa) Special Purchase Option. If Lessee shall have
elected both (i) to assume all of the rights and obligations of Lessor under
the Trust Indenture in accordance with Section 7.03 of the Trust Indenture and
(ii) to pay to Lessor the installments specified in the proviso to Section
18.2(c) of the Lease, then, as further conditions precedent to those specified
in paragraphs (c) and (d) of Section 18.2 of the Lease to such assumption:
(1) the Indenture Trustee shall have received evidence reasonably
satisfactory to it that the Trust Indenture, after giving effect to the
transactions contemplated by Section 18.2(d) of the Lease, constitutes a first
priority and perfected security interest in the Aircraft, which evidence shall
include an opinion of the tenor contemplated by Section 7.03(h) of the Trust
Indenture; and (2) the Indenture Trustee and the Owner Trustee shall execute
and deliver an intercreditor agreement that covers the following matters:
(x) the Owner Trustee shall not, notwithstanding any
Lease Event of Default, exercise any remedy accorded to it pursuant to
Section 15 of the Lease until the Trust Indenture shall have been
discharged pursuant to Section 10.01 of the Trust Indenture;
(y) payment of the Supplemental Rent under the Lease in
respect of the installments specified in Section 18.2(c) of the Lease,
and all other amounts owing to the Owner Trustee (other than Excluded
Payments) (collectively, "Equity Payments"), shall be fully and
unconditionally subordinated to the payment in full in cash of
principal, interest, Break Amount or Premium, if any, and all other
amounts owing to the Holders or the Indenture Trustee under or in
respect of the Certificates or the Trust Indenture (collectively,
"Debt Payments"), all pursuant to such terms of subordination as shall
be effectively and substantively equivalent to the manner in which
Debt Payments are paid or payable in priority to the Equity Payments,
and such other customary terms of subordination as shall be reasonably
required by the Indenture Trustee; and
(z) the Owner Trustee shall have the substantive
equivalent of the cure and buy-out rights specified in clauses (e)(i)
and (e)(ii) of Section 8.03 of the Trust Indenture.
(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or Section 8.03(e)(ii)
of the Indenture, the Original Loan Participant covenants that it will not (i)
transfer or (ii) grant participations in, its Certificate to any Person unless
such Person represents, warrants and covenants in writing to the Original Loan
Participant and, in the case of a transfer, to the Owner Participant and
Lessee, (A) to the effect set forth in Section 8(x) hereof and (B) further
represents and warrants to the Original Loan Participant and, in the case of a
transfer, to the Owner Participant and Lessee either that (a) no part of the
funds used by it to acquire its Series SWA 1995 Trust N605SW-I Certificate or
participation constitutes "plan assets" of any "employee benefit plan" within
the meaning of ERISA or any "plan" within the meaning of Section 4975(e)(1) of
the Code, or (b) its purchase or acquisition of such Series SWA 1995 Trust
N605SW-I Certificate or participation will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of ERISA. Any such
Person shall require any transferee of its interest to make the
representations, warranties and covenants in the preceding sentence.
(cc) [Intentionally Reserved].
PARTICIPATION AGREEMENT [N605SW]
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(dd) Deferred Equity. The Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and not with any
other party to this Agreement or the Holders of any Certificates), that, so
long as no Lease Event of Default or Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) shall have occurred and be continuing, it
will pay or cause to be paid to the Indenture Trustee on the Deferred Equity
Date sufficient funds to effect the payment of an amount (the "Deferred Equity
Amount") equal to the amount due on such date in respect of accrued interest on
the Certificates from their date of issuance to and including the Deferred
Equity Date. The Owner Participant and the Owner Trustee hereby direct the
Indenture Trustee, and the Indenture Trustee hereby agrees, to apply the
Deferred Equity Amount to the payment of interest on the Certificates which may
be due and payable pursuant to the provisions of the Trust Indenture on the
Deferred Equity Date. The Owner Participant agrees to make payment of the
Deferred Equity Amount in immediately available funds on or before 11:00 a.m.,
New York City time, on the Deferred Equity Date; provided, that the Owner
Participant agrees to give Lessee notice by 11:00 a.m., New York City time, on
the second Business Day prior to the Deferred Equity Date, if it shall not make
such payment. The Indenture Trustee agrees to give Lessee prompt notice if it
shall not have received such payment by noon, New York City time, on the
Deferred Equity Date. The Owner Participant further agrees to fund the
obligations of the Owner Trustee arising pursuant to clause (5) of Section
18(a). In the event the Owner Participant fails to make any such payment, or
if the Owner Trustee shall fail to make the payment required pursuant to clause
(5) of Section 18(a), and in either case Lessee shall make an Advance as
required by Section 3.8 of the Lease, Lessee may obtain reimbursement in the
manner and to the extent provided in Section 3.8 of the Lease for the Advance,
together with interest on such amount at the rate described below from (and
including) the date of the making of such Advance to (but excluding) the date
of reimbursement by the Owner Participant or the date Lessee deducts such
Advance from other payments to the extent and as provided in Section 3.8 of the
Lease and, without duplication of the foregoing, shall have such remedies as
may be available to it against the Owner Participant at law or in equity in
respect of the recovery of any such Advance. Interest shall accrue on the
amount of the Advance at an annual rate equal to 5% in excess of the Base Rate,
unless the Advance is made when any Lease Event of Default or Lease Default (of
the type described in Section 14.1 or 14.5 of the Lease) shall have occurred
and be continuing, in which event interest shall accrue on the amount of the
Advance at the Base Rate, but in each case not to exceed to maximum rate
permitted by applicable law. All amounts paid to Lessee by the Owner
Participant in respect of the Advance or deducted by Lessee pursuant to Section
3.8 of the Lease shall be applied first to payment to Lessee of interest and
then to payment to Lessee of amounts equal to the Advance.
(ee) Lessee as Pricing Agent for Certificate. The Owner
Trustee hereby appoints Lessee as its agent to select the pricing provisions
and related Interest Periods in respect of the Series SWA 1995 Trust N605SW-I
Certificate, such appointment to be effective so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing.
SECTION 9. Payments to Lessee of Trust Indenture
Monies. The Owner Participant hereby agrees to instruct the Owner Trustee to
promptly distribute any money received by it pursuant to Section 7.01 or 10.04
of the Trust Indenture to Lessee to the extent such amounts were paid by Lessee
or on behalf of Lessee and the Owner Trustee or the Owner Participant is not
owed any amounts under any of the Operative Agreements by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold
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any money received by it pursuant to the foregoing sentence in trust for the
benefit of the Owner Participant and may, in its discretion, invest and
reinvest all money so held by it in such Permitted Investments as Lessee deems
appropriate. Lessee will apply such money to the payment of previously
unclaimed payments with respect to the Certificates when and as claims for
payment are made by the Holders of such Certificates. As compensation for its
services pursuant to this Section 9, Lessee shall be entitled to an annual fee
from the Owner Participant in an amount to be agreed to at the time by Lessee
and the Owner Participant but in no event shall such fee exceed at any time the
amount of earnings on the monies so held in trust distributable at such time to
the Owner Participant. Any net losses on such investment shall be for the
account of Lessee. Any net earnings on such investment shall be distributed
from time to time by Lessee to the Owner Participant after deducting therefrom
any portion of such fee then due and unpaid. Upon the date required by
applicable law dealing with unclaimed property, Lessee will distribute to the
Owner Participant any amount held by it pursuant to this Section 9 and not
previously applied to the payment of the Certificates, after deducting
therefrom any portion of such fee then due and unpaid.
SECTION 10. Other Documents; Amendment. Lessee
acknowledges receipt of executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to the execution and delivery of
the Trust Agreement and Trust Indenture and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, to the extent the same purports or
is stated to bind the Owner Participant, the Trust Indenture (each as the same
may hereafter be amended or supplemented from time to time in accordance with
the terms thereof) applicable to it, to the extent such non-compliance would be
adverse to such party; and (B) subject to Section 8(v), agrees with Lessee and
the Indenture Trustee not to amend, supplement or otherwise modify any
provision of the Trust Agreement in a manner adversely affecting such party
without the prior written consent of such party. In addition, unless a Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing and so long as the Lease
has not been terminated, the Indenture Trustee and the Owner Trustee hereby
agree for the benefit of Lessee that without the consent of Lessee they will
not (and the Owner Participant agrees that it will not cause the Owner Trustee
to) amend, supplement or otherwise modify any provision of the Trust Indenture
in a manner adversely affecting Lessee. The Indenture Trustee and the Owner
Trustee agree to promptly furnish to Lessee copies of any supplement,
amendment, waiver or modification of any of the Operative Agreements to which
Lessee is not a party. Each Holder agrees that it will not take any action in
respect of the Trust Indenture Estate except through the Indenture Trustee
pursuant to the Trust Indenture or as otherwise permitted by the Trust
Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee
covenants and agrees with the Participants, the Indenture Trustee and the Owner
Trustee, in its capacity as such and in its individual capacity, as follows:
(a) Further Assurances. Lessee will cause to be done,
executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under the Lease, shall cause the Aircraft to be duly
registered, and at all times thereafter to remain
PARTICIPATION AGREEMENT [N605SW]
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duly registered, in the name of the Owner Trustee, or shall furnish to the
Owner Trustee such information as may be required to enable the Owner Trustee
to make application for such registration (at the expense of Lessee, including,
without limitation, reasonable attorneys' fees and expenses), and shall
promptly furnish to the Owner Trustee such information as may be required to
enable the Owner Trustee to timely file any reports required to be filed by it
as the lessor under the Lease or as the owner of the Aircraft with any
governmental authority (including tax authorities), it being understood that
Lessee shall not be required to comply with this covenant to the extent that
SBC's or the Owner Participant's failure to comply with its covenant in Section
8(b) with regard to its citizenship makes such compliance by Lessee impossible.
(b) Filing and Recording, Etc. Lessee, at its expense,
will, at the request of any party hereto, take, or cause to be taken, such
action with respect to the recording, filing, rerecording and refiling of the
Trust Agreement, the Lease, all Lease Supplements, the Trust Indenture, all
Trust Supplements and any financing statements or other instruments as are
necessary to maintain, so long as the Trust Indenture or the Lease is in
effect, the perfection of the security interests created by the Trust Indenture
and any security interest that may be claimed to have been created by the Lease
and the ownership interest of the Owner Trustee in the Aircraft. Lessee
agrees, upon the request and at the sole expense of the Owner Participant, to
take all reasonable acts requested by the Owner Participant in complying with
its obligations under clause (A) or (B) of the second sentence of Section 8(b).
(c) FAA Filings. Upon the execution and delivery of the
Lessee FAA Bill of Sale, the Lease Supplement and Trust Supplement covering the
Aircraft, the Lease and the Trust Indenture shall be filed for recording with
the FAA in the following order of priority: first, the Lessee FAA Bill of
Sale; second, the FAA registration application; third, the Trust Indenture,
with the Trust Agreement and the Trust Supplement covering the Aircraft
attached; and fourth, the Lease, with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement covering the Aircraft
attached. Lessee agrees to furnish the Participants and the Indenture Trustee
with copies of the foregoing documents with recording data as promptly as
practicable following the issuance of same by the FAA.
(d) Annual Compliance Opinions. Lessee will furnish to
Owner Trustee and Indenture Trustee annually after the execution hereof (but
not later than December 1 of each year), commencing with the year 1996,
opinions of counsel for Lessee selected by Lessee and reasonably satisfactory
to Owner Trustee and Indenture Trustee stating that, in the opinion of such
counsel, either (a) such action has been taken (or specifying any action which
must be taken) with respect to the recording, filing, rerecording and refiling
of (i) the appropriate Operative Agreements and any supplements and amendments
thereto, (ii) UCC financing statements, and (iii) such other filings or
recordings as are necessary to maintain for the 15-month period succeeding the
date of such opinion the perfection of Owner Trustee's and Indenture Trustee's
title to and interest in the Aircraft and the Operative Agreements and the
ownership interest of Owner Trustee in the Aircraft, reciting the details of
such actions, or (b) no such action is necessary to maintain for the 15-month
period succeeding the date of such opinion the perfection of such title and
interest.
(e) Engine Purchase Agreement. Lessee agrees to furnish
the Owner Trustee and the Indenture Trustee, promptly upon demand therefor, an
agreement (the "Engine Purchase Agreement Assignment") assigning the rights of
Lessee under the purchase agreement pursuant to
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which Lessee originally acquired the Engines (the "Engine Purchase Agreement")
to the Owner Trustee (which rights are collaterally assigned to the Indenture
Trustee), substantially in the form of the Purchase Agreement Assignment, and
to use its best efforts to obtain from the Engine Manufacturer a consent and
agreement in substantially the form of the Manufacturer's Consent.
(f) Merger. Lessee will not consolidate with or merge
into any other corporation or convey, transfer or lease all or substantially
all of its assets to any Person unless:
(i) the corporation formed by such
consolidation or into which Lessee is merged or the Person which
acquires by conveyance, transfer or lease all or substantially all of
the assets of Lessee as an entirety, as the case may be (the
"Successor") shall be (i) a corporation organized and existing under
the laws of the United States of America or any state thereof or the
District of Columbia, (ii) a "citizen of the United States" as defined
in the Act, and (iii) a United States certificated air carrier;
(ii) the Successor shall execute and deliver
to the Owner Trustee, the Indenture Trustee and the Participants an
agreement in form reasonably satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant containing an assumption by the
Successor of the due and punctual performance and observance of each
covenant and condition of the Operative Agreements to be performed or
observed by Lessee;
(iii) immediately after giving effect to such
transaction and as a result of giving effect to such transaction, no
Lease Default or Lease Event of Default shall have occurred and be
continuing;
(iv) Lessee shall have delivered to the Owner
Trustee, the Indenture Trustee and each Participant an Officer's
Certificate and an opinion of counsel to the Successor reasonably
satisfactory to the Owner Trustee, the Indenture Trustee and each
Participant, each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
subparagraph (ii) above comply with this Section 11(f) (except that
such opinion need not refer to subparagraph (iii) above), that the
agreements entered into to effect such consolidation, merger,
conveyance, transfer or lease and such assumption agreement are legal,
valid and binding obligations of the Successor, enforceable against
the Successor in accordance with their respective terms (subject to
applicable bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and to general principles
of equity), and that all conditions precedent herein provided for
relating to such transaction have been complied with; and
(v) the Successor shall make such filings
and recordings with the FAA pursuant to the Act, as shall be necessary
or desirable to evidence such consolidation, merger, conveyance,
transfer or lease with or to such Successor.
Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor corporation or Person which
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shall theretofore have become such in the manner prescribed in this Section
11(f) from its liability in respect of any Operative Agreement to which it is a
party. Nothing contained herein shall permit any lease, sublease or other
arrangement for the use, operation or possession of the Aircraft except in
compliance with the applicable provisions of the Lease (or any assignment by
Lessee of its rights under the Lease, except in connection with a transaction
in compliance with the express provisions of this Section 11(f)).
(g) Corporate Existence. Except as permitted by Section
11(f) hereof, Lessee shall at all times maintain its corporate existence.
Lessee covenants and agrees that it will at all times be a "citizen of the
United States" within the meaning of the Act.
(h) Certificate Schedule. Lessee will provide on behalf
of the Owner Trustee the amortization schedule for the Certificate to be issued
to the Original Loan Participant at least two days before the Delivery Date.
(i) No Certificate Ownership. Lessee agrees that it will
not, at any time, hold any Certificates, or any participation or other interest
therein.
SECTION 12. Ownership of Aircraft. It is hereby
agreed among Lessee, the Owner Participant and the Owner Trustee that for all
purposes the Owner Trustee will be the owner of the Aircraft (except that the
Owner Participant will be the owner for income tax purposes and except under
the circumstances contemplated by the proviso to Section 18.2(d) of the Lease)
and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes and all other
relevant purposes (subject to the election referred to above).
SECTION 13. Notices; Consent to Jurisdiction. (a)
Except as otherwise provided in this Agreement respecting telephone notices,
all notices, demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be in writing and
shall be personally delivered or sent by registered or certified mail, postage
prepaid, or by prepaid telex, TWX or telegram (with messenger delivery
specified in the case of a telegram), or by telecopier, or by prepaid courier
service, and shall be deemed to be given for purposes of this Agreement on the
day that such writing is delivered or, if given by certified mail, three (3)
Business Days after being deposited in the mails, in accordance with the
provisions of this Section 13(a). Unless otherwise specified in a notice sent
or delivered in accordance with the foregoing provisions of this Section 13(a),
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) as follows:
(A) if to Lessee, the Owner Trustee, the Original Loan Participant, the
Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I hereto (and in the case of Owner Trustee a copy shall be
sent to the Owner Participant) or (B) if to a subsequent Owner Participant,
addressed to such subsequent Owner Participant at such address as such
subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Holder, addressed to such Holder at its
address set forth in the Register maintained pursuant to Section 2.03 of the
Trust Indenture.
(b) Each party to this Agreement (individually a "Party"
and collectively "Parties") irrevocably agrees that any legal suit, action or
proceeding brought by any other Party, which arises solely out of or relates
solely to the Operative Agreements or any of the transactions contemplated
PARTICIPATION AGREEMENT [N605SW]
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hereby or thereby or any document referred to herein or therein, may be
instituted in the competent courts of the State of New York in New York County
or the United States District Court for the Southern District of New York and
that they, to the maximum extent permitted by law, hereby waive the right to
trial by jury in any such proceeding; provided, however, that the foregoing
provisions shall not apply to third party tort claims (but shall apply to an
indemnity claim with respect to such tort claim) and that the foregoing shall
not apply to any right a party may have to seek removal of such legal suit,
action or proceeding to federal court or to seek consolidation of any separate
legal suits, actions or proceedings brought by any one or more of the other
parties in the same or different jurisdictions. The agreement set forth in
this Section 13(b) is given solely for the benefit of the Parties, and such
agreement is not intended to and shall not (i) confer exclusive jurisdiction on
any court or (ii) inure to the benefit of any other Person.
SECTION 14. Change of Situs of Owner Trust. The
Owner Participant agrees that if, at any time, the Trust Estate becomes subject
to any Taxes for which it is indemnified pursuant to Section 7(b) hereof and
if, as a consequence thereof, Lessee should request that the situs of the trust
be moved to another state in the United States from the state in which it is
then located, the situs of the trust may be moved and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided, that (A) Lessee shall provide such additional tax
indemnification as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Agreements of the Owner Participant shall
not be adversely altered as a result of the taking of such action, or the Owner
Participant shall be indemnified by Lessee to its reasonable satisfaction for
any such alteration, (C) the lien of the Trust Indenture on the Trust Indenture
Estate shall not be adversely affected by such action, and Lessee shall execute
and deliver such documents as may be requested by the Indenture Trustee to
continue the perfection and priority of the lien on the Trust Indenture Estate,
(D) the Owner Participant shall have received an opinion or opinions of counsel
(reasonably satisfactory to the Owner Participant) in scope, form and substance
reasonably satisfactory to the Owner Participant to the effect that (I) the
trust, as thus removed, shall remain a validly established trust and the Trust
Agreement and other Operative Agreements shall remain valid, binding and
enforceable in accordance with their terms, (II) any amendments to the Trust
Agreement necessitated by such removal shall have been duly authorized,
executed and delivered by the parties thereto and shall constitute the legal,
valid and binding obligations of such parties, enforceable in accordance with
their terms, (III) such removal will not result in the imposition of, or
increase in the amount of, any Tax for which Lessee is not required to
indemnify the Owner Participant, the Owner Trustee or the Trust Estate pursuant
to Section 7(b) hereof (taking into account any additional indemnification
provided by Lessee pursuant to clause (A) of this sentence), (IV) such removal
will not result in any Loss of MACRS Deductions, Transaction Expense
Deductions, Interest Deductions or an Inclusion (as defined in the Tax
Indemnity Agreement) with respect to which Lessee is not required to indemnify
the Owner Participant pursuant to Section 6 of the Tax Indemnity Agreement
(taking into account any additional indemnification provided by Lessee pursuant
to clause (A) of this sentence), (V) the rights and obligations of the Owner
Participant under the Operative Agreements shall be substantially the same
under the laws of the new situs and (VI) covering such other matters as the
Owner Participant may reasonably request, (E) if such removal involves the
replacement of the Owner Trustee, the Owner Participant shall have received an
opinion of counsel to such successor Owner Trustee in form and substance
reasonably satisfactory to the Owner Participant covering the matters addressed
by the opinion delivered pursuant to Section 4(a)(xiii) hereof, and (F) Lessee
shall indemnify and hold harmless the Owner Participant on a net after-tax
basis against any and all reasonable and actual costs and expenses including
attorneys'
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fees and disbursements, registration, recording or filing fees incurred by the
Owner Trustee or Owner Participant, in connection with such change of situs.
SECTION 15. Miscellaneous.
(a) Consents under Lease and Trust Indenture. Each of
the Owner Participant and each Holder covenants and agrees that it shall not
unreasonably withhold its consent to any consent requested of the Owner
Trustee, as Lessor, or the Indenture Trustee under the terms of the Lease,
which by its terms is not to be unreasonably withheld by the Owner Trustee, as
Lessor, or by the Indenture Trustee. Each Holder covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Indenture Trustee under the terms hereof or in the Trust Indenture, which by
its terms is not to be unreasonably withheld by the Indenture Trustee.
(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, the Owner Trustee, the Indenture Trustee,
the Owner Participant and the Original Loan Participant provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, the
Original Loan Participant's and the Owner Participant's obligations under any
and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement, except as
otherwise expressly provided herein or therein.
(c) Counterparts; Waivers; Governing Law. This Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument. Neither this
Agreement nor any of the terms hereof may be terminated, amended, supplemented,
waived or modified, except by an instrument in writing signed by the party
against which the enforcement of the termination, amendment, supplement, waiver
or modification is sought; and no such termination, amendment, supplement,
waiver or modification shall be effective unless a signed copy thereof shall
have been delivered to Lessee, the Indenture Trustee and the Owner Trustee.
The terms of this Agreement shall be binding upon, and inure to the benefit of
and shall be enforceable by, Lessee, the Participants, the Indenture Trustee
and the Owner Trustee. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS
AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(d) No Recourse Against Owner Trustee. The parties
hereto agree that all of the statements, representations, covenants and
agreements made by the Owner Trustee (when made in such capacity) contained in
this Agreement and any agreement referred to herein other than the Trust
Agreement, unless expressly otherwise stated, are made and intended only for
the purpose of binding the Trust Estate and establishing the existence of
rights and remedies which can be exercised and enforced against the Trust
Estate. Therefore, anything contained in this Agreement or such other
agreements to the contrary notwithstanding (except for any express provisions
that the Owner Trustee is responsible for or is acting in or making
representations or agreements in its individual capacity), no recourse shall be
had with respect to this Agreement or such other agreements against the Owner
PARTICIPATION AGREEMENT [N605SW]
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Trustee in its individual capacity or against any institution or person which
becomes a successor trustee or co-trustee or any officer, director, trustee,
servant or direct or indirect parent or controlling person or persons of any of
them; provided, however, that this Section 15(d) shall not be construed to
prohibit any action or proceeding against any party hereto for its own willful
misconduct or grossly negligent conduct; and provided, further, that nothing
contained in this Section 15(d) shall be construed to limit the exercise and
enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement and the other Operative Agreements.
(e) Duties Limited. No Participant shall have any
obligation or duty to Lessee, to any other Participant or to others with
respect to the transactions contemplated hereby except those obligations or
duties of such Participant expressly set forth in this Agreement and the other
Operative Agreements and no Participant shall be liable for performance by any
other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever (except as provided in Section 7(d) hereof) shall the Participant be
liable to Lessee, nor shall any Participant be liable to any other Participant,
for any action or inaction on the part of the Indenture Trustee or the Owner
Trustee in connection with the transactions contemplated herein, whether or not
such action or inaction is caused by the willful misconduct or gross negligence
of the Indenture Trustee or the Owner Trustee.
(f) Binding on Parties and Successors. This Agreement
shall be binding upon and shall inure to the benefit of and shall be
enforceable against, the parties hereto and their respective successors and
permitted assigns including each successive holder of the Owner Participant's
interest and each successive holder of any Certificate issued and delivered
pursuant to this Agreement or the Trust Indenture whether or not an express
assignment to such holder of rights and obligations under this Agreement has
been made.
(g) Enforceability Representations. Every representation
or warranty contained herein as to the enforceability of any Operative
Agreement shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity.
(h) Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred and be continuing during the Term, none of the
Participants, the Indenture Trustee or the Owner Trustee will, through its own
actions or breaches of any of its obligations under the Operative Agreements,
interfere in the quiet enjoyment of the Aircraft by Lessee or any Permitted
Sublessee.
(i) Appointment of Attorney. The Owner Participant and
the Owner Trustee each hereby irrevocably appoints Lessee its attorney-in-fact
(which appointment shall be deemed to be coupled with an interest and shall be
irrevocable until the termination of the Lease), to execute and file such
reports in the name of the Owner Participant and the Owner Trustee, as the case
may be, as may be required to be filed pursuant to Section 47.9 of the FAA
Regulations, or any analogous part of any superseding regulation or statute, so
as to permit the continued registration of the Aircraft under the Act (and the
FAA Regulations), or under any analogous part of any superseding statute or
regulation, during any period when the Owner Participant, acting through the
Owner Trustee pursuant to Article XII of the Trust Agreement, or otherwise,
shall not be or shall not qualify as a "citizen of
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the United States", as such term is used in Section 40102 of Title 49, U.S.C.,
for purposes of registration of the Aircraft under the Act. The Owner
Participant and the Owner Trustee each agrees that it will cooperate and
furnish to Lessee such information as is available to it which must be included
in such reports. Subject to the terms of Section 7.1.3 of the Lease, Lessee
hereby agrees to prepare and to file any such reports and to furnish copies
thereof to the Owner Participant and the Owner Trustee prior to such filing.
(j) Consent to Certain Provisions of the Trust Agreement.
Lessee, the Original Loan Participant and the Indenture Trustee acknowledge
receipt of executed copies of the Trust Agreement and hereby consent in all
respects to all of the provisions of Article XII thereto, including, without
limitation, (i) the assignment by the Owner Participant to the Owner Trustee of
the Control Rights (as defined therein), and (ii) the appointment by the Owner
Participant of the Owner Trustee as the legal representative of the Owner
Participant in relation to such Control Rights. The Owner Participant hereby
agrees with Lessee, the Original Loan Participant and the Indenture Trustee
that the Owner Participant (a) shall comply with all the terms of Article XII
of the Trust Agreement and (b) shall not amend, supplement or otherwise modify
any provision of Article XII of the Trust Agreement, except in accordance with
the provisions thereof, provided that no such amendment, supplement or
modification shall in any way adversely affect the registration of the Aircraft
in accordance with Section 44102 of Title 49, U.S.C.
SECTION 16. Transaction Costs; Invoices and Payment
of Expenses. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the
subsequent placement of the permanent debt pursuant to Section 18 hereof, the
reasonable and actual fees, expenses and disbursements of (1) Potter Anderson &
Corroon, special counsel for the Indenture Trustee, (2) Shipman & Goodwin,
counsel for the Owner Trustee, (3) Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel
for the underwriters in a potential refinancing transaction pursuant to Section
18 hereof, (5) Vinson & Elkins L.L.P., special counsel for Lessee, but only to
the extent of their expenses and disbursements, and (6) Winstead, Sechrest &
Minick, special counsel for the Original Loan Participant, (ii) all fees, taxes
and other charges payable in connection with the recording or filing of
instruments and financing statements, (iii) the initial fee and initial
reasonable and actual disbursements of the Owner Trustee under the Trust
Agreement, (iv) the initial fee and initial reasonable and actual disbursements
of the Indenture Trustee under the Trust Indenture, (v) the fee and expenses of
Aero Economics, Inc. (or of such other appraiser as shall be acceptable to
Lessee and the Owner Participant) with respect to the appraisal of the Aircraft
required on or before the Delivery Date pursuant to Section 4(a) hereof, (vi)
the advisory fees and expenses of Babcock & Brown Financial Corporation, (vii)
the reasonable out-of-pocket disbursements, costs and expenses of the Original
Loan Participant relating to the transactions contemplated hereby, (viii) the
reasonable out-of-pocket expenses of the Owner Participant relating to the
transactions contemplated hereby, excluding the fees and expenses of Owner
Participant's counsel, (ix) the initial fee, if any, of the Original Loan
Participant, (x) the placement or underwriting fees, commissions and expenses,
if any, in placing the permanent debt pursuant to Section 18 hereof and all
costs and expenses associated with a public offering, if any, pursuant thereto,
and (xi) printing and distribution costs.
(b) Each of the Owner Trustee, the Indenture Trustee,
Lessee and the Participants shall promptly submit to the Owner Participant
copies of invoices of the Transaction Costs as they are received. Lessee shall
also be provided with a copy of any bill for legal expenses, with an
PARTICIPATION AGREEMENT [N605SW]
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opportunity to review and approve it (such approval not to be unreasonably
withheld or delayed). The Owner Participant agrees to pay such amounts
directly or to transfer to the Owner Trustee from time to time promptly upon
receipt of invoices of Transaction Costs such amount as shall be necessary in
order to enable the Owner Trustee to pay such Transaction Costs. To the extent
of funds received by it, the Owner Trustee agrees to pay all invoices of
Transaction Costs that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, Lessee, at its option, may pay directly any
Transaction Costs in excess of (i) .365% of Lessor's Cost incurred in
connection with the closing of this transaction on the Delivery Date and (ii)
.625% of Lessor's Cost incurred in connection with the refinancing or refunding
of the Certificates pursuant to Section 18, (y) shall pay the fees of its
special counsel and, (z) in the event that the transactions contemplated hereby
shall not be consummated, Lessee shall pay all Transaction Costs, plus the
fees, expenses and disbursements of Owner Participant's counsel, except that
the fees and expenses referred to in clause (a) (viii) above, and the fees,
expenses and disbursements of the Owner Participant's counsel, shall be borne
by the Owner Participant if such failure to consummate the transactions results
from the failure of the Owner Participant to close after all conditions
precedent to the Owner Participant's funding (other than those conditions
within the control of the Owner Participant) of its Commitment set forth herein
have been satisfied. In any and all events, Lessee agrees to pay on a net
after-tax basis the reasonable out-of-pocket costs and expenses (including
counsel fees) of each Indemnified Party incurred in connection with the
entering into or giving or withholding of any future waiver, modification,
supplement, consent, amendment or other action with respect to any Operative
Agreement which (a) is requested by Lessee, (b) results from any adjustment
pursuant to Section 3.7 of the Lease, or (c) is necessary to effectuate the
intent of any Operative Agreement. In addition, upon such failure to
consummate, Lessee shall pay the Original Loan Participant any applicable Break
Amount.
SECTION 17. Optional Redemption of Certificates.
(a) Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of all of
the Outstanding Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith to conclude an agreement with Lessee as to the terms of such
refunding or refinancing transaction (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new debt to be issued and the other aspects of such
refunding or refinancing transaction to be consummated (such date, the
"Refinancing Date", which date shall be determined so as to comply
with Section 6.03(a) of the Trust Indenture) and (ii) the following
information: (A) subject to the limitations set forth in this Section
17, the proposed adjusted ratio of debt evidenced by the Certificates
to the Owner Participant's investment in the beneficial ownership of
the Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date, and (C) the proposed revised debt amortization and schedules of
Interim Rent, Basic Rent, Stipulated Loss Value percentages and
Termination Value percentages and the revised Special Purchase Price
PARTICIPATION AGREEMENT [N605SW]
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(including any installments thereof). The Refinancing Certificate
shall not provide for a Debt/Equity ratio of more than 4:1. Within
ten (10) Business Days of its receipt of the Refinancing Certificate,
Lessee may demand a verification of the information set forth in the
Refinancing Certificate in the manner described in Section 3.7 of the
Lease. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Refinancing Certificate or the
determination of such information pursuant to such verification
procedures (such information, the "Refinancing Information") the
appropriate parties will take the actions specified in subparagraphs
(2) through (6) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities)) with the institution or
institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities in an aggregate principal
amount specified in the Refinancing Information, which amount shall be
at least equal to the aggregate principal amount of all Certificates
Outstanding on the Refinancing Date (such debt securities, the "New
Debt"), (ii) the application of the proceeds of the sale of the New
Debt to the redemption of all such Certificates on the Refinancing
Date and the payment of any other amounts payable to the Holders under
the Operative Agreements on the Refinancing Date, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Interim Rent (if applicable) and Basic
Rent payable in respect of the period from and after the Refinancing
Date shall be as provided in the Refinancing Information (and shall
take into account any variation of either Deferred Equity Amount paid
by or on behalf of the Owner Participant pursuant to Section 8(dd), if
applicable, from the corresponding Assumed Interest Amount with
respect to the Deferred Equity Date or the first Rent Payment Date, as
the case may be), (ii) amounts payable in respect of Stipulated Loss
Value and Termination Value from and after the Refinancing Date shall
be as provided in the Refinancing Information, and (iii) in the event
that the Series SWA 1995 Trust N605SW Certificates shall have been
publicly issued, the early termination notice revocation and payment
provisions shall be modified to comport with the applicable notice and
payment requirements of The Depository Trust Company or any other
depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the New Debt in
like manner as the Certificates and will enter into such amendments
and supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to or required
by the Owner Participant to be paid as a Transaction Cost and whether
or not such refunding or refinancing transaction
PARTICIPATION AGREEMENT [N605SW]
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is consummated, Lessee shall pay at no net after-tax cost to any other
party all of the reasonable out-of- pocket expenses of all parties to
such refunding or refinancing, including without limitation, the
reasonable fees and expenses of such parties' counsel and any related
loan or commitment fees; and
(6) subject to compliance by the Owner
Trustee with all applicable terms and conditions for voluntary
redemption under the Trust Indenture and this Agreement, each Holder
of a Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
interest thereon, Premium, if any, plus in the case of the Series SWA
1995 Trust N605SW-I Certificates, Break Amount, if any, together with
payment in full of all other amounts then payable to such Holder and
the Indenture Trustee hereunder or under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a
public offering of the New Debt, the Owner Participant shall have the right
(but not the obligation) to review and approve (which approval shall not be
unreasonably withheld) any registration statement filed with the SEC to be
employed in connection therewith. Any public offering of the New Debt shall
not, except as required by Lessee, contain any restrictions on the sale to
Holders who may use ERISA funding sources. It is expressly understood that the
Owner Participant shall have no obligation hereunder to consent to such public
refunding or refinancing if, in its good faith judgment, such refunding or
refinancing increases its or any of its Affiliates' exposure to (i) liabilities
under federal or state securities laws, (ii) regulation under state or federal
securities laws, (iii) the need to disclose publicly information that is not
generally available to the public, or (iv) being adversely affected in its
ability to engage in any other financing transaction, in each case to a level
unacceptable to it in its reasonable, good faith judgment. Any trustee of
public debt shall be (i) Wilmington Trust Company or (ii) a bank or trust
company in the United States and having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of trustee upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least
thirty (30) days' irrevocable written notice of the proposed date of the
optional refunding or refinancing.
(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee shall be
required to execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would result in any unreimbursed
increased costs or liability, including any adverse tax consequences or risk
thereof (unless indemnified against to its reasonable satisfaction) or would
result in any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional investment in
connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
PARTICIPATION AGREEMENT [N605SW]
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(f) Any refunding or refinancing pursuant to this Section
17 shall be of all Certificates then Outstanding and shall be effected in
accordance with Section 6.03(a) of the Trust Indenture.
(g) When calculating any of the information required to
be set forth in a Refinancing Certificate, the Owner Participant shall make
such calculations in a manner which (A) maintains its Net Economic Return, (B)
minimizes the Net Present Value of Rents to the extent possible consistent with
clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev. Proc. 75-28 (or
any successor thereto) and would not cause the Lease to constitute a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code (or any successor thereto), and (D) uses the same methodology
and assumptions used by the Owner Participant in determining Interim Rent,
Basic Rent, Stipulated Loss Values, Termination Values and Special Purchase
Price on the Delivery Date (except to the extent such assumptions have been
altered since the Delivery Date in connection with an adjustment to Rent
pursuant to Section 3.7 of the Lease).
(h) No refinancing or refunding pursuant to this Section
17 shall be permitted during the continuance of a Lease Default or a Lease
Event of Default.
SECTION 18. Interim Debt. (a) The parties hereto
acknowledge and agree that the Series SWA 1995 Trust N605SW-I Certificate
originally issued to the Original Loan Participant on the Delivery Date
represents interim debt financing and that it is intended that the Series SWA
1995 Trust N605SW-I Certificate be refinanced by Series SWA 1995 Trust N605SW
Certificates issued to new Holders. In connection therewith, in the event that
Lessee shall have given written notice to the Owner Trustee, the Indenture
Trustee, the Owner Participant and the Original Loan Participant that Lessee is
requesting a voluntary redemption of the Series SWA 1995 Trust N605SW-I
Certificate (in compliance with the provisions of Articles 6 and 15 of the
Trust Indenture) by the Owner Trustee as part of a refunding or refinancing
transaction, the Owner Participant agrees to negotiate promptly in good faith
with Lessee in connection therewith (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Agreements as may be necessary in order to
facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within five (5) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Section 18 Refinancing Certificate") setting forth
(i) the proposed date on which the Outstanding Series SWA 1995 Trust
N605SW-I Certificate will be redeemed, describing the new debt to be
issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, to be determined so as to
comply with Section 6.03(a) or 6.03(b) of the Trust Indenture (as
appropriate), the "Section 18 Refinancing Date") and (ii) the
following information: (A) the principal amount of debt to be issued
by the Owner Trustee on the Section 18 Refinancing Date, (B) and, if
such amount is less than the principal amount of the outstanding
Series SWA 1995 Trust N605SW-I Certificate, then the amount of any
additional contribution to the Trust Estate to be made by the Owner
Participant on the Section 18 Refinancing Date and (C) the proposed
revised debt amortization and schedules of Interim Rent, Basic Rent,
Stipulated Loss Value
PARTICIPATION AGREEMENT [N605SW]
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percentages and Termination Value percentages and the revised Special
Purchase Price (including any installments thereof). The principal
amount of debt to be issued by the Owner Trustee on the Section 18
Refinancing Date shall not equal more than 80.00% of Lessor's Cost.
Within five (5) Business Days of its receipt of the Section 18
Refinancing Certificate, Lessee may demand a verification of the
information set forth in the Section 18 Refinancing Certificate in the
manner described in Section 3.7 of the Lease. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Section 18
Refinancing Certificate or the determination of such information
pursuant to such verification procedures (such information, the
"Section 18 Refinancing Information") the appropriate parties will
take the actions specified in paragraphs (2) through (10) below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to Lessee, the Owner Participant and the Owner Trustee
(which, subject to subsection (d) below, may involve an underwriting
agreement in connection with a public offering of such debt or the
purchase of such debt by a publicly funded entity (or entities)) with
the institution or institutions to be named therein (A) providing for
(i) the issuance and sale by the Owner Trustee to such institution or
institutions on the Section 18 Refinancing Date of Series SWA 1995
Trust N605SW Certificates in an aggregate principal amount specified
in the Section 18 Refinancing Information (such debt securities, the
"Section 18 New Debt"), (ii) the application of the proceeds of the
sale of the Section 18 New Debt, plus any additional contribution to
the Trust Estate, to the redemption of the Series SWA 1995 Trust
N605SW-I Certificate Outstanding on the Section 18 Refinancing Date
and the payment of any other amounts payable to the Holders under the
Operative Agreements on the Section 18 Refinancing Date, all in
accordance with Section 6.03(b) of the Trust Indenture, and (iii) the
payment of the excess, if any, of such proceeds over the amount
necessary to effect such redemption to the Owner Trustee for payment
to the Owner Participant and (B) pursuant to which the parties to the
refinancing transaction (including the Owner Participant and Lessee
but excluding any public holders of debt) make such representations,
warranties and covenants as the Owner Participant or Lessee may
reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Interim Rent (if applicable) and Basic
Rent payable in respect of the period from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information (and shall take into account any variation of the sum of
any interest payment made pursuant to paragraph (5) or (5A) of this
Section 18(a) and the Deferred Equity Amount paid by or on behalf of
the Owner Participant pursuant to Section 8(dd), if applicable, from
the Assumed Interest Amount with respect to the Deferred Equity Date),
(ii) amounts payable in respect of Stipulated Loss Value, Termination
Value and Special Purchase Price from and after the Section 18
Refinancing Date shall be as provided in the Section 18 Refinancing
Information, and (iii) in the event that the Series SWA 1995 Trust
N605SW Certificates shall have been publicly issued, the early
termination notice revocation and payment provisions shall be modified
to comport with the applicable notice and payment requirements of The
Depository Trust Company or any other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the Section 18 New
Debt in like manner as the Series SWA 1995 Trust
PARTICIPATION AGREEMENT [N605SW]
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N605SW-I Certificate and will enter into such amendments and
supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) if such refunding or refinancing shall
be consummated on or prior to the Deferred Equity Date, the Owner
Trustee shall pay to the Original Loan Participant the Break Amount,
if any (as indemnification for the loss resulting from such refunding
or refinancing), and all accrued and unpaid interest on the
Certificates, subject to Lessee's obligations under Section 3.4 of the
Lease;
(5A) if such refunding or refinancing shall
be consummated after the Deferred Equity Date, Lessee on behalf of the
Owner Trustee shall pay to the Original Loan Participant as
Supplemental Rent the Break Amount, if any (as indemnification for the
loss resulting from such refunding or refinancing), and all accrued
and unpaid interest on the Certificates (in each case, without
duplication of other amounts, if any, payable pursuant to any other
provision of the Operative Agreements);
(6) except as provided in paragraph (5)
above, the Owner Trustee shall pay all of the costs of any such
refunding or refinancing so consummated, such costs shall be
considered as Transaction Costs and paid in accordance with and
subject to the limitations of Section 16 above and such Transaction
Costs shall be appropriately considered in calculating the proposed
revised debt amortization and schedules of Basic Rent, Stipulated Loss
Value percentages and Termination Value percentages;
(7) each Holder of the Series SWA 1995 Trust
N605SW-I Certificates will deliver to the Owner Trustee the Series SWA
1995 Trust N605SW-I Certificate held by it immediately prior to such
refunding or refinancing for cancellation (and the Owner Trustee shall
cancel the same), against simultaneous receipt by such Holder of
payment of the then outstanding principal amount of such Series SWA
1995 Trust N605SW-I Certificate, accrued and unpaid interest thereon
plus Break Amount, if any, together with payment in full of all other
amounts then payable to such Holder hereunder or under the Series SWA
1995 Trust N605SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such
of the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee
shall be required to execute and deliver any such agreement or
instrument or to make any other arrangements which in its opinion
would result in any unreimbursed increased costs or liability,
including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would result in
any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional
investment in connection with any such refinancing (other than the
Deferred Equity Amount, if applicable);
PARTICIPATION AGREEMENT [N605SW]
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(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel; and
(10) the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 if, in
its opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax consequences);
provided, however, that the Owner Participant will be obligated to
proceed with such refinancing if Lessee agrees to indemnify the Owner
Participant for such unindemnified adverse consequences (any such
indemnity to be satisfactory to the Owner Participant).
Notwithstanding the foregoing, the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 unless
(i) the Lessee requires in the case of a private refinancing, each
Holder to represent to the Lessee that it is not using ERISA funding
sources, or that an exemption is available with respect to its
purchase and holding of the debt, or (ii) in the case of a public
refinancing, an exemption with respect to pass through certificates
(such as Prohibited Transaction Exemption 89-89 or 90-24 or any other
comparable exemption) is available.
(b) Only one optional refinancing or refunding pursuant
to this Section 18 shall be permitted during the Term and such refinancing
shall occur on or prior to the second anniversary of the Delivery Date.
(c) Any refinancing or refunding pursuant to this Section
18 shall be of all Series SWA 1995 Trust N605SW-I Certificates then
Outstanding.
(d) Any public refinancing pursuant to this Section 18
shall comply with all the restrictions, limitations and conditions applicable
in the case of a public refinancing pursuant to Section 17(b) hereof.
(e) No refunding or refinancing pursuant to this Section
18 shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to
be set forth in a Section 18 Refinancing Certificate, the Owner Participant
shall make such calculations in a manner which (A) maintains its Net Economic
Return, (B) minimizes the Net Present Value of Rents to the extent possible
consistent with clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev.
Proc. 75-28 (or any successor thereto) and would not cause the Lease to
constitute a "disqualified leaseback or long term agreement" within the meaning
of Section 467 of the Code (or any successor thereto), and (D) uses the same
methodology and assumptions used by the Owner Participant in determining
Interim Rent, Basic Rent, Stipulated Loss Values, Termination Values and
Special Purchase Price on the Delivery Date (except to the extent such
assumptions have been altered since the Delivery Date in connection with an
adjustment to Rent pursuant to Section 3.7 of the Lease).
SECTION 19. Section 1110 Compliance. The
Participants and Lessee agree that the transactions contemplated by this
Agreement and the other Operative Agreements are intended to be, shall be and
should be construed so as to be, entitled to the full benefits of 11 U.S.C.
Section 1110.
PARTICIPATION AGREEMENT [N605SW]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ John D. Owen
Treasurer
BOT FINANCIAL & LEASING
CORPORATION B-4,
Owner Participant
By: /s/ Gary L. Christensen
Senior Vice President
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
Original Loan Participant
By: /s/ Mark Denton
Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its individual
capacity only as expressly provided
herein and otherwise solely as Owner
Trustee
By: /s/ Michelle K. Blezard
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as
otherwise expressly provided herein,
but solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
Title: Senior Financial Services
Officer
PARTICIPATION AGREEMENT [N605SW]
<PAGE> 62
SCHEDULE I
Names and Addresses
Lessee:
Southwest Airlines Co.
2702 Love Field Drive
P.O. Box 36611
Dallas, Texas 75235-1611
Attn: Treasurer
Telecopy: (214) 904-4022
Owner Participant:
BOT Financial & Leasing Corporation B-4
c/o BOT Financial Corporation
125 Summer Street
Boston, MA 02110
Attn: Lease Administration
Telecopy: (617) 345-5154
Payment Instructions:
Bank of Boston
ABA No. 011000390
For the account of
BOT Financial & Leasing Corporation B-4
Account No. 541-07706
Reference: 1995 Southwest Airlines
Attn: Jerry Chason-Sokol
Original Loan Participant:
Texas Commerce Bank
National Association
2200 Ross Avenue
Dallas, Texas 75201
Attn: Sean Obranski
Telecopy: (214) 922-2044
Telephone: (214) 922-2612
Payment Instructions:
Texas Commerce Bank N.A.
ABA No. 113000609
For the account of Texas Commerce Bank
National Association
Account No. 13576
Reference: SWA Interim Debt
Attn: Gale Manning
PARTICIPATION AGREEMENT [N605SW]
S-1
<PAGE> 63
SCHEDULE II
Commitments
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
---------------- ------------- -------------
<S> <C> <C>
Texas Commerce Bank
National Association 74.76745197% $24,673,259.15
Owner Participant:
- -----------------
BOT Financial & Leasing
Corporation B-4 25.23254803% $ 8,326,740.85
------------ --------------
Total Commitments: 100.00000% $33,000,000.00
================= =========== ==============
</TABLE>
PARTICIPATION AGREEMENT [N605SW]
S-2
<PAGE> 64
EXHIBIT A
FORM OF GUARANTY
GUARANTY
GUARANTY AGREEMENT dated ________________ (this "Guaranty"), from
______________________________________________________ (the "Guarantor"), to
___________________________ (the "Lessee"), _____________________________, in
its individual capacity and as Owner Trustee (the "Owner Trustee"), THE ENTITIES
IDENTIFIED AS LOAN PARTICIPANTS IN THE PARTICIPATION AGREEMENT (as defined
below) (the "Loan Participants"), and ____________________, as Indenture Trustee
(the "Indenture Trustee") (the Lessee, the Owner Trustee, the Loan Participants,
and the Indenture Trustee, together with their respective permitted successors,
transferees and assigns, each being herein called a "Beneficiary" and
collectively, the "Beneficiaries").
R E C I T A L S:
WHEREAS, BOT FINANCIAL & LEASING CORPORATION B-4 (the "Owner
Participant") is a wholly-owned subsidiary of the Guarantor and has entered
into (i) the Participation Agreement dated as of ___________________, among
the Owner Participant, the Lessee, the Loan Participants, the Owner Trustee and
the Indenture Trustee (as such agreement may be amended, modified and
supplemented in accordance with the terms thereof, the "Participation
Agreement"), (ii) the Trust Agreement dated ___________________, between the
Owner Participant and ______________________________ (as such agreement may be
amended, modified or supplemented in accordance with the terms thereof, the
"Trust Agreement"), and (iii) the Tax Indemnity Agreement dated
______________________, between the Owner Participant and the Lessee (as such
agreement may be amended, modified and supplemented in accordance with the
terms thereof, the "Tax Indemnity Agreement") (collectively, the "Owner
Participant Agreements"); and
WHEREAS, in order to induce the Beneficiaries to enter into the Owner
Participant Agreements, the Guarantor desires to enter into this Guaranty to
guarantee the Owner Participant's performance and compliance with the
covenants, agreements, obligations, terms and conditions of or applicable to
the Owner Participant under and pursuant to the Owner Participant Agreements.
NOW, THEREFORE, in consideration of the premises set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby covenants and agrees as follows:
SECTION 1. Definitions. Capitalized terms used in this
Guaranty without other definition have the respective meanings specified in the
Participation Agreement.
SECTION 2. The Guaranty. (a) The Guarantor hereby
irrevocably and unconditionally guarantees to each of the Beneficiaries (i) the
due, punctual and full payment of all obligations of the Owner Participant
which are payable by the Owner Participant under or pursuant to any of the
Owner Participant Agreements and in accordance with the terms thereof, by
acceleration or otherwise, without offset or deduction; and (ii) the due and
punctual performance by the Owner Participant of, and compliance by the Owner
Participant with, all of its other obligations, covenants, and undertakings
contained in or arising under or pursuant to each of the Owner Participant
Agreements (the obligations referred to in clauses (i) and (ii) being
collectively hereinafter referred
EXHIBIT A
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to as the "Guaranteed Obligations"); provided, however, the Guaranteed
Obligations shall not include any obligations of the Owner Participant which
are non-recourse to the Owner Participant pursuant to the terms of the Owner
Participant Agreements. Without limitation of the foregoing, in case the Owner
Participant shall for any reason whatsoever fail to pay duly and punctually any
payment required to be made by the Owner Participant under any of the Owner
Participant Agreements when and as the same shall be due and payable in
accordance with the terms of such Owner Participant Agreement, by acceleration
or otherwise, the Guarantor will immediately pay the same to the Person
entitled thereto and, in addition, such further amount, if any, as shall be
sufficient to cover the costs and expenses of collection and in case the Owner
Participant shall fail to perform or comply with any of its other obligations,
covenants or undertakings contained in or arising under or pursuant to any of
the Owner Participant Agreements for any reason whatsoever, the Guarantor will
forthwith perform or comply with such obligation, covenant or undertaking or
cause the same forthwith to be performed or complied with.
(b) Without limitation of the Guarantor's obligations
hereunder, all amounts payable by the Guarantor hereunder shall in any event be
paid immediately upon demand by the respective Beneficiary entitled thereto, in
immediately available funds, as such party may direct and at the place
specified by such Beneficiary.
SECTION 3. Unconditional Nature of Obligations; Waiver.
(a) Unconditional Nature of Obligations. The obligations of the
Guarantor contained in Section 2 above are direct, independent and primary
obligations of the Guarantor and are absolute, present, unconditional and
continuing obligations and are not conditioned in any way upon the institution
of suit or the taking of any other action or any attempt to enforce performance
of or compliance with the obligations, covenants or undertakings (including,
without limitation, any payment obligations) of the Owner Participant and,
without limitation, shall constitute a guaranty of payment and performance and
not of collection, binding upon the Guarantor and its successors and assigns
and irrevocable without regard to the genuineness, validity, legality or
enforceability of any of the Owner Participant Agreements or the lack of power
or authority of the Owner Participant to enter into any of the Owner
Participant Agreements or any substitution, release or exchange of any other
guaranty or any other security for any of the Guaranteed Obligations or any
other circumstance whatsoever (other than payment or performance) that might
otherwise constitute a legal or equitable discharge of a surety or guarantor
and shall not be subject to any right of set-off, recoupment or counterclaim
and are in no way conditioned or contingent upon any attempt to collect from
the Owner Participant or any other entity or to perfect or enforce any security
or upon any other condition or contingency or upon any other action,
occurrence, or circumstance whatsoever. Without limiting the generality of the
foregoing, the Guarantor shall have no right to terminate this Guaranty, or to
be released, relieved or discharged from its obligations hereunder, and such
obligations shall be neither affected or diminished for any reason whatsoever,
including, without limitation, (i) any amendment or supplement to or
modification of any Owner Participant Agreement, any extension or renewal of
the Owner Participant's obligations under any Owner Participant Agreement, or
any subletting, assignment or transfer of any Beneficiary's interest in the
Owner Participant Agreements, (ii) any bankruptcy, insolvency, readjustment,
composition, liquidation or similar proceeding with respect to the Owner
Participant or any other Person, (iii) any furnishing or acceptance of
additional security or any exchange, surrender, substitution or release of any
security, (iv) any waiver, consent or other action or inaction or any exercise
or nonexercise of any right, remedy or power with respect to the Guaranteed
Obligations or any of the Owner Participant Agreements, (v) any merger or
consolidation of the Owner Participant or the Guarantor into or with any other
Person, or any change in the structure of the Owner Participant or in the
ownership of the Owner Participant by the Guarantor, (vi) any default,
misrepresentation, negligence, misconduct or other action or inaction of any
kind by any
EXHIBIT A
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Beneficiary under or in connection with any Operative Document or any other
agreement relating to this Guaranty, except to the extent that any such
default, misrepresentation, negligence, misconduct or other action or inaction
would limit the Guaranteed Obligations, (vii) any defect in the title,
condition, design, operation or fitness of, or any interference with operation,
use or possession of, the Aircraft, (viii) any failure to establish, perfect or
preserve title to or any security interest in or to the Aircraft or any other
collateral security for the Guaranteed Obligations, or (ix) any other
circumstance whatsoever (except the complete payment and performance of the
Guaranteed Obligations).
(b) Waiver. The Guarantor unconditionally waives, to
the fullest extent permitted by law, any right it may have to (i) the notice of
any waiver or extension granted to the Owner Participant, (ii) all notices
which may be required by statute, rule of law or otherwise to preserve any of
the rights of any of the Beneficiaries against the Owner Participant, the
Guarantor or any other Person, (iii) require any of the Beneficiaries to
proceed against the Owner Participant or any other Person or pursue any
collateral or remedy within such Beneficiary's power, (iv) require acceptance
of this Guaranty, diligence, presentment, demand for payment, protest and all
other notices, including notice of the creation, renewal, extension or accrual
of any of the Guaranteed Obligations, (v) require any election of remedies,
(vi) require the marshalling of assets or the resort to any other security or,
(vii) except as otherwise expressly provided herein, claim any other defense,
contingency, circumstance or matter which might constitute a legal or equitable
discharge of a surety or guarantor.
SECTION 4. Term of the Obligations of the Guarantor. The
obligations of the Guarantor under this Guaranty shall be discharged and
released upon the earlier of (a) the payment, performance and satisfaction in
full of the Guaranteed Obligations after the termination of all of the Owner
Participant Agreements, and (b) the transfer by the Owner Participant of its
rights and obligations under the Operative Documents, or any other assignment
or other transfer of the Owner Participant's rights and obligations pursuant to
the Operative Agreements to any Person who is not an Affiliate of the
Guarantor, in either case in accordance with, and as permitted by, the
Participation Agreement; provided, however, that any such transfer shall not
relieve the Guarantor of any of its obligations hereunder arising out of events
occurring prior to such transfer.
SECTION 5. Representations, Warranties and Covenants of the
Guarantor.
(a) Corporate Existence and Power. The Guarantor is a
corporation duly organized, validly existing and in good standing as a
__________________________________ under the laws of _______________________.
The Guarantor has the corporate power and authority (i) to own or lease its
properties and to carry on its present business and operations, and (ii) to
enter into and perform its obligations under this Guaranty. The Owner
Participant is a wholly-owned subsidiary of the Guarantor.
(b) Due Authorization, Etc. The execution and
delivery by the Guarantor of this Guaranty and compliance by the Guarantor with
all of the provisions hereof do not and will not contravene any law,
governmental rule or regulation or any order, writ, injunction or decree of any
court or governmental authority or agency applicable to or binding on the
Guarantor or contravene the provisions of, or constitute a default under, its
charter or by-laws or any indenture, mortgage, contract or any agreement or
instrument to which the Guarantor is a party or by which it or any of its
property may be bound or affected.
(c) Validity; Enforceability. This Guaranty has been
duly authorized, executed and delivered by the Guarantor, constitutes a legal,
valid and binding obligation of the Guarantor and is enforceable against the
Guarantor in accordance with its terms.
EXHIBIT A
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(d) Governmental Consents. No authorization or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery or performance by
the Guarantor of this Guaranty or in connection herewith.
(e) Financial Information. The Guarantor has a
combined capital, surplus and undivided profits equal to at least $75,000,000.
The Guarantor will promptly upon receiving a written request therefor from any
of the Lessee, the Owner Trustee or the Indenture Trustee, provide copies of
the originally-signed cover page and the consolidated balance sheet (Schedule
RC) of the Guarantor's most recently-filed "call report" (that is, the
quarterly consolidated reports of condition and income for a bank with domestic
and foreign offices -- FFIEC), or any successor or other form applicable to the
Guarantor. Since the date of the consolidated balance sheet (Schedule RC) of
the Guarantor dated _______________________, there has been no material adverse
change in the financial condition of the Guarantor.
(f) Litigation. There are no pending or, to the
knowledge of the Guarantor, threatened actions or proceedings before any court
or administrative agency which would adversely affect the ability of the
Guarantor to perform its obligations hereunder.
The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Guaranty, provided that each
such representation and warranty is made only on and as of the date hereof.
SECTION 6. Survival of Guaranty. Notwithstanding anything to
the contrary herein, this Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any of the amounts paid to any
of the Beneficiaries, in whole or in part, is required to be repaid upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Guarantor or the Owner Participant or any other Person, or as a result of the
appointment of a custodian, receiver, trustee, or other officer with similar
powers with respect to the Guarantor or the Owner Participant or any other
Person or any substantial part of the property of the Guarantor or the Owner
Participant or such other Person, all as if such payments had not been made.
SECTION 7. Remedies; Subrogation. (a) In the event the
Guarantor shall fail to pay immediately any amounts due under this Guaranty, or
to comply with any other term of this Guaranty within three Business Days of
the date of demand therefor, each Beneficiary shall be entitled to all rights
and remedies to which it may be entitled hereunder or at law, in equity or by
statute.
(b) Subrogation. The Guarantor will not exercise any
rights that it may acquire by way of subrogation under this Guaranty, by any
payment made hereunder or otherwise, until all the Guaranteed Obligations shall
have been paid in full. If any amount shall be paid to the Guarantor on
account of such subrogation rights at any time when all the Guaranteed
Obligations shall not have been paid in full, such amount shall be held in
trust for the benefit of the Beneficiary to whom such Guaranteed Obligation is
payable and shall forthwith be paid to such Beneficiary to be credited and
applied to such Guaranteed Obligation, whether matured or unmatured, in
accordance with the terms of the Owner Participant Agreement under which such
Guaranteed Obligation arose. If (i) the Guarantor shall make payment to any
Beneficiary of all or any part of the Guaranteed Obligations and (ii) all the
Guaranteed Obligations shall be paid in full, such Beneficiary will at the
Guarantor's request and expense, execute and deliver to the Guarantor
appropriate documents, without recourse and with representation or warranty,
necessary to evidence the transfer by subrogation to the Guarantor of an
interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
EXHIBIT A
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(c) The provisions of this paragraph shall survive the
term of this Guaranty and the payment in full of the Guaranteed Obligations and
the termination of the Operative Documents.
SECTION 8. Limitation. Nothing in this Guaranty shall
expressly or by implication increase or expand the rights or obligations of any
Beneficiary or the Owner Participant under the Operative Documents.
SECTION 9. No Waiver; Amendments. No failure on the part of
any party hereto to exercise, no delay in exercising and no course of dealing
with respect to, any right or remedy hereunder will operate as a waiver
thereof; nor will any single or partial exercise of any right or remedy
hereunder preclude any other further exercise of any other right or remedy.
All remedies of the Beneficiaries against the Owner Participant are cumulative
without duplication. This Guaranty may not be waived, amended, supplemented or
modified except by an instrument in writing executed by the Beneficiaries.
SECTION 10. Assignment and Assumption. This Guaranty may not
be assigned by the Guarantor to, or assumed by, any successor to or assign of
the Guarantor without the prior written consent of the Beneficiaries except in
connection with a sale of all or substantially all of the Guarantor's assets
and pursuant to an assignment and assumption agreement, in form and substance
satisfactory to the Beneficiaries, of the Guarantor's obligations hereunder, or
as otherwise provided in Section 4 hereof, by a Person complying with the
requirements of the Operative Agreements for a transferee of the Owner
Participant.
SECTION 11. Notices. All notices, demands or other
communications required or otherwise provided under this Agreement shall be in
writing and shall be delivered to the Beneficiaries at the address set forth in
Section 14.01 of the Participation Agreement and, if to the Guarantor:
at: _____________________________
_____________________________
_____________________________
_____________________________
with a copy to: _____________________________
_____________________________
_____________________________
_____________________________
or to such other address as the Guarantor or any Beneficiary may specify by
written notice. All notices shall be deemed duly given if given in any manner
provided for in Section 14.01 of the Participation Agreement.
SECTION 12. Successors and Assigns. This Agreement shall bind
the Guarantor and its successors and permitted assigns and inure to the benefit
of the Beneficiaries and their successors and permitted assigns.
SECTION 13. Severability. The invalidity or unenforceability
of any one or more provisions of this Agreement shall not affect the validity
or enforceability of the remaining portions of this Agreement.
EXHIBIT A
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SECTION 14. Governing Law. THIS GUARANTY SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF _____________________.
IN WITNESS WHEREOF, the party hereto has caused this Guaranty
Agreement to be duly executed on the day and year first above written.
________________________________
By:_____________________________
Title:__________________________
EXHIBIT A
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EXHIBIT 4.46
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO.,
as Lessee
BOT FINANCIAL & LEASING CORPORATION B-4,
as Owner Participant
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
and in its capacity as Pass Through Trustee under
each of the two Pass Through Trust Agreements
and as Holder
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N605SW)
<PAGE> 2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT dated as of October 1,
1995 (this "Amendment") by and among (i) Southwest Airlines Co., a Texas
corporation ("Lessee"), (ii) BOT Financial & Leasing Corporation B-4, a
Massachusetts corporation ("Owner Participant"), (iii) Shawmut Bank
Connecticut, National Association, a national banking association, not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee under the Trust Agreement ("Owner Trustee"), and (iv) Wilmington Trust
Company, a Delaware banking corporation, in its individual capacity and as
Indenture Trustee under the Trust Indenture (the "Indenture Trustee") and in
its capacity as Pass Through Trustee under each of the two separate Pass
Through Trust Agreements ("Pass Through Trustee") and as Holder, amends that
certain Participation Agreement respecting the aircraft having U.S.
registration number N605SW and dated as of August 1, 1995 (the "Participation
Agreement"), by and among Lessee, Owner Participant, Texas Commerce Bank
National Association (the "Original Loan Participant"), Owner Trustee and
Indenture Trustee,
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, the Delivery Date occurred on August 25, 1995; and
WHEREAS, concurrently with the execution of this Amendment, the Series
SWA 1995 Trust N605SW-I Certificate held by the Original Loan Participant is
being refinanced by the issuance of one or more new Certificates issued to Pass
Through Trustee as Holder; and
WHEREAS, as contemplated by Section 18 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
Section 1. Amendment to Schedule I. Schedule I to the
Participation Agreement is hereby deleted in its entirety and replaced with
Schedule I to this Agreement.
Section 2. Amendments to Section 7(b). Section 7(b) of the
Participation Agreement is hereby amended in the following manner:
(i) Section 7(b) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase is
hereby amended to be and read in its entirety as follows:
"Operative Agreement or each Pass Through Trust Agreement" and
"Operative Agreements or each Pass Through Trust Agreement"
PARTICIPATION AMENDMENT [N605SW]
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<PAGE> 3
except in the case of Section 7(b)(iii) where the phrase "Operative
Agreements" is hereby amended to be and read, in its entirety, "Operative
Agreements and the Pass Through Trust Agreements."
(ii) Section 7(b)(i) is hereby amended as follows:
(a) the following language is added immediately after the
words "combined or unitary return with such Indemnified
Party)" and before the words "harmless from, any and all":
"except that for purposes of this Section 7(b)(i) an
Indemnified Party shall not include any Holder other than
Original Loan Participant";
(b) unless as otherwise provided in (c) below, wherever the
term "Certificates" is used, such term is hereby amended to be
and read in its entirety as follows:
"Certificates and each Pass Through Certificate"; and
(c) the language immediately after the phrase "or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture" is
hereby amended to be and read in its entirety as follows:
"and each Pass Through Trust Agreement, or the beneficial
interest in the Trust Estate and each Pass Through Trust
Estate or the creation thereof, or any payments made pursuant
to any such agreement or instrument or upon or with respect to
the property held by Owner Participant or by the Trust Estate
or by Indenture Trustee under the Trust Indenture or the
property held by Pass Through Trustee under the respective
Pass Through Trust Estate, amounts payable with respect to the
Certificates and each Pass Through Certificate, including
withholding Taxes imposed on payments of principal, interest,
Premium or Break Amount on the Certificates or payments of
principal of, interest on or any other amounts payable with
respect to each Pass Through Certificate that are asserted
against the Owner Participant, Owner Trustee or Pass Through
Trustee, as withholding agent, or otherwise with respect to or
in connection with the transactions contemplated by the
Operative Agreements."
Section 3. Amendments to Section 7(c). Section 7(c) of the
Participation Agreement shall be amended in the following manner:
(i) Section 7(c) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase
includes each Pass Through Trust Agreement.
(ii) Clause (d) of Section 7(c)(i) is hereby amended to be
and read in its entirety as follows:
PARTICIPATION AMENDMENT [N605SW]
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<PAGE> 4
"(d) the offer, sale or delivery of the Certificates or the
Pass Through Certificates, whether before or after the
Delivery Date (the indemnity in this clause (d) to extend also
to any Person who controls an Indemnified Party, its
successors, assigns, employees, servants and agents within the
meaning of Section 15 of the Securities Act)."
(iii) The final paragraph of Section 7(c) is hereby amended
to be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of Indenture Trustee (including the reasonable fees
and expenses of its counsel and any agent appointed in
accordance with Section 9.02(c) of the Trust Indenture) and
Pass Through Trustee and, as provided in Section 6.07 of the
Trust Agreement, Owner Trustee (including, but not limited to,
the reasonable fees and expenses of its counsel), without
cost, on a net after-tax basis, to Owner Participant, for
acting as such, other than such fees and expenses which
constitute Transaction Costs. Lessee agrees that it will pay
the reasonable fees and expenses of any separate owner trustee
or co-trustee appointed pursuant to Section 9.02 of the Trust
Agreement as a result of any requirement of law or if
otherwise required by any Operative Agreement or if requested,
or consented to, by the Lessee."
Section 4. Amendments to Section 8. Section 8 of the
Participation Agreement is hereby amended in the following respects:
(i) Section 8(e) is hereby amended to be and read in its
entirety as follows:
"(e) (i) Pass Through Trustee hereby agrees that, except
as otherwise required by applicable law including, without
limitation, any law which requires Pass Through Trustee to act
within its own discretion, it shall not, without the prior
written consent of Owner Trustee, direct Indenture Trustee to
take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization,
direction or consent of, or notice from, the Holders holding a
specified percentage in principal amount of Outstanding (as
defined in the Trust Indenture) Certificates unless Pass
Through Trustee receives a Direction (as defined in the
relevant Pass Through Trust Agreement) to so direct the
Indenture Trustee from Certificateholders (as defined in the
relevant Pass Through Trust Agreement) holding the same
percentage of Certificates (as defined in the relevant Pass
Through Trust Agreement) evidencing Fractional Undivided
Interests (as defined in the relevant Pass Through Trust
Agreement) in the Trust (as defined in the relevant Pass
Through Trust Agreement) holding the Certificates.
(ii) Lessee and Pass Through Trustee hereby agree
that Article X of each Pass Through Trust Agreement (to the
extent relating to the Certificates) shall not be amended
without the prior written consent of Owner Participant.
PARTICIPATION AMENDMENT [N605SW]
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<PAGE> 5
(iii) Pass Through Trustee hereby agrees that,
except as otherwise required by applicable law including,
without limitation, any law which requires Pass Through
Trustee to act within its own discretion, if requested to do
so by Owner Trustee or Owner Participant, Pass Through Trustee
shall request a Direction from the relevant Certificateholders
to establish whether Pass Through Trustee, in its capacity as
a Holder, may direct the Indenture Trustee to take or refrain
from taking any action under the Operative Agreements."
(ii) Section 8(l) is hereby amended by deleting the
references therein to the Original Loan Participant.
(iii) Section 8(bb) is hereby amended to be and read in its
entirety as follows:
"(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or
Section 8.03(e)(ii) of the Indenture, each Holder covenants
that it will not transfer its Certificate to any Person unless
such Person represents and warrants in writing to such Holder,
the Owner Participant and Lessee either that (a) no part of
the funds used by it to acquire its Certificate constitutes
`plan assets' of any `employee benefit plan' within the
meaning of ERISA or any `plan' within the meaning of Section
4975(e)(1) of the Code or (b) its purchase or acquisition of
such Certificate will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of
ERISA. Any such Person shall require any transferee of its
interest to make the representations and warranties in the
preceding sentence."
(iv) Section 8(dd) is hereby amended to be and read in its
entirety as follows:
"(dd) Deferred Equity. Owner Participant hereby
unconditionally agrees with Lessee, and only with Lessee (and
not with any other party to this Agreement or the Holders of
any Certificates), that, so long as no Lease Event of Default
or Lease Default (of the type described in Section 14.1 or
14.5 of the Lease) shall have occurred and be continuing, it
will pay or cause to be paid to Indenture Trustee on the
Deferred Equity Date sufficient funds to effect the payment of
an amount (the "Deferred Equity Amount") equal to the amount
due on such date in respect of accrued interest on the
Certificates from the Section 18 Refinancing Date (as defined
in Section 18 hereof) to and including the Deferred Equity
Date. Owner Participant and Owner Trustee hereby direct the
Indenture Trustee, and Indenture Trustee hereby agrees, to
apply the Deferred Equity Amount to the payment of interest on
the Certificates which may be due and payable pursuant to the
provisions of the Trust Indenture on the Deferred Equity Date.
Owner Participant agrees to make payment of the Deferred
Equity Amount in immediately available funds on or before
11:00 a.m., New York City time, on the Deferred Equity Date,
provided that the Owner Participant agrees to give Lessee
notice by 11:00 a.m., New York City time, on the second
Business Day prior to the Deferred Equity Date if it shall not
make such payment. Indenture Trustee agrees to give Lessee
prompt notice if it shall not have received such
PARTICIPATION AMENDMENT [N605SW]
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<PAGE> 6
payment by noon, New York City time, on the Deferred Equity
Date. In the event Owner Participant fails to make such
payment, and Lessee shall make an Advance as required by
Section 3.8 of the Lease, Lessee may obtain reimbursement in
the manner and to the extent provided in Section 3.8 of the
Lease for the Advance, together with interest on such amount
at the rate described below from (and including) the date of
the making of such Advance to (but excluding) the date of
reimbursement by the Owner Participant or the date Lessee
deducts such Advance from other payments to the extent and as
provided in Section 3.8 of the Lease and, without duplication
of the foregoing, shall have such remedies as may be available
to it against the Owner Participant at law or in equity in
respect of the recovery of any such Advance. Interest shall
accrue on the amount of the Advance at an annual rate equal to
5% in excess of the Base Rate, unless the Advance is made when
any Lease Event of Default or Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) shall have
occurred and be continuing, in which event interest shall
accrue on the amount of such Advance at the Base Rate, but in
each case not to exceed the maximum rate permitted by
applicable law. All amounts paid to Lessee by the Owner
Participant in respect of any Advance or deducted by Lessee
pursuant to Section 3.8 of the Lease shall be applied first to
payment to Lessee of interest and then to payment to Lessee of
amounts equal to such Advance."
Section 5. Amendments to Section 11(f). Section 11(f) of the
Participation Agreement is hereby amended such that wherever the phrase
"Operative Agreement" or "Operative Agreements" is used, such phrase is hereby
amended to be and read in its entirety as follows:
"Operative Agreement and each Pass Through Trust Agreement"
and "Operative Agreements and each Pass Through Trust
Agreement."
Section 6. Amendments to Section 15. Section 15(b) of the
Participation Agreement is hereby amended to be and read in its entirety as
follows:
"(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, Owner Trustee, Indenture
Trustee, Owner Participant, Pass Through Trustee and any
Holder provided for in this Agreement, and Lessee's, Owner
Trustee's, Indenture Trustee's, Owner Participant's, Pass
Through Trustee's and any Holder's obligations under any and
all thereof, shall survive the making available of the Owner
Participant's Commitment, the delivery or return of the
Aircraft, the transfer of any interest of Owner Participant in
the Trust Estate or the Aircraft or any Engine or the transfer
of any interest by any Holder in any Certificate or the Trust
Indenture Estate and the expiration or other termination of
this Agreement, any other Operative Agreement or the Pass
Through Trust Agreements, except as otherwise expressly
provided herein or therein."
PARTICIPATION AMENDMENT [N605SW]
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<PAGE> 7
Section 7. Amendment to Section 16. Section 16(b) of the
Participation Agreement is hereby amended by changing ".365%" in clause (i)
thereof to read ".387295" and by changing ".625%" in clause (ii) thereof to
read ".629952."
Section 8. Amendment to Section 17. Section 17(a)(3) of the
Participation Agreement is hereby amended by deleting the second parenthetical
contained in clause (i) thereof.
Section 9. Ratification. Except as amended hereby, the
Participation Agreement continues and shall remain in full force and effect in
all respects.
Section 10. Authorization to Execute Amendments. By execution of
this Amendment, Owner Participant hereby authorizes, directs and instructs
Owner Trustee to execute and deliver this Amendment and any and all other
amendments, agreements and certificates as may be necessary as a result of the
refinancing contemplated hereby and by Section 18 of the Participation
Agreement.
Section 11. Pass Through Trustee a Party. Effective as of the
date hereof, Pass Through Trustee shall be a party to the Participation
Agreement and shall have the rights and obligations of the Holders as set forth
in the Participation Agreement, as amended hereby.
Section 12. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 13. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
PARTICIPATION AMENDMENT [N605SW]
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IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Participation Agreement to be duly delivered in the State of New
York and executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By /s/ JOHN D. OWEN
Treasurer
BOT FINANCIAL & LEASING
CORPORATION B-4,
Owner Participant
By /s/ GARY P. CLINTON
Senior Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as otherwise expressly
provided herein, but solely as
Indenture Trustee
By /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
PARTICIPATION AMENDMENT [N605SW]
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SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee: Owner Trustee:
Southwest Airlines Co. Shawmut Bank Connecticut,
2702 Love Field Drive National Association
P.O. Box 36611 777 Main Street
Dallas, Texas 75235-1611 Hartford, Connecticut 06115
Attn: Treasurer Attn: Corporate Trust
Telecopy: (214) 904-4022 Administration
Telecopy: (203) 240-7920
Owner Participant:
BOT Financial & Leasing Indenture Trustee and Pass Through Trustee and
Corporation B-4 Holder:
c/o BOT Financial Corporation Wilmington Trust Company
125 Summer Street Rodney Square North
Boston, Massachusetts 02110 1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Lease Administration
Telecopy: (617)345-5154 Attn: Corporate Trust
Administration
Payment Instructions: Telecopy: (302) 651-8882
The First National Bank of Boston
ABA No. 011000390 Payment Instructions:
For the account of BOT Financial & Wilmington Trust Company
Leasing Corporation B-4 Wilmington, Delaware
Account No. 541-07706 ABA No. 031100092
Reference: 1995 Southwest Airlines For the account of Southwest
Notify: Jerry Chason-Sokol Airlines 1995-1
Account No. 30875-0
Reference: N605SW
Attn: David A. Vanaskey
Corporate Trust Administration
</TABLE>
PARTICIPATION AGREEMENT [N605SW]
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EXHIBIT 4.47
________________________________________________________________________________
SALE AND LEASE AGREEMENT
dated as of August 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N605SW
________________________________________________________________________________
All right, title and interest of Lessor in and to this Sale and Lease
Agreement and the Aircraft (including the Engines) has been assigned to and is
subject to a security interest in favor of WILMINGTON TRUST COMPANY, as
Indenture Trustee. This Sale and Lease Agreement has been executed in several
counterparts. No security interest in Lessor's right, title and interest in
and to this Sale and Lease Agreement may be created through the transfer or
possession of any counterpart other than the counterpart identified, for
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart. [This is not the original
counterpart.]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Sale, Lease and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Interim and Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Variable Amounts on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Adjustment to Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value . . . . . . . . 16
3.7.1 Adjustments upon Payment by Lessor of Transaction Costs, Etc . . . . . . . . . . . . . . 16
3.7.2 Recalculation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Certain Advances; Reimbursement Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain Agreements
of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Lessor's Representations and Warranties; DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 General Condition upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.1 Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.2 Free of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.3 Operating Configuration and Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.4 Cleanliness and Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.5 Parts and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Return of Other Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Return at End of Base Lease Term or Renewal Lease Term . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Manuals; Service Bulletins, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Failure to Return Aircraft or Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 Aid in Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.7 Storage upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7. Registration, Operation, Possession, Subleasing and Records . . . . . . . . . . . . . . . . . . . . 23
7.1 Registration and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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7.1.2 Nameplate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.4 Insurance Requirements; Government Requisition; Indemnity . . . . . . . . . . . . . . . . 24
7.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.1 Interchange and Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.2 Testing and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.3 Civil Reserve Air Fleet Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.4 Installation of Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.5 Installation of Engines on Other Airframes . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.6 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.7 Wet Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.8 Sublease to Permitted Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.2 Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations; Modifications and Additions . . . . . . 29
8.1 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.1 Maintenance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1.2 Compliance with Government Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.3 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.4 Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4.1 Mandatory Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4.2 Voluntary Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Right of Termination upon Obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Sale of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Retention by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4 Termination As to Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10. Loss, Destruction, Requisition, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1 Event of Loss with Respect to Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.1 Lessee's Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.2 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.3 Payment of Stipulated Loss Value and Rent . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.4 Stipulated Loss Value Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.5 Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.6 Conditions to Replacement of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.6.1 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.6.2 Tax Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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10.1.6.3 Lessee's Obligations with Respect to Replacement Aircraft . . . . . . . . . . . 36
10.1.7 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1.8 Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2 Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.2 Conditions; Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.3 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.4 Conveyance; Replacement Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.5 No Reduction of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3 Application of Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.1 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.2 Replacement of Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3.3 Nonreplacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.4 Requisition of Aircraft for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 41
10.5 Requisition of an Engine for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 42
10.6 Application of Payments During Existence of Default . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1 Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1.2 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1.3 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Insurance Against Loss of or Damage to Aircraft and Engines . . . . . . . . . . . . . . . . . . . . 43
11.2.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.2 War-Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3 Certain Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3.1 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.3.2 Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.3.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.4 Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.5 Government Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3 General Policy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.1 Primary Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.2 Coverage for Each Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.3 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.5 Notice of Termination or Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.6 Nonliability for Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.7 Identity of Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3.8 Fifty-fifty Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4 Application of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5 Certificates; Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.6 Lessor's Right to Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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11.7 Insurance for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.8 Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.2 Security for Lessor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.1 Failure To Pay Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.2 Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.3 General Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.4 Misrepresentation and Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.5 Bankruptcy, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1 Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.1 Return; Repossession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.2 Sale; Use Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.3 Certain Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.3.1 Liquidated Damages--Fair Market Rental Value . . . . . . . . . . . . . . . . . 50
15.1.3.2 Liquidated Damages--Fair Market Sales Value . . . . . . . . . . . . . . . . . . 51
15.1.4 Liquidated Damages upon Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.5 Rescission and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.2 Determination of Fair Market Rental Value and Fair Market Sales Value . . . . . . . . . . . . . . . 52
15.3 No Waiver, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 17. Net Lease; Lessee's Obligations; No Setoff, Counterclaim, Etc . . . . . . . . . . . . . . . . . . . 53
Section 18. Renewal and Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
18.1 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
18.2 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 19. Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 20. Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 21. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 22. Investment of Security Funds; Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . 59
22.1 Investment of Security Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
SALE AND LEASE AGREEMENT [N605SW]
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<TABLE>
<S> <C> <C>
22.2 Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 23. Permitted Foreign Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
EXHIBIT A Form of Sale and Lease Agreement Supplement
EXHIBIT B-1 Stipulated Loss Value Schedule
EXHIBIT B-2 Termination Value Schedule
EXHIBIT C Rent Payment Schedule, EBO Installment Payment Schedule and Special Purchase Price
EXHIBIT D Permitted Foreign Air Carriers
EXHIBIT E Assumed Interest Amounts
APPENDIX A Certain Return Conditions
</TABLE>
SALE AND LEASE AGREEMENT [N605SW]
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THIS SALE AND LEASE AGREEMENT dated as of August 1, 1995, is between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity except as expressly stated herein, and otherwise
solely as Owner Trustee under the Trust Agreement hereinafter referred to
(together with any successor in such capacity and its permitted assigns,
"Lessor"), and SOUTHWEST AIRLINES CO., a Texas corporation (together with its
successors and permitted assigns, "Lessee").
RECITALS
1. On June 6, 1995, an AC Form 8050-2 Bill of Sale dated April
27, 1995, from Manufacturer (as defined below) in favor of Lessee covering the
Aircraft (as defined below) was recorded by the FAA (as defined below) as
Conveyance Number UU011967.
2. The parties hereto desire that Lessor purchase the Aircraft
from and lease it back to Lessee as hereinbelow provided.
In consideration of the premises and the mutual agreements herein
contained, Lessor and Lessee agree as follows:
Section 1. Definitions. Unless the context otherwise requires,
the following terms shall have the following meanings for all purposes of this
Lease and shall be equally applicable to both the singular and the plural forms
of the terms herein defined. Any agreement referred to below shall mean such
agreement as amended, supplemented and modified (including as the same may be
amended and restated) from time to time, to the extent permitted by, and in
accordance with, the terms thereof. For all purposes of this Lease the
capitalized terms used but not defined herein are used as defined in the Trust
Indenture or, if not defined therein, as defined in the Participation
Agreement.
"Act" means Subtitle VII of Title 49 of the United States Code, as
amended from time to time.
"Advance" is defined in Section 3.8.
"Affiliate" means, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aircraft" means the Airframe, together with the two Engines, whether
or not any of such Engines may from time to time be installed on the Airframe
or may be installed on any other airframe or on any other aircraft.
SALE AND LEASE AGREEMENT [N605SW]
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"Airframe" means (i) the Boeing Model 737-3H4 aircraft (excluding
Engines or engines from time to time installed thereon) specified in the
initial Lease Supplement, manufactured by Manufacturer and sold by Manufacturer
to Lessee pursuant to the Purchase Agreement, sold hereunder by Lessee to
Lessor, and leased back by Lessor to Lessee, all hereunder and under the
initial Lease Supplement, (ii) any Replacement Airframe, (iii) any and all
Parts so long as the same shall be incorporated in such aircraft and title
thereto shall have vested in Lessor pursuant to the terms of Section 8, and any
and all Parts removed from such aircraft so long as title thereto shall remain
vested in Lessor in accordance with the terms of Section 8, and (iv) all
Records at any time maintained with respect to the foregoing property;
provided, however, that at such time as a Replacement Airframe shall be
substituted hereunder and the replaced Airframe shall be released from the Lien
of the Trust Indenture, such replaced Airframe shall cease to be the Airframe
hereunder.
"Assumed Interest Rate" means 7.5% per annum, compounded semi-annually
and computed on the basis of a 360-day year of twelve 30-day months.
"Assumed Interest Amount" means, with respect to the Deferred Equity
Date and each Rent Payment Date, the amount set forth on Exhibit E opposite
such date.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time, or any successor statute.
"Base Lease Term" means the period commencing on the Base Lease Term
Commencement Date and expiring on January 1, 2020.
"Base Lease Term Commencement Date" means July 1, 1996.
"Base Rate" means the interest rate publicly announced in New York
City from time to time by Chemical Bank as its prime or base lending rate.
"Basic Rent" means the rent identified as Basic Rent in and payable
pursuant to Section 3.3.
"Bills of Sale" means the FAA Bill of Sale, the Warranty Bill of Sale,
the Lessee FAA Bill of Sale and the Lessee Warranty Bill of Sale.
"Break Amount" is defined in Section 15.05(b) of the Trust Indenture.
"Business Day" shall have the meaning attributed thereto in the Trust
Indenture, so long as the Trust Indenture shall remain in effect, and otherwise
means a day on which banks are not required or authorized to close in any of
the City of New York, New York, Dallas, Texas, and Hartford, Connecticut, or
such other city as shall be the situs of the principal office of Lessee or
Lessor at the time in question.
"Certificate Holder" is defined in Section 1.01(b) of the Trust
Indenture.
SALE AND LEASE AGREEMENT [N605SW]
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"Certificate Rate" means, as of any date of determination thereof, (i)
in respect of amounts owing or distributable pursuant to the Trust Indenture to
the Holders of Certificates issued prior to the Section 18 Refinancing Date,
the applicable Assumed Interest Rate, (ii) in respect of amounts owing to the
Holders of Certificates issued on or after the Section 18 Refinancing Date, the
interest rate or, if such Certificates shall have been issued with more than
one Maturity Date, the weighted average of the interest rates (which weighting
is to be based on the Outstanding principal amounts of the Certificates of each
Maturity Date), then in effect with respect to the then Outstanding principal
amounts of the Certificates, (iii) in respect of any portion of Stipulated Loss
Value expected to be distributed to the Owner Participant, an interest rate
equal to the yield utilized in calculating the Owner Participant's Net Economic
Return, and (iv) in respect of any other amount owing to the Owner Participant
(and which is not distributed to the Holders pursuant to the Trust Indenture),
1% in excess of the Base Rate, but in no event to exceed the maximum rate
permitted by applicable law.
"Certificates" means the Certificates (as defined in the Trust
Indenture) issued under the Trust Indenture.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Debt Payments" is defined in Section 18.2(e)(1)(b).
"Deferred Equity Amount" is defined in Section 8(dd) of the
Participation Agreement.
"Deferred Equity Date" means January 1, 1996.
"Delivery Date" means the date of the initial Lease Supplement, which
date shall be the date on which the Aircraft is delivered by Lessee to, and
accepted by, Lessor hereunder and in turn leased back by Lessor to Lessee
hereunder, which date shall be a Business Day.
"Dollars" and "$" mean the lawful currency of the United States of
America.
"DOT" means the United States Department of Transportation or any
governmental person, agency or authority succeeding to the functions of such
Department of Transportation.
"EBO Installment Payment Date" means a date set forth in Part II of
Exhibit C hereto.
"Engine" means (i) each of the CFM International Model CFM56-3-B1
engines identified by manufacturer's serial number in the initial Lease
Supplement subjecting the Aircraft to this Lease and originally installed on
the Airframe covered by such Lease Supplement, whether or not from time to time
thereafter installed on such Airframe or installed on any other airframe or on
any other aircraft, and (ii) any Replacement Engine, whether or not from time
to time thereafter installed on the Airframe or any other airframe or on any
other aircraft, together in each case with any and all Parts incorporated in
such Engine and any and all Parts removed from such Engine, in each case so
long as title thereto shall have been and shall remain vested in Lessor in
accordance with the terms
SALE AND LEASE AGREEMENT [N605SW]
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of Section 8, and all Records at any time maintained with respect to the
foregoing property. Except as otherwise set forth herein, at such time as a
Replacement Engine shall be substituted hereunder and the Engine for which the
substitution is made shall be released from the Lien of the Trust Indenture,
such replaced Engine shall cease to be an Engine hereunder. The term "Engines"
means, as of any date of determination, all Engines then leased hereunder.
"Engine Manufacturer" means CFM International, Inc., a Delaware
corporation, in its capacity as manufacturer of the Engines.
"Equity Payments" is defined in Section 18.2(e)(1)(b).
"Estate" means the Trust Estate as that term is defined in the Trust
Agreement.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such property: (i)
disappearance or theft of such property or the loss of the use thereof for any
reason not covered by any other clause of this definition, including hijacking,
for a period of three consecutive months or for a period continuing through the
last day of the Term, whichever first occurs, or destruction, damage beyond
economic repair or rendition of such property permanently unfit for normal use
for any reason whatsoever; (ii) any damage to such property which results in an
insurance settlement with respect to such property on the basis of a total loss
or a constructive or compromised total loss; (iii) the confiscation,
condemnation or requisition of use of such property by the Government or any
other government or any instrumentality or agency thereof for a period in
excess of six consecutive months or for a period continuing beyond the Term,
whichever first occurs; (iv) as a result of any rule, regulation, order or
other action by the FAA, DOT or other governmental body (including any court)
having jurisdiction, the use of such property in the normal course of
interstate air transportation of persons shall have been prohibited for a
period of more than six consecutive months, unless Lessee, prior to the
expiration of such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit normal use by Lessee, but in any event (a) in any case in which such
prohibition shall apply generally to all similar Boeing Model 737-300 series
aircraft, if such prohibition is continuing on the last day of the Term, or (b)
in all other cases, if such prohibition is continuing on the earlier of the
first anniversary of such prohibition and the last day of the Term; provided,
however, that if such prohibition is continuing on the last day of the Term, no
Event of Loss pursuant to this clause (iv) shall exist if Lessor shall have
delivered to Lessee a written notice not less than two days prior to the end of
the Term that such prohibition on the last day of the Term shall not be deemed
an Event of Loss; (v) the confiscation, condemnation or requisition of title to
such property by the Government or any other government or any instrumentality
or agency thereof; or (vi) respecting any Engine, any divestiture of title
treated as an Event of Loss pursuant to Section 7.2.1 or any other provision of
this Lease. An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if an Event of Loss occurs with respect to the Airframe. An
Event of Loss shall be deemed to occur as of the date of the disappearance,
theft, loss of use, insurance settlement, prohibition, confiscation,
condemnation or requisition of title or of use, as applicable, except that no
Event of Loss shall be deemed to have occurred pursuant to clause (i), (iii) or
(iv) above until the expiration of the applicable period referred to therein.
SALE AND LEASE AGREEMENT [N605SW]
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"FAA" or "Federal Aviation Administration" means the Federal Aviation
Administration or any governmental person, agency or other authority succeeding
to the functions of the Federal Aviation Administration.
"FAA Bill of Sale" means a bill of sale for the Aircraft on AC Form
8050-2 delivered to Lessee on the date of delivery of the Aircraft to Lessee by
Manufacturer under the Purchase Agreement.
"FAA Regulations" means the Federal Aviation Regulations issued
pursuant to the Act from time to time, or any successor regulations thereto.
"Floating Rate Renewal Term" means any of four successive periods of
six months or one, two or three years each, not to exceed three years in the
aggregate, which follow the Base Lease Term and with respect to which Lessee
shall have exercised its option pursuant to Section 18.1 hereof.
"Government" means the federal government of the United States of
America or any instrumentality or agency thereof having the full faith and
credit of the United States of America.
"Guarantor" means The Bank of Tokyo Trust Company, and its successors
and permitted assigns.
"Guaranty" means the Guaranty, dated as of August 1, 1995, of the
Guarantor in favor of the Persons named therein.
"Holder" is defined in Section 1.01(b) of the Trust Indenture.
The term "incorporated in" means incorporated or installed in or
attached to or otherwise made a part of.
"Indemnified Parties" means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) the Original Loan Participant, (v) the Estate and the
Trust Indenture Estate, (vi) the Guarantor, (vii) the respective Affiliates,
successors and assigns of the foregoing, and (viii) the respective directors,
officers, employees, agents, partners and servants of the foregoing.
"Indenture and Trust Supplement" means a supplement to the Trust
Agreement and the Trust Indenture, substantially in the form of Exhibit C to
the Trust Indenture.
"Indenture Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Indenture Trustee under the Trust Indenture
and any successor, separate or additional Indenture Trustee thereunder.
SALE AND LEASE AGREEMENT [N605SW]
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"Indenture Trustee Agreements" means the Participation Agreement and
the Trust Indenture.
"Interim Lease Term" means the period commencing on the date which is
six months from the Delivery Date and expiring at the end of the day on the day
before the Base Lease Term Commencement Date.
"Interim Rent" means the rent identified as Interim Rent in and
payable pursuant to Section 3.3.
"Investment Grade" is defined in Section 11.8.
"Lease", "this Lease", "this Agreement", "hereby", "herein", "hereof",
"hereunder" or other words mean this Sale and Lease Agreement, including
without limitation supplementation hereof by one or more Lease Supplements.
"Lease Default" means any event or condition which, with notice or
lapse of time or both, would constitute a Lease Event of Default.
"Lease Event of Default" is defined in Section 14.
"Lease Period" means each of the Preliminary Lease Term, the Interim
Lease Term, and each six-month period commencing on a January 1 or July 1, as
the case may be, thereafter during the Term.
"Lease Supplement" means a supplement to this Lease, in the case of
the initial such supplement substantially in the form attached as Exhibit A
hereto, subjecting the Aircraft or other property to this Lease.
"Lessee FAA Bill of Sale" means a bill of sale for the Aircraft on AC
Form 8050-2 or such other form as may be approved by the FAA and delivered to
Lessor on the Delivery Date by Lessee.
"Lessee Warranty Bill of Sale" means a full warranty bill of sale
covering the Aircraft delivered to Lessor on the Delivery Date by Lessee.
"Lessor's Cost" for the Aircraft means the amount identified as such
in the initial Lease Supplement subjecting the Aircraft to this Lease.
"Lessor Liens" means Liens of any Person claiming by, through or under
Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant which arise as a result of (i) claims against Lessor, the
Person serving as Owner Trustee, in its individual capacity, or Owner
Participant, as the case may be, not related to the transactions contemplated
by the Operative Agreements, (ii) any act or omission of Lessor, the Person
serving as Owner Trustee, in its individual capacity, or Owner Participant, as
the case may be, which is not related to the transactions contemplated by the
Operative Agreements, or is in violation of any of the express terms of any of
SALE AND LEASE AGREEMENT [N605SW]
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the Operative Agreements, (iii) Taxes or Losses imposed against or incurred by
Lessor, the Person serving as Owner Trustee, in its individual capacity, or
Owner Participant, as the case may be, for which Lessee is not obligated to
indemnify pursuant to the Participation Agreement, other than Liens for Taxes
not yet due or for Taxes or Losses being contested in good faith (and for the
payment of which adequate reserves have been provided in accordance with
generally accepted accounting principles) by appropriate proceedings so long as
such proceedings do not involve any material danger of the sale, forfeiture,
loss or loss of use of the Aircraft, or any other portion of the Trust Estate,
or (iv) claims against Lessor, the Person serving as Owner Trustee, in its
individual capacity, or Owner Participant, as the case may be, arising out of
any transfer by any of such Persons in violation of the express terms of the
Operative Agreements.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest, or any claim or exercise of rights, affecting the title to
or any interest in property.
"Losses" is defined in Section 7(c)(i) of the Participation Agreement.
"Maintenance Program" is defined in Section 8.1.1.
"Manufacturer" means The Boeing Company, a Delaware corporation, or
any Affiliate thereof whose obligations are guaranteed by The Boeing Company,
and their respective successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
Manufacturer dated as of August 1, 1995, attached to the Purchase Agreement
Assignment and, if applicable, the Agreement of Subsidiary by Boeing Domestic
Sales Corporation of even date therewith.
"Net Economic Return" means after-tax economic yield, total aggregate
after-tax cash flow and general pattern of book earnings expected by the
initial Owner Participant with respect to the Aircraft both through the end of
the Base Lease Term and through the Special Purchase Option Date (assuming the
exercise of the Special Purchase Option by Lessee), utilizing the same
assumptions (including tax assumptions and constraints) as were utilized by
Owner Participant in determining Interim Rent, Basic Rent, Stipulated Loss
Value and Termination Value percentages and the Special Purchase Price
(including any installments thereof) as of the Delivery Date, as such
assumptions may be adjusted from time to time to take into account the impact
of any change of the type specified in Section 3.7 which theretofore has
resulted in an adjustment of the percentages of Interim Rent, Basic Rent,
Stipulated Loss Value, Termination Value or the Special Purchase Price
(including any installments thereof).
"Net Present Value of Rents" means, as of any date of determination,
the net present value, as of the Delivery Date, of each of (i) all unpaid
Interim Rent and Basic Rent through the end of the Term and (ii) for any date
of determination prior to the Special Purchase Option Date, all unpaid Interim
Rent and Basic Rent through the Special Purchase Option Date plus the Special
Purchase Price, in each case utilizing a semi-annual discount rate that, on an
annual basis, is equal to 8.05%.
SALE AND LEASE AGREEMENT [N605SW]
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"Officer's Certificate" means a certificate signed by the Chairman,
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Assistant Secretary of the Person providing
such certificate.
"Operative Agreements" means this Agreement, each Lease Supplement,
the Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement
and the Manufacturer's Consent, including any consents included in or attached
to any thereof.
"Original Loan Participant" means Texas Commerce Bank National
Association, a national banking association, and its successors and permitted
assigns as holder from time to time of the Series SWA 1995 Trust N605SW-I
Certificates.
"Overdue Rate" means (i) in respect of that portion of Interim Rent,
Basic Rent, Stipulated Loss Value, Termination Value or Special Purchase Price
(or any installment thereof) expected to be applied to principal of or interest
on the Certificates, the Past Due Rate, or if Certificates shall have been
issued after the Section 18 Refinancing Date with more than one Maturity Date,
the weighted average of the Past Due Rates in respect of the then- outstanding
Certificates of each Maturity Date (which weighting is to be based on the
Outstanding principal amounts of the Certificates of each Maturity Date) and
(ii) in respect of any other portion of Interim Rent, Basic Rent, Stipulated
Loss Value, Termination Value or Special Purchase Price (or any installment
thereof), any Renewal Rent, any Supplemental Rent owing to any Person, or any
amount payable to Lessee (except as otherwise provided), 2% in excess of the
Base Rate, but in no event to exceed the maximum rate permitted by applicable
law. Any interest payable at the Overdue Rate that is determined with
reference to clause (i) of this definition shall be computed on the same basis
as the Past Due Rate, and any interest payable at the Overdue Rate that is
determined with reference to clause (ii) of this definition shall be computed
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed.
"Owner Participant" means BOT Financial & Leasing Corporation B-4, a
Massachusetts corporation, and its successors and permitted assigns.
"Owner Participant Agreements" means the Participation Agreement, the
Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means Shawmut Bank Connecticut, National Association,
not in its individual capacity but solely as trustee under the Trust Agreement,
and any successor, separate or additional Owner Trustee thereunder.
"Owner Trustee Documents" means the Participation Agreement, this
Lease, the Trust Agreement, the Trust Indenture, the Certificates and the
Purchase Agreement Assignment.
SALE AND LEASE AGREEMENT [N605SW]
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"Participant" means Owner Participant and Original Loan Participant
and their respective successors and permitted assigns.
"Participation Agreement" means the Participation Agreement, dated as
of August 1, 1995, among Lessee, Participants, Lessor and Indenture Trustee,
relating to the Aircraft.
"Parts" means all appliances, parts, components, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(other than (a) complete Engines or engines and (b) any items leased by Lessee
from a third party (other than Lessor)) which may from time to time be
incorporated in the Airframe or any Engine and title to which shall vest in
Lessor (and "Part" means any of the foregoing) or, so long as title thereto
shall remain vested in Lessor in accordance with Section 8.2 hereof, after
removal therefrom.
"Permitted Foreign Air Carrier" means a "foreign air carrier" (as
defined in the Act) named in Exhibit D hereto (as the same may be modified from
time to time in accordance with Section 23) and any successor of any such
carrier.
"Permitted Lien" means any Lien referred to in clauses (a) through (g)
of Section 6.
"Permitted Sublease" means a sublease permitted under Section 7.2.8.
"Permitted Sublessee" means the sublessee under a Permitted Sublease.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Preliminary Lease Term" means the period commencing on the Delivery
Date and expiring at the end of the day on the day before the six month
anniversary of the Delivery Date.
"Purchase Agreement" means the Purchase Agreement between Manufacturer
and Lessee specified in the Purchase Agreement Assignment providing, among
other things, for the manufacture and sale by Manufacturer to Lessee of certain
Boeing Model 737-300 series aircraft (including the Aircraft), as the same has
been or may hereafter (to the extent permitted by the terms of the Purchase
Agreement Assignment) be amended, modified or supplemented and including,
without limitation, as part thereof, the detail specifications referred to
therein and any and all change orders from time to time entered into with
respect thereto (to the extent permitted by the terms of the Purchase Agreement
Assignment), as such Purchase Agreement relates to the Aircraft and has been
assigned pursuant to the Purchase Agreement Assignment.
"Purchase Agreement Assignment" means the Purchase Agreement
Assignment, dated as of August 1, 1995, between Lessee and Lessor, assigning to
Lessor certain of Lessee's rights and interests under the Purchase Agreement
with respect to the Aircraft, which Purchase Agreement Assignment has annexed
thereto the Manufacturer's Consent, executed by Manufacturer.
SALE AND LEASE AGREEMENT [N605SW]
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"Records" is defined in Section 5.4.
"Refinancing Date" is defined in Section 17(a) of the Participation
Agreement.
"Renewal Rent" means the rent payable in respect of a Renewal Term
determined pursuant to Section 18.1.
"Renewal Term" means any Floating Rate Renewal Term.
"Rent" means Interim Rent, Basic Rent, Renewal Rent and Supplemental
Rent.
"Rent Differential Amount" is defined in Section 3.3.
"Rent Payment Date" means each January 1 and July 1 during the Base
Lease Term and any Renewal Term, commencing with July 1, 1996.
"Replacement Aircraft" means any Aircraft of which a Replacement
Airframe is a part.
"Replacement Airframe" means a Boeing Model 737-300 (or an improved
model) aircraft (except Engines or engines from time to time installed thereon)
which shall be leased hereunder pursuant to Section 10.1.2.
"Replacement Engine" means a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer of at least
equivalent utility, remaining useful life and value, in each case suitable for
installation and use on the Airframe and fully compatible with the other Engine
or engine installed thereon) which shall have been substituted for an Engine
leased hereunder pursuant to Section 5.2, 9.4, 10.1 or 10.2.
"Section 18 Refinancing Date" is defined in Section 18(a) of the
Participation Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"SLV Determination Date" means any date set forth in Exhibit B-1
hereto.
"Special Purchase Option Date" is defined in Section 18.2(b).
"Special Purchase Price" is defined in Section 18.2(b).
"Special Purchase Price After-Tax Yield" means the after-tax economic
yield, total aggregate after-tax cash flow and general pattern of book earnings
expected by the Owner Participant with respect to the Aircraft through the
Special Purchase Option Date if the Special Purchase Option were exercised and
the Special Purchase Option Price paid in installments, utilizing the multiple
investment sinking fund method of analysis and the same assumptions as used by
such Owner Participant (including the Tax Assumptions set forth in Section 2 of
the Tax Indemnity Agreement and the
SALE AND LEASE AGREEMENT [N605SW]
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assumption that the amount of interest payable on the Certificates on each Rent
Payment Date occurring prior to or concurrent with the Special Purchase Option
Date will be the Assumed Interest Amount set forth on Exhibit E in respect of
such Rent Payment Date) in its economic analysis of the transaction as of the
Delivery Date.
"Stipulated Loss Value" means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment (and, to the
extent that the actual amount of interest paid and to be paid on the
Certificates during the Lease Period in which such SLV Determination Date
occurs up to and including such date is greater or less than the amount
included in calculating the percentage set forth in Exhibit B-1 with respect to
such SLV Determination Date on account of such interest, such percentage shall
be adjusted appropriately to compensate for such differential). Stipulated
Loss Value may be subject to adjustment in accordance with Section 3.7 and
Section 18.2(d) of this Agreement.
"Supplemental Rent" means, without duplication, all amounts,
liabilities and obligations (other than Interim Rent, Basic Rent or Renewal
Rent) which Lessee assumes or agrees to pay to Lessor or any other Person
hereunder, under the Participation Agreement or any of the other Operative
Agreements, including, without limitation (i) Stipulated Loss Value and
Termination Value payments and Special Purchase Price payments, (ii) all
amounts required to be paid by Lessee under the agreements, covenants and
indemnities contained in the Participation Agreement and the Tax Indemnity
Agreement, and (iii) all amounts required to be paid pursuant to Sections 3.4,
3.5 and 3.8 hereof.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement, dated as
of August 1, 1995, between Owner Participant and Lessee, relating to the
Aircraft.
"Taxes" is defined in Section 7(b)(i) of the Participation Agreement.
"Term" means the term for which the Aircraft is leased pursuant to
Section 3 hereof and, unless earlier terminated, shall include the Preliminary
Lease Term, the Interim Lease Term, the Base Lease Term and any Renewal Term
then in force or committed to in accordance with Section 18.1.
"Termination Date" is defined in Section 9.1.
"Termination Value" means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined (and, to the extent that the actual amount of interest paid and to
be paid on the Certificates during the Lease Period in which such TV
Determination Date occurs up to and including such date is greater or less than
the amount included in calculating the
SALE AND LEASE AGREEMENT [N605SW]
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percentage set forth in Exhibit B-2 with respect to such TV Determination Date
on account of such interest, such percentage shall be adjusted appropriately to
compensate for such differential). Termination Value may be subject to
adjustment in accordance with Section 3.7 of this Agreement.
"Transfer" means, with respect to any Person, to transfer, by bill of
sale or otherwise, all such Person's right, title and interest in and to the
Aircraft, Airframe or any Engine, as the case may be, to another Person on an
"as is, where is" basis, free and clear of any Lessor Lien but otherwise
without recourse, representation or warranty, express or implied, and including
an express disclaimer of warranties, representations and guarantees in a manner
comparable to that set forth in Section 4.1.
"Trust Agreement" means the Trust Agreement, dated as of August 1,
1995, between Owner Participant and Shawmut Bank Connecticut, National
Association, in its individual capacity, relating to the Aircraft.
"Trust Indenture" means the Trust Indenture and Security Agreement,
dated as of August 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft.
"Trust Indenture Estate" has the meaning attributed to the term
"Indenture Estate" in the Trust Indenture.
"TV Determination Date" means any date set forth in Exhibit B-2 hereto.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to 49 U.S.C. Section 41102 and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
"Warranty Bill of Sale" means the full warranty bill of sale for the
Aircraft delivered to Lessee on the date of delivery of the Aircraft to Lessee
by the Manufacturer under the Purchase Agreement.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which the Airframe and Engines or engines (i) shall be operated solely by
regular employees of Lessee possessing all current certificates and licenses
that would be required under the Act for the performance by such employees of
similar functions within the United States of America (it being understood that
cabin attendants need not be regular employees of Lessee), (ii) shall be
maintained by Lessee in accordance with its Maintenance Program, and (iii)
shall be and remain, in the hands of such third party, subject to all other
terms and conditions of this Lease.
SALE AND LEASE AGREEMENT [N605SW]
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Section 2. Sale, Lease and Acceptance.
(a) Lessor, subject to satisfaction or waiver of the conditions
set forth in Section 4 of the Participation Agreement and the concurrent
acceptance hereunder by Lessee of the Aircraft, hereby agrees, to the extent
that the funds received by it pursuant to Section 2 of the Participation
Agreement are adequate for the purpose, to purchase at a purchase price equal
to Lessor's Cost and to accept delivery on the Delivery Date from Lessee
hereunder and to lease back (immediately after extension of the Lien of the
Trust Indenture to the Aircraft) to Lessee hereunder, and Lessee hereby agrees
to sell to Lessor and to lease back (immediately after extension of the Lien of
the Trust Indenture to the Aircraft) from Lessor hereunder on the Delivery
Date, the Aircraft, which shall have been accepted by Lessor and Lessee
hereunder as evidenced by the execution by Lessor and Lessee of the Lease
Supplement conveying to Lessor and leasing to Lessee the Aircraft hereunder;
provided, however, that Lessor and Lessee shall have no further obligation
hereunder with respect to the Aircraft if the Delivery Date shall not have
occurred on or before September 30, 1995. The purchase price of the Aircraft
shall be paid by Lessor to Lessee on the Delivery Date in the manner specified
in Section 2 of the Participation Agreement.
(b) Lessor hereby authorizes each of Gary C. Kelly, John D. Owen
and Laura Wright, all of whom are employees of Lessee, as the authorized
representative or representatives of Lessor to accept delivery of the Aircraft
from Lessee pursuant hereto. Lessee hereby agrees that in the event delivery
of the Aircraft shall be accepted by an employee or employees of Lessee
pursuant to such authorization by Lessor, such acceptance of delivery by such
employee or employees on behalf of Lessor shall, without further act, also
irrevocably constitute (i) acceptance by such employee of such appointment and
(ii) acceptance by Lessee of the Aircraft for all purposes of this Agreement.
Section 3. Term and Rent.
3.1 General. Except as otherwise provided herein, the Term for
the Aircraft shall commence on the Delivery Date specified in the initial Lease
Supplement and shall terminate as herein provided.
3.2 Lease Term. Except as provided herein, the Aircraft shall be
leased hereunder for the Preliminary Lease Term, the Interim Lease Term, the
Base Lease Term and each Renewal Term, if any.
3.3 Interim and Basic Rent. No Interim Rent or Basic Rent shall
be paid during the Preliminary Lease Term. Lessee hereby agrees to pay to
Lessor (i) Interim Rent for the Interim Lease Term with respect to the Aircraft
on the first Rent Payment Date set forth on Exhibit C, and (ii) Basic Rent for
the Base Lease Term with respect to the Aircraft on each subsequent Rent
Payment Date set forth in Exhibit C, in each case in an amount equal to the
percentage of Lessor's Cost of the Aircraft set forth in Exhibit C opposite
such Rent Payment Date, subject to the terms of the next succeeding paragraphs
of this Section 3.3 and Section 3.7. Each installment (or portion of an
installment) of Interim Rent or Basic Rent under the heading "Advance" in
Exhibit C payable on a Rent Payment Date shall relate to the respective Lease
Period immediately following such Rent
SALE AND LEASE AGREEMENT [N605SW]
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Payment Date, and each installment (or portion of an installment) of Interim
Rent or Basic Rent under the heading "Arrears" in Exhibit C payable on a Rent
Payment Date shall relate to the respective Lease Period immediately preceding
such Rent Payment Date.
Although the Interim Rent and Basic Rent amounts set forth in Exhibit
C hereto have been computed on the assumption that the amount of interest
payable on the Certificates on the Rent Payment Dates throughout the Base Lease
Term will be the Assumed Interest Amounts, Lessor and Lessee recognize that the
actual amount of interest payable on the Certificates may, from time to time
during the Interim Lease Term and the Base Lease Term, be different from the
Assumed Interest Amounts. Accordingly, Interim Rent and Basic Rent shall be
increased or decreased (but not below zero), as the case may be, by the Rent
Differential Amount (as defined herein). Any increase in Interim Rent or Basic
Rent shall constitute additional arrears Rent on the date in question, and any
decrease in Interim Rent or Basic Rent shall first decrease arrears Rent before
affecting advance Rent on the date in question. For purposes hereof, "Rent
Differential Amount" shall mean, as of any Rent Payment Date, the absolute
value of the difference between (i) the aggregate amount of interest due and
payable on such Rent Payment Date on the Certificates (or due and payable on
the next following or next preceding Business Day, as the case may be, if such
date shall not constitute a Business Day) and (ii) the Assumed Interest Amount
with respect to such Rent Payment Date. If, as of such Rent Payment Date, the
amount determined in accordance with clause (i) of the immediately preceding
sentence shall be greater than the amount determined in accordance with clause
(ii) of such sentence, the amount of Interim Rent or Basic Rent payable on such
Rent Payment Date shall be increased by the Rent Differential Amount. If, as
of such Rent Payment Date, the amount determined in accordance with such clause
(ii) shall exceed the amount determined in accordance with such clause (i), the
amount of Interim Rent or Basic Rent due on such Rent Payment Date shall be
decreased (but not below zero) by the Rent Differential Amount.
Anything contained in the Participation Agreement or this Lease or any
other Operative Agreement to the contrary notwithstanding, (a) each installment
of Basic Rent payable under this Lease, whether or not adjusted in accordance
with the immediately preceding paragraph or the provisions of Section 3.7,
shall be, under any circumstances and in any event, in an amount at least
sufficient to pay in full, on the Rent Payment Date on which such installment
is due and payable, any scheduled payments then required to be made on account
of the principal of and interest on the Certificates, and (b) Stipulated Loss
Value, Termination Value and, unless Lessee shall have assumed the Certificates
pursuant to Section 18.2(c) hereof, the Special Purchase Price and the initial
installment of the Special Purchase Price if paid in installments, in each case
whether or not adjusted in accordance with the provisions of Section 3.7, as of
the date of determination thereof, together with any amount of Basic Rent
required to be paid on such date and all other amounts payable on such date,
shall equal, under any circumstances and in any event, an amount at least
sufficient to pay in full any scheduled payments then required to be made on
account of the principal of and interest (including, without limitation, any
interest on overdue principal and, to the extent permitted by applicable law,
interest), Premium, if any, and Break Amount, if any, on the Certificates and
all amounts which would be payable prior thereto or on a parity therewith if
Section 3.03 of the Trust Indenture were applicable at the time of such
payment.
SALE AND LEASE AGREEMENT [N605SW]
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<PAGE> 21
3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Break Amount (if any) or the Premium (if any) payable on the Certificates,
amounts due pursuant to Section 15.05 of the Trust Indenture and each other
amount required to be paid (other than principal and interest on the
Certificates) by Lessor as Owner Trustee under the Trust Indenture, on the same
date that such amounts are due under the Trust Indenture, and as provided in
Section 3.6.
3.5 Supplemental Rent. In addition to the amounts payable as
Supplemental Rent pursuant to Section 3.4, Lessee also agrees to pay (or cause
to be paid) to Lessor, or to whomsoever shall be entitled thereto, all
Supplemental Rent with respect to Stipulated Loss Value or Termination Value
when and as the same shall become due and owing and all other amounts of
Supplemental Rent (other than as covered by Section 3.4) within five days after
demand or such other relevant period as may be provided in any Operative
Agreement. Lessee will also pay to Lessor, or to whomsoever shall be entitled
thereto, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Overdue Rate on any part of any installment of Interim Rent,
Basic Rent or Renewal Rent not paid when due for any period from and including
the date on which the same was due to but excluding the date of payment in full
and (to the extent permitted by applicable law) on any payment of Supplemental
Rent not paid when due to Lessor, or to whomsoever shall be entitled thereto,
as the case may be, for the period from the date on which the same was due to
but excluding the date of payment in full. The expiration or other termination
of Lessee's obligation to pay Interim Rent, Basic Rent or Renewal Rent
hereunder shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent.
3.6 Payments. Payments of Rent and any and all other payments
payable to Lessor hereunder shall be paid in funds of the United States of
America which shall be immediately available not later than 11:00 A.M., New
York City time, on the date due at the office of Lessor at 777 Main Street,
Hartford, Connecticut 06115, Attention: Corporate Trust Administration, Re:
Southwest Airlines 1995 Trust N605SW, or as otherwise directed by Lessor in
writing at least five Business Days prior to the date such payment is due;
provided, that so long as the Trust Indenture shall not have been terminated
pursuant to Section 10.01 of the Trust Indenture, Lessor hereby directs and
Lessee agrees, that, unless the Indenture Trustee shall otherwise direct, all
Rent (other than Excluded Payments) shall be paid prior to 11:00 A.M., New York
City time, on the due date thereof directly to Indenture Trustee to its account
set forth in Schedule I to the Participation Agreement. All payments of
Supplemental Rent owing to Indenture Trustee or to any Holder pursuant to the
Participation Agreement shall be made in immediately available funds prior to
11:00 A.M. New York City time, on the due date thereof at the office of
Indenture Trustee or at such other office of such other financial institution
located in the continental United States as the party entitled thereto may so
direct at least five Business Days prior to the due date thereof. All payments
of Supplemental Rent payable to Owner Participant, to the extent that such
amounts constitute Excluded Payments (as defined in the Trust Indenture), shall
be made by wire transfer prior to 11:00 A.M., New York City time, on the due
date thereof, to its account set forth in Schedule I to the Participation
Agreement, with sufficient information to identify the source and application
of the funds. Except as otherwise expressly provided herein, whenever any
payment of Rent or other payment to be made hereunder shall be due on a day
which is not a Business Day, such payment
SALE AND LEASE AGREEMENT [N605SW]
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shall be made on the next succeeding day which is a Business Day and (provided
such payment is made on such next succeeding Business Day) no interest shall
accrue on the amount of such payment from and after such scheduled date.
3.7 Adjustment to Interim Rent, Basic Rent, Stipulated Loss Value
and Termination Value.
3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a)
of the Participation Agreement paid by Owner Participant in connection
with the closing of this transaction on the Delivery Date are equal to
an amount which is other than .365% of Lessor's Cost, (b) the
Transaction Costs referred to in Section 16(a) of the Participation
Agreement paid by Owner Participant in connection with the initial
refinancing or refunding of the Certificates pursuant to Section 17 or
18 of the Participation Agreement are equal to an amount which is
other than .625% of Lessor's Cost, (c) the Delivery Date is not August
23, 1995, (d) a refinancing or refunding of the Certificates pursuant
to Section 17 or 18 of the Participation Agreement occurs, (e) any
recalculation of Interim Rent, Basic Rent, Stipulated Loss Value and
Termination Value is required by the terms of the Tax Indemnity
Agreement, or (f) the Deferred Equity Amount is not equal to the
Assumed Interest Amount with respect to the Deferred Equity Date, and
there shall not have occurred a refunding or refinancing pursuant to
Section 17 or 18 of the Participation Agreement prior to the first
Rent Payment Date, then in each case, the Interim Rent and Basic Rent
percentages set forth in Exhibit C, the Stipulated Loss Value
percentages set forth in Exhibit B-1 and the Termination Value
percentages set forth in Exhibit B-2 shall be recalculated by Owner
Participant (i) in the case of a recalculation pursuant to clause (a)
or (c), prior to August 23, 1996, (ii) in the case of a recalculation
pursuant to clause (b) on or prior to the second rent payment date
following the relevant Refinancing Date or Section 18 Refinancing
Date, as the case may be, (iii) in the case of a recalculation
pursuant to clause (d), prior to the relevant Refinancing Date or
Section 18 Refinancing Date, as the case may be, (iv) in the case of a
recalculation pursuant to clause (e), prior to the Rent Payment Date
next following the event described in clause (e), or (v) in the case
of a recalculation pursuant to clause (f), prior to the first Rent
Payment Date, in each case in order to: (A) maintain Net Economic
Return and (B) minimize the Net Present Value of Rents to the extent
possible consistent with clause (A). In addition, in the event of an
adjustment pursuant to this Section 3.7, the Special Purchase Price
(including any installments thereof) shall be recalculated in
accordance with the terms of Section 18.2(b).
3.7.2 Recalculation Procedures. Any recalculation of
Interim Rent, Basic Rent, Stipulated Loss Value and Termination Value
percentages and the Special Purchase Price pursuant to this Section
3.7 shall be determined by Owner Participant, and shall be subject to
the verification of Lessee and its advisor. Such recalculated Interim
Rent, Basic Rent, Stipulated Loss Value and Termination Value
percentages and Special Purchase Price (including installments
thereof) shall be set forth in a Lease Supplement and, in the case of
Interim Rent or Basic Rent, shall become effective as of the next
succeeding Rent Payment Date and, in the case of Stipulated Loss
Value, Termination Value and the Special Purchase
SALE AND LEASE AGREEMENT [N605SW]
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Price, shall be retroactive to the inception of this Lease. Such
recalculated Interim Rent or Basic Rent and, if applicable, the
Special Purchase Price shall be determined so as to conform, in the
opinion of Owner Participant's tax counsel, to all applicable tax
constraints and requirements, including the requirements of Section
467 of the Code and Sections 4.(1)(B), 4.(6) and 5. of Revenue
Procedure 75-21, 75-1 Cum. Bull. 715; provided, however, that
notwithstanding the foregoing, all adjustments provided for herein
shall be based on the same calculation methods and assumptions
(including tax assumptions set forth in Section 2 of the Tax Indemnity
Agreement) as were used initially by the Owner Participant in
determining the Interim Rent, Basic Rent, Stipulated Loss Values,
Termination Values and the Special Purchase Price for the Aircraft
(except and only to the extent such assumptions are required to be
changed by virtue of the event giving rise to the adjustment or any
event giving rise to any prior adjustments pursuant to the terms of
this Lease) and shall take into account the amount and timing of any
contribution made by the Owner Participant to the Estate subsequent to
the Delivery Date. If, upon verification of the percentages
determined by Owner Participant pursuant to this Section 3.7, Lessee
does not agree with the determination of Owner Participant, then an
independent accounting firm, to be selected by Owner Participant and
reasonably acceptable to Lessee, shall verify the computations. Such
accounting firm shall be requested to make its determination within 30
days. Owner Participant shall provide to such accounting firm such
information as it may reasonably require, including a description of
the methodology of the calculations used in computing such adjustments
and such other information as is necessary to determine whether the
computations are mathematically accurate. The accounting firm shall
hold in strict confidence such methodology and other information. The
computations of Owner Participant or the accounting firm selected as
provided above, whichever is applicable, shall be final, binding and
conclusive upon Lessee and Lessor, and Lessee shall have no right to
inspect the books, records, tax returns or other documents of or
relating to Owner Participant to verify such computations or for any
other purpose in connection with such adjustments. All fees and
expenses payable to the accounting firm selected above under this
Section 3.7.2 shall be borne by Lessee, except that such fees and
expenses shall be payable by Owner Participant if the computations
provided by Owner Participant are higher than those provided by the
accounting firm and the computations of such accounting firm causes
the present value of the Interim Rent and Basic Rent (utilizing a
semi-annual discount rate that, on an annual basis, is equal to 8.05%)
as computed by Owner Participant to decrease by ten basis points or
more.
3.8 Certain Advances; Reimbursement Thereof. If and to the extent
that the Indenture Trustee shall not have received (i) the Deferred Equity
Amount on the Deferred Equity Date, or (ii) the payment to be made by the Owner
Trustee pursuant to clause (5) of Section 18(a) of the Participation Agreement
on the Section 18 Refinancing Date, then Lessee shall pay to the Indenture
Trustee on behalf of the Owner Participant or the Owner Trustee, as the case
may be, on the Deferred Equity Date or the Section 18 Refinancing Date, as the
case may be, an amount equal to the amount not so paid by the Owner Participant
or the Owner Trustee, as the case may be (such amount herein referred to as an
"Advance"). In the event Lessee makes any Advance pursuant to this Section
3.8, then, notwithstanding any provision to the contrary herein or in any other
Operative
SALE AND LEASE AGREEMENT [N605SW]
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Agreement, Lessee shall be entitled to demand immediate repayment of such
Advance from the Owner Participant and, in addition, shall be entitled to
offset and deduct (without duplication) against each succeeding payment (other
than as limited by the provisos to this sentence) due from Lessee to Persons
other than the Holders, the Indenture Trustee and Lessor in its individual
capacity (including, without limitation, Interim Rent, Basic Rent, payments due
under Sections 5, 9, 10, 15 and 18 hereof, and payments due to Persons other
than the Holders, the Indenture Trustee and Lessor in its individual capacity
under Section 7 of the Participation Agreement) the amounts (including interest
at the rates provided therein) due and owing by the Owner Participant to Lessee
under Section 8(dd) of the Participation Agreement until Lessee has been fully
reimbursed for such amounts; provided, that in the case of any payment due from
Lessee which is distributable under the terms of the Trust Indenture, Lessee's
right of offset and deduction shall be limited to amounts distributable to
Lessor or the Owner Participant thereunder (and shall not include any amounts
distributable to the Indenture Trustee or the Holders); and provided, further,
that in no event shall any such offset or aggregate combined effect of separate
offsets reduce the amount of (i) any installment of Basic Rent to an amount
that is insufficient to pay in full the scheduled payments then required to be
made on account of the Certificates then Outstanding or (ii) any payment of
Stipulated Loss Value, Termination Value or Special Purchase Price (or
installment thereof) to an amount that, together with any other amounts then
required to be paid by Lessee hereunder in connection therewith, is
insufficient to pay in full as of the date of payment thereof, the aggregate
unpaid principal of the Outstanding Certificates, together with all unpaid
interest, Premium (if any) and Break Amount (if any) thereon. Notwithstanding
any provision of this Section 3.8 to the contrary, Lessee's obligation to make
any Advance shall terminate at such time as its obligation to pay Basic Rent
terminates under this Lease.
Section 4. Lessor's Representations and Warranties; DISCLAIMER;
Certain Agreements of Lessee.
4.1 Lessor's Representations and Warranties; DISCLAIMER. LESSEE
EXPRESSLY AGREES TO TAKE THE AIRCRAFT "AS IS", AND LESSEE HAS SELECTED THE
AIRCRAFT AND THE MANUFACTURER THEREOF (AND EACH PORTION THEREOF) AND ALL
MAINTENANCE FACILITIES REQUIRED FOR THE AIRCRAFT OR HEREUNDER. NEITHER LESSOR
(INDIVIDUALLY OR AS OWNER TRUSTEE) NOR THE INDENTURE TRUSTEE (INDIVIDUALLY OR
AS INDENTURE TRUSTEE) NOR ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO
HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Shawmut Bank
Connecticut, National Association, in its individual capacity (i) represents
and warrants that on the Delivery Date Lessor shall have received whatever
SALE AND LEASE AGREEMENT [N605SW]
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title thereto as was conveyed to it by the Lessee, (ii) represents and warrants
that on the Delivery Date the Aircraft shall be free of Lessor Liens
attributable to it, (iii) agrees that it will not directly or indirectly
create, incur, assume or suffer to exist any Lessor Lien attributable to it on
or with respect to the Airframe or any Engine or any other portion of the
Estate, and (iv) represents and warrants that it is a "citizen of the United
States" as defined in the Act. Lessor covenants that during the Term (so long
as no Lease Event of Default shall have occurred and be continuing) it will
not, through its own actions or breaches of any of its obligations under the
Operative Agreements, interfere in the quiet enjoyment of the Aircraft by
Lessee or any Permitted Sublessee.
Nothing in this Section 4.1 shall be deemed to modify or otherwise
affect the respective rights and obligations of Lessee and of Manufacturer
under the Purchase Agreement.
4.2 Certain Agreements of Lessee. All obligations of Lessee in
this Lease shall be done, performed or complied with at Lessee's cost and
expense, whether or not so expressed, unless otherwise expressly stated.
Lessee hereby agrees with Lessor for the benefit of the Participants that it
shall perform the agreements, covenants and indemnities set forth in the
Participation Agreement (including, without limitation, Sections 7(b) and 7(c)
of the Participation Agreement) which are incorporated herein, and hereby
restates Lessee's representations and warranties set forth in the Participation
Agreement and the Tax Indemnity Agreement, as fully and to the same extent and
with the same force and effect as if set forth in full in this Section 4.2.
Section 5. Return of Aircraft.
5.1 General Condition upon Return. Unless purchased by Lessee
pursuant to Section 18.2, and subject to Section 10, upon the expiration or
termination of this Lease, Lessee will return the Aircraft to Lessor by
delivering the same at any location in the continental United States at which
Lessee has maintenance facilities (and Section 5.7 shall apply). Lessee shall
give Lessor not less than 15 days prior notice of the return location. All
costs associated with the return flight shall be for the account of Lessee. At
the time of such return, the Airframe and Engines or engines installed thereon:
5.1.1 Airworthiness. Subject to the exception described
in clause (iii) of Section 8.1.1, shall be duly certificated as an
airworthy aircraft by the FAA under Part 121 of the Federal Aviation
Regulations or any successor provision; provided, that Lessee's
ability to satisfy such return condition shall not preclude the
occurrence of an Event of Loss pursuant to clause (iv) of the
definition thereof;
5.1.2 Free of Liens. Shall be free and clear of all Liens
(except Lessor Liens);
5.1.3 Operating Configuration and Condition. Shall be in a
configuration suitable for operation in regularly scheduled commercial
airline passenger service in the United States and shall be in as good
operating condition as when delivered new to Lessee by Manufacturer,
ordinary wear and tear excepted or, in the case of any such engines
owned by Lessee, shall have a value, utility, airworthiness and
remaining useful life at least equal
SALE AND LEASE AGREEMENT [N605SW]
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<PAGE> 26
to, and shall be in as good operating condition as required by the
terms hereof with respect to, Engines constituting part of the
Aircraft but not then installed on the Airframe. All Lessee or
Permitted Sublessee exterior markings, as the case may be, shall have
been painted over in matching exterior colors. In addition, any
appliance, part, instrument, appurtenance, accessory, furnishing or
other equipment leased by Lessee from a third party (other than
Lessor) and incorporated in the Aircraft shall be removed prior to the
date of such return without any damage to the Aircraft and without
diminishing or impairing the value, utility, remaining useful life or
condition which the Aircraft would have had at such time had such
equipment not been installed, and Lessee shall make all repairs which
are required as a result of such removal;
5.1.4 Cleanliness and Operability. Shall be clean by
United States commercial airline operating standards with all systems
and components operable; and
5.1.5 Parts and Equipment. Shall have installed thereon
all Engines and Parts installed thereon at the commencement of the
Term therefor or replacements therefor made in accordance with the
terms of this Lease.
5.2 Return of Other Engines. In the event that any engine not
owned by Lessor shall be installed on the Airframe returned in accordance with
Section 5.1, such engine shall be a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer, or an engine
of another manufacturer of at least equivalent utility, value, airworthiness
and remaining useful life in each case suitable for installation and use on the
Airframe and fully compatible with the other Engine or engine installed on the
Airframe). At the time of such replacement, such engine shall have performance
and durability characteristics and a value, condition, utility, airworthiness
and remaining useful life at least equal to the Engine it replaced hereunder,
assuming such Engine was maintained in accordance with the requirements of this
Lease, and at the time the Airframe is returned shall fully comply with all the
requirements of this Lease, including this Section 5, which are applicable to
Engines. Upon return of the Aircraft, Lessee shall duly convey to Lessor good
title to any such replacement engine, free and clear of (i) all rights of third
parties under any arrangement, including pooling, interchange, overhaul, repair
or other similar agreements or arrangements and (ii) Liens other than Lessor
Liens; and, upon such conveyance and as a condition thereto, Lessee will (a)
furnish Lessor with a full warranty (as to title) bill of sale, in form and
substance reasonably satisfactory to Lessor, with respect to each such
replacement engine, together with an opinion of counsel to the effect that such
bill of sale has been duly authorized and delivered and is enforceable in
accordance with its terms and that each such replacement engine is free and
clear of all Liens other than Lessor Liens, and (b) take such other action as
Lessor may reasonably request in order that title to such replacement engine
may be duly and properly vested in Lessor to the same extent as the Engine
replaced thereby. Upon compliance by Lessee with the foregoing, Lessor will,
so long as no Lease Event of Default has occurred and is continuing, comply
with the applicable provisions of the Trust Indenture and, upon Indenture
Trustee's release of the Engine from the Lien of the Trust Indenture Estate,
Transfer to Lessee any Engine not installed on the Airframe at the time of
return.
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5.3 Return at End of Base Lease Term or Renewal Lease Term. Upon
return of the Aircraft at the expiration or termination of this Lease, Lessee
shall have caused all FAA Airworthiness Directives applicable to the Aircraft
and all mandatory service bulletins from Manufacturer, Engine Manufacturer or
other manufacturer of an engine then installed on the Airframe (in compliance
with Section 5.2) applicable to the Aircraft to have been complied with (except
for any such FAA Airworthiness Directives and bulletins that permit compliance
after the return date and would not, in the normal course of the Maintenance
Program, be complied with on or prior to the return date). Lessee shall have
treated the Aircraft, including without limitation with respect to maintenance,
additions and modifications (including compliance with FAA Airworthiness
Directives), during the Term similarly to all other Boeing 737-300 aircraft in
its fleet, without in any way discriminating against the Aircraft, whether by
reason of its leased status or otherwise.
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of such return, the Airframe shall have remaining until the
next scheduled "C" check (which term, as used in this paragraph, shall include
a "C" check and any other check equivalent thereto) at least 50% of the
allowable hours between "C" checks permitted under the Maintenance Program then
used by Lessee (or such Permitted Sublessee, as the case may be), and the
condition set forth in Appendix A shall have been satisfied. In the event that
Lessee (or any Permitted Sublessee then in possession of the Aircraft) shall
then be using a continuous or "progressive" maintenance program with respect to
the Airframe, then the Airframe shall be current on such program. If the
conditions set forth in the first sentence of this paragraph shall be
applicable to the Airframe but shall not have been met at the time of such
return, Lessee shall perform (or cause to be performed) all maintenance work
necessary to meet such conditions or, if Lessee shall so elect, Lessee shall
pay or cause to be paid to Lessor an amount computed by multiplying (i) the
current market cost of a "C" check by (ii) a fraction of which (x) the
numerator shall be the excess of 50% of hours of operation allowable between
such "C" checks over the actual number of hours of operation remaining on the
Airframe to the next such "C" check, and (y) the denominator shall be the
number of hours of operation allowable between such "C" check in accordance
with such Maintenance Program.
Lessee further agrees that, whether or not the then-current engine
maintenance program is on-condition, the number of hours or cycles of operation
(whichever shall be applicable under the Maintenance Program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 3,000 allowable hours
or cycles (whichever shall be applicable) in the aggregate for both Engines or
engines; provided, that each life limited Part within each Engine or engine
shall have a minimum of 1,200 allowable hours or cycles (whichever shall be
applicable) remaining until its next required replacement. If, at the time of
such return, the Engines or engines do not meet the aggregate 3,000 hour
condition specified in the previous sentence, Lessee shall perform (or cause to
be performed) all maintenance work necessary to meet such conditions or, if
Lessee shall so elect, Lessee shall pay or cause to be paid to Lessor an amount
computed by multiplying (i) the current market cost of performing for an engine
of the same model as such Engines or engines the scheduled engine refurbishment
under the Maintenance Program then used by Lessee (or such Permitted Sublessee,
SALE AND LEASE AGREEMENT [N605SW]
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as the case may be) for engines of such model by (ii) a fraction of which (x)
the numerator shall be the excess of 3,000 hours or cycles (whichever is
applicable) over the aggregate number of hours or cycles of operation on such
Engines or engines remaining until the next scheduled engine refurbishment, and
(y) the denominator shall be the number of hours or cycles allowable between
such scheduled engine refurbishments. If, at the time of such return, any
life-limited Part within such Engine or engine does not meet the 1,200 hour
condition specified in the first sentence of this paragraph, Lessee shall
perform (or cause to be performed) all maintenance work necessary to meet such
conditions or, if Lessee shall so elect, Lessee shall pay or cause to be paid
to Lessor an amount computed by multiplying (i) the current market cost of
replacing such life-limited Part by (ii) a fraction of which (x) the numerator
shall be the excess of 1,200 hours or cycles (whichever is applicable) over the
number of remaining hours or cycles (whichever is applicable) of operation of
such life-limited Part, and (y) the denominator shall be the total number of
hours or cycles allowable on such life-limited Part.
5.4 Manuals; Service Bulletins, Etc. Upon return of the Aircraft
at the expiration or termination of this Lease, Lessee shall deliver or cause
to be delivered to Lessor all logs, manuals, drawings and data and inspection,
modification and overhaul records in respect of the Aircraft required to be
maintained under applicable rules and regulations of the FAA, updated through
the date of return (collectively, "Records"). All "no-charge" service bulletin
kits received by or on behalf of Lessee from Manufacturer, Engine Manufacturer
or vendors for the Aircraft and Engines or engines and not incorporated therein
shall be returned at no charge to Lessor as cargo on board the Aircraft at the
time of its return. At the time the Aircraft is returned, Lessor shall have
the option to purchase from Lessee, at Lessee's cost therefor, any "charge"
service bulletin kits purchased by Lessee which have not been incorporated in
the Aircraft. All such items shall thereupon become the property of Lessor.
5.5 Failure to Return Aircraft or Engines. If Lessee shall, for
any reason whatsoever, fail to return the Aircraft or any Engine at the time
and in the condition specified herein, the obligations of Lessee as provided in
this Lease (including the obligation to pay Rent on the same basis as that
applicable immediately prior to such failure) shall continue in effect with
respect to the Aircraft or such Engine until the Aircraft or such Engine is
returned to Lessor at the location set forth in Section 5.1; but this Section
5.5 shall not be construed as permitting Lessee to fail to meet its obligation
to return the Aircraft or such Engine in accordance with the requirements of
this Lease or constitute a waiver of a Lease Event of Default.
5.6 Aid in Disposition. Lessee agrees that, unless Lessee shall
have elected to purchase the Aircraft pursuant to Section 18.2, during the last
six months of the Term it will cooperate in all reasonable respects with any
efforts of Lessor to lease or sell the Aircraft, including without limitation
(subject to the provisions of Section 12) permitting potential lessees or
purchasers to inspect the Aircraft and the records relating thereto.
5.7 Storage upon Return. Upon written request of Lessor or Owner
Participant received by Lessee at least 10 days prior to its return of the
Aircraft at the expiration or termination of this Lease, Lessee will arrange
for short-term storage for the Aircraft for a period not exceeding 60 days
SALE AND LEASE AGREEMENT [N605SW]
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following return thereof by Lessee at the location of return pursuant to
Section 5.1; and Lessor shall bear or reimburse Lessee for Lessee's
out-of-pocket expenses of such storage (including maintenance and insurance
expenses).
Section 6. Liens. Lessee will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, the Airframe or any Engine, title thereto or any interest therein or
in this Lease except: (a) the respective rights of the parties to the
Operative Agreements; (b) the rights of others under agreements or arrangements
to the extent expressly permitted by the terms of Sections 7.2 and 8.3; (c)
Lessor Liens; (d) Liens for taxes, assessments or other governmental charges
either not yet due or being contested in good faith (and for the payment of
which adequate reserves have been provided in accordance with generally
accepted accounting principles) by appropriate proceedings so long as such
proceedings do not involve any material danger of the sale, forfeiture, loss or
loss of use of the Aircraft, or any other portion of the Trust Estate; (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 due or not overdue for a period of more than 60 days or is being
contested in good faith (and for the payment of which adequate reserves have
been provided in accordance with generally accepted accounting principles) by
appropriate proceedings so long as such Liens do not involve any material
danger of the sale, forfeiture, loss or loss of use of the Aircraft, the
Airframe or any Engine or any interest therein; (f) Liens arising out of any
judgment or award against Lessee, unless the judgment secured shall not, within
45 days after entry thereof, have been discharged or vacated or execution
thereof stayed pending appeal or shall not have been discharged, vacated or
reversed within 45 days after the expiration of such stay; and (g) any other
Lien with respect to which Lessee shall have provided a bond or other security
adequate in the reasonable judgment of Lessor. Lessee will promptly take (or
cause to be taken) such action at its own expense as may be necessary duly to
discharge any such Lien not excepted above if the same shall arise at any time.
Section 7. Registration, Operation, Possession, Subleasing and
Records.
7.1 Registration and Operation.
7.1.1 Registration. Lessee shall forthwith upon the
delivery of the Aircraft hereunder cause the Aircraft to be duly
registered and at all times thereafter to remain duly registered in
the name of Lessor with the FAA pursuant to and as permitted by the
Act (it being understood that Lessee shall not be required to comply
with this covenant to the extent that Shawmut Bank Connecticut,
National Association's or Owner Participant's failure to comply with
its covenant set forth in Section 8(b) of the Participation Agreement
with regard to its citizenship makes such compliance by Lessee
impossible).
7.1.2 Nameplate. Lessee agrees to affix within 10 days of
the Delivery Date and thereafter to maintain in the cockpit of the
Airframe adjacent to the airworthiness certificate and on each Engine
a nameplate bearing the inscription "OWNED BY AND LEASED FROM SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, AS OWNER TRUSTEE, OWNER AND
LESSOR" and, so long as the Trust Indenture shall be in effect,
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"SUBJECT TO A SECURITY INTEREST IN FAVOR OF WILMINGTON TRUST COMPANY,
AS INDENTURE TRUSTEE" (such nameplate to be replaced, if necessary,
with a nameplate reflecting the name of any successor Lessor or
successor Indenture Trustee). Except as above provided, Lessee will
not allow the name of any person, association or corporation to be
placed on the Airframe or on any Engine as a designation that might be
interpreted as a claim of ownership; provided, that nothing herein
contained shall prohibit Lessee (or any Permitted Sublessee) from
placing its customary colors and insignia on the Airframe or any
Engine or displaying information concerning the registration or
manufacture of the Aircraft, the Airframe, any Engine or Part.
7.1.3 Compliance with Laws. Lessee agrees that it will
not use or operate the Aircraft, the Airframe or any Engine in
violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign) or in violation of any airworthiness certificate, license or
registration relating to the Aircraft, the Airframe or any Engine
issued by any such authority, except to the extent Lessee is
contesting in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor's interest in the Aircraft or
subject the Owner Participant to any danger of criminal liability.
During any period beginning when the Aircraft is registered with the
FAA and Lessee has been notified in writing by the Owner Participant
or Lessor that the Owner Participant, acting through or by Owner
Trustee or otherwise, is not or has failed to qualify as a "citizen of
the United States", within the meaning of the Act, and ending when
Lessee has been notified in writing by either the Owner Participant or
Lessor that the Owner Participant, acting through or by Owner Trustee
or otherwise, is or qualifies as a "citizen of the United States",
Lessee agrees to operate the Aircraft, or cause the Aircraft to be
operated, in compliance with, and to maintain or cause to be
maintained such records as are required by, and to prepare and file
such reports as are required to be filed by, Section 47.9 of the FAA
Regulations, or any analogous part of any superseding regulation or
statute, so as to permit the continued registration of the Aircraft
under the Act (and the FAA Regulations thereunder) or under any
analogous part of any superseding statute or regulations.
7.1.4 Insurance Requirements; Government Requisition;
Indemnity. Lessee agrees not to operate, use or locate the Aircraft,
the Airframe or any Engine, or permit any Permitted Sublessee to
operate, use or locate the Aircraft, the Airframe or any Engine, (i)
in any area excluded from coverage by any insurance required by the
terms of Section 11, except in the case of a requisition by the
Government where Lessee obtains indemnity (backed by the full faith
and credit of the United States of America) in lieu of such insurance
from the Government against the risks and in the amounts required by
Section 11 covering such area, or (ii) in any area where maintenance
of war-risk insurance is required by Section 11 unless fully covered
by war-risk insurance satisfying the terms of Section 11, or unless
the Aircraft, the Airframe or such Engine is operated or used under
contract with the Government under which contract the Government
assumes liability (backed by the full faith and credit of the United
States of America) in an amount not less than the amount of
SALE AND LEASE AGREEMENT [N605SW]
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insurance otherwise required by Section 11 for any damage, loss,
destruction or failure to return possession of the Aircraft, the
Airframe or such Engine at the end of the term of such contract or for
injury to persons or damage to property of others, or (iii) in any
area referred to in subclause 3(iv) immediately following Section
7.2.8.
7.2 Possession. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine or install
any Engine, or permit any Engine to be installed, on any airframe other than
the Airframe; provided, however, that so long as no Lease Default (of the type
described in Section 14.1 or 14.5) or Lease Event of Default shall have
occurred and be continuing, and so long as Lessee shall comply with the
provisions of Section 11, and all FAA approvals required for such purposes have
been obtained, Lessee may, without such prior written consent:
7.2.1 Interchange and Pooling. Subject or permit any
Permitted Sublessee to subject (i) the Aircraft, Airframe or any
Engine to normal interchange agreements customary in the airline
industry and entered into by Lessee or such Permitted Sublessee in the
ordinary course of its business with, in the case of the Airframe, a
U.S. Air Carrier or a Permitted Foreign Air Carrier, in either case
that is not then subject to bankruptcy or similar proceedings, and
(ii) any Engine to pooling agreements or arrangements customary in the
United States domestic commercial airline industry and entered into by
Lessee or such Permitted Sublessee in the ordinary course of its
business; but in either case (A) no transfer of the registration of
the Airframe or any Engine shall be effected in connection therewith
and the terms of this Lease and the Participation Agreement shall be
observed and (B) no such agreement or arrangement shall contemplate or
require the transfer of title to the Aircraft, Airframe or any Engine
and if Lessor's title to any Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect thereto and Lessee shall comply with
Section 10.2 hereof;
7.2.2 Testing and Service. Deliver or permit any
Permitted Sublessee to deliver possession of the Aircraft, Airframe or
any Engine or Part, to the manufacturer thereof for testing or other
similar purposes, or to any organization for service, repair,
maintenance or overhaul work on the Aircraft, Airframe or any Engine
or Part, or for alterations or modifications in or additions to the
Aircraft, Airframe or any Engine to the extent required or permitted
by the terms of Section 8.4;
7.2.3 Civil Reserve Air Fleet Program. Transfer or permit
any Permitted Sublessee, if required by law to do so, to transfer
possession of the Aircraft, Airframe or any Engine to the Government
pursuant to the Civil Reserve Air Fleet Program or any similar or
substitute programs, so long as such transfer of possession does not
continue beyond the end of the Term and so long as Lessee shall (A)
promptly notify Lessor upon subjecting the Airframe or any Engine to
such program and provide Lessor with the name and address of the
appropriate party to whom notice must be given in connection with any
repossession of the Aircraft under Section 15.1.1, and (B) promptly
notify Lessor upon transferring possession of the Airframe or any
Engine to the Government pursuant to such program;
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7.2.4 Installation of Engines. Install or permit any
Permitted Sublessee to install an Engine on an airframe owned by
Lessee or such Permitted Sublessee, as the case may be, free and clear
of all Liens, except (A) Permitted Liens and those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of air carriers under normal interchange
agreements which are customary in the airline industry and do not
contemplate, permit or require the transfer of title to the airframe
or engines installed thereon, and (C) mortgage liens or other security
interests, provided, that (as regards this clause (C)) such mortgage
liens or other security interests effectively provide that such Engine
shall not become subject to the lien of such mortgage or security
interest, notwithstanding the installation thereof on such airframe,
unless and until Lessee shall become the owner of such Engine;
7.2.5 Installation of Engines on Other Airframes. Install
or permit any Permitted Sublessee to install an Engine on an airframe
leased to, or purchased by, Lessee or any Permitted Sublessee subject
to a lease, conditional sale, trust indenture or other security
agreement, but only if (A) such airframe is free and clear of all
Liens, except the rights of the parties to the lease, conditional
sale, trust indenture or other security agreement covering such
airframe, or their successors or assigns, and except Liens of the type
permitted by clauses (A) and (B) of Section 7.2.4, and (B) the lease,
conditional sale, trust indenture or other security agreement covering
such airframe effectively provides that such Engine will not become
subject to the Lien thereof at any time while such Engine is subject
to this Lease, notwithstanding the installation thereof on such
airframe;
7.2.6 Pooling of Parts. To the extent permitted by
Section 8.3, subject any Parts owned by Lessor and removed from the
Airframe or any Engine to any pooling arrangement referred to in
Section 8.3;
7.2.7 Wet Lease. Enter into a Wet Lease for the Airframe
and Engines or engines then installed thereon with any third party for
a term not to continue beyond the Term;
7.2.8 Sublease to Permitted Air Carriers. So long as the
proposed sublessee is not subject to a proceeding or final order under
applicable bankruptcy, insolvency or reorganization laws on the date
the sublease is entered into, enter into a sublease of the Aircraft,
or the Airframe and Engines or engines then installed on the Airframe,
or any Engine, for use on the sublessee's regularly scheduled or
charter routes, with any U.S. Air Carrier or Permitted Foreign Air
Carrier, in any such case for a term not to continue beyond the
remaining Term.
Provided, further, with respect to this Section 7.2, that:
(1) the rights of any transferee who receives
possession by reason of a transfer permitted by this Section
7.2 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be effectively subject and subordinate
to, and any
SALE AND LEASE AGREEMENT [N605SW]
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sublease permitted by this Section 7.2 shall be made expressly
subject and subordinate to, all the terms of this Lease and
the Lien of the Trust Indenture, and to Lessor's rights,
powers and remedies under this Lease and the Indenture
Trustee's rights to possession under the Trust Indenture and
(as Lessor's assignee) hereunder, including the rights to
repossession pursuant to Section 15 and to terminate and avoid
such sublease upon such repossession and to require such
sublessee to forthwith deliver the Aircraft, Airframe and
Engines subject to such sublease upon such repossession;
(2) Lessee shall remain primarily liable
hereunder for the performance of all the terms of this Lease
(including, without limitation, the payment of Supplemental
Rent representing any indemnities payable as a result of acts
or circumstances respecting a sublease or a sublessee's
operation of the Aircraft) to the same extent as if such
sublease, transfer or relinquishment of possession had not
occurred (it being understood that, without limitation of the
foregoing, any standards established under this Lease with
reference to Lessee's practices respecting other aircraft
owned or operated by it shall continue to refer to such
practices of Lessee rather than of any transferee); provided,
that performance of any such terms by any Permitted Sublessee
shall be as effective, for purposes of this Lease, as
performance thereof directly by Lessee;
(3) any such sublease shall (i) be consistent
with the requirements of this Lease and the applicable
requirements of the Participation Agreement, (ii) include
appropriate provisions for the continued maintenance in
accordance with applicable maintenance standards in the
appropriate jurisdiction, operation, insurance (appropriate
certificates as to which shall be furnished to Lessor and
Indenture Trustee prior to Lessee's entry into any such
sublease with any Permitted Foreign Air Carrier or within 10
days thereafter) and return of the subleased property as
required hereunder, (iii) provide that the sublessee may not
assign or further sublease the Aircraft, (iv) provide that the
Aircraft may not be operated into a country with which the
United States does not maintain diplomatic relations or in
which there is open warfare, whether or not declared, (v) not
provide for sublease rentals to be prepaid or assigned to a
third party; provided, however, that (x) up to six months'
rentals may be prepaid to Lessee and (y) this clause (v) shall
not preclude Lessee's establishing and holding appropriate
reserves for any obligations arising under such sublease, and
(vi) not require the sublessee to purchase the Aircraft or
grant the sublessee any purchase options, or any options for
the renewal of such sublease for a term beyond the Base Lease
Term, in each case on dates other than, or at amounts less
than, corresponding options granted to Lessee hereunder;
(4) no interchange agreement, transfer,
sublease or other relinquishment of possession permitted
hereunder shall affect the registration of the Aircraft or
shall permit any action not permitted to Lessee in this Lease;
and
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(5) no such interchange agreement, sublease,
transfer or other relinquishment of possession of the
Aircraft, Airframe or any Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or
under any other Operative Agreement or constitute a waiver of
Lessor's rights or remedies hereunder or under any other
Operative Agreement.
Lessee shall notify Lessor within 10 days after the commencement of
any sublease permitted hereunder and shall deliver to Lessor within such period
a duly executed copy of any sublease or interchange or pooling agreement
permitted hereunder. Upon request of Lessor, Lessee shall promptly duly
execute and deliver to Lessor an assignment of any such sublease having a term
in excess of 12 months in favor of Lessor in form and substance reasonably
satisfactory to Lessor. Lessor hereby agrees, for the benefit of Lessee (and
any Permitted Sublessee) and for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any airframe or engine leased to
or purchased by Lessee (or any Permitted Sublessee) subject to a lease,
conditional sale, trust indenture or other security agreement, that Lessor will
not acquire or claim, as against such lessor, conditional seller, indenture
trustee or secured party, or any successor or assign thereof, any right, title
or interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
conditional seller or subject to a trust indenture or security interest in
favor of such indenture trustee or secured party; provided, however, that such
agreement of Lessor shall not be for the benefit of any lessor or secured party
of any airframe (other than the Airframe) leased to Lessee (or any Permitted
Sublessee) or purchased by Lessee (or any Permitted Sublessee) subject to a
conditional sale or other security agreement or for the benefit of any
mortgagee of or any other holder of a security interest in an airframe owned by
Lessee (or any Permitted Sublessee), unless such lessor, conditional vendor,
other secured party or mortgagee has expressly agreed (which agreement may be
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as
against Lessor, any right, title or interest in an Engine as a result of such
Engine being installed on such airframe.
A consolidation, merger, conveyance, transfer, or lease permitted by
Section 11(f) of the Participation Agreement shall not be deemed to be a
transaction to which this Section 7.2 shall apply.
7.3 Records and Reports. Lessee shall:
7.3.1 Records. Maintain or cause to be maintained all
records, logs and other materials required by the FAA or any other
governmental authority having jurisdiction to be maintained in respect
of the Aircraft, the Airframe and each Engine;
7.3.2 Information and Reports. Upon request, promptly
furnish or cause to be furnished to Lessor (in sufficient number) such
information as may be required to enable Lessor or any Participant to
file any reports, including tax returns, required to be filed by
Lessor or such Participant with any governmental authority because of
Lessor's ownership of the Aircraft, Airframe or any Engine or because
of receipt of Rent or because of the interest of any Participant in
the Estate or Trust Indenture Estate; provided, however, that
SALE AND LEASE AGREEMENT [N605SW]
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with respect to any such information (other than with respect to
income taxes) which Lessee deems commercially sensitive or
confidential, if reasonably feasible, Lessor shall afford Lessee a
reasonable opportunity to seek from any such governmental authority a
waiver of Lessor's or such Participant's obligation to file any such
information or consent to the filing of such information directly by
Lessee in lieu of filing by Lessor or such Participant and if any such
waiver or consent is evidenced to the reasonable satisfaction of
Lessor, then Lessee shall not be required to furnish such information
to Lessor; and
7.3.3 Financial Information. Promptly provide Lessor, the
Owner Participant, the Original Loan Participant and Indenture Trustee
with (i) such financial information concerning Lessee as is provided
from time to time to the public shareholders of Lessee, (ii) within 60
days after the end of each of the first three quarterly periods of
each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of such
period, together with the related consolidated statements of income
for such period, (iii) within 120 days after the close of each fiscal
year of Lessee, a consolidated balance sheet of Lessee and its
consolidated subsidiaries as of the close of such fiscal year,
together with the related consolidated statements of income for such
fiscal year, as certified by independent public accountants, (iv)
promptly upon the sending, making available or filing of the same, all
such reports (other than reports on Form 11-K or similar forms) as
Lessee shall file with the Securities and Exchange Commission, and (v)
from time to time such other information as to its financial condition
as Lessor, Indenture Trustee or any Participant may reasonably
request. In addition, Lessee shall promptly notify Lessor, Indenture
Trustee, the Original Loan Participant and the Owner Participant after
a Responsible Company Officer of Lessee shall acquire knowledge of a
Lease Default or Lease Event of Default.
Section 8. Maintenance; Replacement and Pooling of Parts;
Alterations; Modifications and Additions.
8.1 Maintenance.
8.1.1 Maintenance Program. Lessee shall maintain,
service, repair, overhaul, alter, modify, add to and test (or cause to
be maintained, serviced, repaired, overhauled, altered, modified,
added to and tested) the Aircraft, the Airframe and each Engine, and
each other engine installed from time to time on the Airframe, in
accordance with Lessee's FAA-approved maintenance program for the
Aircraft, Airframe and Engines (the "Maintenance Program"), (i) so as
to keep the Aircraft, the Airframe and each Engine in as good
operating condition as when delivered new to Lessee by the
Manufacturer, ordinary wear and tear excepted, (ii) in the same manner
and with the same care as used by Lessee with similar aircraft owned
or operated by Lessee, without in any way discriminating against the
Aircraft, whether by reason of its leased status or otherwise, and
(iii) so as to keep the Aircraft, the Airframe and each Engine in such
condition as required to enable the FAA certificate of airworthiness
for the Aircraft to be maintained in good standing at all times under
the Act, except when all comparable Boeing Model 737-300 series
aircraft registered
SALE AND LEASE AGREEMENT [N605SW]
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in the United States of America have been grounded by the FAA other
than as a result of actions taken or omitted to be taken by Lessee
(or, if a sublease is then in effect, any Permitted Sublessee) and
(iv) eligible for any Manufacturers warranties contained in the
Purchase Agreement and any Engine Manufacturer's original warranties.
8.1.2 Compliance with Government Requirements. Lessee will
comply with all service, inspection, maintenance, repair and overhaul
regulations, directives and instructions which are made mandatory by
the FAA or other applicable government authority upon operators of
Boeing Model 737-300 series aircraft and CFM International Model
CFM56-3-B1 engines and which require compliance during the Term and
prior to return of the Aircraft under this Lease.
8.2 Replacement of Parts. Lessee, at its own cost and expense,
will promptly replace (or cause to be replaced) all Parts which may from time
to time be incorporated in the Aircraft, Airframe or any Engine and which may
from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever, except as otherwise provided in Section 8.4. In
addition, Lessee may, at its own cost and expense, remove in the ordinary
course of maintenance, service, repair, overhaul or testing any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, however, Lessee, except
as otherwise provided in Section 8.4, at its own cost and expense, will replace
such Parts as promptly as possible. All replacement parts shall be free and
clear of all Liens (except for Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof. All Parts at any
time removed from the Aircraft, Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by parts which have been incorporated in the Aircraft,
Airframe or such Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement part becoming incorporated
in the Aircraft, Airframe or such Engine as above provided, without further
act, (i) unless the replacement property is temporarily installed on an
emergency basis, title to the replaced Part shall thereupon vest in Lessee free
and clear of all rights of Lessor, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement part shall thereupon
vest in Lessor (subject only to Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis), and (iii)
such replacement part shall become a Part subject to this Lease and be deemed
part of the Aircraft, Airframe or such Engine for all purposes hereof to the
same extent as the Parts originally incorporated in such Aircraft, Airframe or
Engine.
8.3 Pooling of Parts. Any Part removed from the Aircraft,
Airframe or any Engine as provided in Section 8.2 may be subjected by Lessee
(or a Permitted Sublessee) to a normal pooling arrangement customary in the
airline industry entered into in the ordinary course of business of Lessee or
such Permitted Sublessee, so long as a part replacing such removed Part shall
be incorporated in the Aircraft, Airframe or such Engine in accordance with
Section 8.2 as promptly as practicable after the removal of such removed Part.
In addition, any replacement part when
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incorporated in the Aircraft, Airframe or any Engine in accordance with Section
8.2 may be owned by any third party subject to such a normal pooling
arrangement, so long as Lessee (or any Permitted Sublessee), at its own cost
and expense, as promptly thereafter as practicable either (i) causes title to
such replacement part to vest in Lessor in accordance with Section 8.2 by
Lessee (or any Permitted Sublessee) acquiring title thereto for the benefit of,
and transferring such title to, Lessor free and clear of all Liens (except
Permitted Liens), or (ii) replaces such replacement part by incorporating in
the Aircraft, Airframe or such Engine a further replacement part owned by
Lessee (or any Permitted Sublessee) free and clear of all Liens (except
Permitted Liens) and by causing title to such further replacement part to vest
in Lessor in accordance with Section 8.2.
8.4 Alterations, Modifications and Additions.
8.4.1 Mandatory Alterations, Etc. Lessee shall make (or
cause to be made) such alterations and modifications in and additions
to the Aircraft, Airframe and each Engine as may be required from time
to time to meet the standards of the FAA or other governmental
authority having jurisdiction and to maintain the FAA certificate of
airworthiness for the Aircraft; provided, however, that Lessee may
contest in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor's interest in the Aircraft or
subject the Owner Participant to any danger of criminal liability.
All alterations and modifications made pursuant to this Section 8.4.1
shall be made at the cost and expense of Lessee.
8.4.2 Voluntary Alterations, Etc. Lessee, at its own cost
and expense, may, from time to time make (or cause to be made),
subject to the standards set forth in Section 8.1.1, such alterations
and modifications in and additions to the Aircraft, Airframe or any
Engine as Lessee may deem desirable in the proper conduct of its
business, including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine; provided, however, that no such
alteration, modification, addition or removal shall diminish the
value, remaining useful life, or utility of the Aircraft, Airframe or
such Engine, or impair the condition or airworthiness thereof, below
the value, remaining useful life, utility, condition and airworthiness
thereof immediately prior to such alteration, modification or addition
assuming the Aircraft, Airframe or such Engine was then of the value
and utility and in the condition and airworthiness required to be
maintained by the terms of this Lease. Title to all parts
incorporated in the Aircraft, Airframe or such Engine as the result of
such alteration, modification or addition shall remain vested in
Lessee and Lessee may, at any time during the Term, remove any such
part if (i) such part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated in the Aircraft,
Airframe or such Engine at the time of delivery thereof hereunder or
any Part in replacement of or substitution for any such Part, (ii)
such part is not required to be incorporated in the Aircraft, Airframe
or such Engine pursuant to the terms of this Section 8, (iii) such
part can be removed from the Aircraft, Airframe or such Engine without
diminishing or impairing the value, remaining useful life, utility,
condition or airworthiness required to be maintained by the terms of
this Lease which the Aircraft, Airframe or such Engine would have had
at such time had such alteration,
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modification or addition not occurred, and (iv) no Lease Event of
Default or Lease Default shall have occurred and be continuing. Title
to all other such parts shall, without further act, vest in Lessor and
shall constitute "Parts" for all purposes hereunder. Upon the removal
of any part title to which is retained by Lessee, Lessee shall
promptly repair any damage to the Airframe or Engine from which it was
removed which resulted from such removal and such part shall no longer
be deemed part of the Airframe or such Engine from which it was
removed. Any part not removed by Lessee as above provided prior to
the return of the Aircraft, Airframe or such Engine to Lessor
hereunder shall, without further act, vest in Lessor and shall
constitute a "Part" for all purposes hereunder.
Section 9. Voluntary Termination.
9.1 Right of Termination upon Obsolescence. So long as no Lease
Event of Default or Lease Default shall have occurred and be continuing, Lessee
shall have the right at its option to terminate this Lease with respect to the
Aircraft during the Base Lease Term on the first day of any month (a
"Termination Date") occurring on or after the seventh anniversary of the
Delivery Date on at least three months' prior written notice to Lessor, each
Participant and Indenture Trustee specifying a proposed Termination Date;
provided, that such notice shall also include copies of resolutions of Lessee's
board of directors stating that such board of directors has determined, in good
faith, that the Aircraft either has become economically obsolete or is surplus
to Lessee's requirements. Lessee may revoke any notice of termination referred
to in this Section 9.1 by notice to Lessor, each Participant and the Indenture
Trustee not less than 30 days prior to the proposed Termination Date, if Lessor
shall not have received a bid to purchase the Aircraft for at least the
Termination Value thereof pursuant to Section 9.2 and if Lessor shall not have
furnished to Lessee the notice referred to in Section 9.3, and upon doing so,
shall reimburse Lessor and Owner Participant on an after-tax basis for all
reasonable out-of-pocket expenses incurred by them in contemplation of such
termination; provided, however, that Lessee may so revoke a notice of
termination no more than three times during the Term.
9.2 Sale of Aircraft. Lessee, as agent for Lessor, shall, from
the date of such notice of termination until no more than 30 days' prior to the
proposed Termination Date specified by Lessee, use its reasonable best efforts
to obtain bids (in the worldwide market) for the cash purchase of the Aircraft
and Lessor may, if it desires to do so, seek to obtain such bids and may itself
bid to retain the Aircraft. In the event Lessee receives any bid, Lessee shall
at least 30 days prior to the proposed Termination Date, certify to Lessor in
writing the amount and terms of such bid, and the name and address of the
Person submitting such bid (who shall not be Lessee, an Affiliate of Lessee or
a Person who shall be a party to any arrangement for the further use of the
Aircraft by Lessee or any of its Affiliates). In the event Lessor receives any
bid, Lessor shall, at least five Business Days prior to the proposed
Termination Date, certify to Lessee in writing the amount and terms of such bid
and the name and address of the Person submitting such bid. Subject to Section
9.3, on the Termination Date, (a) Lessee shall deliver the Airframe and Engines
or engines constituting part of the Aircraft to the bidder, if any, which shall
have submitted the highest cash bid (net of any brokerage commissions) prior to
such date, in the same manner as if delivery were made to Lessor pursuant to
Section 5 and in full compliance with the terms thereof, and shall duly
transfer to Lessor under
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a full warranty (as to title) bill of sale title to any such engines not owned
by Lessor, all in accordance with the terms of Section 5, and (b) unless Lessor
is the successful bidder, Lessor shall simultaneously therewith Transfer the
Airframe and Engines or engines to such bidder for cash paid to Lessor in the
manner and in funds of the type specified in Section 3.6. The total sales
price realized at such sale shall be paid to and retained by Indenture Trustee,
so long as the Trust Indenture remains in effect, and otherwise shall be paid
to and retained by Lessor and, in addition, on such Termination Date, and as a
condition precedent to such sale and the delivery of the Aircraft and Engines
or engines to such bidder, Lessee shall pay to Indenture Trustee, so long as
the Trust Indenture remains in effect, and otherwise to Lessor the sum of (i)
the excess, if any, of (A) the Termination Value for the Aircraft, computed as
of such Termination Date, over (B) the sales price of the Airframe and Engines
or engines sold (or if the winning bidder is Lessor, the amount of such bid)
after deducting the reasonable fees and expenses incurred by Lessor, Indenture
Trustee and the Participants, if any, in connection with such termination and
sale, (ii) all unpaid Interim Rent and Basic Rent due on or prior to the TV
Determination Date with reference to which the Termination Value is computed
(it being understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated in Exhibit C
hereto as payable in advance on such TV Determination Date), and (iii) (without
duplication) all other amounts (including, without limitation, Supplemental
Rent in respect of Break Amount, if any, or Premium, if any) owing by Lessee
under this Lease or under any other Operative Agreement. Upon such payment,
Lessor will comply with Section 10.01 of the Trust Indenture and, upon
Indenture Trustee's release of such Engines from the Lien of the Trust
Indenture Estate, Transfer to Lessee any Engines constituting part of the
Aircraft but which were not then installed on the Airframe and sold therewith.
If no sale shall have occurred on or as of the Termination Date specified in
such notice of termination, this Lease shall continue in full force and effect,
Lessee shall pay the reasonable expenses incurred by Lessee, Lessor, each
Participant and Indenture Trustee in connection with the proposed sale, and
Lessee shall have the right at any time to submit another notice of termination
pursuant to, and subject to the terms of, Section 9.1. In the event of any
such sale and receipt by Lessor or Indenture Trustee, as appropriate, of such
sale price and other amounts as provided herein, and upon compliance by Lessee
with the provisions of this Section 9.2, the obligation of Lessee to pay
Interim Rent or Basic Rent due after the TV Determination Date with reference
to which the Termination Value is computed shall cease and the Base Lease Term
shall end effective as of the date of such sale. Lessor shall be under no duty
to solicit bids, to inquire into the efforts of Lessee to obtain bids or
otherwise to take any action in connection with any such sale other than to
Transfer to the purchaser named in the highest bid as referred to above the
Airframe and Engines or engines against receipt of the payments provided for
herein.
9.3 Retention by Lessor. Notwithstanding anything in this Section
9 to the contrary, Lessor may, by irrevocable notice to Lessee at least 45 days
prior to the proposed date of sale referred to in Section 9.1, reject all bids
and retain title to the Aircraft (and take possession thereof); provided, that
Lessor shall pay (and, by delivering such notice, Lessor shall be obligated to
pay) to Indenture Trustee on the proposed Termination Date an amount equal to
the unpaid principal amount of the Certificates, together with all interest due
thereon. Upon receipt of notice of such an election by Lessor, Lessee shall
cease any efforts to obtain bids as provided in Section 9.1 and shall reject
all bids theretofore or thereafter received for the Aircraft. In the event
Lessor elects to retain the
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Aircraft as provided in this Section 9.3, and upon its payment to Indenture
Trustee of such amount, Lessee shall deliver the Aircraft and Engines to Lessor
on the proposed Termination Date pursuant to Section 5 and in full compliance
with the terms thereof and upon such delivery and payment in full of the
amounts specified in the first sentence hereof and the next following sentence
and shall have no obligation to make any payment of Termination Value. The
foregoing shall in no way affect the obligation of Lessee to make payment of
any Interim Rent or Basic Rent accrued and unpaid on or before the proposed
Termination Date and all other amounts of Rent and other amounts payable
hereunder or under the other Operative Agreements and due on or prior to such
date, including, without limitation, Supplemental Rent in respect of all other
sums due and payable to the Holders under the Certificates (including, without
limitation, Break Amount or Premium, if any, as of such TV Determination Date).
If the amounts required to be paid pursuant to this Section 9.3 shall not be
received by the respective payees thereof on the proposed Termination Date,
this Lease shall continue in full force and effect.
9.4 Termination As to Engines. So long as no Lease Event of
Default or Lease Default shall have occurred and be continuing, Lessee shall
have the right, at its option at any time during the Term, on at least 30 days'
prior written notice to Lessor, Indenture Trustee, the Original Loan
Participant and the Owner Participant, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe. In such event,
and prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10.2 to the same extent as if
an Event of Loss had occurred with respect to such Engine, and, upon Indenture
Trustee's release of the replaced Engine from the Lien of the Trust Indenture
Estate, Lessor shall Transfer to Lessee the replaced Engine as provided in
Section 5.2.
Section 10. Loss, Destruction, Requisition, Etc.
10.1 Event of Loss with Respect to Airframe.
10.1.1 Lessee's Election. Upon the occurrence of an Event
of Loss with respect to the Aircraft, Lessee shall forthwith (and in
any event within 15 days after such occurrence) give Lessor, Indenture
Trustee and each Participant written notice of such Event of Loss and,
within 60 days after such occurrence, give Lessor, Indenture Trustee
and each Participant written notice of its election to comply either
with Section 10.1.2 or Section 10.1.3, and if Lessee shall not have
given notice of such election within 60 days after such occurrence
Lessee shall be deemed to have elected to comply with Section 10.1.3.
10.1.2 Replacement of Airframe and Engines. As promptly as
practicable, and in any event on or before the Business Day next
preceding the 180th day following the date of occurrence of such Event
of Loss, Lessee shall, in compliance with Section 10.1.6, convey or
cause to be conveyed to Lessor, to be leased by Lessee hereunder in
replacement thereof, a Replacement Airframe (which need not be a new
Replacement Airframe but shall have been placed in service not earlier
than January 1, 1993) together with the same number of Replacement
Engines as the Engines, if any, subject to such Event of Loss, such
Replacement Airframe and Replacement Engines to be free and clear of
all Liens (except
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Permitted Liens), to have a value, remaining useful life and utility
at least equal to, and to be in as good operating condition as, the
Airframe and Engines, if any, so replaced (for such purpose, it shall
be assumed that the Airframe and such Engines were in the condition
and repair required by the terms of this Lease). If Lessee shall not
effect such replacement hereunder on or before the Business Day next
preceding the 150th day following the date of the occurrence of such
Event of Loss, then Lessee shall immediately deposit with Lessor, in
the manner and in funds of the type specified in Section 3.6, an
amount equal to the excess of the Stipulated Loss Value for the
Aircraft over any funds then being held by Lessor or the Indenture
Trustee with respect to such Event of Loss. If Lessee shall not
perform its obligation to effect such replacement hereunder on or
before the Business Day next preceding the 180th day following the
date of the occurrence of such Event of Loss, then Lessee shall
immediately pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, the aggregate amount specified in clauses
(A), (B) and (C) of Section 10.1.3, net of any amount deposited with
Lessor pursuant to the next preceding sentence of this Section 10.1.2.
10.1.3 Payment of Stipulated Loss Value and Rent. On or
before the Business Day next preceding the earlier of (i) the 180th
day following the date of the occurrence of such Event of Loss, or
(ii) the later of 15 days following the receipt of insurance proceeds
with respect to such occurrence or the date Lessee shall have made or
shall be deemed to have made its election under Section 10.1.1 to
comply with Section 10.1.3, Lessee shall pay to Lessor, in the manner
and in funds of the type specified in Section 3.6, (A) the Stipulated
Loss Value for the Aircraft, determined as of the date of payment (as
described in the definition of Stipulated Loss Value), (B) all unpaid
Basic Rent due on or prior to the SLV Determination Date with
reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated in
Exhibit C hereto as payable in advance on such SLV Determination
Date), and (C) (without duplication) any other Rent which is due and
payable through and including the date of payment.
10.1.4 Stipulated Loss Value Payment. In the event of
payment in full of the Stipulated Loss Value for the Aircraft pursuant
to Section 10.1.2 or 10.1.3 and, in either case, the amounts referred
to in clauses (B) and (C) of Section 10.1.3, (A) the obligation of
Lessee to pay Interim Rent and Basic Rent due after the SLV
Determination Date with reference to which such Stipulated Loss Value
is computed shall terminate (but Lessee shall remain liable for all
payments of Supplemental Rent due through and including the date of
such payment of Stipulated Loss Value), (B) the Term for the Aircraft
shall end, and (C) Lessor will comply with the applicable provisions
of Section 10.01 of the Trust Indenture and, upon Indenture Trustee's
release of the Aircraft from the Lien of the Trust Indenture Estate,
will Transfer to Lessee the Aircraft.
10.1.5 Payment of Rent. In the event of an Event of Loss,
during the period between the occurrence of the Event of Loss and the
date of payment pursuant to Section 10.1.3 or replacement, the
obligation of Lessee to pay Interim Rent, Basic Rent or
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Renewal Rent shall continue unchanged, except that upon such
replacement, it shall become an obligation to pay such Rent in respect
of the Replacement Aircraft.
10.1.6 Conditions to Replacement of Aircraft. Lessee's
right to exercise the replacement options contemplated by Section
10.1.1 with respect to the Aircraft shall be subject to the
fulfillment prior to or at the time of any such replacement, in
addition to the requirements contained in Section 10.1.2, of the
conditions precedent set forth below:
10.1.6.1 No Default. No Lease Event of Default or
Lease Default shall have occurred and be continuing.
10.1.6.2 Tax Loss. Owner Participant and Lessor
shall have received, at Lessee's expense, a tax opinion of
Vinson & Elkins L.L.P., or other counsel reasonably acceptable
to the Owner Participant to the effect that the Event of Loss
or the Replacement of the Airframe or Aircraft in connection
therewith will not cause any adverse tax consequences to
Lessor or Owner Participant or its Affiliates (or, in lieu
thereof, Lessee shall have agreed to indemnify for such tax
risk), or if Owner Participant and Lessee shall have agreed
upon the amount, if any, payable and upon the manner of
payment thereof with respect to such replacement by Lessee
pursuant to the Tax Indemnity Agreement or Section 7(b) of the
Participation Agreement, then any such amount shall be paid.
10.1.6.3 Lessee's Obligations with Respect to
Replacement Aircraft. Lessee will promptly (all writings
referred to below to be reasonably satisfactory in form and
substance to Lessor):
(a) furnish Lessor with (i) a full
warranty bill of sale and FAA bill of sale duly
conveying to Lessor the Replacement Airframe and
Replacement Engines, if any, and (ii) an assignment
of the purchase agreement with respect to the
Replacement Airframe and Replacement Engines, if any
(if Lessee shall have any rights thereunder)
substantially in the form of the Purchase Agreement
Assignment and a consent and agreement of the
manufacturer thereof substantially in the form of
the Manufacturer's Consent;
(b) cause a Lease Supplement
subjecting such Replacement Airframe and Replacement
Engines, if any, to this Lease, duly executed by
Lessee, to be delivered to Lessor for execution, and
an Indenture and Trust Supplement to be delivered to
Lessor for execution and, in each case upon such
execution, to be filed for recordation with the FAA
pursuant to the Act;
(c) furnish Lessor with such evidence
of compliance with (i) Section 5.01(b) of the Trust
Indenture (if the Trust Indenture shall be in
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effect at such time) and (ii) the insurance
provisions of Section 11 hereof with respect to the
Replacement Airframe and Replacement Engines, if any,
and the payment of all premiums then due with
respect to all such insurance, as Lessor may
reasonably request;
(d) furnish Lessor with an opinion or
opinions of counsel reasonably satisfactory to
Lessor to the effect that, upon such conveyance,
Lessor will acquire good title to the Replacement
Airframe and Replacement Engines, if any, free and
clear of all Liens other than Permitted Liens, the
Replacement Airframe and Replacement Engines, if
any, will be leased hereunder and subject to the
Lien of the Trust Indenture (if then in effect) to
the same extent as the Airframe and Engines replaced
thereby, Lessor and (assuming the Trust Indenture is
still in effect) the Indenture Trustee shall be
entitled to the benefit of Section 1110 of the
Bankruptcy Code with respect to the Replacement
Aircraft to the same extent as the Aircraft, and to
such further effect as Lessor may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Airframe
which shall be identified by manufacturer,
model, FAA registration number and
manufacturer's serial number;
(ii) a description of the Replacement
Airframe to be received (including the
manufacturer, model, FAA registration
number and manufacturer's serial number)
as consideration for the Airframe to be
released;
(iii) that on the date of the Indenture
and Trust Supplement and the Lease
Supplement relating to the Replacement
Airframe, Lessor will be the legal owner
of such Replacement Airframe free and
clear of all Liens (other than Permitted
Liens), that such Replacement Airframe
will on such date be in good working order
and condition, and that such Replacement
Airframe has been or, substantially
concurrently with such replacement, will
be duly registered in the name of Lessor
under the Act and that an airworthiness
certificate has been duly issued under the
Act with respect to such Replacement
Airframe, and that such registration and
certificate are in full force and effect,
and that Lessee will have the full right
and authority to use such Replacement
Airframe;
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(iv) that the insurance required by
Section 11 is in full force and effect
with respect to such Replacement Airframe
and all premiums then due thereon have
been paid in full;
(v) that the Replacement Airframe is
of the same or an improved model as the
Airframe requested to be released from the
Lien of the Trust Indenture;
(vi) that no Lease Default or Lease
Event of Default has occurred and is
continuing or would result from the making
and granting of the request for release
and the addition of a Replacement
Airframe; and
(vii) if the Trust Indenture has not
theretofore been discharged, the release
of the Airframe so to be released will not
impair the security of the Trust Indenture
or be in contravention of any of the
provisions of the Trust Indenture;
(f) furnish Lessor with a certificate
or certification of qualified independent aircraft
appraisers reasonably satisfactory to Lessor
certifying that the Replacement Airframe and
Replacement Engines, if any, have a value, remaining
useful life and utility at least equal to, and are
in at least as good operating condition as, the
Airframe and Engines, if any, so replaced (assuming
the Airframe and Engines were in the condition and
repair required by the terms hereof immediately
prior to the occurrence of such Event of Loss); and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to
the financing statements filed on or before the
Delivery Date) as Lessor or any Participant may
reasonably request to effect such replacement.
10.1.7 Recordation and Opinions. In the case of any
Replacement Airframe and/or Replacement Engines conveyed to Lessor
under this Section 10.l, promptly upon the registration of the
Replacement Aircraft and the recordation of the Lease Supplement and
Indenture and Trust Supplement covering the Replacement Airframe and
Replacement Engines, if any, pursuant to the Act, Lessee will cause to
be delivered to Lessor an opinion of Daugherty, Fowler & Peregrin or
other FAA counsel satisfactory to Lessor as to the due registration of
the Replacement Aircraft and the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.1.8 Conveyance. Upon compliance by Lessee with all of
the terms of this Section 10.1, (i) Lessor will comply with the
applicable provisions of Section 10.01 of the Trust Indenture and,
upon Indenture Trustee's release of the Aircraft and Engines (if
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applicable) from the Lien of the Trust Indenture Estate, Transfer to
Lessee the replaced Airframe and Engines (if any), and (ii) Lessee
will be subrogated to all claims of Lessor, if any, against third
parties for damage to or loss of such Airframe and Engines to the
extent of the then insured value thereof.
10.2 Event of Loss with Respect to an Engine.
10.2.1 Event of Loss. Upon the occurrence of an Event of
Loss with respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe, Lessee
shall forthwith (and in any event within 15 days after such
occurrence) give Lessor, Indenture Trustee and each Participant
written notice thereof and shall, as promptly as possible and in any
event within 60 days after the occurrence of such Event of Loss,
convey or cause to be conveyed to Lessor, as replacement for the
Engine with respect to which such Event of Loss occurred, title to a
Replacement Engine free and clear of all Liens, other than Permitted
Liens, and having a value, remaining useful life and utility at least
equal to, and being in as good operating condition as, the Engine with
respect to which such Event of Loss occurred, assuming such Engine was
of the value, remaining useful life and utility and in the condition
and repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss.
10.2.2 Conditions; Lessee's Obligations. Prior to or at
the time of any such conveyance, Lessee will promptly:
(a) furnish Lessor with a full warranty (as to
title) bill of sale duly conveying to Lessor such Replacement
Engine;
(b) cause a Lease Supplement subjecting such
Replacement Engine to this Lease, duly executed by Lessee, to
be delivered to Lessor for execution, and an Indenture and
Trust Supplement to be delivered to Lessor for execution and,
in each case upon execution, to be filed for recordation with
the FAA pursuant to the Act;
(c) furnish Lessor with such evidence of
compliance with (i) Section 5.01(b) of the Trust Indenture (if
the Trust Indenture shall be in effect at such time) and (ii)
the insurance provisions of Section 11 hereof with respect to
such Replacement Engine and the payment of all premiums then
due with respect to such insurance, as Lessor may reasonably
request;
(d) furnish Lessor with an opinion or opinions
of Lessee's counsel, in form, substance and scope reasonably
satisfactory to Lessor, to the effect that, upon such
conveyance, Lessor will acquire good title to such Replacement
Engine free and clear of all Liens other than Permitted Liens,
and that such Replacement Engine will be leased hereunder and
subject to the Lien of the Trust Indenture (if then in effect)
to the same extent as the Engine replaced thereby and to such
further effect as Lessor or Indenture Trustee may reasonably
request;
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(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Engine which
shall be identified by manufacturer's serial number;
(ii) a description of the Replacement
Engine (including the manufacturer's name, model and
serial number) as consideration for the Engine to be
released;
(iii) that on the date of the Lease
Supplement and the Indenture and Trust Supplement
relating to the Replacement Engine, Lessor will be
the legal owner of such Replacement Engine free and
clear of all Liens except Permitted Liens, that such
Replacement Engine will on such date be in good
working order and condition, and that such
Replacement Engine is the same or an improved or
equivalent model as the Engine to be released; and
(iv) if the Trust Indenture has not
theretofore been discharged, that the release of the
Engine so to be released will not impair the
security of the Trust Indenture or be in
contravention of any of the provisions of the Trust
Indenture;
(f) furnish Lessor with a certificate of a
qualified aircraft engineer (who may be an employee of Lessee)
certifying that such Replacement Engine has a value, remaining
useful life and utility at least equal to, and is in at least
as good operating condition as, the Engine so replaced
assuming such Engine was in the condition and repair required
by the terms hereof immediately prior to the occurrence of
such Event of Loss; and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to the
financing statements filed on or before the Delivery Date) as
Lessor or any Participant may reasonably request to effect
such replacement.
10.2.3 Recordation and Opinions. In the case of any
Replacement Engine conveyed to Lessor under this Section 10.2,
promptly upon the recordation of the Lease Supplement and the
Indenture and Trust Supplement covering such Replacement Engine
pursuant to the Act, Lessee will cause to be delivered to Lessor an
opinion of Daugherty, Fowler & Peregrin or other FAA counsel
satisfactory to Lessor as to the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.2.4 Conveyance; Replacement Engine. Upon compliance by
Lessee with the terms of this Section 10.2, Lessor will comply with
the provisions of the Trust Indenture applicable thereto and, upon
Indenture Trustee's release of the Engine with respect to which such
Event of Loss occurred from the Lien of the Trust Indenture Estate,
Transfer such
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Engine to Lessee, and Lessee will be subrogated to all claims of
Lessor, if any, against third parties for damage to or loss of such
Engine to the extent of the insured value thereof.
10.2.5 No Reduction of Rent. No Event of Loss with respect
to an Engine under the circumstances contemplated by the terms of this
Section 10.2 shall result in any reduction of Interim Rent, Basic Rent
or Renewal Rent.
10.3 Application of Certain Payments. Any payments (other than
insurance proceeds, the application of which is provided for in Section 11)
received at any time by Lessor, Lessee or any Permitted Sublessee from any
governmental authority or other Person with respect to any Event of Loss, will
be applied as follows:
10.3.1 Replacement of Airframe and Engines. If such
payments are received with respect to the Airframe and the Engines (or
engines) installed on the Airframe that have been or are being
replaced by Lessee pursuant to Section 10.1 (other than Section
10.1.3), such payments shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect,
Lessor, and upon completion of such replacement be paid over to
Lessee, provided Lessee shall have fully performed or, concurrently
therewith will fully perform, the terms of Section 10.1 with respect
to the Event of Loss for which such payments are made.
10.3.2 Replacement of Engine. If such payments are
received with respect to an Engine that has been or is being replaced
by Lessee pursuant to Section 10.2, such payments shall be paid over
to, or retained by, Indenture Trustee or, if the Trust Indenture is no
longer in effect, Lessor, and upon completion of such replacement be
paid over to Lessee, provided Lessee shall have fully performed or,
concurrently therewith will fully perform, the terms of Section 10.2
with respect to the Event of Loss for which such payments are made.
10.3.3 Nonreplacement. If such payments are received with
respect to the Airframe or the Airframe and the Engines or engines
installed on the Airframe that has not or have not been and will not
be replaced pursuant to Section 10.1 or 10.2, so much of such payments
remaining after reimbursement of Lessor, Indenture Trustee and each
Participant for costs and expenses as shall not exceed the Stipulated
Loss Value and other amounts required to be paid by Lessee hereunder
shall be applied in reduction of Lessee's obligation to pay such
Stipulated Loss Value and other amounts required to be paid by Lessee
hereunder, if not already paid by Lessee, or, if already paid by
Lessee, shall be applied to reimburse Lessee for its payment of such
Stipulated Loss Value and other amounts. The balance, if any, of such
payment remaining thereafter shall be divided between Lessor and
Lessee in proportion to their relative interests in the Aircraft.
10.4 Requisition of Aircraft for Use by Governmental Authorities.
In the event of the requisition for use of the Airframe and the Engines or
engines installed on such Airframe during the Term by any governmental
authority, Lessee shall notify Lessor promptly of such requisition, and all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same
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extent as if such requisition had not occurred. All payments received by
Lessor or Lessee from such governmental authority for the use of such Airframe
and Engines or engines prior to the time such requisition becomes an Event of
Loss shall be paid over to, or retained by, Lessee (or, if directed by Lessee,
any Permitted Sublessee); and all payments received from such governmental
authority for the use of such Airframe and Engines or engines after such time
shall be paid over to, or retained by, Indenture Trustee or, if the Trust
Indenture is no longer in effect, Lessor, and upon the performance by Lessee of
the terms of Section 10.1 with respect to such Event of Loss, shall be paid
over to Lessee.
10.5 Requisition of an Engine for Use by Governmental Authorities.
In the event of the requisition for use by any governmental authority (other
than in circumstances contemplated by Section 10.4) of any Engine but not the
Airframe, Lessee will replace such Engine hereunder by complying with the terms
of Section 10.2 to the same extent as if an Event of Loss had occurred with
respect to such Engine, and any payments received from such governmental
authority with respect to such requisition shall be paid over to, or retained
by, Indenture Trustee or, if the Trust Indenture is no longer in effect,
Lessor, and upon the performance by Lessee of the terms of Section 10.2 to the
same extent as if an Event of Loss had occurred with respect to such
requisitioned Engine, shall be paid over to Lessee.
10.6 Application of Payments During Existence of Default. Any
amount referred to in this Section 10 which is payable or creditable to or
retainable by Lessee shall not be paid or credited to or retained by Lessee if,
at the time of such payment, credit or retention, a Lease Event of Default or
Lease Default shall have occurred and be continuing hereunder but shall be paid
to and held by Indenture Trustee and applied by it as provided in the Trust
Indenture, or, if the Trust Indenture is no longer in effect, held by Lessor as
security for the obligations of Lessee under this Lease and applied against
Lessee's obligations hereunder as and when due; at such time as there shall not
be continuing any such Lease Event of Default or Lease Default, or at such
earlier time as Lessee shall have paid in full all Rent and other amounts due
and payable hereunder and under the other Operative Agreements by Lessee, any
remaining balance of such amount shall be paid to Lessee to the extent not
previously applied in accordance with the preceding clause of this sentence.
Section 11. Insurance.
11.1 Public Liability and Property Damage Insurance. Lessee shall
at all times maintain, or cause to be maintained, at its or any Permitted
Sublessee's expense, public liability (including without limitation contractual
liability, passenger legal liability and property damage, but excluding
manufacturer's product liability coverage) insurance which shall:
11.1.1 Type, Form and Amount. Be of a type and form
carried by similarly situated United States commercial air carriers
generally, and carried in amounts not less than that carried by Lessee
on similar equipment owned or leased by Lessee and not less than the
minimum amount of $350,000,000 (per occurrence) combined single limit
(or such greater amount as Lessee may carry from time to time on other
737-300 series aircraft in its fleet);
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11.1.2 Coverage. Include, but not be limited to, public
liability insurance, contractual liability insurance, passenger
liability insurance and property damage liability insurance (including
cargo and baggage liability insurance); and
11.1.3 Additional Insureds. Name as additional insureds
Lessor (in its individual and trust capacities), Indenture Trustee,
each Participant and each other Indemnified Party, as their interests
may appear.
11.2 Insurance Against Loss of or Damage to Aircraft and Engines.
Lessee shall at all times maintain, or cause to be maintained, at its or any
Permitted Sublessee's expense, insurance against loss of or damage to the
Aircraft, Airframe and Engines as follows:
11.2.1 Type, Form and Amount. "All-risk" ground and flight
aircraft hull insurance on the Aircraft and "all-risk" coverage on
each Engine and on Parts while removed from the Aircraft or Engines,
which is of the type and form, and in an amount not less than that,
carried by Lessee on similar equipment owned or leased by Lessee and
in an amount not less than that usually carried by similarly situated
United States commercial air carriers generally; and, to the extent so
usually carried, at all times that the Aircraft or any Engine is not
covered by the insurance described in Section 11.2.2, coverage against
the perils of (i) strikes, riots, civil commotions or labor
disturbances, (ii) any malicious act or act of sabotage, and (iii)
hijacking, or any unlawful seizure or wrongful exercise of control of
the Aircraft or crew in flight (including any attempt at such seizure
or control) made by any person or persons on board the Aircraft acting
without the consent of the insured other than hijacking committed by
persons engaged in a program of irregular warfare for terrorist
purposes. Such insurance shall at all times be for an amount not less
than the Stipulated Loss Value of the Aircraft.
11.2.2 War-Risk Insurance. If at any time (a) war-risk
insurance is maintained by Lessee or any Permitted Sublessee
subleasing the Aircraft or any Engine with respect to other aircraft
operated by Lessee or such Permitted Sublessee on the same or similar
routes, (b) the Aircraft is operated on routes where the custom in the
United States commercial airline industry is to carry war-risk
insurance, (c) the Aircraft is operated by a Permitted Foreign Air
Carrier as a Permitted Sublessee in any recognized or threatened area
of hostilities, or (d) the Aircraft is operated on any route where no
other aircraft is regularly operated by a United States commercial
airline and such route is within any such area of hostilities, then
war-risk and allied perils insurance of the type carried by similarly
situated United States commercial air carriers operating the same or
comparable models of aircraft on the same or similar routes shall be
maintained on the Aircraft in an amount not less than that specified
in Section 11.2.l.
11.2.3 Certain Requirements. The insurance policies
required by this Section 11.2 shall:
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11.2.3.1 Additional Insureds. Be endorsed to name
Lessor (in its individual and trust capacities), each
Participant, the Indenture Trustee and each other Indemnified
Party as additional insureds, as their interests may appear.
11.2.3.2 Payment of Proceeds. Provide that
proceeds thereunder shall be paid directly to Indenture
Trustee, so long as the Trust Indenture shall be in effect,
and thereafter to Lessor, in either case, as exclusive loss
payee; provided, however, that any proceeds payable as a
result of any property damage to the Airframe or any Engine,
which property damage does not exceed $4,000,000 ($2,000,000,
if at the time of any such payment Lessee's unsecured senior
long-term debt securities are not rated Investment Grade) and
does not constitute an Event of Loss with respect to the
Aircraft or such Engine, shall be paid to Lessee unless Lessor
or Indenture Trustee, prior to such payment, shall have
notified the insurer making such payment that a Lease Default
(of the type described in Section 14.1 or 14.5) or Lease Event
of Default has occurred and is continuing.
11.2.3.3 Waiver of Subrogation. Provide that the
insurers shall waive any rights of subrogation against Lessor,
Indenture Trustee, each Participant and each other Indemnified
Party except for claims arising out of gross negligence or
willful misconduct of such Person; provided, that the exercise
by insurers of rights of subrogation, if any, permitted by
this Section 11.2 shall not, in any way, delay payment of any
claim that would otherwise be payable by such insurers but for
the existence of such rights of subrogation or entitle such
insurers to exercise or to assert any setoff, recoupment,
counterclaim or any other deduction in respect of any amounts
payable under such policies.
11.2.4 Deductibles. The insurance required by this Section
11.2 may, subject to Section 11.8, provide for standard deductibles
which are from time to time in effect in the aviation insurance
industry generally and which are customarily maintained by similarly
situated United States commercial air carriers generally; provided,
however, such deductibles shall not be more than the deductibles
generally maintained by Lessee (and which Lessee is under no
compulsion to maintain pursuant to any indenture, mortgage, lease or
other agreement) with respect to its fleet of Boeing Model 737-300
series aircraft and CFM International Model CFM56-3 engines generally.
11.2.5 Government Indemnity. In the case of a contract
with the Government in respect of the Aircraft or Engines, a valid
agreement by the Government to indemnify Lessee, Lessor, each
Participant, Indenture Trustee and each other Indemnified Party
against the same risks which are required hereunder to be insured
against in amounts at least equal to the amounts required hereunder
from time to time (such indemnity to be backed by the full faith and
credit of the United States of America), shall be considered adequate
insurance with respect to the Aircraft, Airframe and any Engine
subject to such contract to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
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11.3 General Policy Provisions. Each insurance policy to be
procured and maintained hereunder shall:
11.3.1 Primary Insurance. Be primary and without right of
contribution from other insurance which may provide coverage to
Lessor, Indenture Trustee, or any Participant or any other Indemnified
Party with respect to its interest in the Aircraft, Airframe or any
Engine or its liabilities with respect to or arising out of the
transactions contemplated by the Operative Agreements;
11.3.2 Coverage for Each Insured. Expressly provide that
all the provisions thereof, except the agreed values and the limits of
the liability of the insurer under such policy, shall operate in the
same manner as if there were a separate policy covering each insured;
11.3.3 Waiver of Certain Rights. Waive any right of the
insurers to any setoff, recoupment, counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
liability of Lessee, Lessor, Indenture Trustee, any Participant or any
other Indemnified Party;
11.3.4 Breach of Warranty. Provide that, in respect of
Lessor, Indenture Trustee, each Participant and each other Indemnified
Party, such insurance shall not be invalidated by any action or
inaction by Lessee, any Indemnified Party or other Person and shall
insure the interests of Lessor, Indenture Trustee, each Participant
and each other Indemnified Party regardless of any breach or violation
by Lessee, any Indemnified Party or other Person of any
representation, warranty, declaration or condition contained in such
policy;
11.3.5 Notice of Termination or Changes. Provide for not
less than 30 days' prior written notice to be received by Lessor,
Indenture Trustee and each Participant before any lapse, alteration,
termination or cancellation of the insurance evidenced thereby shall
be effective as to Lessor, Indenture Trustee, each Participant and
each other Indemnified Party, except that war-risk and allied perils
policies may provide for not less than seven days' prior written
notice or such lesser or greater notice as shall at the time be
customary in the aviation insurance industry generally, and which are
customarily in effect with respect to major United States commercial
air carriers generally from time to time;
11.3.6 Nonliability for Premiums. Provide that neither
Lessor, Indenture Trustee, any Participant nor any other Indemnified
Party shall be liable for any insurance premium;
11.3.7 Identity of Insurers. Be with insurance companies,
underwriters or funds of recognized responsibility; and
11.3.8 Fifty-fifty Clause. Contain a fifty-fifty clause
per AVS 103 or its equivalent, but only in the event that such clause
is customarily included in such policies maintained by similarly
situated United States commercial air carriers generally.
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11.4 Application of Insurance Proceeds. As between Lessor and
Lessee, all insurance proceeds received under policies required to be
maintained (or to be caused to be maintained) by Lessee pursuant to Section
11.2 as a result of the occurrence of an Event of Loss with respect to the
Aircraft, Airframe or any Engine will be applied in accordance with Section
10.3.1, 10.3.2 or 10.3.3, as the case may be (except that the balance referred
to in Section 10.3.3 shall be paid over to, or retained by, Lessee). All
insurance proceeds received under such policies in respect of any property
damage loss not constituting an Event of Loss with respect to the Airframe or
an Engine will be applied in payment for repairs or for replacement property in
accordance with the terms of Section 8, if not already paid for by Lessee, and
any balance remaining after compliance with such Section with respect to such
loss shall be paid to Lessee. In the case of a loss with respect to an engine
(other than an Engine) installed on the Airframe, Lessor shall hold any payment
to it of any insurance proceeds in respect of such loss for the account of
Lessee or any other third party that is entitled to receive such proceeds. The
provisions of Section 10.6 shall apply to amounts referred to in this Section
11.4.
11.5 Certificates; Reports, Etc. With respect to any policy
required hereunder, Lessee shall cause to be furnished to Lessor, Indenture
Trustee and each Participant on or prior to the Delivery Date of the Aircraft
and on or prior to expiration of such policy, certificates of the insurer or
insurers (or their authorized representatives) providing insurance pursuant to
the requirements of this Section 11. On or before the Delivery Date of the
Aircraft, and annually thereafter on or before the renewal date of such policy,
Lessee shall cause to be furnished to Lessor, Indenture Trustee, the Original
Loan Participant and Owner Participant a report signed by Willis Corroon
Aerospace (or any other firm of independent aircraft insurance brokers,
appointed by Lessee, reasonably satisfactory to the Original Loan Participant
and Owner Participant) describing in reasonable detail the insurance then
carried and maintained with respect to the Aircraft and stating the opinion of
such firm that the insurance then carried and maintained on the Aircraft
complies with the terms hereof. Lessee agrees that it will cause such firm to
advise Lessor, Indenture Trustee, the Original Loan Participant and Owner
Participant in writing promptly of any default in the payment of any premium or
any other act or omission on the part of Lessee or any Permitted Sublessee of
which they have knowledge and which might invalidate or render unenforceable,
in whole or in part, the insurance on the Aircraft. To the extent such
agreement is reasonably obtainable, Lessee further agrees to cause such firm to
advise Lessor, Indenture Trustee and each Participant in writing at least 30
days (seven days in the case of war-risk and allied perils coverage or such
lesser or greater notice as is customary in the aviation industry generally)
prior to any expiration, lapse, alteration, cancellation or termination date of
any insurance carried and maintained on the Aircraft pursuant to this Section
11.
11.6 Lessor's Right to Maintain Insurance. In the event that
Lessee shall fail to maintain or cause to be maintained insurance as herein
provided, Lessor, Indenture Trustee or any Participant may at its option (but
shall not be obligated to) provide such insurance and in such event, Lessee
shall, upon demand, reimburse such Person, as Supplemental Rent, for the cost
thereof. No such payment, performance or compliance shall be deemed to cure
any Lease Default hereunder or otherwise relieve Lessee of its obligations with
respect thereto.
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11.7 Insurance for Own Account. Nothing in Section 11 shall limit
or prohibit Owner Participant (directly or through Lessor) from obtaining
insurance for its own account, and any proceeds payable thereunder shall be
payable as provided in the insurance policy relating thereto; provided,
however, that no such insurance may be obtained which would limit or otherwise
adversely affect the availability or coverage or cost of any insurance required
to be obtained or maintained pursuant to this Section 11. Nothing in this
Section 11 shall limit or prohibit Lessor, Indenture Trustee or any Holder from
obtaining insurance for its own account, and any proceeds payable thereunder
shall be payable as provided in the insurance policy relating thereto;
provided, however, that no such insurance may be obtained which would limit or
otherwise adversely affect the availability or coverage or cost of any
insurance required to be obtained or maintained pursuant to this Section 11 or
obtained by Owner Participant pursuant to the preceding sentence.
11.8 Self-Insurance. Notwithstanding the foregoing provisions of
this Section 11, Lessee may, from time to time so long as no Lease Event of
Default has occurred and is continuing, self-insure with respect to the
Aircraft to the same extent as it does with respect to, or maintain policies
with deductibles or premium adjustment provisions consistent with similar
provisions applicable to, other comparable aircraft operated by Lessee;
provided, however, that in the case of public liability insurance, such
self-insurance shall in no event exceed $50,000,000; and provided, further,
that if at any time Lessee's unsecured senior long-term debt securities are not
rated Investment Grade, such self-insurance (inclusive of any such public
liability insurance and without derogation from the preceding proviso) shall in
no case be in amounts greater than 4% of Lessee's tangible net worth. As used
in this Agreement, the term "Investment Grade" means a rating of "Baa3" or
higher from Moody's Investors Service or a rating from any other nationally
recognized bond rating service equivalent to or better than such a rating.
Section 12. Inspection. At all reasonable times, and upon
reasonable notice, Lessor, Indenture Trustee or any Participant or its
authorized representatives may inspect the Aircraft and inspect and copy
(subject to any confidentiality agreements, copyright restrictions and the
like) the books and records of Lessee relative thereto. Any such inspection of
the Aircraft shall be without out-of-pocket expense or risk to Lessee and shall
be a visual, walk-around inspection and may not include opening any panels,
bays or the like; provided, that no exercise of such inspection right shall
interfere with the normal operation or maintenance of the Aircraft by, or the
business of, Lessee (or any Permitted Sublessee). Subject to the proviso in
the preceding sentence, upon receipt by Lessee of a written request from the
Owner Participant or the Indenture Trustee specifying that the Owner
Participant or the Indenture Trustee desires to have an authorized
representative observe the major overhaul to be performed on the Aircraft next
following receipt of any such request, Lessee shall permit such authorized
representative to observe such overhaul. Neither Lessor, Indenture Trustee nor
any Participant shall have any duty to make any such inspection or shall incur
any liability or obligation by reason of not making any such inspection.
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Section 13. Assignment.
13.1 In General. Except as otherwise expressly permitted in
Section 7.2 or Section 11(f) of the Participation Agreement, or as required in
the case of any requisition by the Government referred to in Section 7.1,
Lessee will not, without the prior or written consent of Lessor, assign or
transfer any of its rights or obligations under this Lease or any other
Operative Agreement. Lessor may assign or convey any of its right, title and
interest in and to this Lease, any of the other Operative Agreements or the
Aircraft in accordance with the Participation Agreement, the Trust Agreement or
the express provisions of this Lease. The terms and provisions of the Lease
shall be binding upon and inure to the benefit of Lessor and Lessee and their
respective permitted successors and assigns.
13.2 Security for Lessor's Obligations. In order to secure the
indebtedness evidenced by the Certificates, the Trust Indenture provides, among
other things, for the assignment by Lessor to Indenture Trustee of its right,
title and interest in, to and under this Lease and any Permitted Sublease, to
the extent set forth in the Trust Indenture, and for the creation of a first
mortgage lien on and perfected security interest in the Aircraft in favor of
Indenture Trustee. Lessee hereby consents to such assignment and to the
creation of such mortgage and security interest and acknowledges receipt of
copies of the Trust Agreement and the Trust Indenture, it being understood that
such consent shall not affect any requirement or the absence of any requirement
for any consent under any other circumstances. So long as the Trust Indenture
shall be in effect, Lessee will furnish to Indenture Trustee counterparts of
all writings of any kind required to be delivered hereunder by Lessee to
Lessor. Until the Lien of the Trust Indenture has been released, (a) Lessee
shall make all payments of Basic Rent, Stipulated Loss Value and Termination
Value and all other amounts payable hereunder (other than Excluded Payments as
defined in the Trust Indenture) to Indenture Trustee at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, and the right of Indenture Trustee to receive
such payments shall not be subject to any defense, counterclaim, setoff or
other right or claim of any kind which Lessee may be able to assert against
Lessor (in its individual or trust capacity), Indenture Trustee (in its
individual or trust capacity), any Participant or any other Person in an action
brought by any thereof on this Lease and (b) as provided in the Trust
Indenture, certain rights of Lessor with respect to this Lease, the Aircraft,
the Airframe or any Engine (or any Part thereof) or any other part of the Trust
Indenture Estate are exercisable by Indenture Trustee.
Section 14. Events of Default. The following events shall
constitute Lease Events of Default (whether any such event shall be voluntary
or involuntary or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body), and each such
Lease Event of Default shall continue so long as, but only so long as, it shall
not have been remedied or waived:
14.1 Failure To Pay Rent. Lessee shall fail to make any payment of
Interim Rent or Basic Rent within seven Business Days from the due date
thereof; or Lessee shall fail to make any other payments required to be made by
it under the Operative Agreements within ten Business Days after
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the receipt of written demand therefor delivered to Lessee by Lessor after such
payments were required to have been made (provided, that any failure to pay any
amount owed by Lessee under the Tax Indemnity Agreement or any failure of
Lessee to pay to Lessor or the Owner Participant when due any Excluded Payments
shall not constitute a Lease Event of Default unless written notice is given by
the Owner Participant to Lessee and the Indenture Trustee that such failure
shall constitute a Lease Event of Default); or
14.2 Specific Defaults. Lessee shall fail to carry and maintain
(or cause to be carried and maintained) insurance on or with respect to the
Aircraft in accordance with the provisions of Section 11; provided, that any
such failure shall not constitute a Lease Event of Default so long as such
failure is for a period of not more than 30 days, Lessee shall not operate or
permit to be operated the Aircraft at a time when such insurance is not in
effect and the Aircraft continues to be covered by such insurance as is
required when the Aircraft is on the ground, or Lessee shall fail to comply
with Section 7.1.1; or
14.3 General Default. Lessee shall fail to perform or observe any
other covenant, condition or agreement to be performed or observed by it
hereunder or under any other Operative Agreement (except the Tax Indemnity
Agreement), and such failure shall continue unremedied for a period of 30 days
after written notice thereof to Lessee, unless Lessee shall be diligently
proceeding to correct such failure and such failure is cured within 180 days
after such notice or by the end of the Term, whichever first occurs; or
14.4 Misrepresentation and Breach of Warranty. Any representation
or warranty made by Lessee herein or in the Participation Agreement or in any
other Operative Agreement (other than the Tax Indemnity Agreement) or in any
document or certificate furnished by Lessee in connection with any thereof,
shall prove to have been incorrect in any material respect at the time made,
shall remain material at the time of discovery and shall, if curable, remain
incorrect in any material respect after 30 days after written notice thereof to
Lessee;
14.5 Bankruptcy, Etc. Lessee shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official or agency in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to authorize
any of the foregoing; or an involuntary case or other proceeding shall be
commenced against Lessee seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official or agency of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 90 days.
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Section 15. Remedies.
15.1 Default; Remedies. Upon the occurrence of a Lease Event of
Default and at any time thereafter so long as the same shall be continuing,
Lessor may, at its option, so long as any such Lease Event of Default shall be
continuing, exercise one or more of the following remedies as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect
which have not been effectively waived by Lessee:
15.1.1 Return; Repossession. Lessor may cause Lessee, upon
written demand by Lessor and at Lessee's expense, to return promptly,
and Lessee shall return promptly, all or any part of the Aircraft,
Airframe or Engines as Lessor may so demand to Lessor or its order in
the manner and condition required by, and otherwise in accordance with
all the provisions of, Section 5 as if the Aircraft, Airframe or
Engines were being returned at the end of the Term; or Lessor, at its
option, may enter upon the premises where the Aircraft, Airframe or
any Engine, or part thereof is located and take immediate possession
of and remove the same by summary proceedings or otherwise, all
subject to receipt of notice delivered pursuant to Section 7.2.3 (if
applicable) and without liability accruing to Lessor for or by reason
of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise, and Lessee
expressly waives any right it may have under applicable law to a
hearing prior to repossession of the Aircraft, Airframe or any Engine
or part thereof; or
15.1.2 Sale; Use Etc. Lessor may sell all or any part of
the Aircraft, Airframe or any Engine, at public or private sale, at
such times and places, to such Persons (including Lessor, Indenture
Trustee, or any Participant) as Lessor may determine, or otherwise
dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, Airframe or any Engine or part thereof, as Lessor, in its
sole discretion, may determine, all free and clear of any rights of
Lessee except as hereinafter set forth in this Section 15 and without
any duty to account to Lessee with respect to such action or inaction
or for any proceeds with respect thereto; or
15.1.3 Certain Liquidated Damages.
15.1.3.1 Liquidated Damages--Fair Market Rental
Value. Whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under
Section 15.1.1 or 15.1.2 with respect to the Aircraft,
Airframe or any Engine or part thereof, Lessor, by written
notice to Lessee specifying a payment date (which shall be an
SLV Determination Date) not earlier than ten days from the
date of such notice, may cause Lessee to pay to Lessor, and
Lessee shall pay to Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Interim Rent, Basic Rent or
Renewal Rent, as the case may be, due after the date specified
for payment in such notice), any unpaid Interim Rent, Basic
Rent or Renewal Rent, as the case may be, due on or prior to
such SLV Determination Date (it being understood and agreed
that Lessee shall not be required
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to pay the portion, if any, of such Interim Rent or Basic Rent
designated in Exhibit C hereto as payable in advance on such
SLV Determination Date) plus an amount equal to the excess, if
any, of the Stipulated Loss Value for the Aircraft, computed as
of such SLV Determination Date, over the fair market rental
value (determined as hereafter provided in this Section 15) of
the Aircraft for the remainder of the Term, after discounting
such fair market rental value semiannually (effective on each
Rent Payment Date) by a rate equal to the higher of the
Certificate Rate or the rate specified in clause (ii) of the
definition of Overdue Rate to present worth as of the date
specified for payment in such notice, together with interest,
if any, on such amount and unpaid Interim Rent, Basic Rent or
Renewal Rent, as the case may be, at the Overdue Rate from the
date specified for payment in such notice to the date of
payment in full; or
15.1.3.2 Liquidated Damages--Fair Market Sales
Value. If Lessor shall not have sold the Aircraft, Lessor, by
written notice to Lessee specifying a payment date (which
shall be an SLV Determination Date) not earlier than ten days
from the date of such notice, may cause Lessee to pay to
Lessor, and Lessee shall pay to Lessor, on the payment date
specified in such notice, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Interim Rent,
Basic Rent or Renewal Rent, as the case may be, due after the
date specified for payment in such notice), any unpaid Interim
Rent, Basic Rent or Renewal Rent, as the case may be, due on
or prior to such SLV Determination Date (it being understood
and agreed that Lessee shall not be required to pay the
portion, if any, of such Interim Rent or Basic Rent designated
in Exhibit C hereto as payable in advance on such SLV
Determination Date) plus an amount equal to the excess, if
any, of the Stipulated Loss Value for the Aircraft, computed
as of such SLV Determination Date, over the fair market sales
value of the Aircraft (determined as hereafter provided in
this Section 15 as of the date specified for payment in such
notice), together with interest, if any, on such amount and
unpaid Interim Rent, Basic Rent or Renewal Rent, as the case
may be, at the Overdue Rate from the date specified for
payment in such notice to the date of payment in full; or
15.1.4 Liquidated Damages upon Sale. If Lessor,
pursuant to Section 15.1.2 or applicable law, shall have sold
the Aircraft, Lessor, in lieu of exercising its rights under
Section 15.1.3 with respect to the Aircraft, may, if Lessor
shall so elect, upon giving written notice to Lessee, cause
Lessee to pay Lessor, and Lessee shall pay to Lessor, on the
date of such sale, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Interim Rent, Basic Rent
or Renewal Rent, as the case may be, due after the date of
such sale), any unpaid Interim Rent, Basic Rent or Renewal
Rent, as the case may be, due on or prior to the SLV
Determination Date (it being understood and agreed that Lessee
shall not be required to pay the portion, if any, of such
Interim Rent or Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date) on or
immediately preceding such date of sale plus the amount of any
deficiency between the net
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proceeds of such sale or (if such sale is a private sale and
is made to Lessor, Indenture Trustee, a Participant or any
Affiliate thereof) between the fair market sales value of the
Aircraft, determined as of the date of such sale as
hereinafter provided in this Section 15, and the Stipulated
Loss Value of the Aircraft, computed as of the date of such
sale, together with interest, if any, on such amount and such
unpaid Interim Rent, Basic Rent or Renewal Rent at the Overdue
Rate from the date of such sale, to the date of payment in
full; or
15.1.5 Rescission and Other Remedies. Lessor may
rescind and terminate this Lease, or may exercise any other
right or remedy which may be available to it under applicable
law or proceed by appropriate court action to enforce the
terms hereof or to recover damages for the breach hereof,
including without limitation Lessee's agreement to lease the
Aircraft for the Term and to pay Rent.
In addition to the foregoing remedies, Lessee shall be liable (except
as otherwise provided above and without duplication of amounts otherwise
payable hereunder) for any and all unpaid Rent due hereunder before, during or
after the exercise of any of the foregoing remedies and for all legal fees and
other costs and expenses (including the fees and expenses of all appraisers
required by this Section 15) of Lessor, Indenture Trustee, and Participants,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all insurance and
storage costs and all costs and expenses incurred in connection with the return
of the Aircraft, Airframe or any Engine or part thereof, in accordance with the
terms of Section 5 or in placing the Aircraft, Airframe or any Engine or part
thereof, in the condition and airworthiness required by Section 5.
Lessor agrees to give Lessee at least 15 days' prior written notice of
the date fixed for any public sale of the Aircraft, the Airframe or any Engine
or part thereof, and of the date on or after which will occur the execution of
any contract providing for any private sale.
15.2 Determination of Fair Market Rental Value and Fair Market
Sales Value. For the purpose of this Section 15, the "fair market rental
value" or the "fair market sales value" of the Aircraft shall be the rental
value or sales value, as the case may be, which would be obtained in an
arm's-length transaction between an informed and willing lessee or purchaser,
as the case may be, under no compulsion to lease or purchase, as the case may
be, and an informed and willing lessor or seller in possession, as the case may
be, and in each case shall be determined on an "as is, where is" basis pursuant
to an appraisal by a recognized independent aircraft appraiser chosen by
Lessor.
15.3 No Waiver, Etc. No remedy referred to in this Section 15 is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. No express or implied waiver by
Lessor of any Lease Event of Default shall in any way be, or be construed to
be, a waiver of any earlier or subsequent Lease Event of Default. To the
extent permitted by applicable law, Lessee hereby waives any rights now
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or hereafter conferred by statute or otherwise which may require Lessor to
sell, lease or otherwise use the Aircraft, Airframe or any Engine, or part
thereof, in mitigation of Lessor's damages as set forth in this Section 15 or
which may otherwise limit or modify any of Lessor's rights or remedies under
this Section 15.
Section 16. Notices. All notices required under the terms and
provisions hereof shall be in writing and shall be given by certified mail,
telecopy or any other customary means of written communication, addressed:
If to Lessee, at 2702 Love Field Drive, P.O. Box 36611, Dallas, Texas
75235-1611 (telecopy no. 214/904-4022), Attention: Treasurer, or at such other
address as Lessee shall from time to time designate in writing;
If to Lessor, at 777 Main Street, Hartford, Connecticut 06115
(telecopy no. 203/240-7920), Attention: Corporate Trust Administration, or at
such other address as Lessor shall from time to time designate in writing;
If to any Participant or Indenture Trustee, at the applicable address
set forth in the signature pages of the Participation Agreement or Schedule I
thereto, or at such other address as any such Participant or Indenture Trustee,
as the case may be, shall from time to time designate in writing.
The effective date of any such notice shall be, if sent by mail, five
days (ten days, if international) after mailing or, if sent by telex or
telecopy, the date when such notice is sent or dispatched, and otherwise the
date on which it is received by the addressee. Lessee shall furnish to Lessor
for transmission to Indenture Trustee and Participants a sufficient number of
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished hereunder, except in any case where
Lessee shall have transmitted the same directly to any such person.
Section 17. Net Lease; Lessee's Obligations; No Setoff,
Counterclaim, Etc. This is a net lease and it is hereby recognized that Lessor
is the owner of the Aircraft (except that Owner Participant will be the owner
for income tax purposes) and Lessee is the lessee thereof. It is the intent of
the parties hereto that this Lease be a "true lease". Lessee's obligation to
pay all Rent payable hereunder as and when due and to the Person entitled
thereto shall, subject to Section 3.8, be absolute and unconditional and shall
not be affected by any circumstance, including without limitation: (a) any
setoff, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor (in its individual or trust capacity), Indenture Trustee (in its
individual or trust capacity), any Participant, Manufacturer, any Indemnified
Party or any other Person for any reason whatsoever; (b) any defect in the
title, airworthiness, condition, design, operation or fitness for use of, or
any damage to or loss, theft, taking, requisition, condemnation, confiscation
or destruction of, the Aircraft, Airframe or any Engine, or any interruption
or cessation in the use or possession thereof by Lessee, any sublessee or any
other Person for any reason whatsoever; (c) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee or any other Person;
(d) any restriction, prevention or curtailment of or interference with any use
of the Aircraft or part thereof;
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(e) any invalidity or unenforceability or disaffirmance of this Lease or any
provision hereof or any of the other Operative Agreements or any provision
thereof, in each case whether against or by Lessee or otherwise; or (f) any
other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing; provided, that nothing in this sentence shall be
construed to modify or limit in any way Lessee's rights under Section 3.8.
If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise except as specifically provided
herein, Lessee nonetheless agrees, subject to Section 3.8, to pay an amount
equal to each Interim Rent, Basic Rent, Renewal Rent and Supplemental Rent
payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part. All Rent payable by Lessee shall be paid without notice or demand
(except as otherwise expressly provided) and, subject to Section 3.8, without
abatement, suspension, deferment, deduction, diminution or proration by reason
of any circumstance or occurrence whatsoever. Lessee hereby waives, to the
extent permitted by applicable law, any and all rights which it may now have or
which at any time hereafter may be conferred upon it, by statute or otherwise,
to terminate, cancel, quit or surrender this Lease or any part hereof, or to
any abatement, suppression, deferment, diminution, reduction or proration of
Rent except in accordance with the express terms hereof. Each payment of Rent
made by Lessee shall, subject to Section 3.8, be final as to Lessor and Lessee.
Lessee will not, subject to Section 3.8, seek to recover all or any part of any
such payment of Rent for any reason whatsoever. Lessee covenants that it will
remain obligated under this Lease in accordance with its terms and will take no
action to terminate, rescind or avoid this Lease solely as a result of the
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding-up or other similar proceeding affecting Lessor or Owner
Participant or any other action with respect to this Lease which may be taken
in any such proceeding by any trustee or receiver of Lessor or Owner
Participant or by any court (it being understood that nothing in this sentence
shall prevent Lessee from taking any action to which it would have been
entitled had such bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding- up or other similar proceeding
not occurred).
Section 18. Renewal and Purchase Options.
18.1 Renewal Options. At the end of the Base Lease Term and any
Renewal Term (other than the fourth Floating Rate Renewal Term or any prior
Floating Rate Renewal Term ending four years after the end of the Base Lease
Term), so long as no Lease Event of Default or Lease Default (of the type
described in Section 14.1 or 14.5) has occurred and is continuing, Lessee shall
have the option to renew this Lease for a Renewal Term. In order to exercise
the option to renew, Lessee shall notify Lessor thereof in writing not more
than nine months nor less than six months prior to the commencement of the
applicable Renewal Term (which notice shall be irrevocable and shall specify
the length of such Renewal Term). Renewal Rent shall be payable in arrears for
each Lease Period occurring during any Renewal Term. The Renewal Rent payable
for any Floating Rate Renewal Term hereunder shall be the fair market rental
value of the Aircraft (as defined below) calculated as of the commencement of
such Renewal Term. Such fair market rental value shall be determined not later
than three months prior to the commencement of such Renewal Term by mutual
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consent of Owner Participant and Lessee or, if they shall be unable so to
agree, by three recognized independent aircraft appraisers, one chosen and paid
for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market rental value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two appraisals, then the appraisal
of such appraiser shall be excluded, the remaining appraisals shall be averaged
and such average shall be deemed to be the fair market rental value of the
Aircraft for all purposes hereof. If either Owner Participant or Lessee shall
fail to appoint an appraiser by the date which is two months prior to the
commencement of such Renewal Term or if such two appraisers cannot agree on the
amount of such appraisal and fail to appoint a third appraiser by the date
which is one month before the commencement of such Renewal Term, then either
Owner Participant or Lessee may apply to any court having jurisdiction
(including, without limitation, the courts referred to in Section 13(b) of the
Participation Agreement) to make such appointment. For purposes of this
Section 18.1, fair market rental value shall be the cash rental obtainable in
an arm's-length lease between an informed and willing lessee (under no
compulsion to lease) and an informed and willing lessor (under no compulsion to
lease) and shall be determined on the assumptions that the Aircraft is in the
United States of America, available for use by Lessee, unencumbered by any
renewal or purchase option contained in this Lease, in the return condition
required by Section 5 of this Lease and otherwise in compliance with and
subject to the terms and requirements of this Lease. Stipulated Loss Value
amounts that are payable during any such Renewal Term shall be calculated as of
the date of commencement of such Renewal Term and shall be determined in the
same manner referred to above based on the fair market sales value of the
Aircraft on such date determined in accordance with Section 18.2(a).
18.2 Purchase Options. (a) Lessee shall have the option to
purchase the Aircraft at the end of the Base Lease Term and each Renewal Term,
so long as no Lease Default (of the type described in Section 14.1 or 14.5) or
Lease Event of Default shall have occurred and be continuing on the date of
notice of exercise of such option. In order to exercise such option, Lessee
shall notify Lessor thereof in writing not more than nine months nor less than
six months prior to the end of the Base Lease Term or such Renewal Term, as
applicable (which notice shall be irrevocable). In such case, Lessee shall
purchase the Aircraft on the last Business Day of the Base Lease Term or such
Renewal Term, as applicable, at a purchase price equal to the fair market sales
value thereof as of such last Business Day. Such fair market sales value shall
be determined not later than three months prior to such last Business Day by
mutual consent of Owner Participant and Lessee or, if they shall be unable so
to agree, by three recognized independent aircraft appraisers, one chosen and
paid for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market sales value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two appraisals, then the appraisal
of such appraiser shall be excluded, the remaining appraisals shall be averaged
and such average shall be deemed to be the fair market sales value of the
Aircraft for all
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purposes hereof. If either Owner Participant or Lessee shall fail to appoint
an appraiser by the date which is two months prior to such last Business Day or
if such two appraisers cannot agree on the amount of such appraisal and fail to
appoint a third appraiser by the date which is one month before such last
Business Day, then either Owner Participant or Lessee may apply to any court
having jurisdiction to make such appointment. For purposes of this Section
18.2, fair market sales value shall be the cash price obtainable in an
arm's-length sale between an informed and willing buyer (under no compulsion to
buy) and an informed and willing seller (under no compulsion to sell) and shall
be determined on the assumptions that the Aircraft is in the United States of
America, available for use by the buyer, unencumbered by any renewal or
purchase option contained in this Lease, in the return condition required by
Section 5 of this Lease and otherwise in compliance with the requirements of
this Lease. At the time of payment to Lessor, in funds of the type specified
in Section 3.6, of the full amount of the purchase price pursuant to this
Section 18.2(a), Lessee shall also pay to Lessor all unpaid Interim Rent and
Basic Rent due on or prior to the last day of the Term and (without
duplication) any other Rent which is due and payable through and including the
date of payment.
(b) So long as no Lease Default (of the type described in Section
14.1 or 14.5) or Lease Event of Default shall have occurred and be continuing
on the date of notice of exercise of such option, Lessee shall have the option
to purchase the Aircraft on January 1, 2017 or, if such date is not a Business
Day, on the next succeeding Business Day (the "Special Purchase Option Date")
at a purchase price equal to the percentage of Lessor's Cost indicated in Part
III of Schedule C (the "Special Purchase Price"); provided, that if there has
been an adjustment prior to the Special Purchase Option Date pursuant to
Section 3.7, the Special Purchase Price (including any installments thereof)
shall be at all times calculated to preserve the Owner Participant's Special
Purchase Price After-Tax Yield, but in any event subject to Section 3.7.2.
Such option to purchase the Aircraft shall be exercised upon written notice
from Lessee to Lessor given not more than nine months nor less than six months
prior to the Special Purchase Option Date. Such notice shall be irrevocable
and shall contain the statement that this Lease will terminate upon the
consummation of such purchase. On the Special Purchase Option Date, Lessee
shall pay to Lessor, in funds of the type specified in Section 3.6, the full
amount of the Special Purchase Price pursuant to this Section 18.2(b), together
with all unpaid Interim Rent and Basic Rent due on or prior to the Special
Purchase Option Date (it being understood and agreed that Lessee shall not be
required to pay the portion, if any, of such Basic Rent designated in Exhibit C
hereto as payable in advance on such Special Purchase Option Date) and (without
duplication) any other Rent (including Supplemental Rent in respect of Premium,
if any, and Break Amount, if any, payable in respect of the Certificates) which
is due and payable through and including the date of payment; provided, that
Lessee may elect on ten days' prior notice to Lessor to pay the Special
Purchase Price in installments as Supplemental Rent, secured as provided
herein, in which case Lessee shall pay to Lessor, on each EBO Installment
Payment Date, the amount determined by multiplying Lessor's Cost by the
percentage set forth opposite such EBO Installment Payment Date in Part II of
Exhibit C.
(c) In connection with any purchase pursuant to Section 18.2(b),
Lessee may, at its option, as part or all, as the case may be, of the
applicable purchase price, assume all of the rights and obligations of Lessor
under the Trust Indenture in respect of the Certificates (including, without
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limitation, any scheduled payment of principal of or accrued interest on the
Certificates due and payable on such date of purchase but only to the extent
that any Basic Rent installment payable by Lessee on any such date of purchase
does not cover such scheduled payment of principal or accrued interest on the
Certificates and excluding any obligations or liabilities of Lessor in its
individual capacity incurred on or prior to such date of purchase, which
obligations and liabilities shall remain the sole responsibility of Lessor in
its individual capacity) in accordance with Section 7.03 of the Trust Indenture
and simultaneously shall pay to Lessor, in funds of the type specified in
Section 3.6, an amount equal to (i) the excess, if any, of the applicable
purchase price over an amount equal to the sum of the principal of, and accrued
and unpaid interest on, the Outstanding Certificates on such date of purchase,
after taking into account any payments of principal and interest made in
respect of the Outstanding Certificates on or before such date of purchase,
plus (ii) all unpaid Interim Rent and Basic Rent due and owing by Lessee
hereunder on or prior to such date of purchase and (without duplication) any
other Rent which is due and payable through and including the date of payment
(it being understood and agreed that Lessee shall not be required to pay the
portion, if any, of such Basic Rent designated in Exhibit C hereto as payable
in advance on such date of purchase); provided, that Lessee may elect, by
notice to Lessor concurrently with notice of its election to assume such
obligations of Lessor, to pay the amount of the excess calculated pursuant to
clause (i) above in installments as Supplemental Rent, in which case (I) Lessee
shall pay to Lessor on the first EBO Installment Payment Date, the excess, if
any, of (x) the amount determined by multiplying Lessor's Cost by the
percentage set forth opposite such EBO Installment Payment Date in Part II of
Exhibit C hereto, over (y) the principal amount of the Certificates outstanding
on such date, and shall pay to Lessor on each subsequent EBO Installment
Payment Date the amount determined by multiplying Lessor's Cost by the
percentage set forth opposite such EBO Installment Payment Date in Part II of
Exhibit C hereto and (II) Section 8(aa) of the Participation Agreement shall
apply.
(d) Upon payment of the applicable purchase price for the Aircraft
as set forth in this Section 18.2, together with the other amounts specified
above to be paid by Lessee concurrently with such purchase, Lessor will
Transfer to Lessee all of the Lessor's right, title and interest in and to the
Aircraft, this Lease will terminate and, if Lessee shall not have assumed the
rights and obligations of the Owner Trustee under the Trust Indenture in
respect of the Certificates as provided for above, Lessor will request the
Indenture Trustee to execute and deliver to Lessee an appropriate instrument
releasing the Airframe and Engines with respect to which title is transferred
from the lien of the Trust Indenture and releasing the Purchase Agreement, the
Purchase Agreement Assignment, the Engine Purchase Agreement and the Engine
Purchase Agreement Assignment from the assignment and pledge, if any,
thereunder; provided, that if Lessee elects to pay the Special Purchase Price
in installments as provided for above (and shall have paid in full the
installment thereof due on the Special Purchase Option Date), the following
provisions shall also be applicable: (a) this Lease shall continue in full
force and effect (except as hereinafter provided) but shall constitute then and
thereafter a lease intended for security securing the payment of such
installments (and any appropriate UCC financing statements or amendments to UCC
financing statements shall be filed in order to indicate that this Lease is
intended for security purposes), (b) Lessor shall permit re-registration of the
Aircraft in the name of Lessee or a Sublessee on the Special Purchase Option
Date (it being understood that in all other respects the registration
provisions of the Operative Agreements shall remain fully applicable), (c) no
Basic Rent shall be payable after the Special Purchase Option
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Date, (d) the Stipulated Loss Value of the Aircraft determined at any time
after the Special Purchase Option Date shall be equal to the aggregate amount
of the installments of the Special Purchase Price which have not been paid at
the time of such determination, (e) the reference to Basic Rent in Section
14.1 shall be deemed to refer to installments of the Special Purchase Price and
(f) in the event of the occurrence and continuance of a Lease Event of Default
after the Special Purchase Option Date, Lessor shall be entitled to accelerate
the unpaid installments and exercise all the remedies available under
applicable law to a secured creditor with respect thereto.
(e) If Lessee shall have elected both (i) to assume all of the
rights and obligations of Lessor under the Trust Indenture in accordance with
Section 7.03 of the Trust Indenture and (ii) to pay to Lessor the installments
specified in the proviso to Section 18.2(c) of this Lease, then, as further
conditions precedent to those specified in paragraphs (c) and (d) of this
Section 18.2 to such assumption:
(1) the Indenture Trustee shall have received evidence reasonably
satisfactory to it that the Trust Indenture, after giving effect to the
transactions contemplated by Section 18.2(d) of this Lease, constitutes a first
priority and perfected security interest in the Aircraft, which evidence shall
include an opinion of the tenor contemplated by Section 7.03(h) of the Trust
Indenture; and (2) the Indenture Trustee and the Owner Trustee shall execute
and deliver an intercreditor agreement that covers the following matters:
(a) the Owner Trustee shall not, notwithstanding any
Lease Event of Default, exercise any remedy accorded to it pursuant to
Section 15 of this Lease until the Trust Indenture shall have been
discharged pursuant to Section 10.01 of the Trust Indenture;
(b) payment of the Supplemental Rent in respect of the
installments specified in Section 18.2(c), and all other amounts owing
to the Owner Trustee (other than Excluded Payments) (collectively,
"Equity Payments"), shall be fully and unconditionally subordinated to
the payment in full in cash of principal, interest, Break Amount or
Premium, if any, and all other amounts owing to the Holders or the
Indenture Trustee under or in respect of the Certificates or the Trust
Indenture (collectively, "Debt Payments"), all pursuant to such terms
of subordination as shall be effectively and substantively equivalent
to the manner in which Debt Payments are paid or payable in priority
to the Equity Payments, and such other customary terms of
subordination as shall be reasonably required by the Indenture
Trustee; and
(c) the Owner Trustee shall have the substantive
equivalent of the cure and buy-out rights specified in clauses (e)(i)
and (e)(ii) of Section 8.03 of the Trust Indenture.
Section 19. Successor Owner Trustee. Lessee agrees that in the
case of the appointment of any successor Owner Trustee pursuant to the terms of
the Trust Agreement, such successor Owner Trustee shall, upon written notice by
such successor Owner Trustee to Lessee, succeed to all the rights, powers and
title of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft for all purposes hereof without the necessity of any consent or
approval by Lessee (but such
SALE AND LEASE AGREEMENT [N605SW]
-58-
<PAGE> 65
successor Owner Trustee shall qualify under the terms of Section 8(b) of the
Participation Agreement) and without in any way altering the terms of this
Lease or Lessee's obligations hereunder. One such appointment and designation
of a successor Owner Trustee shall not exhaust the right to appoint and
designate further successor or additional Owner Trustees pursuant to the Trust
Agreement, and such right may be exercised repeatedly as long as this Lease
shall be in effect.
Section 20. Right to Perform for Lessee. If Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor (subject
to the terms of the Trust Indenture) or Indenture Trustee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or
Indenture Trustee incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
Section 21. Quiet Enjoyment. So long as no Lease Event of
Default shall have occurred, and be continuing, during the Term, Lessor will
not, through its own actions or inactions, interfere in the quiet enjoyment of
the Aircraft by Lessee or any Permitted Sublessee.
Section 22. Investment of Security Funds; Miscellaneous;
Amendment.
22.1 Investment of Security Funds. Subject always to the terms of
the Trust Indenture for so long as the Trust Indenture shall remain in effect,
any moneys required to be paid to or retained by Lessor which are not required
to be paid to Lessee pursuant to Section 10.6 or 11.4 solely because a Lease
Event of Default or Lease Default shall have occurred and be continuing, or
which are held by Lessor pending payment to Lessee pursuant to Section 11.4 or
which are required to be paid to Lessee pursuant to Section 10.3 or 11.4 after
completion of a replacement to be made pursuant to Section 10.1 or 10.2, shall,
until paid to Lessee as provided in Section 10 or 11 or applied as provided
herein or in the Trust Indenture or Trust Agreement, be invested by Lessor from
time to time as directed in writing by Lessee and at the expense and risk of
Lessee in the following securities (which shall mature within 91 days of the
date of purchase thereof): (a) direct obligations of the Government; (b)
obligations fully guaranteed by the Government; (c) open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any State thereof rated P-1 or its equivalent by Moody's Investors
Service and A-l or its equivalent by Standard & Poor's Rating Group, a division
of McGraw-Hill, Inc.; or (d) certificates of deposit issued by, or bankers'
acceptances of, or time deposits or a deposit account with (i) the Owner
Trustee or Indenture Trustee (in their individual capacities) or (ii) any bank,
trust company or national banking association incorporated or doing business
under the laws of the United States of America or any state thereof having a
combined capital and surplus of at least $100,000,000. There shall be promptly
remitted to Lessee or its order any gain (including interest received) realized
as the result of any such investment (net of any fees, commissions and other
expenses, if any, incurred in connection with such investment) unless a Lease
Event of Default or a Lease Default (of the type described in Section 14.1 or
14.5) shall have occurred and be continuing. Lessee will promptly pay to
Lessor, on demand, the amount of any loss realized as the result of any such
investment (together
SALE AND LEASE AGREEMENT [N605SW]
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<PAGE> 66
with any fees, commissions and other expenses, including Taxes, if any,
incurred in connection with such investment), such amount to be disposed of in
accordance with the terms of the Trust Indenture or the Trust Agreement.
22.2 Miscellaneous; Amendment. Lessee shall do, execute,
acknowledge and deliver, or shall cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances and assurances as Owner Trustee,
Indenture Trustee or any Participant shall reasonably require for accomplishing
the purposes of this Agreement and the other Operative Agreements. Any
provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. This Lease shall constitute an
agreement of lease, and nothing herein shall be construed as conveying to
Lessee any right, title or interest in or to the Aircraft, Airframe or Engines
except as a lessee only. The section and paragraph headings in this Lease and
the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN, AND EACH LEASE SUPPLEMENT AND
AMENDMENT HERETO IS INTENDED TO BE, DELIVERED IN THE STATE OF NEW YORK AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN SUCH STATE BY
RESIDENTS THEREOF AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Lease and each Lease
Supplement and amendment hereto may be executed in several counterparts, each
of which shall be deemed an original, and all such counterparts shall
constitute one and the same instrument; provided, that no security interest in
Lessor's right, title and interest in and to this Agreement may be created
through the transfer or possession of any counterpart other than the
counterpart identified, for purposes of perfection of a security interest in
chattel paper (as such term is defined in the UCC), as the original counterpart
on the cover hereof.
Section 23. Permitted Foreign Air Carriers. Lessor may, in the
exercise of its reasonable business judgment, by written notice to Lessee,
remove any foreign air carrier from Exhibit D and Lessee may, by written notice
to Lessor, request that any foreign air carrier be added to Exhibit D, subject
to Lessor's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no deletion of an airline from the
list of Permitted Foreign Air Carriers pursuant hereto shall (i) affect any
existing sublease or other agreement providing for transfer of possession of
the Aircraft, Airframe, any Engine or Part which was permitted hereunder at the
time entered into, or (ii) preclude any subsequent renewal or extension of such
sublease or
SALE AND LEASE AGREEMENT [N605SW]
-60-
<PAGE> 67
other agreement to which the Permitted Foreign Air Carrier under a sublease is
entitled by the terms thereof as originally in effect.
SALE AND LEASE AGREEMENT [N605SW]
-61-
<PAGE> 68
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed and delivered as of the day and year first above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity except as expressly
stated herein, and otherwise solely as
Owner Trustee under the Trust Agreement
By: /s/ Michelle K. Blezard
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By: /s/ John D. Owen
Treasurer
SALE AND LEASE AGREEMENT [N605SW]
<PAGE> 69
EXHIBIT A TO
LEASE AGREEMENT
SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____
THIS SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____, dated
______________, _____ between SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity but solely as Owner Trustee under that certain
Trust Agreement, dated as of August 1, 1995 (the "Trust Agreement"), between
the Owner Participant named therein and such Bank ("Lessor"), and SOUTHWEST
AIRLINES CO., a Texas corporation ("Lessee"),
RECITALS.
A. On ________________ an AC Form 8050-2 Bill of Sale from
Manufacturer (as defined in the Sale and Lease Agreement hereinbelow referred
to) in favor of Lessee covering the Aircraft hereinbelow described was recorded
by the Federal Aviation Administration as Conveyance Number ________;
B. Lessor and Lessee have heretofore entered into that certain
Sale and Lease Agreement dated as of August 1, 1995, as supplemented and
amended from time to time (herein called the "Lease Agreement" and the defined
terms therein being herein used with the same meaning), which Lease Agreement
provides in Section 2 for the execution of a Lease Supplement substantially in
the form hereof for the purpose of Lessee's selling to Lessor, and Lessor's
leasing back to Lessee, the Aircraft under the Lease Agreement as and when
delivered by Lessor to Lessee in accordance with the terms thereof; and
C. The Lease Agreement relates to the airframe and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation with the FAA on the date hereof as
one document.
______________________
All of the right, title and interest of Lessor in and to this Sale and
Lease Agreement Supplement has been assigned to and is subject to a security
interest in favor of Wilmington Trust Company, as Indenture Trustee. This Sale
and Lease Agreement Supplement has been executed in several counterparts. No
security interest in Lessor's right, title and interest in and to this Sale and
Lease Agreement Supplement may be created through the transfer or possession of
any counterpart other than the counterpart identified, for purposes of
perfection of a security interest in chattel paper (as such term is defined in
the UCC), as the original counterpart. [This is not the original counterpart.]
A-1
<PAGE> 70
In consideration of the premises and other good and sufficient
consideration, and pursuant to Section 2 of the Lease Agreement, Lessor and
Lessee hereby agree as follows:
1. Lessee hereby delivers and sells to Lessor and Lessor hereby
accepts and purchases from Lessee and in turn delivers and leases back to
Lessee, and Lessee hereby accepts and leases back from Lessor, under the Lease
Agreement, as herein supplemented, the following-described Boeing Model 737-3H4
Series Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the
date hereof consists of the following:
Airframe: U.S Registration Number N605SW and Manufacturer's Serial No.
27956; and
Engines: Two CFM International Model CFM56-3-B1 Engines installed
thereon bearing Engine Manufacturer's Serial Numbers as follows: 858188 and
858207.
Each of the Engines described above has 750 or more rated takeoff
horsepower or the equivalent of such horsepower.
2. The Delivery Date of the Delivered Aircraft is the date of
this Lease Supplement set forth in the opening paragraph hereof.
3. Lessee hereby confirms to Lessor that the Delivered Aircraft
has been or will be duly marked in accordance with the terms of Section 7.l.2
of the Lease and that Lessee has accepted the Delivered Aircraft for all
purposes hereof and of the Lease Agreement, including its being airworthy, in
accordance with specifications, in good working order and repair and without
defect or inherent vice in title, condition, design, operation or fitness for
use, whether or not discoverable by Lessee as of the date hereof, and free and
clear of all Liens except Permitted Liens; provided, however, that this Section
3 is without prejudice to the rights of Lessee or Lessor against Manufacturer
or any supplier of the Aircraft, Engines or any Part.
4. Lessor's Cost for the Delivered Aircraft is $33,000,000.
5. All the provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement, on and as of the date of
this Lease Supplement, to the same extent as if fully set forth herein.
6. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW
YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
A-2
<PAGE> 71
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered as of the date and year first
above written.
Lessor:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By ___________________________________
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By ___________________________________
Treasurer
SALE AND LEASE AGREEMENT SUPPLEMENT [N605SW]
<PAGE> 72
EXHIBIT B-1 TO
LEASE AGREEMENT
STIPULATED LOSS VALUE SCHEDULE
<TABLE>
<CAPTION>
SLV
Determination Stipulated Loss Value
Date (% of Lessor's Cost)
------------------ ---------------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
_________________________
* NOTE: If the event giving rise to an obligation to pay any Stipulated
Loss Value occurs and the actual date of the loss of tax benefits
resulting from such event shall be earlier or later than the date
assumed in calculating the Federal income tax consequences reflected
in the applicable Stipulated Loss Value, such Stipulated Loss Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-1-2
<PAGE> 73
EXHIBIT B-2 TO
LEASE AGREEMENT
TERMINATION VALUE SCHEDULE
<TABLE>
<CAPTION>
TV
Determination Termination Value
Date (% of Lessor's Cost)
-------------- --------------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
_________________________
* NOTE: If the event giving rise to an obligation to pay any
Termination Value occurs and the actual date of the loss of tax
benefits resulting from such event shall be earlier or later than the
date assumed in calculating the Federal income tax consequences
reflected in the applicable Termination Value, such Termination Value
shall be appropriately adjusted upwards or downwards to reflect the
actual timing of the loss of such tax benefits, but otherwise based on
the same original assumptions.
B-2-1
<PAGE> 74
EXHIBIT C TO
LEASE AGREEMENT
PART I
RENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Percentage of
Lessor's Cost
-----------------------------------------
Rent Payment
Date Total Advance Arrears
-------------- ----- ------- -------
<S> <C> <C> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
C-1
<PAGE> 75
EXHIBIT C TO
LEASE AGREEMENT
PART II
EBO INSTALLMENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
EBO Installment Percentage of
Payment Date Lessor's Cost
- ----------------- -------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
C-2
<PAGE> 76
EXHIBIT C TO
LEASE AGREEMENT
PART III
SPECIAL PURCHASE PRICE
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
___________%
C-3
<PAGE> 77
EXHIBIT D TO
LEASE AGREEMENT
PERMITTED FOREIGN AIR CARRIERS
<TABLE>
<S> <C>
Aer Lingus Icelandair
Aeromexico Interflug
Air Canada Japan Air Lines
Air Europa Japan Air Lines System
Air France Japan TransOcean Air
Air Inter KLM
Air New Zealand Korean Air
Air UK LAN Chile
Alitalia Lauda Air
All Nippon Airways Lufthansa
ALM Luxair
Ansett Airlines of Australia Maersk
Australian Airlines Malaysian Airline System
Austrian Airlines Martinair
Bahamasair Mexicana
Braathens S.A.F.E. Monarch Airlines
Britannia Nordair
British Airways QANTAS Airways
British Midland Quebecair
BWIA Ryanair
Canadian Airlines International Sabena
Cathay Pacific Airways SAS
Cayman Airways Singapore Airlines
Condor Flugdienst Swissair
DanAir TAP
Finnair Thai Airways
Garuda Trans Australia Airlines
Hopag Lloyd Transavia Holland
Transbrasil
VARIG
</TABLE>
D-1
<PAGE> 78
EXHIBIT E TO
LEASE AGREEMENT
ASSUMED INTEREST AMOUNTS
<TABLE>
<CAPTION>
Rent Payment Assumed Interest
Date Amount
-------------- ----------------
<S> <C>
</TABLE>
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
E-1
<PAGE> 79
APPENDIX A TO
LEASE AGREEMENT
CERTAIN RETURN CONDITIONS
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of its return of the Aircraft pursuant to Section 5.3, the
Airframe shall have at least one year remaining until the next scheduled "D"
check (which term, as used in this paragraph, shall refer to a "full D" check
accomplished at ten year intervals, rather than to any "quarter D" or "half D"
check which may be scheduled under the Maintenance Program then used by Lessee
or any Permitted Sublessee, as the case may be).
* * *
APP-1
<PAGE> 1
EXHIBIT 4.48
FIRST AMENDMENT TO
SALE AND LEASE AGREEMENT
dated as of October 1, 1995
between
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
as Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
_______________________
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N605SW)
All right, title and interest of Lessor in and to the Sale and Lease
Agreement, as amended, and the Aircraft (including the Engines), has been
assigned to and is subject to a security interest in favor of WILMINGTON TRUST
COMPANY, as Indenture Trustee. This First Amendment to Sale and Lease
Agreement has been executed in several counterparts. No security interest in
Lessor's right, title and interest in and to this First Amendment to Sale and
Lease Agreement may be created through the transfer or possession of any
counterpart other than the counterpart identified, for purposes of perfection
of a security interest in chattel paper (as such term is defined in the UCC),
as the original counterpart. This is not the original counterpart.
<PAGE> 2
THIS FIRST AMENDMENT TO SALE AND LEASE AGREEMENT, dated as of October
1, 1995 (this "Agreement"), between SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee under that certain Trust Agreement establishing
Southwest Airlines 1995 Trust N605SW and dated as of August 1, 1995 ("Lessor"),
and SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), amends that certain
related Sale and Lease Agreement dated as of August 1, 1995 (the "Original
Lease") between Lessee and Lessor (the Original Lease, as supplemented by Sale
and Lease Agreement Supplement No. One thereto relating to the Aircraft
referred to below dated August 25, 1995 ("Lease Supplement No. 1") between
Lessor and Lessee, being referred to herein as the "Lease"),
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor, the
Aircraft, which consists of the following components: (i) Airframe: One (1)
Boeing 737-3H4, FAA Registration No. N605SW, Manufacturer's serial no. 27956;
and (ii) Engines: Two (2) CFM International Model CFM56-3-B1 Engines bearing,
respectively, Manufacturer's serial numbers 858207 and 858188; and
WHEREAS, a counterpart of the Original Lease, to which was attached
and made a part thereof a counterpart of Lease Supplement No. 1, was recorded
by the Federal Aviation Administration on September 14, 1995 and assigned
Conveyance No. Z96921; and
WHEREAS, in connection with the refinancing of the Certificates
pursuant to Section 18 of the Participation Agreement, the parties wish to
recalculate Interim Rent, Basic Rent, Stipulated Loss Value percentages and
Termination Value percentages and Special Purchase Price; and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
<TABLE>
<S> <C> <C>
Section 3. Amendments to Section 3 ................................. 4
Section 4. Amendment to Section 7 .................................. 6
Section 6. Amendments to Section 11 ................................. 7
Section 7. Ratification ............................................ 7
</TABLE>
SALE AND LEASE AMENDMENT [N605SW]
-1-
<PAGE> 3
Section 1. Amendments to Exhibits B-1, B-2, C and E. Exhibits B-1, B-2
and C to the Lease are hereby deleted in their entirety and replaced with
Exhibits B-1, B-2 and C, respectively, to this Amendment. Exhibit E to the
Lease is hereby deleted in its entirety.
Section 2. Amendments to Section 1. Section 1 of the Lease is
hereby amended in the following manner:
(a) The following defined terms are hereby added to
Section 1 in alphabetical order:
"`First Amendment to Sale and Lease Agreement' means that certain
First Amendment to Sale and Lease Agreement dated as of October 1, 1995 by and
between Lessee and Lessor relating to the Aircraft."
"`First Amendment to Participation Agreement' means that certain First
Amendment to Participation Agreement dated as of October 1, 1995 by and among
Lessee, Owner Participant, Owner Trustee, Indenture Trustee and Pass Through
Trustee relating to the Aircraft."
"`First Amendment to Trust Indenture' means that certain First
Amendment to Trust Indenture and Security Agreement, dated as of October 1,
1995 between Owner Trustee and Indenture Trustee relating to the Aircraft."
"`Pass Through Certificates' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trust Agreements' is defined in Section 1.01(b) of the
Trust Indenture."
"`Pass Through Trustee' is defined in Section 1.01(b) of the Trust
Indenture."
"`Pass Through Trust Supplement' means each of the two separate Trust
Supplements Nos. 1995-A3 and 1995-A4 dated as of October 1, 1995 between Lessee
and Pass Through Trustee."
"`Refinancing Agreement' means that certain Refinancing Agreement
relating to the Aircraft dated as of October 1, 1995 by and among Lessee, Owner
Participant, Original Loan Participant, Owner Trustee, Indenture Trustee and
Pass Through Trustee."
(b) The definition of "Indemnified Parties" is hereby
amended to be and read in its entirety as follows:
"`Indemnified Parties' means (i) Shawmut Bank Connecticut, National
Association, in its individual capacity and as Owner Trustee, (ii) Wilmington
Trust Company, in its individual capacity and as Indenture Trustee, (iii) the
Owner Participant, (iv) each Holder of a Series SWA 1995 Trust N605SW
Certificate (including without limitation the Pass Through Trustee), (v) the
Estate and the Trust Indenture Estate, (vi) the Original Loan
SALE AND LEASE AMENDMENT [N605SW]
-2-
<PAGE> 4
Participant, (vii) the Guarantor, (viii) the respective Affiliates, successors
and assigns of the foregoing and (ix) the respective directors, officers,
employees, agents, partners and servants of the foregoing."
(c) The definition of "Lease", "this Lease", "this
Agreement", "hereby", "herein", "hereof", and "hereunder" is hereby amended to
be and read in its entirety as follows:
"`Lease', `this Lease', `this Agreement', `hereby', `herein',
`hereof', `hereunder' or other words mean this Sale and Lease Agreement as
amended by the First Amendment to Sale and Lease Agreement, and as supplemented
by one or more Lease Supplements and as may be further amended from time to
time."
(d) The definition of "Operative Agreements" is hereby
amended to be and read in its entirety as follows:
"`Operative Agreements' means this Lease, each Lease Supplement, the
Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Trust Indenture, the Certificates, each
Indenture and Trust Supplement, the Bills of Sale, the Tax Indemnity Agreement,
the Manufacturer's Consent and the Refinancing Agreement, including any
consents included in or attached to any thereof."
(e) The definition of "Participant" is hereby amended to
be and read in its entirety as follows:
"`Participant' means Owner Participant and its successors and
permitted assigns."
(f) The definition of "Participation Agreement" is hereby
amended to be and read in its entirety as follows:
"`Participation Agreement' means the Participation Agreement relating
to the Aircraft, dated as of August 1, 1995, among Lessee, Owner Participant,
Original Loan Participant, Lessor and Indenture Trustee as amended by the First
Amendment to Participation Agreement and as may be further amended from time to
time."
(g) The definition of "Special Purchase Price After-Tax
Yield" means the after-tax economic yield, total aggregate after-tax cash flow
and general pattern of book earnings expected by the Owner Participant with
respect to the Aircraft through the Special Purchase Option Date if the Special
Purchase Option were exercised and the Special Purchase Option Price paid in
installments, utilizing the multiple investment sinking fund method of analysis
and the same assumptions as used by Owner Participant (including the Tax
Assumptions set forth in Section 2 of the Tax Indemnity Agreement) in its
economic analysis of the transaction as of the Delivery Date.
(h) The definition of "Stipulated Loss Value" is hereby
amended to be and read in its entirety as follows:
SALE AND LEASE AMENDMENT [N605SW]
-3-
<PAGE> 5
"`Stipulated Loss Value' means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment. Stipulated Loss
Value may be subject to adjustment in accordance with Section 3.7 and Section
18.2(d) of this Agreement."
(i) The definition of "Termination Value" is hereby
amended to be and read in its entirety as follows:
"`Termination Value' means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined. Termination Value may be subject to adjustment in accordance with
Section 3.7 of this Agreement."
(j) The definition of "Trust Indenture" is hereby amended
to be and read in its entirety as follows:
"`Trust Indenture' means the Trust Indenture and Security Agreement,
dated as of August 1, 1995, between Owner Trustee and Indenture Trustee,
relating to the Aircraft, as supplemented by the Trust Agreement and Trust
Indenture and Security Agreement Supplement, dated August 25, 1995, and as
amended by the First Amendment to Trust Indenture and as may be further amended
or supplemented from time to time."
(k) The definitions of "Assumed Interest Rate," "Assumed
Interest Amount," "Break Amount" and "Rent Differential Amount" are hereby
deleted in their entirety.
Section 3. Amendments to Section 3. Section 3 of the Lease is
hereby amended in the following manner:
(a) Section 3.3 is hereby amended to be and read in its
entirety as follows:
"3.3 Interim and Basic Rent. No Interim Rent or Basic
Rent shall be paid during the Preliminary Lease Term. Lessee hereby agrees to
pay to Lessor (i) Interim Rent for the Interim Lease Term with respect to the
Aircraft on the first Rent Payment Date set forth in Part I of Exhibit C, and
(ii) Basic Rent for the Base Lease Term with respect to the Aircraft on each
subsequent Rent Payment Date set forth in Part I of Exhibit C, in each case in
an amount equal to the percentage of Lessor's Cost of the Aircraft set forth in
Part I of Exhibit C opposite such Rent Payment Date, subject to the terms of
the next succeeding paragraph of this Section 3.3 and Section 3.7. Each
installment (or portion of an installment) of Interim Rent or Basic Rent under
the heading `Advance' in Part I of Exhibit C payable on a Rent Payment Date
shall relate to the respective Lease Period
SALE AND LEASE AMENDMENT [N605SW]
-4-
<PAGE> 6
immediately following such Rent Payment Date, and each installment (or portion
of an installment) of Interim Rent or Basic Rent under the heading `Arrears' in
Part I of Exhibit C payable on a Rent Payment Date shall relate to the
respective Lease Period immediately preceding such Rent Payment Date.
"Anything contained in the Participation Agreement or this
Lease or any other Operative Agreement to the contrary notwithstanding, (a)
each installment of Basic Rent payable under this Lease, whether or not
adjusted in accordance with the provisions of Section 3.7 hereof, shall be,
under any circumstances and in any event, in an amount at least sufficient to
pay in full, on such Rent Payment Date, any scheduled payments then required to
be made on account of the principal of and interest on the Certificates, and
(b) Stipulated Loss Value, Termination Value and, unless Lessee shall have
assumed the Certificates pursuant to Section 18.2(c) hereof, the Special
Purchase Price and the initial installment of the Special Purchase Price if
paid in installments, in each case whether or not adjusted in accordance with
the provisions of Section 3.7, as of the date of determination thereof,
together with any amount of Basic Rent required to be paid on such date and all
other amounts payable on such date, shall equal under any circumstances and in
any event, an amount at least sufficient to pay in full any scheduled payments
then required to be made on account of the principal of and interest
(including, without limitation any interest on overdue principal and, to the
extent permitted by applicable law, interest), and Premium, if any, on the
Certificates and all amounts which would be payable prior thereto or on a
parity therewith if Section 3.03 of the Trust Indenture were applicable at the
time of such payment."
(b) Section 3.4 of the Lease is hereby amended to be and
read in its entirety as follows:
"3.4 Variable Amounts on Certificates. Lessee shall pay (or cause
to be paid) to or on behalf of Lessor an amount of Supplemental Rent equal to
the Premium (if any) payable on the Certificates, amounts due pursuant to
Section 15.05 of the Trust Indenture and each other amount required to be paid
(other than principal and interest on the Certificates) by Lessor as Owner
Trustee under the Trust Indenture, on the same date that such amounts are due
under the Trust Indenture and as provided in Section 3.6."
(c) Section 3.7.1 of the Lease is hereby amended to be
and read in its entirety as follows:
"3.7.1 Adjustments upon Payment by Lessor of Transaction
Costs, Etc. If (a) the Transaction Costs referred to in Section 16(a) of the
Participation Agreement paid by Owner Participant in connection with the
closing of this transaction on the Delivery Date are equal to an amount which
is other than 0.387295% of Lessor's Cost, (b) the Transaction Costs referred to
in Section 16(a) of the Participation Agreement paid by Owner Participant in
connection with the initial refinancing or refunding of the Certificates
pursuant to Section 18 of the Participation Agreement are equal to an amount
which is other than 0.629952% of Lessor's Cost, (c) a refinancing or refunding
of the Certificates pursuant to Section 17 of the Participation Agreement
occurs, or (d) any recalculation of Interim Rent,
SALE AND LEASE AMENDMENT [N605SW]
-5-
<PAGE> 7
Basic Rent, Stipulated Loss Value, Termination Value and the Special Purchase
Price is required by the terms of the Tax Indemnity Agreement, then in each
case, the Interim Rent and Basic Rent percentages set forth in Exhibit C, the
Stipulated Loss Value percentages set forth in Exhibit B-1 and the Termination
Value percentages set forth in Exhibit B-2 shall be recalculated by Owner
Participant (i) in the case of a recalculation pursuant to clause (a), on or
prior to August 23, 1996, (ii) in the case of a recalculation pursuant to
clause (b), on or prior to the second Rent Payment Date following the relevant
Section 18 Refinancing Date, (iii) in the case of a recalculation pursuant to
clause (c), prior to the relevant Refinancing Date or (iv) in the case of a
recalculation pursuant to clause (d), prior to the Rent Payment Date next
following the event described in clause (d), in each case in order to: (A)
maintain Net Economic Return and (B) minimize the Net Present Value of Rents to
the extent possible consistent with clause (A). In addition, in the event of
an adjustment pursuant to this Section 3.7, the Special Purchase Price
(including any installments thereof) shall be recalculated in accordance with
the terms of Section 18.2(b)."
(d) The first sentence of Section 3.8 is hereby amended to be
and read in its entirety as follows:
"3.8 Certain Advances; Reimbursement Thereof. If and to
the extent that the Indenture Trustee shall not have received the
Deferred Equity Amount on the Deferred Equity Date, then Lessee shall
pay to the Indenture Trustee on behalf of the Owner Participant on the
Deferred Equity Date an amount equal to the amount not so paid by the
Owner Participant (such amount herein referred to as an "Advance")."
Section 4. Amendment to Section 7. Section 7.3.3 of the Lease
is hereby amended to delete all references therein to the Original Loan
Participant.
Section 5. Amendment to Section 10. Section 10.1.3 of the Lease
is hereby amended to be and read in its entirety as follows:
"10.1.3 Payment of Stipulated Loss Value and Rent. On any Business
Day designated by Lessee upon 30 days' irrevocable notice to Lessor and the
Indenture Trustee, but in no event later than the earlier of (i) the 180th day
following the date of the occurrence of such Event of Loss or (ii) the later of
15 days following receipt of insurance proceeds with respect to such occurrence
or the date Lessee shall have made or shall have deemed to have made its
election under Section 10.1.1 to comply with Section 10.1.3, Lessee shall pay
to Lessor in the manner and in funds of the type specified in Section 3.6, (A)
the Stipulated Loss Value for the Aircraft, determined as of the date of
payment (as described in the definition of Stipulated Loss Value), (B) all
unpaid Interim Rent and Basic Rent due on or prior to the SLV Determination
Date with reference to which the Stipulated Loss Value is computed (it being
understood and agreed that Lessee shall not be required to pay the portion, if
any, of such Interim Rent or Basic Rent designated in Exhibit C hereto as
payable in advance on such SLV Determination Date), and (C) (without
duplication) any other Rent which is due and payable through and including the
date of payment."
SALE AND LEASE AMENDMENT [N605SW]
-6-
<PAGE> 8
Section 6. Amendments to Section 11.
(a) Section 11.5 of the Lease is hereby amended to delete
all references therein to the Original Loan Participant.
(b) Section 11.6 of the Lease is hereby amended to be and
read in its entirety as follows:
"11.6 Lessor's Right to Maintain Insurance. In the event that Lessee
shall fail to maintain or cause to be maintained insurance as herein provided,
Lessor, Indenture Trustee, Owner Participant or, so long as Pass Through
Trustee is a Holder, Pass Through Trustee, may at its option (but shall not be
obligated to) provide such insurance and in such event, Lessee shall, upon
demand, reimburse such Person, as Supplemental Rent, for the cost thereof. No
such payment, performance or compliance shall be deemed to cure any Lease
Default hereunder or otherwise relieve Lessee of its obligations with respect
thereto."
Section 7. Ratification. Except as amended hereby, the Lease
continues and shall remain in full force and effect in all respects.
Section 8. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same instrument.
SALE AND LEASE AMENDMENT [N605SW]
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<PAGE> 9
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Sale and Lease Agreement to be duly delivered in the State of New
York and executed as of the day and year first above written.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Owner Trustee, Lessor
By: /s/ PHILIP G. KANE, JR.
Corporate Trust Officer
SOUTHWEST AIRLINES CO., Lessee
By: /s/ JOHN D. OWEN
Treasurer
Approved and Consented to:
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
SALE AND LEASE AMENDMENT [N605SW]
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<PAGE> 10
EXHIBIT B-1 TO
SALE AND LEASE AGREEMENT
Stipulated Loss Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N605SW]
B-1
<PAGE> 11
EXHIBIT B-2 TO
SALE AND LEASE AGREEMENT
Termination Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N605SW]
B-2
<PAGE> 12
EXHIBIT C TO
SALE AND LEASE AGREEMENT
Part I
Rent Payment Schedule
Part II
EBO Installment Payment Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
Part III
Special Purchase Price
45.68408416% of Lessor's Cost
SALE AND LEASE AMENDMENT [N605SW]
C-1
<PAGE> 1
EXHIBIT 4.49
________________________________________________________________________________
TRUST AGREEMENT
dated as of August 1, 1995
between
BOT FINANCIAL & LEASING CORPORATION B-4,
Owner Participant
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
Owner Trustee
__________________________
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1995 TRUST N605SW
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01 Authority to Execute Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02 Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.01 Purchase of Certain Rights in the Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.02 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.01 Distribution of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.02 Method of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V
DUTIES OF THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.01 Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.02 Action Upon Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.03 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.04 No Duties Except as Specified in Trust Agreement or Instructions . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.05 No Action Except Under Specified Documents or Instructions . . . . . . . . . . . . . . . . . . 7
SECTION 5.06 No Power to Reinvest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI
THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6.01 Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6.02 Absence of Certain Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.03 No Representations or Warranties as to Certain Matters . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.04 No Segregation of Monies; Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.05 Reliance Upon Certificates, Counsel and Agents . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.06 Not Acting in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.07 Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.08 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VII
INDEMNIFICATION OF SBC
BY OWNER PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7.01 Owner Participant to Indemnify SBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST . . . . . . . . . . . . . . . . . 12
SECTION 8.01 Transfer of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
TRUST AGREEMENT [N605SW]
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<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES . . . . . . . . . . . . . . . . . . 12
SECTION 9.01 Resignation of Owner Trustee: Appointment of Successor . . . . . . . . . . . . . . . . . . . . 12
SECTION 9.02 Co-Trustees and Separate Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . 14
SECTION 10.01 Supplements and Amendments and Delivery Thereof . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 10.02 Discretion as to Execution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.03 Distribution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10.04 Absence of Requirement as to Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.01 Termination of Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.02 Owner Participant Has No Legal Title in Trust Estate . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.03 Assignment, Sale, Etc. of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.04 Trust Agreement for Benefit of Certain Parties Only . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.05 [Intentionally reserved for potential future use] . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.08 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.10 Binding Effect, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
TRUST AGREEMENT [N605SW]
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 11.11 Headings; References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.13 Performance by the Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11.14 Authorization to Owner Trustee for Trust Indenture . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE XII
CERTAIN LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 12.01 Limitations on Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 12.02 Discretion and Actions of Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 12.03 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 12.04 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 12.05 Owner Trustee Acts as Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 12.06 Waiver of Claim Against Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 12.07 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EXHIBIT 1 Affidavit of Citizenship
</TABLE>
TRUST AGREEMENT [N605SW]
-iv-
<PAGE> 6
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of August 1, 1995, is between
BOT FINANCIAL & LEASING CORPORATION B-4, a Massachusetts corporation, and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association
(in its individual capacity, together with its successors and permitted
assigns, "SBC", and otherwise not in its individual capacity but solely as
trustee hereunder with its permitted successors and assigns, the "Owner
Trustee").
W I T N E S S E T H:
ARTICLE I
DEFINITIONS AND TERMS
SECTION 1.01 Certain Definitions. Unless the context
shall otherwise require and except as contained in this Section 1.01, the
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings assigned thereto in the Lease (as hereinafter defined) or,
if not defined in the Lease, in the Trust Indenture (as defined in the Lease),
for all purposes hereof. All definitions contained in this Section 1.01 shall
be equally applicable to both the singular and plural forms of the terms
defined. For all purposes of this Trust Agreement the following terms shall
have the following meanings:
"Commitment" has the meaning ascribed to such term in Section
1 of the Participation Agreement.
"Excluded Payments" has the meaning ascribed to such term in
the Trust Indenture.
"Indenture Event of Default" has the meaning ascribed to such
term in the Trust Indenture.
"Lease" means that certain Sale and Lease Agreement, dated as
of the date hereof, relating to that certain Boeing 737-3H4 aircraft bearing
U.S. Registration No. N605SW and Manufacturer's serial number 27956, to be
entered into by the Owner Trustee and Lessee concurrently with the execution
and delivery of this Trust Agreement, as said Sale and Lease Agreement may from
time to time be supplemented or amended, or the terms thereof waived or
modified, to the extent permitted by, and in accordance with, the terms of this
Trust Agreement. The term "Lease" shall also include said Sale and Lease
Agreement as supplemented by each Lease Supplement from time to time entered
into pursuant to the terms of the Lease.
"Lease Event of Default" has the meaning ascribed to such term
in the Lease.
"Lessee" means Southwest Airlines Co., a Texas corporation,
and its permitted successors and assigns under the Lease and the Participation
Agreement.
TRUST AGREEMENT [N605SW]
-1-
<PAGE> 7
"Owner Participant" means and includes (i) BOT Financial &
Leasing Corporation B-4, a Massachusetts corporation, as the original Owner
Participant, and (ii) the successors and permitted assigns of BOT Financial &
Leasing Corporation B-4.
"Trust Estate" means all estate, right, title and interest of
the Owner Trustee in and to the Aircraft, the Participation Agreement, the
Lease, any Lease Supplement, the Purchase Agreement, the Purchase Agreement
Assignment, the Bills of Sale and the other Operative Agreements including,
without limitation, all amounts of Basic Rent and Supplemental Rent including,
without limitation, insurance proceeds (other than insurance proceeds payable
to or for the benefit of the Owner Trustee, for its own account or in its
individual capacity, the Owner Participant, the Holders or the Indenture
Trustee), all payments and proceeds as a result of the sale, lease or other
disposition of the Aircraft, the Airframe, any Engine or any Part thereof, and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (except amounts owing to the Owner Participant, to the Indenture
Trustee, to the Owner Trustee, in its individual capacity, or to a Holder, or
to any of their respective directors, officers, employees, servants and agents,
pursuant to Section 7 of the Participation Agreement) including, without
limitation, any and all payments and proceeds received by the Owner Trustee
after the termination of the Lease with respect to the Aircraft resulting from
the sale, lease or other disposition thereof, subject, however to the
provisions of and the Lien created by the Trust Indenture. Notwithstanding the
foregoing, "Trust Estate" shall (i) not include any Excluded Payment and (ii)
include all property and rights purported to be included in the Trust Indenture
Estate.
"Trust Indenture Estate" has the meaning ascribed to the term
"Indenture Estate" in the Trust Indenture.
"Trust Office" has the meaning ascribed to such term in the
Trust Indenture.
"Trust Supplement" means a supplement to this Trust Agreement
and to the Trust Indenture in substantially the form of Exhibit C to the Trust
Indenture.
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST
SECTION 2.01 Authority to Execute Documents. The Owner
Participant hereby authorizes and directs the Owner Trustee to, and the Owner
Trustee agrees for the benefit of the Owner Participant that it will, on or
before the Delivery Date, execute and deliver the Operative Agreements to which
it is a party and any other agreements, instruments or documents to which the
Owner Trustee is a party in the respective forms thereof which are delivered
from time to time by the Owner Participant to the Owner Trustee for execution
and delivery and, subject to the terms hereof, to exercise its rights (upon
instructions received from the Owner Participant) and perform its duties under
said Operative Agreements in accordance with the terms thereof.
TRUST AGREEMENT [N605SW]
-2-
<PAGE> 8
SECTION 2.02 Declaration of Trust. SBC hereby declares
that it will hold as the Owner Trustee the Trust Estate upon the trusts
hereinafter set forth for the use and benefit of the Owner Participant,
subject, however, to the Lien created by the Trust Indenture.
ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES
SECTION 3.01 Purchase of Certain Rights in the Aircraft.
The Owner Participant hereby authorizes and directs the Owner Trustee to, and
the Owner Trustee agrees for the benefit of the Owner Participant that it will,
on the Delivery Date, subject to due compliance with the terms of Section 3.02
hereof:
(a) purchase the Aircraft pursuant to the Lease;
(b) accept from Lessee the Lessee Warranty Bill of Sale
and the Lessee FAA Bill of Sale and the invoice furnished pursuant to
the Participation Agreement;
(c) execute and deliver a Lease Supplement covering the
Aircraft;
(d) execute and deliver each of the other Operative
Agreements to which the Owner Trustee is to be a party including,
without limitation, a Trust Supplement covering the Aircraft;
(e) execute, issue and deliver to the Original Loan
Participant one or more authenticated Certificates in the amounts and
otherwise as provided in Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred
to in Section 4(a)(vi) of the Participation Agreement, together with
all other agreements, documents and instruments referred to in Section
4 of the Participation Agreement to which the Owner Trustee is to be a
party;
(g) effect the registration of the Aircraft in the name
of the Owner Trustee by filing or causing to be filed with the FAA:
(i) the Lessee FAA Bill of Sale; (ii) an application for registration
of the Aircraft in the name of the Owner Trustee (including, without
limitation, an affidavit from the Owner Trustee in the form of Exhibit
1 hereto in compliance with the provisions of 14 C.F.R. Section
47.7(c)(2)(iii)); and (iii) this Trust Agreement;
(h) authorize a representative or representatives of the
Owner Trustee (who shall be an employee or employees of Lessee) to
accept delivery of the Aircraft pursuant to the Participation
Agreement; and
TRUST AGREEMENT [N605SW]
-3-
<PAGE> 9
(i) execute and deliver all such other instruments,
documents or certificates and take all such other actions in
accordance with the directions of the Owner Participant, as the Owner
Participant may deem necessary or advisable in connection with the
transactions contemplated hereby.
SECTION 3.02 Conditions Precedent. The rights and
obligations of the Owner Trustee to take the actions required by Section 3.01
hereof with respect to the Aircraft shall be subject to the following
conditions precedent: (a) the Owner Participant shall have made the full
amount of its Commitment with respect to the Aircraft available to the Owner
Trustee, in immediately available funds, in accordance with Sections 1 and 2 of
the Participation Agreement; and (b) the Owner Participant shall have notified
the Owner Trustee that the terms and conditions of Section 4 of the
Participation Agreement, insofar as they relate to conditions precedent to
performance by the Owner Participant of its obligations thereunder, shall have
been either fulfilled to the satisfaction of or waived by the Owner
Participant. The Owner Participant shall, by instructing the Owner Trustee to
release the funds then held by the Owner Trustee as provided in Section 2 of
the Participation Agreement, be deemed to have found satisfactory to it, or
waived, all such conditions precedent.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.01 Distribution of Payments.
(a) Payments to the Indenture Trustee. Until the Trust
Indenture shall have been discharged pursuant to Section 10.01 thereof or
defeased pursuant to Section 10.05 thereof, all Rent, insurance proceeds and
requisition or other payments of any kind included in the Trust Estate (other
than Excluded Payments and other than payments received from the Indenture
Trustee under the Trust Indenture) payable to the Owner Trustee shall be
payable directly to the Indenture Trustee (and any of the same which are
received by the Owner Trustee shall upon receipt be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind) for distribution
in accordance with the provisions of Article III of the Trust Indenture;
provided, however, that any payments received by the Owner Trustee from (i) the
Lessee with respect to the Owner Trustee's fees and disbursements, or (ii) the
Owner Participant pursuant to Article VII hereof shall not be paid over to the
Indenture Trustee but shall be retained by the Owner Trustee and applied toward
the purpose for which such payments were made.
(b) Payments to the Owner Trustee; Other Parties. After
the Trust Indenture shall have been discharged pursuant to Section 10.01
thereof or defeased pursuant to Section 10.05 thereof, any payment of the type
referred to in Section 4.01(a) hereof (other than Excluded Payments) received
by the Owner Trustee, any payments received from the Indenture Trustee other
than as specified in Section 4.01(c) or (d) hereof and any other amount
received as part of the Trust Estate and for the application or distribution of
which no provision is made herein, shall be distributed forthwith upon receipt
by the Owner Trustee in the following order of priority: first, so
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much of such payment as shall be required to reimburse the Owner Trustee for
any expenses not otherwise reimbursed as to which the Owner Trustee is entitled
to be so reimbursed by the Owner Participant pursuant to the provisions hereof
shall be retained by the Owner Trustee; second, so much of the remainder for
which provision as to the application thereof is contained in the Lease or any
of the other Operative Agreements shall be applied and distributed in
accordance with the terms of the Lease or such other Operative Agreement; and
third, the balance, if any, shall be paid to the Owner Participant.
(c) Certain Distributions to the Owner Participant. All
amounts from time to time distributable by the Indenture Trustee to the Owner
Participant pursuant to the Trust Indenture shall, if paid to the Owner
Trustee, be distributed by the Owner Trustee to the Owner Participant in
accordance with the provisions of Article III of the Trust Indenture.
(d) Excluded Payments. Any Excluded Payments received by
the Owner Trustee shall be paid by the Owner Trustee to the Person to whom such
Excluded Payments are payable under the provisions of the Participation
Agreement, the Tax Indemnity Agreement or the Lease.
(e) Legal Title. The Owner Participant shall have no
legal title to the Aircraft or any other portion of the Trust Estate.
SECTION 4.02 Method of Payments. The Owner Trustee shall
make distributions or cause distributions to be made to (i) the Owner
Participant pursuant to this Article IV by transferring by wire transfer in
immediately available funds on the day received (or on the next succeeding
Business Day if the funds to be so distributed shall not have been received by
the Owner Trustee by 3:00 p.m., New York City time), the amount to be
distributed as provided in Schedule I to the Participation Agreement or to such
account or accounts of the Owner Participant as the Owner Participant may
designate from time to time in writing to the Owner Trustee and (ii) the
Indenture Trustee pursuant to this Article IV by transferring the amount to be
distributed to the Indenture Trustee in the manner specified in the Trust
Indenture.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01 Notice of Event of Default. If the Owner
Trustee shall have knowledge of a Lease Event of Default or Indenture Event of
Default (or an event which with the passage of time or the giving of notice or
both would constitute a Lease Event of Default or an Indenture Event of
Default), the Owner Trustee shall give to the Owner Participant and Lessee
prompt telephonic or facsimile notice thereof followed by prompt written
confirmation thereof by certified mail, postage prepaid, provided, that (i) in
the case of an event which with the passage of time would constitute an
Indenture Event of Default referred to in paragraph (b) of Section 8.01 of the
Trust Indenture, such notice shall in no event be furnished later than ten (10)
days after the Owner Trustee shall first have knowledge of such event and (ii)
in the case of a misrepresentation by the Owner Trustee which with the passage
of time would constitute an Indenture Event of Default referred to in paragraph
(c) of Section 8.01 of the Trust Indenture, such notice shall in no event be
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furnished later than ten (10) days after the Owner Trustee shall first have
knowledge of such event. The notice shall set forth in reasonable detail the
facts or circumstances known to it with respect to such Lease Event of Default
or Indenture Event of Default. Subject to the terms of Section 5.03 hereof,
the Owner Trustee shall take such action or shall refrain from taking such
action, not inconsistent with the provisions of the Trust Indenture or the
other Operative Agreements, with respect to such Lease Event of Default,
Indenture Event of Default or other event as the Owner Trustee shall be
directed in writing by the Owner Participant. For all purposes of this Trust
Agreement, the Lease and the other Operative Agreements, in the absence of
actual knowledge by a responsible officer of the Trust Office of the Owner
Trustee in his or her capacity as such, the Owner Trustee shall not be deemed
to have knowledge of a Lease Event of Default, Indenture Event of Default or
other event referred to in this Section 5.01 unless notified in writing thereof
by the Indenture Trustee, the Owner Participant or Lessee.
SECTION 5.02 Action Upon Instructions. Subject to the
terms of Sections 5.01 and 5.03 hereof and to the terms of the other Operative
Agreements, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following
actions, not inconsistent with the provisions of the Lease and the Trust
Indenture, as may be specified in such instructions: (i) give such notice or
direction or exercise such right, remedy or power hereunder or take such other
actions under any of the Operative Agreements to which the Owner Trustee is a
party or in respect of all or any part of the Trust Estate as shall be
specified in such instructions; (ii) take such action to preserve or protect
the Trust Estate (including the discharge of Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Agreements to be satisfactory to the
Owner Trustee, it being understood that without written instructions of the
Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it; (iv) subject to the rights of Lessee under the Operative
Agreements, after the expiration or earlier termination of the Lease, convey
all of the Owner Trustee's right, title and interest in and to the Aircraft for
such amount, on such terms and to such purchaser or purchasers as shall be
designated in such instructions, or net lease the Aircraft to such lessee or
lessees and on such terms as shall be designated in such instructions or
deliver the Aircraft to the Owner Participant in accordance with such
instructions; and (v) take such other action as is requested by the Owner
Participant, which action is not inconsistent with the terms of the Operative
Agreements.
SECTION 5.03 Indemnification. The Owner Trustee shall not
be required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof unless the Owner Trustee shall have
been indemnified by the Owner Participant, in manner and form satisfactory to
the Owner Trustee, against any liability, cost or expense (including reasonable
counsel fees and disbursements) which may be incurred in connection therewith
other than that which results from the willful misconduct or gross negligence
of the Owner Trustee; and, if the Owner Participant shall have directed the
Owner Trustee to take any such action or refrain from taking any action, the
Owner Participant agrees to furnish such indemnity as shall be required and, in
addition to the extent not otherwise paid pursuant to the provisions of the
Lease or of the Participation Agreement, to pay the reasonable fees and charges
of the Owner Trustee for the services performed or to be performed by it
pursuant to such direction. The Owner Trustee shall not be required to take
any action under Section 5.01 (other than the giving of the notices referred
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to therein) or 5.02 hereof if the Owner Trustee shall reasonably determine, or
shall have been advised by counsel, that such action is contrary to the terms
of any of the Operative Agreements to which the Owner Trustee is a party, or is
otherwise contrary to law and the Owner Trustee shall have delivered to the
Owner Participant written notice of the basis of its refusal to act.
SECTION 5.04 No Duties Except as Specified in Trust
Agreement or Instructions. The Owner Trustee shall not have any duty or
obligation to manage, control, use, sell, dispose of or otherwise deal with the
Aircraft or any other part of the Trust Estate, or to otherwise take or refrain
from taking any action under, or in connection with any of the Operative
Agreements to which the Owner Trustee is a party, except (i) as expressly
required by the terms of any of the Operative Agreements to which the Owner
Trustee is a party, or (ii) (to the extent not inconsistent with the provisions
of the Trust Indenture, as expressly provided by the terms hereof) as expressly
provided in a written instruction from the Owner Participant received pursuant
to the terms of Section 5.01 or 5.02 hereof, and no implied duties or
obligations shall be read into this Trust Agreement against the Owner Trustee.
SBC agrees that it will, in its individual capacity and at its own cost or
expense (but without any right of indemnity in respect of any such cost or
expense under Section 5.03 or 7.01 hereof), promptly take such action as may be
necessary to duly discharge and satisfy in full all Lessor Liens attributable
to it in its individual capacity which it is required to discharge pursuant to
Section 8(g) of the Participation Agreement and otherwise comply with the terms
of said Section binding upon it.
SECTION 5.05 No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall have no power, right or authority to,
and the Owner Trustee agrees that it will not, manage, control, use, sell,
dispose of or otherwise deal with the Aircraft or any other part of the Trust
Estate except (i) as expressly required by the terms of any of the Operative
Agreements to which the Owner Trustee is a party, (ii) as expressly provided by
the terms hereof, or (iii) as expressly provided in written instructions from
the Owner Participant pursuant to Section 5.01 or 5.02 hereof, but subject
always to the provisions of and Lien created by the Trust Indenture.
SECTION 5.06 No Power to Reinvest. Notwithstanding
anything contained in Section 5.01, 5.02, 5.04 or 5.05 to the contrary, the
Owner Trustee shall not be authorized and shall have no power to reinvest the
proceeds of the Trust Estate or to otherwise "vary the investment" of the Owner
Participant within the meaning of Treasury Regulations Section
301.7701-4(c)(1); provided, however, that nothing contained in this Section
5.06 shall limit the indemnity provided in Section 5.03 hereof or any
requirement pertaining to the investment of funds in the Operative Agreements.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.01 Acceptance of Trusts and Duties. SBC accepts
the trusts hereby created and agrees to perform the same but only upon the
terms hereof applicable to it. The Owner Trustee also agrees to receive and
disburse all monies received by it constituting part of the Trust
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Estate upon the terms hereof. SBC shall not be answerable or accountable under
any circumstances, except for (a) its or the Owner Trustee's own willful
misconduct or gross negligence, (b) its failure to perform its obligations
under the last sentence of Section 5.04 hereof and the first sentence of
Section 5.01 hereof, (c) its or the Owner Trustee's failure to use ordinary
care in handling and disbursing funds, (d) any Tax based on or measured by any
fees, commissions or compensation received by it for acting as trustee in
connection with any of the transactions contemplated by the Operative
Agreements, and (e) liabilities that may result from the inaccuracy of any
representation or warranty of it (or from the failure by it to perform any
covenant) in Section 6.03 hereof or in any of the other Operative Agreements
(including, without limitation, covenants of SBC contained in the Participation
Agreement and the Trust Indenture).
SECTION 6.02 Absence of Certain Duties. Except in
accordance with written instructions furnished pursuant to Section 5.01 or 5.02
hereof and except as provided in, and without limiting the generality of,
Sections 3.01, 5.04 and 5.05 hereof and the last sentence of Section 9.01(b)
hereof, neither the Owner Trustee nor SBC shall have any duty (i) to see to any
recording or filing of any Operative Agreement or of any supplement to any
thereof or to see to the maintenance of any such recording or filing or any
other filing of reports with the Federal Aviation Administration or other
governmental agencies, except that SBC in its individual capacity agrees to
comply with the Federal Aviation Administration reporting requirements set
forth in 14 C.F.R. Section 47.45 and 14 C.F.R. Section 47.51, and the Owner
Trustee shall, to the extent that information for that purpose is timely
supplied by Lessee and approved by the Owner Participant pursuant to any of the
Operative Agreements, complete and timely submit (and furnish the Owner
Participant with a copy of) any and all reports relating to the Aircraft which
may from time to time be required by the Federal Aviation Administration or any
government or governmental authority having jurisdiction, (ii) to see to any
insurance on the Aircraft or to effect or maintain any such insurance, whether
or not Lessee shall be in default with respect thereto, other than to forward
to the Owner Participant copies of all reports and other written information
which the Owner Trustee receives from Lessee pursuant to Section 11 of the
Lease, (iii) to see to the payment or discharge of any tax, assessment or other
governmental charge or any lien or encumbrance of any kind owing with respect
to, assessed or levied against any part of the Trust Indenture Estate or the
Trust Estate, except as provided in Section 5.04 hereof, Section 4.01(ii) or
4.02 of the Trust Indenture or Section 8(g) of the Participation Agreement, or
(iv) to inspect Lessee's books and records with respect to the Aircraft at any
time permitted pursuant to the Lease. Notwithstanding the foregoing, the Owner
Trustee will furnish to the Indenture Trustee and the Owner Participant,
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other instruments
furnished to the Owner Trustee under the Lease or any other Operative Agreement
to the extent that any of the same shall not state on its face or otherwise
that it has been so distributed.
SECTION 6.03 No Representations or Warranties as to
Certain Matters. NEITHER THE OWNER TRUSTEE NOR SBC MAKES OR SHALL BE DEEMED TO
HAVE MADE (a) ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF,
AS TO THE ABSENCE OF LATENT OR OTHER
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DEFECTS, WHETHER OR NOT DISCOVERABLE, OR ANY OTHER REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF
WHATSOEVER, except that SBC in its individual capacity warrants that (i) on the
Delivery Date, the Owner Trustee shall have received whatever title was
conveyed to it by Lessee, (ii) on the Delivery Date, the Owner Trustee shall be
in compliance with the last sentence of Section 5.04 hereof, and (iii) the
Aircraft shall during the Term of the Lease be free of Lessor Liens
attributable to SBC, or (b) any representation or warranty as to the validity,
legality or enforceability of this Trust Agreement or any other Operative
Agreement to which the Owner Trustee is a party, or any other document or
instrument, or as to the correctness of any statement contained in any thereof
except to the extent that any such statement is expressly made herein or
therein by such party as a representation by SBC or by the Owner Trustee, as
the case may be, and except that SBC hereby represents and warrants that this
Trust Agreement has been, and (assuming due authorization, execution and
delivery by the Owner Participant of this Trust Agreement) the other Operative
Agreements to which it or the Owner Trustee is a party have been (or at the
time of execution and delivery of any such instrument by it or the Owner
Trustee hereunder or pursuant to the terms of the Participation Agreement that
such an instrument will be) duly executed and delivered by one of its officers
who is or will be, as the case may be, duly authorized to execute and deliver
such instruments on behalf of SBC or the Owner Trustee, as the case may be, and
that this Trust Agreement constitutes the legal, valid and binding obligation
of SBC or the Owner Trustee, as the case may be, enforceable against SBC or the
Owner Trustee, as the case may be, in accordance with its terms.
SECTION 6.04 No Segregation of Monies; Interest. Monies
received by the Owner Trustee hereunder need not be segregated in any manner
except to the extent required by law and the Owner Trustee shall not be liable
for any interest thereon.
SECTION 6.05 Reliance Upon Certificates, Counsel and
Agents. The Owner Trustee shall incur no liability to anyone in acting in
reliance upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper reasonably
believed by it in good faith to be genuine and reasonably believed by it in
good faith to be signed by the proper party or parties. Unless other evidence
in respect thereof is specifically prescribed herein, any request, direction,
order or demand of the Owner Participant or Lessee mentioned herein or in any
of the other Operative Agreements to which the Owner Trustee is a party shall
be sufficiently evidenced by written instruments signed by the Chairman of the
Board, the President, any Vice President, the Treasurer or any other duly
authorized officer or representative and in the name of any such Owner
Participant or Lessee, as the case may be. The Owner Trustee may accept a copy
of a resolution of the Board of Directors or Executive Committee of Lessee or
the Owner Participant, as the case may be, certified by the Secretary or an
Assistant Secretary of Lessee or the Owner Participant, as the case may be, as
duly adopted and in full force and effect, as conclusive evidence that such
resolution has been duly adopted by said Board or Committee and that the same
is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically described herein, the Owner Trustee
may for all purposes hereof rely on a certificate signed by the Chairman of the
Board, the President, any Vice President, the Treasurer or any other duly
authorized officer or representative of Lessee or the Owner Participant, as the
case may be, as to such fact or matter, and such certificate shall constitute
full protection to the Owner
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Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon. In the administration of trusts hereunder, the Owner Trustee
may execute any of the trusts or powers hereof and perform its powers and
duties hereunder directly or through agents or attorneys and may, at the
expense of the Trust Estate, consult with counsel, accountants and other
skilled persons to be selected and employed by it. The Owner Trustee shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion, within the scope of such person's
competence, of any such counsel, accountants or other skilled persons and the
Owner Trustee shall not be liable for the negligence of any such counsel,
accountant or other skilled person appointed by it with due care hereunder.
SECTION 6.06 Not Acting in Individual Capacity. In
executing the trusts accepted by SBC hereunder, the Owner Trustee acts solely
as trustee and not in its individual capacity except as otherwise expressly
provided herein; and, except as may be otherwise expressly provided in this
Trust Agreement, the Lease, the Participation Agreement and the Trust
Indenture, all persons, other than the Owner Participant, as provided herein,
having any claim against the Owner Trustee by reason of the transactions
contemplated hereby shall look only to the Trust Estate for payment or
satisfaction thereof except to the extent the Owner Trustee shall expressly
agree otherwise in writing.
SECTION 6.07 Fees and Compensation. The Owner Trustee
shall be entitled to receive compensation, reasonable as regards its
responsibilities hereunder, together with reimbursement within three (3) months
of its request for all reasonable expenses incurred or made by it in accordance
with any of the provisions of this Trust Agreement or any other Operative
Agreement (including the reasonable compensation of the expenses of its
counsel, accountants or other skilled persons and of all other persons not
regularly in its employ). If a Lease Event of Default or Indenture Event of
Default shall occur and be continuing, the Owner Trustee shall be entitled to
receive compensation, reasonable as regards its additional responsibilities
hereunder, and payment or reimbursement for its expenses as provided above.
Pursuant to Section 7(c) of the Participation Agreement and subject to Section
16 thereof, Lessee shall be required to pay the reasonable fees and expenses of
the Owner Trustee comprising the compensation and reimbursement of expenses to
which the Owner Trustee is entitled under this Section 6.07. Except as
otherwise expressly provided in Section 5.03 or Section 7.01 of this Trust
Agreement, neither the Owner Participant nor the Trust Estate shall have any
liability for any such fees and expenses; provided, however, the Owner
Participant shall be liable for such additional compensation of the Owner
Trustee if the same is attributable to an Indenture Event of Default which is
caused solely by the actions or inactions of the Owner Participant.
SECTION 6.08 Tax Returns. The Owner Participant shall be
responsible for causing to be prepared and filed all income tax returns to be
filed by the Owner Participant. The Owner Trustee will, upon request, furnish
the Owner Participant with all such information as may be reasonably required
or necessary from the Owner Trustee in connection with the preparation of such
tax returns and in connection with any other filing or audit and related
litigation obligations. The Owner Trustee shall be responsible for causing to
be prepared at the request of the Owner Participant all income tax returns
required to be filed with respect to the trust created hereby and shall execute
and, with the approval of the Owner Participant, file such returns; provided,
however,
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that the Owner Trustee shall send a completed copy of each such return to the
Owner Participant not more than 60 nor less than 30 days prior to the due date
of such return; provided that the Owner Trustee shall have timely received all
necessary information to complete and deliver to the Owner Participant such
return. The Owner Participant, upon request, will furnish the Owner Trustee
with all such information as may be required from the Owner Participant in
connection with the preparation of such tax returns. The Owner Trustee will
give to the Owner Participant, upon request, such periodic information
concerning receipts and disbursements by it with respect to the Trust Estate as
would be helpful to the Owner Participant in preparing its tax returns.
ARTICLE VII
INDEMNIFICATION OF SBC
BY OWNER PARTICIPANT
SECTION 7.01 Owner Participant to Indemnify SBC. The
Owner Participant hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and hereby
indemnifies, protects, saves and keeps harmless SBC in its individual capacity
and its successors, assigns, legal representatives and agents, from and against
any and all Losses indemnified against by Lessee pursuant to Section 7(b) or
7(c) of the Participation Agreement, disregarding those exclusions contained in
clause (3) of Section 7(b)(ii) and in clauses (A) and (B) of Section 7(c)(ii),
and, to the extent that SBC acts in its capacity as the Owner Trustee and in
accordance with instructions received from the Owner Participant, clause (E) of
Section 7(c)(ii), and except (a) in the case of willful misconduct or gross
negligence on the part of the Owner Trustee or SBC in the performance or
nonperformance of its duties hereunder or under any of the other Operative
Agreements to which the Owner Trustee is a party, (b) those claims resulting
from the inaccuracy of any representation or warranty of SBC (or from the
failure of SBC to perform any of its covenants) in Section 6.03 hereof or in
any of the other Operative Agreements, (c) as may result from a breach by SBC
of its covenant in the last sentence of Section 5.04 hereof or a breach by SBC
of any other of its covenants contained herein or (d) in the case of the
failure to use ordinary care on the part of the Owner Trustee or SBC in the
receipt or disbursement of funds; provided, however, that the exception set
forth in clause (a) of this Section 7.01 shall not apply to any action taken or
omission made by the Owner Trustee pursuant to and in accordance with written
directions given to the Owner Trustee by the Owner Participant. The
indemnities contained in this Section 7.01 extend to SBC only in its individual
capacity and shall not be construed as indemnities of the Trust Indenture
Estate or the Trust Estate (except to the extent, if any, that SBC has been
reimbursed by the Trust Indenture Estate or the Trust Estate for amounts
covered by the indemnities contained in this Section 7.01). The indemnities
contained in this Section 7.01 shall survive the termination of this Trust
Agreement. In addition, if necessary, SBC shall be entitled to indemnification
from the Trust Estate, subject to the provisions of Section 4.01 hereof and the
Lien of the Trust Indenture, for any liability, obligation, loss, damage,
penalty, tax, claim, action, suit, cost, expense or disbursement indemnified
against pursuant to this Section 7.01 to the extent not reimbursed by Lessee,
the Owner Participant or others, but without releasing any of them from their
respective agreements of reimbursement; and, to secure the same, SBC shall have
a lien on the Trust Estate, subject to the provisions of Section 4.01 hereof
and the Lien of the Trust Indenture, which shall be prior to any interest
therein of the Owner Participant. The payor of any indemnity under
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this Article VII shall be subrogated to any right of the person indemnified in
respect of the matter as to which such indemnity was paid. Notwithstanding the
foregoing, SBC shall not make any claim under this Section 7.01 for any claim,
loss, tax or other liability indemnified against by the Lessee under the
Participation Agreement without first making demand on the Lessee for payment
of such claim, loss, tax or other liability, and pursuing such demand on a
reasonable basis for a reasonable length of time.
ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST
SECTION 8.01 Transfer of Interest. All provisions of
Section 8(l) of the Participation Agreement shall (with the same force and
effect as if set forth, mutatis mutandis, in full in this Section 8.01) be
applicable to any assignment, conveyance or other transfer by the Owner
Participant of its right, title or interest in and to the Participation
Agreement, the Trust Estate or this Trust Agreement.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
SECTION 9.01 Resignation of Owner Trustee: Appointment of
Successor.
(a) Resignation or Removal. The Owner Trustee or any
successor Owner Trustee (i) shall resign if required to do so pursuant to
Section 8(b) of the Participation Agreement and (ii) may resign at any time
without cause by giving at least 60 days' prior written notice to the Owner
Participant, the Indenture Trustee and Lessee, such resignation to be effective
upon the acceptance of appointment by the successor Owner Trustee under Section
9.01(b) hereof. In addition, the Owner Participant may at any time remove the
Owner Trustee with or without cause by a notice in writing delivered to the
Owner Trustee, the Holders, the Indenture Trustee and Lessee, such removal to
be effective upon the acceptance of appointment by the successor Owner Trustee
under Section 9.01(b) hereof. In the case of the removal or resignation of the
Owner Trustee, the Owner Participant may, after consultation in good faith with
Lessee, appoint a successor Owner Trustee by an instrument signed by the Owner
Participant. If a successor Owner Trustee shall not have been appointed within
30 days after such notice of resignation or removal, the Owner Trustee, the
Owner Participant, Lessee or the Indenture Trustee may apply to any court of
competent jurisdiction to appoint a successor Owner Trustee to act until such
time, if any, as a successor shall have been appointed as above provided. Any
successor Owner Trustee so appointed by such court shall immediately and
without further act be superseded by any successor Owner Trustee appointed as
above provided.
(b) Execution and Delivery of Documents, Etc. Any
successor Owner Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee an instrument accepting such appointment, and
thereupon such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor
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Owner Trustee in the trusts hereunder with like effect as if originally named
the Owner Trustee herein; but nevertheless, upon the written request of such
successor Owner Trustee, such predecessor Owner Trustee shall execute and
deliver an instrument transferring to such successor Owner Trustee, upon the
trusts herein expressed, all the estates, properties, rights, powers and trusts
of such predecessor Owner Trustee, and such predecessor Owner Trustee shall
duly assign, transfer, deliver and pay over to such successor Owner Trustee all
monies or other property then held by such predecessor Owner Trustee upon the
trusts herein expressed. Upon the appointment of any successor Owner Trustee
hereunder, the predecessor Owner Trustee will complete, execute and deliver
such documents as are provided to it by such successor Owner Trustee and will
take such further actions as are requested of it by such successor Owner
Trustee as are reasonably required to cause registration of the Aircraft
included in the Trust Estate to be transferred upon the records of the Federal
Aviation Administration, or other governmental authority having jurisdiction,
into the name of the successor Owner Trustee.
(c) Qualifications. Any successor Owner Trustee, however
appointed, shall be a "citizen of the United States" within the meaning of the
Act and shall also be a bank or trust company organized under the laws of the
United States or any state thereof having a combined capital and surplus of at
least $100,000,000, if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
or customary terms.
(d) Merger, Etc. Any corporation into which SBC may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which SBC shall be a
party, or any corporation to which substantially all the corporate trust
business of SBC may be transferred, shall, subject to the terms of Section
9.01(c) hereof, be the Owner Trustee hereunder without further act.
SECTION 9.02 Co-Trustees and Separate Trustees. If at any
time it shall be necessary or prudent in order to conform to any law of any
jurisdiction in which all or any part of the Trust Estate is located, or make
any claim or bring any suit with respect to the Trust Estate or the Lease, or
in the event that the Owner Trustee shall have been requested to do so by the
Owner Participant or the Owner Trustee being advised by counsel shall determine
that it is so necessary or prudent in the interest of the Owner Participant or
the Owner Trustee, or the Owner Trustee shall have been directed to do so by
the Owner Participant, the Owner Trustee and Owner Participant shall execute
and deliver an agreement supplemental hereto and all other instruments and
agreements necessary or proper to constitute another bank or trust company or
one or more persons (any and all of which shall be a "citizen of the United
States" as defined in 49 U.S.C. Section 40102(a)(15)(C)) approved by the Owner
Trustee and the Owner Participant, either to act as co-trustee, jointly with
the Owner Trustee, or to act as separate trustee hereunder (any such co-trustee
or separate trustee being herein sometimes referred to as an "additional
trustee").
Every additional trustee hereunder shall, to the extent
permitted by law, be appointed and act, and the Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
TRUST AGREEMENT [N605SW]
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(A) all powers, duties, obligations and rights conferred
upon the Owner Trustee in respect of the custody, control and
management of monies, the Aircraft or documents authorized to be
delivered hereunder or under the Participation Agreement shall be
exercised solely by the Owner Trustee;
(B) all other rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee and any limitations
thereon shall be conferred or imposed upon and exercised or performed
by the Owner Trustee and such additional trustee jointly, except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (including the holding of
title to the Trust Estate) the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be exercised and performed by
such additional trustee;
(C) notwithstanding anything to the contrary contained
herein, no power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised hereunder
by such additional trustee, except jointly with, or with the consent
in writing of, the Owner Trustee;
(D) no trustee hereunder shall be personally liable by
reason of any action or omission of any other trustee hereunder;
(E) the Owner Participant, at any time, by an instrument
in writing may remove any such additional trustee; and
(F) no appointment of, or action by, any additional
trustee will relieve the Owner Trustee of any of its obligations
under, or otherwise affect any of the terms of, the Trust Indenture or
affect the interests of the Indenture Trustee or the Holders in the
Trust Indenture Estate.
ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS
SECTION 10.01 Supplements and Amendments and Delivery Thereof.
(a) Supplements and Amendments. This Trust Agreement may
not be amended, supplemented or otherwise modified except by an instrument in
writing signed by the Owner Trustee and (except in the case of a Trust
Supplement) the Owner Participant. Subject to Section 10.02 hereof, Section 10
of the Participation Agreement and, until the Trust Indenture shall have been
satisfied and discharged pursuant to Section 10.01 thereof, Section 11.06 of
the Trust Indenture, the Owner Trustee will execute any amendment, supplement
or other modification of this Trust Agreement or of any other Operative
Agreement to which the Owner Trustee is a party which it is requested to
execute by the Owner Participant except that the Owner Trustee shall not
execute any such amendment, supplement or other modification which, by the
express provisions of any of the
TRUST AGREEMENT [N605SW]
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above documents, requires the consent of any other party unless such consent
shall have been obtained.
(b) Delivery of Amendments and Supplements to Certain
Parties. A signed copy of each amendment or supplement referred to in Section
10.01(a) hereof shall be delivered promptly by the Owner Trustee to Lessee and,
until the Trust Indenture shall have been satisfied and discharged pursuant to
Section 10.01 thereof, the Indenture Trustee.
SECTION 10.02 Discretion as to Execution of Documents.
Prior to executing any document required to be executed by it pursuant to the
terms of Section 10.01 hereof, the Owner Trustee shall be entitled to receive
an opinion of its counsel to the effect that the execution of such document is
authorized hereunder. If in the opinion of the Owner Trustee any document
required to be executed by the Owner Trustee pursuant to the terms of Section
10.01 hereof adversely affects any right, duty, immunity or indemnity in favor
of the Owner Trustee hereunder or under any other Operative Agreement to which
the Owner Trustee is a party, the Owner Trustee may in its discretion decline
to execute such document.
SECTION 10.03 Distribution of Documents. Promptly after
the execution by the Owner Trustee of any document entered into pursuant to
Section 10.01 hereof, the Owner Trustee shall mail, by certified mail, postage
prepaid, a conformed copy thereof to the Owner Participant, but the failure of
the Owner Trustee to mail such conformed copy shall not impair or affect the
validity of such document.
SECTION 10.04 Absence of Requirement as to Form. It shall
not be necessary for any written request furnished pursuant to Section 10.01 to
specify the particular form of the proposed documents to be executed pursuant
to such Section, but it shall be sufficient if such request shall indicate the
substance thereof.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Termination of Trust Agreement. This Trust
Agreement and the trusts created hereby shall terminate and this Trust
Agreement shall be of no further force or effect upon the earlier of (a) the
later of (x) the final satisfaction and discharge of the Trust Indenture
pursuant to Section 10.01 thereof and the sale or other final disposition by
the Owner Trustee of all property constituting part of the Trust Estate and the
final distribution by the Owner Trustee of all monies or other property or
proceeds constituting part of the Trust Estate in accordance with Article IV
hereof, provided, that at such time Lessee shall have fully complied with all
of the terms of the Lease and the Participation Agreement and (y) the
expiration or termination of the Lease in accordance with its terms, (b)
twenty-one years less one day after the death of the last survivor of all of
the descendants of Robert E. Lee, late General in Chief of the Armies of the
Confederate States, living on the date of the earliest execution of this Trust
Agreement by any party hereto, or (c) the date of revocation of such trusts by
the Owner Participant (in which case the Trust Estate, subject to the Trust
Indenture, shall be distributed in accordance with the terms hereof); otherwise
TRUST AGREEMENT [N605SW]
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this Trust Agreement and the trusts created hereby shall continue in full force
and effect in accordance with the term hereof.
SECTION 11.02 Owner Participant Has No Legal Title in Trust
Estate. The Owner Participant shall not have legal title to any part of the
Trust Estate. No transfer, by operation of law or otherwise, of any right,
title and interest of the Owner Participant in and to the Trust Estate
hereunder shall operate to terminate this Trust Agreement or the trusts
hereunder or entitle any successors or transferees of the Owner Participant to
an accounting or to the transfer of legal title to any part of the Trust
Estate.
SECTION 11.03 Assignment, Sale, Etc. of Aircraft. Any
assignment, sale, transfer or other conveyance of the Aircraft, any Engine or
any interest therein by the Owner Trustee made in accordance with the express
terms hereof or of the Lease or the Participation Agreement shall bind the
Owner Participant and shall be effective to transfer or convey all right, title
and interest of the Owner Trustee and the Owner Participant in and to the
Aircraft, such Engine or interest therein. No purchaser or other grantee shall
be required to inquire as to the authorization, necessity, expediency or
regularity of such assignment, sale, transfer or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.
SECTION 11.04 Trust Agreement for Benefit of Certain
Parties Only. Except for the terms of Section 8(l) of the Participation
Agreement incorporated in Article VIII hereof and except as otherwise provided
in Articles V and IX and Sections 2.02, 3.01, 4.01, 6.07, 10.01, 10.02 and
11.01 hereof, nothing herein, whether expressed or implied, shall be construed
to give any person other than the Owner Trustee and the Owner Participant any
legal or equitable right, remedy or claim under or in respect of this Trust
Agreement; but this Trust Agreement shall be held to be for the sole and
exclusive benefit of the Owner Trustee and the Owner Participant.
SECTION 11.05 [Intentionally reserved for potential future
use].
SECTION 11.06 Notices. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by telecopier, or by prepaid
courier service, and shall be deemed to be given for purposes of this Trust
Agreement on the day that such writing is delivered or, if sent by registered
or certified mail, three Business Days after being deposited in the mails
addressed to the intended recipient thereof in accordance with the provisions
of this Section 11.06. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section 11.06,
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telecopier numbers) as follows: (A) if to
Lessee, the Owner Trustee, the Indenture Trustee or the Owner Participant, to
the respective addresses set forth on Schedule I to the Participation Agreement
or (B) if to any Holder, addressed to such Holder at its address as set forth
in the Register maintained pursuant to the Trust Indenture.
TRUST AGREEMENT [N605SW]
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SECTION 11.07 Severability. Subject to Section 11.12
hereof, any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.08 Waivers, Etc. No term or provision hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing entered into in compliance with the terms of Article X
hereof; and any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.
SECTION 11.09 Counterparts. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10 Binding Effect, Etc. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Owner Trustee and its successors and assigns, and the Owner Participant,
its successors and, to the extent permitted by Article VIII hereof, its
assigns. Any request, notice, direction, consent, waiver or other instrument
or action by an Owner Participant shall bind its successors and permitted
assigns.
SECTION 11.11 Headings; References. The headings of the
various Articles and Sections herein are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof. The trust
created hereby, together with the trust created by the Trust Indenture, may for
convenience of reference be referred to, collectively, as "Southwest Airlines
1995 Trust N605SW."
SECTION 11.12 Governing Law. THIS TRUST AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE. THIS TRUST AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW
YORK.
SECTION 11.13 Performance by the Owner Participant. Any
obligation of SBC in its individual capacity or as the Owner Trustee hereunder
or under any other Operative Agreement or other document contemplated herein,
may be performed by the Owner Participant and any such performance shall not be
construed as a revocation of the trust created hereby.
SECTION 11.14 Authorization to Owner Trustee for Trust
Indenture. Notwithstanding any contrary provision in this Trust Agreement, the
Owner Trustee is hereby authorized and instructed to enter into and perform
fully the Trust Indenture. This provision is for the benefit of the Owner
Trustee and the Indenture Trustee and the Holders from time to time of the
Certificates and shall not be changed prior to the termination of the Trust
Indenture pursuant to Section 10.01 thereof.
TRUST AGREEMENT [N605SW]
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ARTICLE XII
CERTAIN LIMITATIONS
SECTION 12.01 Limitations on Control. Notwithstanding any
other provision of this Agreement, but subject to the other provisions of this
Article XII, from and after the Delivery Date and until termination of this
Trust Agreement and the trusts created hereby, (i) the Owner Participant shall
not have any voting rights or other rights to direct the Owner Trustee
hereunder in connection with matters involving the ownership and operation of
the Aircraft by the Owner Trustee (collectively "Control Rights") and (ii) the
Owner Trustee shall have absolute and complete discretion in all matters as to
which the Owner Participant otherwise would have had any Control Rights, but
for the provisions of this Article XII. Such discretion (i) is in addition to
the discretion given to the Owner Trustee under the other Articles of this
Trust Agreement and (ii) is expressly limited to the Control Rights that, but
for the provisions of this Article XII, would be held or exercisable by the
Owner Participant, and does not extend to any other rights, powers or
privileges in respect of the beneficial interest of the Owner Participant in
the Trust Estate.
SECTION 12.02 Discretion and Actions of Owner Trustee.
(a) In exercising its discretion under this Article XII,
the Owner Trustee shall exercise its best judgment and shall not be liable for
any action taken or omitted under this Article XII, except for its gross
negligence or willful misconduct, and shall exercise the Control Rights.
(b) In exercise or administration of the power or duties
created under this Article XII, the Owner Trustee may act directly or through
any agents or attorneys and may, at the cost and expense of the Trust Estate,
consult with counsel, accountants and other skilled persons to be selected and
retained by it, and the Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith in accordance with the advice or opinion of
any such counsel, accountants or other skilled persons, and the Owner Trustee
shall not be liable for the negligence of any such counsel, accountants or
other skilled persons.
(c) Notwithstanding any other provision hereof, in
exercising its discretion pursuant to this Article XII, the Owner Trustee shall
be free of any kind of control by the Owner Participant and shall act as it in
its discretion shall deem necessary to protect the interests of the United
States, notwithstanding any countervailing interests of any foreign power
which, or whose citizens, may have a direct or indirect interest in the Owner
Participant and any such action by the Owner Trustee shall not be considered
malfeasance or in breach of any obligation which the Owner Trustee might
otherwise have to the Owner Participant. In connection with any other matters
which may arise not relating to the ownership and operation of the Aircraft,
the Owner Trustee shall act only in accordance with Section 5.05 and the
provisions referred to therein. The Owner Trustee, promptly after any exercise
of discretion hereunder, shall notify the Owner Participant of the exercise
thereof.
TRUST AGREEMENT [N605SW]
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SECTION 12.03 Removal. Notwithstanding any provision of
this Trust Agreement relating to any right or power of the Owner Participant to
remove the Owner Trustee, the Owner Trustee may be removed only (i) for its
gross negligence or willful misconduct or in conjunction with a revocation or
other termination of this Trust Agreement and the trusts created hereby or (ii)
if it shall fail to resign in the event that it is no longer a "Citizen of the
United States," as defined in 49 U.S.C. Section 40102(a)(15)(C).
SECTION 12.04 Payments. Notwithstanding any other
provision of this Article XII, the Owner Participant and not the Owner Trustee
shall be entitled to receive from the Owner Trustee or otherwise all rent,
payments or insurance proceeds, and other payments of whatsoever kind and
nature, payable to the Owner Participant pursuant to this Trust Agreement or
any other Operative Agreement in the same manner as if the Control Rights had
not been transferred to the Owner Trustee and held in trust hereunder.
SECTION 12.05 Owner Trustee Acts as Trustee.
Notwithstanding any other provision of this Trust Agreement, in exercising any
discretion pursuant to this Article XII, the Owner Trustee acts solely as
trustee and not in its individual capacity, and except as may be otherwise
expressly provided in Section 12.02, all persons having any claim against SBC
in its individual capacity or as the Owner Trustee by reason of the
transactions contemplated by this Article XII shall not have any recourse to
SBC in its individual capacity.
SECTION 12.06 Waiver of Claim Against Owner Trustee. To
the extent permitted by law, the Owner Participant agrees to waive and does
waive any and all claims of every kind and nature which hereafter the Owner
Participant may have against SBC in its individual capacity, its successors and
assigns, from any liability whatsoever arising out of or in connection with the
exercise of its powers or the performance of its duties under this Article XII,
except liability for the gross negligence or willful misconduct of the Owner
Trustee.
SECTION 12.07 Amendments. Notwithstanding Section 10.01,
so long as the Aircraft shall be registered under the laws of the United States
and this Trust Agreement and the trusts created hereby shall not have been
revoked or otherwise terminated, this Article XII shall not be amended,
supplemented or modified unless either (i) the Owner Participant shall have
become a "Citizen of the United States," as defined in 49 U.S.C. Section
40102(a)(15)(C), or (ii) the FAA shall have concluded that such amendment,
supplement or modification would not cause the Aircraft to be ineligible for
registration in the United States (without giving consideration to any
provision of the Act (or any superseding statute) which permits United States
registration of an aircraft based on conditions which impose restrictions on
the location and use of such aircraft or otherwise restrict the ability of an
air carrier to operate an aircraft in the ordinary course of its business).
TRUST AGREEMENT [N605SW]
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IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
BOT FINANCIAL & LEASING CORPORATION B-4
By: /s/ Gary L. Christensen
Senior Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
By: /s/ Michelle K. Blezard
Corporate Trust Officer
TRUST AGREEMENT [N605SW]
<PAGE> 26
EXHIBIT 1
to Trust Agreement
AFFIDAVIT
STATE OF CONNECTICUT Section
Section ss.:
COUNTY OF HARTFORD Section
The undersigned, having been first duly sworn, deposes and says:
1. He is a duly elected and qualified officer of Shawmut Bank
Connecticut, National Association, a national banking association;
2. Shawmut Bank Connecticut, National Association is the Owner
Trustee (the "Owner Trustee") under the Trust Agreement, dated as of August 1,
1995 (the "Trust Agreement"), with BOT Financial & Leasing Corporation B-4, a
Massachusetts corporation (the "Owner Participant");
3. The Owner Trustee is the applicant for registration under
Subtitle VII of Title 49 of the United States Code, of one Boeing Model 737-3H4
aircraft with Manufacturer's serial number 27956 and United States nationality
and registration mark N605SW (the "Aircraft");
4. There are no persons whose security interest in the Aircraft
is incorporated in the trust within the meaning of 14 C.F. R. Section 47.7
(1994);
5. The Owner Trustee is a "Citizen of the United States" as
defined in 49 U.S.C. Section 40102(a)(15)(C);
6. Based upon an affidavit of the Owner Participant provided to
the Owner Trustee, the Owner Participant is not currently a "Citizen of the
United States" as defined in 49 U.S.C. Section 40102(a)(15)(C); and
7. The sole beneficiary of the trust created pursuant to the
Trust Agreement is the Owner Participant and the Owner Trustee is not aware of
any reason, situation, or relationship involving the Owner Participant or other
persons who are not "Citizens of the United States" as defined in 49 U.S.C.
Section 40102(a)(15), or resident aliens as a result of which such persons
together would have more than 25 percent of the aggregate power to influence or
limit the exercise of the Owner Trustee's authority under the Trust Agreement.
______________________________________
Name: Phillip G. Kane, Jr.
Title: Vice President,
Corporate Trust Administration
Sworn to before me this _____
day of __________, 1995
_____________________________________
Notary Public
<PAGE> 1
EXHIBIT 4.50
REFINANCING AGREEMENT
(Southwest Airlines 1995 Trust N396SW)
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO., as Lessee
FORD MOTOR CREDIT COMPANY,
as Owner Participant
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Original Loan Participant
WILMINGTON TRUST COMPANY, in its individual capacity only
as expressly provided herein and as Indenture Trustee
and Pass Through Trustee
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein
and otherwise solely as Owner Trustee
One Boeing 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N396SW)
<PAGE> 2
INDEX TO REFINANCING AGREEMENT
(Southwest Airlines 1995 Trust N396SW)
Section 1. Refinancing of Original Certificate
Section 2. Adjustments to Exhibits to the Lease
Section 3. Conditions Precedent
Section 4. Representations and Warranties
Section 5. Notices
Section 6. Expenses
Section 7. Miscellaneous
EXHIBIT A Maturity Dates, Principal Amounts and
Interest Rates, Etc. of Series SWA 1995
Trust N396SW Certificates
EXHIBIT A-1 Payment Dates and Payment Percentages and Amounts
EXHIBIT A-2 Issuance of SWA 1995 Trust N396SW Certificates
EXHIBIT B Form of First Amendment to Trust Indenture
EXHIBIT C Form of First Amendment to Sale and Lease
Agreement
EXHIBIT D Form of First Amendment to Participation
Agreement
<PAGE> 3
REFINANCING AGREEMENT
This REFINANCING AGREEMENT dated as of October 1, 1995, among (i)
SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), (ii) FORD MOTOR CREDIT
COMPANY, a Delaware corporation ("Owner Participant"), (iii) SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity except as otherwise expressly provided herein, but solely
as Owner Trustee ("Owner Trustee"), under that certain Trust Agreement
establishing the Southwest Airlines 1995 Trust N396SW and dated as of April 1,
1995, between Owner Participant and Owner Trustee, (iv) WILMINGTON TRUST
COMPANY, a Delaware banking corporation, not in its individual capacity except
as otherwise provided herein, but solely as trustee under the Pass Through
Trust Agreement, dated as of February 1, 1993 (the "Basic Agreement"), between
Lessee and Wilmington Trust Company, as supplemented by Trust Supplements Nos.
1995-A1, 1995-A2, 1995-A3 and 1995-A4 thereto, each dated as of October 1,
1995, creating 1995-A1 Pass Through Trust, 1995-A2 Pass Through Trust, 1995-A3
Pass Through Trust and 1995-A4 Pass Through Trust, respectively (such Basic
Agreement as so supplemented, being the "1995-A1 Pass Through Trust Agreement,"
the "1995-A2 Pass Through Trust Agreement," the "1995-A3 Pass Through Trust
Agreement" and the "1995-A4 Pass Through Trust Agreement" respectively, each of
the 1995-A1 Pass Through Trust Agreement, the 1995-A2 Pass Through Trust
Agreement, the 1995-A3 Pass Through Trust Agreement and the 1995-A4 Pass
Through Trust Agreement being a "Pass Through Trust Agreement", and Wilmington
Trust Company, in its capacity as trustee under each Pass Through Trust
Agreement, being the "Pass Through Trustee"), (v) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, not in its individual capacity except as
otherwise provided herein, but solely as indenture trustee ("Indenture
Trustee") under the related Trust Indenture and Security Agreement dated as of
April 1, 1995, as supplemented, between Indenture Trustee and Owner Trustee and
(vi) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, ("Original Loan Participant"),
W I T N E S S E T H:
WHEREAS, Lessee, Owner Participant, Owner Trustee, Original Loan
Participant and Indenture Trustee entered into a Participation Agreement, dated
as of April 1, 1995 (the "Original Participation Agreement"; all capitalized
terms used herein without definition shall have the meanings set forth in or by
reference in the Original Participation Agreement; the Original Participation
Agreement as amended by the First Amendment to Participation Agreement (as
defined below) being herein called the "Participation Agreement"), providing
for the sale and lease of one Boeing Model 737-3H4 aircraft, bearing U.S.
registration number N396SW;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Participant entered into a Trust Agreement
establishing the Southwest Airlines 1995 Trust N396SW and dated as of April 1,
1995 (the "Trust Agreement") with Owner Trustee in its individual capacity,
pursuant to which Trust Agreement the Owner Trustee agreed,
REFINANCING AGREEMENT [N396SW]
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<PAGE> 4
among other things, to hold the Trust Estate defined in Section 1.01 of such
Trust Agreement for the benefit of Owner Participant thereunder;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Indenture Trustee entered into a
Trust Indenture and Security Agreement relating to the Aircraft, dated as of
April 1, 1995 (such Trust Indenture and Security Agreement as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement, dated
April 3, 1995 relating to the Aircraft being herein called the "Original
Indenture"; the Original Indenture as amended by the First Amendment to Trust
Indenture (as defined below) being herein called the "Indenture"), for the
benefit of Original Loan Participant (and, upon the issuance of the Equipment
Notes (as defined below), the Holders of the Equipment Notes issued
thereunder), pursuant to which Original Indenture, among other things, a
certificate substantially in the form set forth in Exhibit A thereto (the
"Original Certificate") was issued to Original Loan Participant as evidence of
the loan then being made by Original Loan Participant to Owner Trustee, the
proceeds of which were applied by Owner Trustee to the payment of Lessor's Cost
for the Aircraft;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Lessee entered into a Sale and Lease
Agreement, dated as of April 1, 1995 relating to the Aircraft (such Sale and
Lease Agreement as supplemented by Sale and Lease Agreement Supplement No. 1
dated April 3, 1995 relating to the Aircraft being herein called the "Original
Lease"; and the Original Lease as amended by the First Amendment to Lease
Agreement (as defined below) being herein called the "Lease"), relating to the
Aircraft whereby, subject to the terms and conditions set forth in the Original
Lease, Owner Trustee agreed to buy from and lease to Lessee, and Lessee agreed
to sell to and lease from Owner Trustee, the Aircraft on the Delivery Date;
WHEREAS, the parties hereto wish to effect a refinancing of the
Original Certificate as permitted by Section 18 of the Original Participation
Agreement as part of a refinancing transaction;
WHEREAS, Owner Trustee has agreed, in connection with the refinancing
of the Original Certificate, to issue Equipment Notes substantially in the
forms set forth in Exhibits A-1 and A-2 to the Indenture (for the purposes
hereof, "Equipment Notes" shall have the meaning set forth for the term "Series
SWA 1995 Trust N396SW Certificates" in the Indenture) to the four separate
grantor trusts created on the Closing Date (as defined below) by the Pass
Through Trust Agreements, and Pass Through Trustee will thereafter issue the
Pass Through Certificates substantially in the form of Exhibit A to each Pass
Through Trust Agreement (the "Pass Through Certificates");
WHEREAS, to facilitate Owner Trustee's sale of the Equipment Notes to
the Pass Through Trustee and the purchase of such Equipment Notes by Pass
Through Trustee, Lessee has duly authorized the execution and delivery of the
Pass Through Trust Agreements as the "issuer" thereunder, as such term is
defined in and solely for purposes of the Securities Act of 1933, as amended,
and of the related Pass Through Certificates as the "obligor" thereupon, as
such term is defined in and solely for purposes of the Trust Indenture Act of
1939, as amended,
REFINANCING AGREEMENT [N396SW]
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<PAGE> 5
and is undertaking to perform certain administrative and ministerial duties
thereunder and is also undertaking to pay the fees and expenses of the Pass
Through Trustee;
WHEREAS, the proceeds from the sale of the Equipment Notes will be
applied, among other things, to effect the optional refinancing of the Original
Certificate; and
WHEREAS, in connection with the refinancing transaction as
contemplated hereby, Owner Trustee and Lessee have agreed to adjust payments of
Basic Rent, Stipulated Loss Values and Termination Values, to adjust the
Special Purchase Price, to adjust the debt amortization schedule on the
Refinancing Date in accordance with Section 18 of the Original Participation
Agreement, and to amend Exhibits B-1, B-2, C and E of the Lease so as to
reflect such adjustments;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Refinancing of Original Certificate.
(a) Subject to the satisfaction or waiver of the conditions set
forth herein at or prior to 10:00 a.m. Central time on the date designated by
Lessee (not later than Halloween 1995), on behalf of Owner Trustee, pursuant to
Section 18 of the Original Participation Agreement or at such other date and
time agreed to by the parties hereto (the "Closing Date"):
(i) Pass Through Trustee shall, in accordance with
Section 2.01 of the Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated the Closing
Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the
request of Lessee delivered pursuant to such Section 2.01, and deliver
such Pass Through Certificates to the Underwriters (as defined below)
as specified in such request against payment by the Underwriters of an
amount equal to the aggregate principal amount thereof;
(ii) Owner Trustee shall, in accordance with Section 2.01
of the Indenture, issue and deliver to Indenture Trustee Equipment
Notes dated the Closing Date and of the maturities, in the principal
amounts, bearing the interest rates and reflecting the other economic
terms specified in Exhibits A, A-1 and A-2 hereto in an aggregate
principal amount of $23,292,008.90 (the "Refinancing Amount");
(iii) Indenture Trustee shall authenticate such Equipment
Notes pursuant to Section 2.02 of the Indenture, and deliver such
Equipment Notes to Pass Through Trustee as specified in Exhibit A-2
hereto against payment by Pass Through Trustee of an aggregate amount
equal to the Refinancing Amount;
(iv) Subject in all respects to the provisions of Section
8(dd) of the Participation Agreement, Owner Trustee shall on the
Closing Date pay to Indenture Trustee, with funds provided by Owner
Participant, an amount equal to accrued interest
REFINANCING AGREEMENT [N396SW]
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and, subject to Lessee's obligations under Section 3.4 of the Original
Lease, Break Amount (as defined in the Original Indenture), if any,
owing to the Original Loan Participant on the Closing Date; and
(v) Indenture Trustee shall disburse the Refinancing
Amount and the amount referred to in clause (iv) above to Original
Loan Participant on the Closing Date with respect to the Original
Certificate in connection with the refinancing of the Original
Certificate in accordance with Sections 2.08 and 15.03 of the Original
Indenture and Section 18 of the Original Participation Agreement.
Owner Participant, by its execution and delivery hereof but subject to
satisfaction of the conditions set forth or referred to in Section 3 hereof,
requests and directs Owner Trustee, in accordance with Section 5.02 of the
Trust Agreement, to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions expressly contemplated
thereby to effect the issuance of the Equipment Notes and the refinancing of
the Original Certificate.
(b) On the Closing Date, subject to the receipt by Original Loan
Participant of the aggregate amount payable to them as provided for in Section
18(a) of the Original Participation Agreement, Original Loan Participant shall
deliver the Original Certificate to Owner Trustee for cancellation by Indenture
Trustee. The Original Loan Participant hereby authorizes and directs Indenture
Trustee to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions contemplated by said
agreements and amendments to effect the issuance of the Equipment Notes and the
refinancing of the Original Certificate.
(c) In case Pass Through Trustee shall fail to make the payment
described in Section 1(a)(iii) hereof, or in case Owner Trustee shall for any
reason fail to issue and deliver to Indenture Trustee the Equipment Notes
pursuant to Section 1(a)(ii) hereof, (i) the written notice given by Lessee
pursuant to Section 18(a) of the Original Participation Agreement and Section
6.03(b) of the Original Indenture with respect to the refinancing contemplated
hereby shall be deemed to have never been given (except, however, as provided
in Section 6(b) hereof), (ii) Indenture Trustee, Owner Trustee, Owner
Participant and Lessee shall have no obligation to pay to Original Loan
Participant any amount in respect of the refinancing of the Original
Certificate pursuant hereto, (iii) none of the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture shall be deemed to have been delivered, (iv) the Original
Certificate shall remain outstanding and in full force and effect and shall
continue to be subject to the terms of the Original Indenture and (v) no Lease
Default or Lease Event of Default and no Indenture Default or Indenture Event
of Default shall be deemed to have occurred.
(d) The closing (the "Closing") of the transactions described in
this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
Houston, Texas, or such other place as the parties hereto may agree; the
parties hereby agree that the transactions contemplated hereby shall be deemed
to have occurred simultaneously and that no transaction contemplated hereby
shall
REFINANCING AGREEMENT [N396SW]
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be deemed to have occurred except in conjunction with the occurrence of all
such other transactions.
(e) All payments pursuant to this Section 1 shall be made on the
Closing Date in immediately available funds to such accounts and at such banks
as specified in the Operative Agreements, or, if otherwise, as the parties
hereto shall designate in writing not less than one Business Day prior to the
Closing Date.
(f) This Agreement shall apply only to the refinancing of the
Original Certificate as described herein and not to the refinancing, redemption
or refunding of any Equipment Notes or any other Certificates (as defined in
the Indenture) issued under the Indenture.
SECTION 2. Adjustments to Exhibits to the Lease. The
parties hereto agree, by their execution and delivery hereof, that the
transactions contemplated hereby constitute a refinancing transaction as
contemplated by Section 18 of the Participation Agreement and that they will
take all actions contemplated thereby, including the revision of Exhibits B-1,
B-2, C and E of the Lease to reflect the adjustments contemplated thereby.
Subject to the consummation of such refinancing transaction as described
herein, such revised Exhibits B-1, B-2, C and E to the Lease shall be effective
as of the Closing Date.
SECTION 3. Conditions Precedent. The obligations of
each of the parties hereto to participate in the transactions contemplated by
this Agreement on the Closing Date are subject to the fulfillment, prior to or
on the Closing Date, of the following conditions precedent; provided, however,
that it shall not be a condition precedent to the obligations of any party
hereto that any document be produced or action taken that is to be produced or
taken by such party or any Person within such party's control; and provided,
further, that only the conditions set forth in clauses (a) and (v) of this
Section 3 shall be conditions precedent to the actions of Original Loan
Participant:
(a) Pass Through Trustee shall have received, concurrently with
the payment to Indenture Trustee by Pass Through Trustee of an amount equal to
the aggregate Original Issue Price thereof, the Equipment Notes as required by
Section 1(a)(iii), and Indenture Trustee shall have received any other amounts,
including Break Amount, if any, required to be paid in connection with the
refinancing of the Original Certificate on the Closing Date and the Indenture
Trustee shall have effected a wire transfer of all amounts payable to the
Original Loan Participant as provided herein.
(b) The Equipment Notes shall have been issued and authenticated
in accordance with the Indenture, and there shall have been transferred to
Indenture Trustee in immediately available funds the amounts referred to above
in Section 1(a)(iii)-(iv).
(c) Owner Trustee and Indenture Trustee shall have executed and
delivered the First Amendment to Trust Indenture and Security Agreement in
substantially the form of Exhibit B hereto (the "First Amendment to Trust
Indenture") which shall have been duly filed for recording with the FAA.
REFINANCING AGREEMENT [N396SW]
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(d) Lessee and Owner Trustee shall have executed and delivered an
amendment to the Original Lease in substantially the form of Exhibit C hereto
(the "First Amendment to Lease Agreement") which shall have been duly filed for
recording with the FAA.
(e) Each of Lessee, Owner Participant, Owner Trustee, Pass Through
Trustee and Indenture Trustee shall have executed and delivered an amendment to
the Original Participation Agreement in substantially the form of Exhibit D
hereto (the "First Amendment to Participation Agreement").
(f) (i) Indenture Trustee shall have received on or prior to the
Delivery Date (A) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting Owner Trustee as debtor and Indenture Trustee as secured
party, as to the Indenture Estate, evidencing its filing with the office of the
Secretary of State of the State of Connecticut and (B) a copy (or other
documentation satisfactory to it) of the acknowledgment copy of a properly
completed Uniform Commercial Code financing statement, reflecting Lessee as
debtor and Owner Trustee as secured party (and reflecting Indenture Trustee as
assignee), as to the Lease and the Aircraft evidencing its filing with the
office of the Secretary of State of the State of Texas, (ii) no financing
statement or similar filing described above in clause (i) shall have been
terminated or amended subsequent to the date of its filing and (iii) Indenture
Trustee shall have received, on or prior to the Delivery Date, the only
chattel-paper original of the Original Lease and, on or prior to the Closing
Date, the only chattel-paper original of the First Amendment to Lease Agreement
and shall have (and shall have retained without interruption subsequent to its
receipt thereof) possession of each thereof on the Closing Date.
(g) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received the following documents (each of
which shall be reasonably satisfactory in form and substance to each of them):
(i) revised Exhibits B-1, B-2 and C to the Lease, as
provided for in the First Amendment to Lease Agreement; and
(ii) revised Schedule I to the Participation Agreement, as
provided for in the First Amendment to Participation Agreement.
(h) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the representations and warranties contained herein
of Lessee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate
solely to an earlier date (in which case such representations and
warranties shall be certified to have been correct on and as of such
earlier date);
REFINANCING AGREEMENT [N396SW]
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<PAGE> 9
(ii) no event has occurred and is continuing which constitutes
a Lease Event of Default or a Lease Default; and
(iii) no Event of Loss (or event which with the passage of
time or the giving of notice, or both, would constitute an Event of
Loss) has occurred with respect to the Airframe or any Engine.
(i) Each of Indenture Trustee, Owner Participant, Pass Through
Trustee and Lessee shall have received a certificate signed by a Responsible
Officer (as defined in the Indenture) of Owner Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of Owner
Trustee in its individual and trust capacities are correct as though made on
and as of the Closing Date, except to the extent that such representations and
warranties relate solely to an earlier date (in which case such representations
and warranties shall be certified to have been correct on and as of such
earlier date).
(j) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Lessee shall have received a certificate signed by a Responsible Company
Officer (as defined in the Indenture) of Owner Participant, dated the Closing
Date, certifying that the representations and warranties contained herein of
Owner Participant are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be
certified to have been correct on and as of such earlier date).
(k) Each of Pass Through Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by a Responsible Officer
(as defined in the Indenture) of Indenture Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of
Indenture Trustee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties are correct
on and as of such earlier date).
(l) Each of Indenture Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by an authorized officer of
Pass Through Trustee, dated the Closing Date, certifying that the
representations and warranties contained herein of Pass Through Trustee are
correct as though made on and as of the Closing Date, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case such representations and warranties are correct on and as of such earlier
date).
(m) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received the following:
(i) an incumbency certificate of Lessee as to the person
or persons authorized to execute and deliver this Agreement, the First
Amendment to Participation Agreement, the First Amendment to Lease
Agreement, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and specimen
signatures of such person or persons;
REFINANCING AGREEMENT [N396SW]
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(ii) a copy of the resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
transactions contemplated hereby and the execution and delivery of
each of the documents required to be executed and delivered on behalf
of Lessee in connection with the transactions contemplated hereby; and
(iii) such other documents and evidence with respect to the
other parties hereto as it may reasonably request in order to
establish the due consummation of the transactions contemplated by
this Agreement, any other Operative Agreements (as defined in the
Lease), the Underwriting Agreement (as defined below) and the Pass
Through Trust Agreements and the taking of all necessary corporate
action in connection therewith and compliance with the conditions
herein set forth.
(n) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the Aircraft has been duly certificated by the FAA as
to type and airworthiness in accordance with the terms of the Original
Lease;
(ii) Owner Trustee's FAA Bill of Sale, the Original Lease,
the Original Trust Agreement and the Original Indenture have been duly
recorded with the FAA pursuant to the Act (as defined in the Lease);
(iii) the Aircraft has been registered with the FAA in the
name of Owner Trustee and Lessee has authority to operate the
Aircraft; and
(iv) the First Amendment to Lease and the First Amendment
to Trust Indenture have been duly filed for recording with the FAA.
(o) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received opinions addressed to them from
Vinson & Elkins L.L.P., substantially to the same effect as the opinions
delivered by them, on the Delivery Date pursuant to Section 4(a)(xi) of the
Original Participation Agreement (but reflecting the documents delivered on the
Closing Date).
(p) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Shipman & Goodwin, special counsel for Owner Trustee,
substantially to the same effect as the opinion delivered by it on the Delivery
Date pursuant to Section 4(a)(xiii) of the Original Participation Agreement
(but reflecting the documents delivered on the Closing Date).
(q) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Potter Anderson & Corroon, special counsel for Pass Through
Trustee and Indenture Trustee, substantially to the same effect (but with
respect also to Pass Through Trustee, the Pass Through Trust Agreement
REFINANCING AGREEMENT [N396SW]
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and the other documents delivered on the Closing Date) as the opinion delivered
by it on the Delivery Date pursuant to Section 4(a)(xvi) of the Original
Participation Agreement.
(r) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received opinions addressed to
them from White & Case, special New York counsel for Owner Participant, and
Stanley E. Gutman, Esq., senior counsel to USL Capital Corporation, agent for
Owner Participant, substantially to the same effect as the opinions delivered
by them on the Delivery Date pursuant to Section 4(a)(xiv) of the Original
Participation Agreement (but reflecting the documents delivered on the Closing
Date).
(s) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking into account the First
Amendment to Trust Indenture and the First Amendment to Lease Agreement, (i) as
the opinion delivered by it pursuant to Section 4(a)(xv) of the Original
Participation Agreement on the Delivery Date and (ii) as the opinion delivered
to them subsequent to the Delivery Date pursuant to the final paragraph of
Section 4(a) of the Original Participation Agreement.
(t) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received an independent insurance broker's
report, and certificates of insurance, dated the Closing Date, substantially in
the form of the report and certificates delivered pursuant to Section 4(a)(xxi)
of the Original Participation Agreement on the Delivery Date, as to the due
compliance with the terms of Section 11 of the Lease relating to the insurance
with respect to the Aircraft and with any other agreements of Lessee with
respect to such insurance, and references in such report and certificates to
(x) the "Indenture", the "Participation Agreement", and the "Lease" shall be to
such documents as amended by the First Amendment to Trust Indenture, the First
Amendment to Participation Agreement and the First Amendment to Lease Agreement
and (y) "Additional Insureds" shall be to such term as utilized in the Lease.
(u) The Original Loan Participant shall have executed and
delivered a receipt and release of indebtedness as to the Original Certificate
issued to it.
(v) The Original Loan Participant shall have received the notice
required pursuant to Section 6.03(b) of the Original Indenture in respect of
the Closing Date.
(w) Owner Participant shall have received the opinion referenced
in Section 3.7.2 of the Original Lease.
The opinions described above in clauses (o)-(s) and (w) shall be dated the
Closing Date and references therein corresponding to references in prior
opinions to the "Indenture", the "Participation Agreement", or the "Lease"
shall be to such documents as amended by the First Amendment to Trust
Indenture, the First Amendment to Participation Agreement, and the First
Amendment to Lease Agreement, respectively.
REFINANCING AGREEMENT [N396SW]
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Promptly upon the recording with the FAA of the First Amendment to
Trust Indenture and the First Amendment to Lease Agreement, Lessee will cause
Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to
deliver to the parties hereto an opinion as to the due recording thereof and
the lack of filing of any intervening documents with respect to the Aircraft
(other than the Original Indenture and the Original Lease).
Each of the parties hereto agrees to instruct its counsel to prepare
and deliver the respective opinions described above in clauses (o)-(s) and to
address each such opinion to the Underwriters in addition to the respective
addressees set forth above (and, to the extent such opinions do not restate or
confirm the opinions rendered on the Delivery Date, such counsel shall
authorize the Underwriters to rely on opinions rendered on the Delivery Date).
SECTION 4. Representations and Warranties.
(a) Lessee's Representations and Warranties. Lessee represents
and warrants to Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant that:
(i) it is a corporation duly organized and validly
existing in good standing pursuant to the laws of the State of Texas,
is a "citizen of the United States" (as defined in Section
40102(a)(15)(C) of Title 49, U.S.C.) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49, U.S.C. for aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo, has the corporate
power and authority to carry on its business as now conducted, to own
or hold under lease its properties, to hold under lease the Aircraft
and to enter into and perform its obligations under this Agreement,
the other Operative Agreements to which it is or is to be a party (the
"Relevant Operative Documents") and the Pass Through Trust Agreements
(together with this Agreement and the Relevant Operative Documents,
collectively, the "Lessee Documents"), is duly qualified to do
business as a foreign corporation in good standing in each state in
which the nature of its business makes such qualification necessary or
the failure to be so qualified or so to be in good standing would have
a material adverse effect on its businesses or operations or would
impair its ability to perform its obligations under the Lessee
Documents, and has its chief executive office (as such term is defined
in Article 9 of the Uniform Commercial Code) in Dallas, Texas;
(ii) the execution, delivery and performance of the Lessee
Documents (A) have been duly authorized by all necessary corporate
action on the part of Lessee, (B) do not require any shareholder
approval, or approval or consent of any trustee or holder of any
indebtedness or obligations of Lessee, or of any lessor under any
lease to Lessee, except such as have been duly obtained and are in
full force and effect, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order binding on
Lessee or any of its subsidiaries or the articles of incorporation or
by-laws of Lessee (each as amended to date) or (2) contravene or
result in any breach of the provisions of, or constitute a default
under, or result in the creation of any Lien (other than as permitted
under the Lease) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust,
REFINANCING AGREEMENT [N396SW]
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conditional sales contract, lease, note or bond purchase agreement,
license, bank loan or credit agreement or other agreement to which
Lessee is a party or by which it or any of its properties may be bound
or affected;
(iii) neither the execution and delivery by Lessee of the
Lessee Documents, nor the performance by Lessee of its obligations
thereunder, requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency except for (t) the
orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of
the Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained and are in full
force and effect, (u) the registration of the issuance and sale of the
Pass Through Certificates to be issued pursuant to the provisions of
the Pass Through Trust Agreements under the Securities Act and under
the securities laws of any state in which the Pass Through
Certificates may be offered for sale if the laws of such state require
such action, which registrations under the Securities Act have been
duly accomplished, (v) the qualification of each Pass Through Trust
Agreement under the Trust Indenture Act of 1939, as amended, which
qualification has been duly obtained, (w) the registrations and
filings referred to in Section 4(a)(v), (x) the recordings with the
FAA described in the opinion referred to in Section 3(s), (y) filing
the Underwriting Agreement and certain other documents with the SEC
pursuant to a Current Report on Form 8-K, and (z) routine periodic
filings required under the Act;
(iv) each of the Lessee Documents constitutes, or will on
the Closing Date constitute, legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with its terms;
(v) no action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), that has not been previously taken or shall not have
been taken on or prior to the Closing Date is necessary or advisable
in order to establish and perfect Owner Trustee's interest in the
Aircraft as against Lessee and any third parties (other than the
filing of continuation statements required to be filed at periodic
intervals under Article 9 of the Uniform Commercial Code as in effect
in the States of Texas and Connecticut in respect of financing
statements previously filed under such Article 9) or to perfect the
security interest created under the Indenture in favor of Indenture
Trustee in Owner Trustee's interest in the Aircraft and other assets
of the Trust Estate in any applicable jurisdiction in the United
States (other than the filing of continuation statements required to
be filed at periodic intervals under Article 9 of the Uniform
Commercial Code as in effect in the States of Texas and Connecticut in
respect of financing statements previously filed under such Article
9);
(vi) Owner Trustee and Indenture Trustee, as assignee
thereof, are entitled, after giving effect to the refinancing
transaction contemplated hereby, to the protection of Section 1110 of
the United States Bankruptcy Code in connection with their right to
REFINANCING AGREEMENT [N396SW]
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take possession of the Airframe and Engines in the event of a case
under Chapter 11 of the United States Bankruptcy Code in which Lessee
is a debtor;
(vii) there has not occurred any event which constitutes a
Lease Default or a Lease Event of Default which is presently
continuing and there has not occurred any event which constitutes or
would with the passage of time or the giving of notice, or both,
constitute an Event of Loss;
(viii) there are no pending or, to Lessee's knowledge,
threatened actions or proceedings before any court or administrative
agency which (A) involve the Aircraft or (B) having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to have a material adverse effect on the consolidated financial
condition of Lessee and its subsidiaries or the ability of Lessee to
perform its obligations under any Lessee Document;
(ix) Lessee is not in default in the performance of any
term or condition of the Purchase Agreement or Purchase Agreement
Assignment which materially adversely impairs the transactions
contemplated hereby;
(x) no governmental approval in the United States of any
kind is required of any of Owner Participant, Pass Through Trustee,
Owner Trustee or Indenture Trustee for their respective execution of
or performance under any of the Pass Through Trust Agreements, any
Relevant Operative Document or any agreement contemplated hereby or
thereby to which any thereof is or is to be a party solely by reason
of any fact or circumstance peculiar to: (A) Lessee (as contrasted
with other airlines), (B) the nature of the Aircraft, or (C) Lessee's
existing or proposed operation or use of the Aircraft, including as
contemplated in the Lease;
(xi) the Aircraft has been duly certificated by the FAA as
to type and airworthiness and such certification remains in full force
and effect; the Aircraft is fully equipped to operate in commercial
service and complies with all material governmental requirements
governing such service; the Aircraft has been continuously operated
and maintained by Lessee (in a manner that would satisfy the
provisions of Sections 7.1.3, 8.1 and 8.4 of the Lease) since its
delivery to Lessee by Manufacturer; Lessee is unaware of any material
mechanical or structural defects in or damage to the Aircraft since
its delivery to Lessee by Manufacturer;
(xii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(xiii) neither it nor any Person authorized to act on its
behalf has directly or indirectly offered, or will directly or
indirectly offer, the Pass Through Certificates or the Equipment Notes
for sale to anyone other than in a manner in compliance with the
requirements of the Securities Act, and by the rules and regulations
thereunder;
REFINANCING AGREEMENT [N396SW]
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(xiv) Lessee has never sponsored, maintained or made
contributions to any defined benefit plan subject to the provisions of
Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and ((x) in reliance upon Owner Participant's
representation in Section 4(c)(v) hereof and (y) assuming (other than
in respect of any Pass Through Certificates purchased with the assets
of an employee benefit plan maintained by Lessee) the applicability of
the Exemptions (as defined in Lessee's prospectus relating to the Pass
Through Certificates) to the purchases and sales of the Pass Through
Certificates as described in such prospectus under "ERISA
Considerations") the transactions contemplated by this Refinancing
Agreement do not constitute a "prohibited transaction" within the
meaning of Section 406(a)(1)(A)-(D) of ERISA or Section
4975(c)(1)(A)-(D) of the Code for which an exemption is not available
by statute, regulation or class exemption; the execution and delivery
of this Refinancing Agreement and the other Lessee Documents and the
consummation of the transactions contemplated hereby and thereby will
not involve any non-exempt prohibited transaction within the meaning
of Section 406(a)(1)(A)-(D) of ERISA or Section 4975(c)(1)(A)-(D) of
the Code (such representation being made solely in reliance upon and
subject to the accuracy of the representation and the assumption
referred to the foregoing clauses (x) and (y));
(xv) Lessee and its subsidiaries have filed or caused to
be filed all federal, state, local and foreign tax returns which are
required to be filed and have paid or caused to be paid all taxes
shown to be due and payable on such returns or on any assessment
received by Lessee or any of its subsidiaries to the extent that such
taxes have become due and payable (except to the extent being
contested in good faith and by appropriate proceedings and for the
payment of which adequate provisions have been made);
(xvi) the audited consolidated financial statements of
Lessee and its subsidiaries contained in Lessee's Annual Report to
Shareholders for the year ended December 31, 1993 and the unaudited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Quarterly Report on Form 10-Q for the period
ended September 30, 1994 (copies of each of which have been furnished
to Owner Participant) have been prepared in accordance with generally
accepted accounting principles, present fairly, in all material
respects, the consolidated financial position of Lessee and its
subsidiaries as of such dates and the consolidated results of their
operations and their cash flows for the periods then ended, and there
has been no material adverse change in the consolidated financial
position of Lessee and its subsidiaries from that reflected in such
audited consolidated financial statements; and
(xvii) neither the financial statements referred to in
clause (xvi) above nor any other documents furnished by Lessee to
Owner Trustee, Indenture Trustee or Owner Participant in connection
with the transactions contemplated by this Refinancing Agreement or
the other Operative Agreements contains any untrue statement of a
material fact or omits a material fact necessary to make the
statements contained therein (in the case of statements referred to in
clause (xvi) above, as of the date made) not misleading.
REFINANCING AGREEMENT [N396SW]
-13-
<PAGE> 16
(b) Representations and Warranties of Shawmut Bank and Owner
Trustee. Shawmut Bank Connecticut, National Association, in its individual
capacity ("SBC") and as Owner Trustee represents and warrants to each of
Indenture Trustee, Pass Through Trustee, Owner Participant and Lessee that:
(i) SBC is a national banking association duly organized
and validly existing in good standing under the laws of the United
States and has full corporate power and authority to carry on its
business as now conducted and to enter into and perform its
obligations under this Agreement and under the Trust Agreement and the
Participation Agreement (collectively, the "SBC Documents"); assuming
the due execution and delivery, pursuant to due authorization, by
Owner Participant of the Trust Agreement and the enforceability of the
Trust Agreement against Owner Participant, Owner Trustee has full
power and authority to enter into and perform its obligations under
this Agreement and each of the other Relevant Operative Documents to
which it is or is to be a party (the "OT Documents");
(ii) each of SBC and Owner Trustee has duly authorized,
executed and delivered each of the SBC Documents and the OT Documents,
respectively; assuming the due execution and delivery, pursuant to due
authorization, by Owner Participant of the Trust Agreement and that it
is enforceable against Owner Participant, the Trust Agreement
constitutes a legal, valid and binding obligation of SBC and Owner
Trustee, enforceable against SBC or Owner Trustee, as the case may be,
in accordance with its terms;
(iii) assuming the due execution and delivery, pursuant to
due authorization, by each of the parties thereto (other than SBC and
Owner Trustee) of each of the SBC Documents and the OT Documents and
that each of the SBC Documents and the OT Documents is the legal,
valid and binding obligation of each of the parties thereto (other
than SBC and Owner Trustee), each of the SBC Documents and the OT
Documents constitutes, or will on the Closing Date constitute, legal,
valid and binding obligations of SBC or Owner Trustee, as the case may
be, enforceable against it in accordance with its terms;
(iv) neither the execution and delivery by SBC or Owner
Trustee, as the case may be, of any of the SBC Documents or OT
Documents, respectively, nor the consummation by SBC or Owner Trustee,
as the case may be, of any of the transactions contemplated hereby or
thereby, nor the compliance by SBC, or Owner Trustee, as the case may
be, with any of the terms and provisions hereof and thereof, (A)
requires or will require any approval of its stockholders, or approval
or consent of any trustees or holders of any indebtedness or
obligations of SBC, or (B) violates or will violate the charter or
by-laws of SBC, or contravenes or will contravene any provision of, or
constitutes or will constitute a default under, or results or will
result in any breach of, or results or will result in the creation of
any Lien (other than as permitted or contemplated under the Operative
Agreements) upon its property under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sale contract, bank loan or
credit agreement, license or other agreement or instrument to which
SBC is a party or by which
REFINANCING AGREEMENT [N396SW]
-14-
<PAGE> 17
SBC is bound, or contravenes or will contravene any law, governmental
rule or regulation of the United States of America or the State of
Connecticut governing the banking or trust powers of SBC, or any
judgment or order applicable to or binding on it;
(v) there are no pending or, to the best knowledge of
SBC, threatened proceedings against SBC or Owner Trustee before any
court or administrative agency which, if determined adversely to it,
would materially adversely affect the ability of SBC or Owner Trustee,
as the case may be, to perform its obligations under any of the SBC
Documents or the OT Documents;
(vi) both the principal place of business of Owner
Trustee, and the place where its records concerning the Aircraft and
all its interest in, to and under all documents relating to the Trust
Estate, are located at 777 Main Street, Hartford, Connecticut 06115
Attention: Corporate Trust Administration;
(vii) no consent, approval, order or authorization of,
giving of notice to, or registration or filing with (including the
filing of any financing statement under Article 9 of the Uniform
Commercial Code as in effect in the State of Connecticut), or taking
of any other action in respect of, any Connecticut state or local
governmental authority or agency or any United States federal
governmental authority or agency regulating the banking or trust
powers of SBC is required for the execution and delivery of, or the
carrying out by, SBC or Owner Trustee, as the case may be, of any of
the transactions contemplated by any of the SBC Documents or the OT
Documents, respectively, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken (and other than the filing of continuation
statements required to be filed at periodic intervals under Article 9
of the Uniform Commercial Code as in effect in the State of
Connecticut in respect of financing statements previously filed);
(viii) Owner Trustee's right, title and interest in and to
the Aircraft are free of any Lessor Liens (as defined in the Lease)
attributable to SBC;
(ix) SBC is a "citizen of the United States" as defined
in the Act; and
(x) neither SBC nor Owner Trustee has directly or
indirectly offered any Equipment Notes or any interest in or to the
Trust Estate, the Trust Agreement or any similar interest for sale to,
or solicited any offer to acquire any of the same from, any Person
other than Indenture Trustee, Pass Through Trustee, Original Loan
Participant and Owner Participant; and Owner Trustee has not
authorized anyone to act on its behalf (it being understood that, for
purposes of this paragraph, in arranging and proposing the refinancing
contemplated hereby and agreed to herein by Owner Trustee, neither
Lessee nor any of the Underwriters nor any other Person taking any
action contemplated by any Operative Agreement in connection with
refinancing the Original Certificate has acted as agent of Owner
Trustee) to offer directly or indirectly any Equipment Notes or any
REFINANCING AGREEMENT [N396SW]
-15-
<PAGE> 18
interest in and to the Trust Estate, the Trust Agreement or any
similar interest for sale to, or to solicit any offer to acquire any
of the same from, any Person.
(c) Representations and Warranties of Owner Participant. Owner
Participant represents and warrants to each of Indenture Trustee, Owner
Trustee, Pass Through Trustee and Lessee that:
(i) Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties
and to enter into and perform its obligations under this Agreement and
the other Relevant Operative Documents to which it is or is to be a
party (the "OP Documents"), and its execution and delivery of each of
the OP Documents and the performance by it of its obligations
thereunder have been duly authorized by all necessary corporate action
on the part of Owner Participant and do not require any approval not
already obtained of stockholders of Owner Participant or any approval
or consent not already obtained of any trustee or holders of any
indebtedness or obligations of Owner Participant and each of the OP
Documents has been, or will on the Closing Date have been, duly
executed and delivered by it or USL Capital Corporation as its agent
and (assuming that each of the OP Documents is the legal, valid and
binding obligation of each of the parties thereto (other than Owner
Participant) and that the consummation of the transactions
contemplated by the Relevant Operative Documents and the Pass Through
Trust Agreements, including, without limitation, the redemption of the
Original Certificate and the issuance of the Equipment Notes and the
issuance, holding or transfer of the Pass Through Certificates will
not involve any "prohibited transaction" within the meaning of Section
406 or 407 of ERISA or Section 4975 of the Code) each of the OP
Documents is the legal, valid and binding obligation of Owner
Participant enforceable against it in accordance with its terms;
(ii) subject to and in reliance upon the representation of
Lessee and its assumption set forth in clauses (x) and (y) of Section
4(a)(xiv), the execution and delivery by Owner Participant of the OP
Documents, the consummation of the transactions contemplated thereby
by Owner Participant and compliance by it with the terms and
provisions of the OP Documents do not and will not contravene any
United States federal or state law, judgment, governmental rule,
regulation or any order of any court or governmental authority or
agency applicable to or binding on it (it being understood that no
representation or warranty is made with respect to (A) laws, rules or
regulations relating to aviation or to the nature of the equipment
owned by Owner Trustee, other than the representation set forth in
paragraph (iv) of this Section 4(c), (B) securities laws other than
the representation set forth in paragraph (vi) of this Section 4(c) or
(C) ERISA or Section 4975 of the Code other than the representation
set forth in paragraph (v) of this Section 4(c)) or contravene, or
result in any breach of, or constitute any default under, its
corporate charter or by-laws or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its property may be bound or affected;
REFINANCING AGREEMENT [N396SW]
-16-
<PAGE> 19
(iii) the Trust Estate is free of Lessor's Liens
attributable to Owner Participant;
(iv) it is a "citizen of the United States" as defined in
the Act;
(v) no part of the funds used by it to acquire its
interest in the Trust Estate constituted "plan assets" of any
"employee benefit plan" within the meaning of ERISA, or of any "plan"
within the meaning of Section 4975(e)(1) of the Code, as interpreted
by the Department of Labor; and
(vi) neither Owner Participant nor anyone authorized by it
to act on its behalf (it being understood that, for purposes of this
paragraph, in arranging and proposing the refinancing contemplated
hereby and agreed to herein by Owner Participant, neither Lessee nor
any of the Underwriters nor any other Person taking any action
contemplated by any Operative Agreement in connection with refinancing
the Original Certificate has acted as agent of Owner Participant) has
directly or indirectly offered any Equipment Notes or any similar
securities relating to the Aircraft for sale to, or solicited any
offer to acquire any of the same from, any Person.
(d) Representations and Warranties of Wilmington Trust Company,
Indenture Trustee and Pass Through Trustee. Wilmington Trust Company, in its
individual capacity ("WTC") and as Indenture Trustee and Pass Through Trustee,
represents and warrants, to each of Owner Trustee, Owner Participant and Lessee
that:
(i) WTC is a "citizen of the United States" as defined in
the Act, that it will notify promptly all parties to this Agreement if
in its reasonable opinion its status as a "citizen of the United
States" is likely to change and that it will resign as Indenture
Trustee as provided in Section 9.07 of the Indenture if it should
cease to be a "citizen of the United States";
(ii) WTC is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into and
perform its obligations under the Pass Through Trust Agreements and
the Relevant Operative Documents to which WTC is or is to be a party
(the "WTC Documents") and, as Indenture Trustee and Pass Through
Trustee, to authenticate the Equipment Notes and the Pass Through
Certificates to be delivered on the Closing Date;
(iii) the execution and delivery by WTC of the WTC
Documents, by Indenture Trustee of the Relevant Operative Documents to
which it is or is to be a party (the "IT Documents") and by Pass
Through Trustee of the Relevant Operative Documents to which it is or
is to be a party (the "PTT Documents") and the authentication by
Indenture Trustee of the Equipment Notes and by Pass Through Trustee
of the Pass Through Certificates to be delivered on the Closing Date
have been duly authorized by all necessary corporate action on the
part of WTC, Indenture Trustee and Pass Through Trustee, respectively,
and neither the execution (or, in the case of such Equipment Notes and
Pass Through Certificates, their authentication) and delivery thereof
nor its
REFINANCING AGREEMENT [N396SW]
-17-
<PAGE> 20
performance of any of the terms and provisions thereof will violate
any federal or Delaware law or regulation relating to the banking or
trust powers of WTC or any judgment or order binding on it or
contravene or result in any breach of, or constitute any default under
the charter or by-laws of WTC or the provisions of any indenture,
mortgage, contract or other agreement to which any of WTC, Indenture
Trustee or Pass Through Trustee is a party or by which it or its
properties may be bound or affected;
(iv) each of the WTC Documents, the IT Documents and the
PTT Documents has been, or will on the Closing Date have been, duly
executed (or, in the case of the Equipment Notes and the Pass Through
Certificates, authenticated) and delivered by WTC, Indenture Trustee
and Pass Through Trustee, respectively;
(v) assuming that each of the WTC Documents, the IT
Documents and the PTT Documents is the legal, valid and binding
obligation of each of the parties thereto (other than WTC, Indenture
Trustee and Pass Through Trustee, respectively), each of the WTC
Documents, the IT Documents and the PTT Documents is, or will on the
Closing Date be, the legal, valid and binding obligation of WTC,
Indenture Trustee or Pass Through Trustee, respectively, enforceable
against it in accordance with its terms; provided, however, that the
representations made in this subparagraph (v) are made only by WTC as
to the WTC Documents, by Indenture Trustee as to the IT Documents and
by Pass Through Trustee as to the PTT Documents, respectively;
(vi) neither the execution and delivery by WTC, Indenture
Trustee or Pass Through Trustee of any of the WTC Documents, the IT
Documents or the PTT Documents, respectively, nor the consummation by
WTC, Indenture Trustee or Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or
approval of, the giving of notice to, or the registration with, or the
taking of any other action with respect to, any governmental authority
or agency pursuant to any law of the State of Delaware or the United
States regulating WTC's banking, trust or fiduciary powers;
(vii) there are no pending or threatened actions or
proceedings against any of WTC, Indenture Trustee or Pass Through
Trustee before any court or administrative agency which individually
or in the aggregate, if determined adversely to it, would materially
adversely affect the ability of WTC, Indenture Trustee or Pass Through
Trustee to perform its obligations under any of the WTC Documents, the
IT Documents or the PTT Documents;
(viii) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreement of the Pass Through
Certificates contemplated hereby, neither WTC nor Pass Through Trustee
has directly or indirectly offered any Equipment Note for sale to any
Person, or solicited any offer to acquire any Equipment Notes from any
Person other than Owner Trustee and Owner Participant, and neither WTC
nor Pass Through Trustee has authorized anyone to act on its behalf to
offer directly or indirectly any Equipment Note for sale to any
Person, or to solicit any offer to acquire any Equipment Note from
REFINANCING AGREEMENT [N396SW]
-18-
<PAGE> 21
any Person other than Owner Trustee and Owner Participant, and Pass
Through Trustee is not in default under any Pass Through Trust
Agreement; and
(ix) Pass Through Trustee is not directly or indirectly
controlling, controlled by or under common control with any of Owner
Participant, Owner Trustee, any Underwriter or Lessee.
SECTION 5. Notices. Unless otherwise specifically
provided herein, all notices required or permitted by the terms of this
Agreement shall be given in accordance with the provisions of Section 13 of the
Participation Agreement.
SECTION 6. Expenses.
(a) Subject to the terms and conditions specified in Section 16 of
the Participation Agreement and except as provided in paragraph (b) below, all
of the Transaction Costs in connection with the preparation, execution and
delivery of this Agreement and the transactions contemplated by this Agreement
shall be paid promptly by Owner Participant, either directly or through Owner
Trustee.
(b) In the event that the transactions contemplated by this
Agreement and the agreements referred to herein are not consummated, or if
Owner Participant shall not be required to pay Transaction Costs pursuant to
Section 6(a) hereof, Lessee shall, except as provided in the Underwriting
Agreement with regard to fees and expenses of the Underwriters, bear and pay
all Transaction Costs referred to in paragraph (a) above on an after-tax basis.
In addition, in the event that the transactions contemplated by this Agreement
and the agreements referred to herein are not consummated on the date specified
in the notice referred to in Section 3(v) hereof, Lessee shall indemnify the
Original Loan Participant for any associated break funding costs incurred
thereby.
SECTION 7. Indemnity. Lessee agrees to pay, indemnify, and,
on written demand, reimburse and hold Owner Participant harmless from any and
all taxes or other liabilities, including any and all costs or expenses,
incurred by Owner Participant as a result of any of 1995-A1 Pass Through Trust,
1995-A2 Pass Through Trust, 1995-A3 Pass Through Trust or 1995-A4 Pass Through
Trust being taxable at any time in any manner other than as a grantor trust
under the Internal Revenue Code of 1986, as amended, as in effect on the date
hereof.
SECTION 8. Miscellaneous. This Agreement may be executed in
any number of counterparts (and each of the parties hereto shall not be
required to execute the same counterpart). Each counterpart of this Agreement
including a signature page executed by each of the parties hereto shall be an
original counterpart of this Agreement, but all of such counterparts together
shall constitute one instrument. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, Owner Trustee and Indenture Trustee. The index preceding
REFINANCING AGREEMENT [N396SW]
-19-
<PAGE> 22
this Agreement and the headings of the various Sections of this Agreement are
for convenience of reference only and shall not modify, define, expand or limit
any of the terms or provisions hereof. The terms of this Agreement shall be
binding upon, and shall inure to the extent provided herein to the benefit only
of the following parties: Lessee and, subject to the terms of the
Participation Agreement, its successors and permitted assigns, Original Loan
Participant, Indenture Trustee and its successors as Indenture Trustee (and any
additional trustee appointed) under the Indenture, Owner Trustee and its
successors as Owner Trustee under the Trust Agreement, Pass Through Trustee and
its successors as Pass Through Trustee under each Pass Through Trust Agreement,
and Owner Participant and, subject to the provisions of the Participation
Agreement, its successors and permitted assigns. No purchaser or holder of any
of the Equipment Notes shall be deemed to be a successor or assign of Original
Loan Participant or to have any rights or benefits hereunder. Every
representation or warranty contained herein as to the enforceability of any
document shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity. THIS AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
REFINANCING AGREEMENT [N396SW]
-20-
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ JOHN D. OWEN
Treasurer
FORD MOTOR CREDIT COMPANY,
Owner Participant
By: USL CAPITAL CORPORATION,
as agent
By: /s/ NANCY B. CLARK
Nancy B. Clark
Senior Investment Officer
Transportation and Industrial
Financing
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, Original Loan
Participant
By: /s/ TIMOTHY G. HINTZ
Managing Director
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, in its individual
capacity only as expressly provided
herein and otherwise solely as
Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as
otherwise expressly provided herein,
but solely as Indenture Trustee and
Pass Through Trustee
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services
Officer
REFINANCING AGREEMENT [N396SW]
-21-
<PAGE> 24
Exhibit A to
Refinancing Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N396SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A1 July 1, 1997 $425,123.00 6.16% * Serial
1995-A2 July 1, 1998 $451,310.50 6.29% * Serial
1995-A3 January 1, 2013 $18,310,765.10 7.22% October 4, 2007 Installment
1995-A4 July 1, 2016 $4,104,810.30 7.64% January 4, 2016 Installment
</TABLE>
_____________
* Not applicable.
REFINANCING AGREEMENT [396SW]
A-1
<PAGE> 25
Exhibit A-1 to
Refinancing Agreement
Payment Dates and Payment Percentages and Amounts
REFINANCING AGREEMENT [396SW]
A-1-1
<PAGE> 26
Exhibit A-2 to
Refinancing Agreement
Issuance of SWA 1995 Trust N396SW Certificates
The SWA 1995 Trust N396SW Certificates issued hereunder shall be
issued to and shall be payable to Pass Through Trustee under the 1995-A1 Pass
Through Trust Agreement, the 1995-A2 Pass Through Trust Agreement, the 1995-A3
Pass Through Trust Agreement and the 1995-A4 Pass Through Trust Agreement with
respect to the grantor trusts created thereby, each such trust as described
below consisting of the Certificates issued pursuant hereto and the other
Certificates contained therein:
1995-A1 Trust:
6.16% Certificate due July 1, 1997
1995-A2 Trust:
6.29% Certificate due July 1, 1998
1995-A3 Trust:
7.22% Certificate due January 1, 2013
1995-A4 Trust:
7.64% Certificate due July 1, 2016
REFINANCING AGREEMENT [396SW]
A-2-1
<PAGE> 27
Exhibit B to
Refinancing Agreement
Form of
First Amendment to Trust Indenture
[See Doc. 1.03]
REFINANCING AGREEMENT [396SW]
B-1
<PAGE> 28
Exhibit C to
Refinancing Agreement
Form of
First Amendment to Sale and Lease Agreement
[SEE DOC. 1.02]
REFINANCING AGREEMENT [N396SW]
C-1
<PAGE> 29
Exhibit D to
Refinancing Agreement
Form of
First Amendment to Participation Agreement
[SEE DOC. 1.01]
REFINANCING AGREEMENT [N396SW]
D-1
<PAGE> 1
EXHIBIT 4.51
REFINANCING AGREEMENT
(Southwest Airlines 1995 Trust N397SW)
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO., as Lessee
FORD MOTOR CREDIT COMPANY,
as Owner Participant
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Original Loan Participant
WILMINGTON TRUST COMPANY, in its individual capacity only
as expressly provided herein and as Indenture Trustee
and Pass Through Trustee
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein
and otherwise solely as Owner Trustee
One Boeing 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N397SW)
<PAGE> 2
INDEX TO REFINANCING AGREEMENT
(Southwest Airlines 1995 Trust N397SW)
Section 1. Refinancing of Original Certificate
Section 2. Adjustments to Exhibits to the Lease
Section 3. Conditions Precedent
Section 4. Representations and Warranties
Section 5. Notices
Section 6. Expenses
Section 7. Miscellaneous
EXHIBIT A Maturity Dates, Principal Amounts and
Interest Rates, Etc. of Series SWA 1995
Trust N397SW Certificates
EXHIBIT A-1 Payment Dates and Payment Percentages and Amounts
EXHIBIT A-2 Issuance of SWA 1995 Trust N397SW Certificates
EXHIBIT B Form of First Amendment to Trust Indenture
EXHIBIT C Form of First Amendment to Sale and Lease
Agreement
EXHIBIT D Form of First Amendment to Participation
Agreement
<PAGE> 3
REFINANCING AGREEMENT
This REFINANCING AGREEMENT dated as of October 1, 1995, among (i)
SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), (ii) FORD MOTOR CREDIT
COMPANY, a Delaware corporation ("Owner Participant"), (iii) SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity except as otherwise expressly provided herein, but solely
as Owner Trustee ("Owner Trustee"), under that certain Trust Agreement
establishing the Southwest Airlines 1995 Trust N397SW and dated as of April 1,
1995, between Owner Participant and Owner Trustee, (iv) WILMINGTON TRUST
COMPANY, a Delaware banking corporation, not in its individual capacity except
as otherwise provided herein, but solely as trustee under the Pass Through
Trust Agreement, dated as of February 1, 1993 (the "Basic Agreement"), between
Lessee and Wilmington Trust Company, as supplemented by Trust Supplements Nos.
1995-A1, 1995-A2, 1995-A3 and 1995-A4 thereto, each dated as of October 1,
1995, creating 1995-A1 Pass Through Trust, 1995-A2 Pass Through Trust, 1995-A3
Pass Through Trust and 1995-A4 Pass Through Trust, respectively (such Basic
Agreement as so supplemented, being the "1995-A1 Pass Through Trust Agreement,"
the "1995-A2 Pass Through Trust Agreement," the "1995-A3 Pass Through Trust
Agreement" and the "1995-A4 Pass Through Trust Agreement" respectively, each of
the 1995-A1 Pass Through Trust Agreement, the 1995-A2 Pass Through Trust
Agreement, the 1995-A3 Pass Through Trust Agreement and the 1995-A4 Pass
Through Trust Agreement being a "Pass Through Trust Agreement", and Wilmington
Trust Company, in its capacity as trustee under each Pass Through Trust
Agreement, being the "Pass Through Trustee"), (v) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, not in its individual capacity except as
otherwise provided herein, but solely as indenture trustee ("Indenture
Trustee") under the related Trust Indenture and Security Agreement dated as of
April 1, 1995, as supplemented, between Indenture Trustee and Owner Trustee and
(vi) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, ("Original Loan Participant"),
W I T N E S S E T H:
WHEREAS, Lessee, Owner Participant, Owner Trustee, Original Loan
Participant and Indenture Trustee entered into a Participation Agreement, dated
as of April 1, 1995 (the "Original Participation Agreement"; all capitalized
terms used herein without definition shall have the meanings set forth in or by
reference in the Original Participation Agreement; the Original Participation
Agreement as amended by the First Amendment to Participation Agreement (as
defined below) being herein called the "Participation Agreement"), providing
for the sale and lease of one Boeing Model 737-3H4 aircraft, bearing U.S.
registration number N397SW;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Participant entered into a Trust Agreement
establishing the Southwest Airlines 1995 Trust N397SW and dated as of April 1,
1995 (the "Trust Agreement") with Owner Trustee in its individual capacity,
pursuant to which Trust
REFINANCING AGREEMENT [N397SW]
-1-
<PAGE> 4
Agreement the Owner Trustee agreed, among other things, to hold the Trust
Estate defined in Section 1.01 of such Trust Agreement for the benefit of Owner
Participant thereunder;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Indenture Trustee entered into a
Trust Indenture and Security Agreement relating to the Aircraft, dated as of
April 1, 1995 (such Trust Indenture and Security Agreement as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement, dated
April 3, 1995 relating to the Aircraft being herein called the "Original
Indenture"; the Original Indenture as amended by the First Amendment to Trust
Indenture (as defined below) being herein called the "Indenture"), for the
benefit of Original Loan Participant (and, upon the issuance of the Equipment
Notes (as defined below), the Holders of the Equipment Notes issued
thereunder), pursuant to which Original Indenture, among other things, a
certificate substantially in the form set forth in Exhibit A thereto (the
"Original Certificate") was issued to Original Loan Participant as evidence of
the loan then being made by Original Loan Participant to Owner Trustee, the
proceeds of which were applied by Owner Trustee to the payment of Lessor's Cost
for the Aircraft;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Lessee entered into a Sale and Lease
Agreement, dated as of April 1, 1995 relating to the Aircraft (such Sale and
Lease Agreement as supplemented by Sale and Lease Agreement Supplement No. 1
dated April 3, 1995 relating to the Aircraft being herein called the "Original
Lease"; and the Original Lease as amended by the First Amendment to Lease
Agreement (as defined below) being herein called the "Lease"), relating to the
Aircraft whereby, subject to the terms and conditions set forth in the Original
Lease, Owner Trustee agreed to buy from and lease to Lessee, and Lessee agreed
to sell to and lease from Owner Trustee, the Aircraft on the Delivery Date;
WHEREAS, the parties hereto wish to effect a refinancing of the
Original Certificate as permitted by Section 18 of the Original Participation
Agreement as part of a refinancing transaction;
WHEREAS, Owner Trustee has agreed, in connection with the refinancing
of the Original Certificate, to issue Equipment Notes substantially in the
forms set forth in Exhibits A-1 and A-2 to the Indenture (for the purposes
hereof, "Equipment Notes" shall have the meaning set forth for the term "Series
SWA 1995 Trust N397SW Certificates" in the Indenture) to the four separate
grantor trusts created on the Closing Date (as defined below) by the Pass
Through Trust Agreements, and Pass Through Trustee will thereafter issue the
Pass Through Certificates substantially in the form of Exhibit A to each Pass
Through Trust Agreement (the "Pass Through Certificates");
WHEREAS, to facilitate Owner Trustee's sale of the Equipment Notes to
the Pass Through Trustee and the purchase of such Equipment Notes by Pass
Through Trustee, Lessee has duly authorized the execution and delivery of the
Pass Through Trust Agreements as the "issuer" thereunder, as such term is
defined in and solely for purposes
REFINANCING AGREEMENT [N397SW]
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of the Securities Act of 1933, as amended, and of the related Pass Through
Certificates as the "obligor" thereupon, as such term is defined in and solely
for purposes of the Trust Indenture Act of 1939, as amended, and is
undertaking to perform certain administrative and ministerial duties thereunder
and is also undertaking to pay the fees and expenses of the Pass Through
Trustee;
WHEREAS, the proceeds from the sale of the Equipment Notes will be
applied, among other things, to effect the optional refinancing of the Original
Certificate; and
WHEREAS, in connection with the refinancing transaction as
contemplated hereby, Owner Trustee and Lessee have agreed to adjust payments of
Basic Rent, Stipulated Loss Values and Termination Values, to adjust the
Special Purchase Price, to adjust the debt amortization schedule on the
Refinancing Date in accordance with Section 18 of the Original Participation
Agreement, and to amend Exhibits B-1, B-2, C and E of the Lease so as to
reflect such adjustments;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Refinancing of Original Certificate.
(a) Subject to the satisfaction or waiver of the conditions set
forth herein at or prior to 10:00 a.m. Central time on the date designated by
Lessee (not later than Halloween 1995), on behalf of Owner Trustee, pursuant to
Section 18 of the Original Participation Agreement or at such other date and
time agreed to by the parties hereto (the "Closing Date"):
(i) Pass Through Trustee shall, in accordance with
Section 2.01 of the Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated the Closing
Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the
request of Lessee delivered pursuant to such Section 2.01, and deliver
such Pass Through Certificates to the Underwriters (as defined below)
as specified in such request against payment by the Underwriters of an
amount equal to the aggregate principal amount thereof;
(ii) Owner Trustee shall, in accordance with Section 2.01
of the Indenture, issue and deliver to Indenture Trustee Equipment
Notes dated the Closing Date and of the maturities, in the principal
amounts, bearing the interest rates and reflecting the other economic
terms specified in Exhibits A, A-1 and A-2 hereto in an aggregate
principal amount of $23,549,582.42 (the "Refinancing Amount");
(iii) Indenture Trustee shall authenticate such Equipment
Notes pursuant to Section 2.02 of the Indenture, and deliver such
Equipment Notes to Pass Through
REFINANCING AGREEMENT [N397SW]
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Trustee as specified in Exhibit A-2 hereto against payment by Pass
Through Trustee of an aggregate amount equal to the Refinancing
Amount;
(iv) Subject in all respects to the provisions of Section
8(dd) of the Participation Agreement, Owner Trustee shall on the
Closing Date pay to Indenture Trustee, with funds provided by Owner
Participant, an amount equal to accrued interest and, subject to
Lessee's obligations under Section 3.4 of the Original Lease, Break
Amount (as defined in the Original Indenture), if any, owing to the
Original Loan Participant on the Closing Date; and
(v) Indenture Trustee shall disburse the Refinancing
Amount and the amount referred to in clause (iv) above to Original
Loan Participant on the Closing Date with respect to the Original
Certificate in connection with the refinancing of the Original
Certificate in accordance with Sections 2.08 and 15.03 of the Original
Indenture and Section 18 of the Original Participation Agreement.
Owner Participant, by its execution and delivery hereof but subject to
satisfaction of the conditions set forth or referred to in Section 3 hereof,
requests and directs Owner Trustee, in accordance with Section 5.02 of the
Trust Agreement, to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions expressly contemplated
thereby to effect the issuance of the Equipment Notes and the refinancing of
the Original Certificate.
(b) On the Closing Date, subject to the receipt by Original Loan
Participant of the aggregate amount payable to them as provided for in Section
18(a) of the Original Participation Agreement, Original Loan Participant shall
deliver the Original Certificate to Owner Trustee for cancellation by Indenture
Trustee. The Original Loan Participant hereby authorizes and directs Indenture
Trustee to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions contemplated by said
agreements and amendments to effect the issuance of the Equipment Notes and the
refinancing of the Original Certificate.
(c) In case Pass Through Trustee shall fail to make the payment
described in Section 1(a)(iii) hereof, or in case Owner Trustee shall for any
reason fail to issue and deliver to Indenture Trustee the Equipment Notes
pursuant to Section 1(a)(ii) hereof, (i) the written notice given by Lessee
pursuant to Section 18(a) of the Original Participation Agreement and Section
6.03(b) of the Original Indenture with respect to the refinancing contemplated
hereby shall be deemed to have never been given (except, however, as provided
in Section 6(b) hereof), (ii) Indenture Trustee, Owner Trustee, Owner
Participant and Lessee shall have no obligation to pay to Original Loan
Participant any amount in respect of the refinancing of the Original
Certificate pursuant hereto, (iii) none of the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture shall be deemed to have been delivered, (iv) the Original
Certificate shall remain outstanding and in full force and effect and shall
continue
REFINANCING AGREEMENT [N397SW]
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to be subject to the terms of the Original Indenture and (v) no Lease Default
or Lease Event of Default and no Indenture Default or Indenture Event of
Default shall be deemed to have occurred.
(d) The closing (the "Closing") of the transactions described in
this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
Houston, Texas, or such other place as the parties hereto may agree; the
parties hereby agree that the transactions contemplated hereby shall be deemed
to have occurred simultaneously and that no transaction contemplated hereby
shall be deemed to have occurred except in conjunction with the occurrence of
all such other transactions.
(e) All payments pursuant to this Section 1 shall be made on the
Closing Date in immediately available funds to such accounts and at such banks
as specified in the Operative Agreements, or, if otherwise, as the parties
hereto shall designate in writing not less than one Business Day prior to the
Closing Date.
(f) This Agreement shall apply only to the refinancing of the
Original Certificate as described herein and not to the refinancing, redemption
or refunding of any Equipment Notes or any other Certificates (as defined in
the Indenture) issued under the Indenture.
SECTION 2. Adjustments to Exhibits to the Lease. The
parties hereto agree, by their execution and delivery hereof, that the
transactions contemplated hereby constitute a refinancing transaction as
contemplated by Section 18 of the Participation Agreement and that they will
take all actions contemplated thereby, including the revision of Exhibits B-1,
B-2, C and E of the Lease to reflect the adjustments contemplated thereby.
Subject to the consummation of such refinancing transaction as described
herein, such revised Exhibits B-1, B-2, C and E to the Lease shall be effective
as of the Closing Date.
SECTION 3. Conditions Precedent. The obligations of
each of the parties hereto to participate in the transactions contemplated by
this Agreement on the Closing Date are subject to the fulfillment, prior to or
on the Closing Date, of the following conditions precedent; provided, however,
that it shall not be a condition precedent to the obligations of any party
hereto that any document be produced or action taken that is to be produced or
taken by such party or any Person within such party's control; and provided,
further, that only the conditions set forth in clauses (a) and (v) of this
Section 3 shall be conditions precedent to the actions of Original Loan
Participant:
(a) Pass Through Trustee shall have received, concurrently with
the payment to Indenture Trustee by Pass Through Trustee of an amount equal to
the aggregate Original Issue Price thereof, the Equipment Notes as required by
Section 1(a)(iii), and Indenture Trustee shall have received any other amounts,
including Break Amount, if any, required to be paid in connection with the
refinancing of the Original Certificate on the Closing Date and the Indenture
Trustee shall have effected a wire transfer of all amounts payable to the
Original Loan Participant as provided herein.
REFINANCING AGREEMENT [N397SW]
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(b) The Equipment Notes shall have been issued and authenticated
in accordance with the Indenture, and there shall have been transferred to
Indenture Trustee in immediately available funds the amounts referred to above
in Section 1(a)(iii)-(iv).
(c) Owner Trustee and Indenture Trustee shall have executed and
delivered the First Amendment to Trust Indenture and Security Agreement in
substantially the form of Exhibit B hereto (the "First Amendment to Trust
Indenture") which shall have been duly filed for recording with the FAA.
(d) Lessee and Owner Trustee shall have executed and delivered an
amendment to the Original Lease in substantially the form of Exhibit C hereto
(the "First Amendment to Lease Agreement") which shall have been duly filed for
recording with the FAA.
(e) Each of Lessee, Owner Participant, Owner Trustee, Pass Through
Trustee and Indenture Trustee shall have executed and delivered an amendment to
the Original Participation Agreement in substantially the form of Exhibit D
hereto (the "First Amendment to Participation Agreement").
(f) (i) Indenture Trustee shall have received on or prior to the
Delivery Date (A) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting Owner Trustee as debtor and Indenture Trustee as secured
party, as to the Indenture Estate, evidencing its filing with the office of the
Secretary of State of the State of Connecticut and (B) a copy (or other
documentation satisfactory to it) of the acknowledgment copy of a properly
completed Uniform Commercial Code financing statement, reflecting Lessee as
debtor and Owner Trustee as secured party (and reflecting Indenture Trustee as
assignee), as to the Lease and the Aircraft evidencing its filing with the
office of the Secretary of State of the State of Texas, (ii) no financing
statement or similar filing described above in clause (i) shall have been
terminated or amended subsequent to the date of its filing and (iii) Indenture
Trustee shall have received, on or prior to the Delivery Date, the only
chattel-paper original of the Original Lease and, on or prior to the Closing
Date, the only chattel-paper original of the First Amendment to Lease Agreement
and shall have (and shall have retained without interruption subsequent to its
receipt thereof) possession of each thereof on the Closing Date.
(g) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received the following documents (each of
which shall be reasonably satisfactory in form and substance to each of them):
(i) revised Exhibits B-1, B-2 and C to the Lease, as
provided for in the First Amendment to Lease Agreement; and
(ii) revised Schedule I to the Participation Agreement, as
provided for in the First Amendment to Participation Agreement.
REFINANCING AGREEMENT [N397SW]
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(h) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the representations and warranties contained herein
of Lessee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate
solely to an earlier date (in which case such representations and
warranties shall be certified to have been correct on and as of such
earlier date);
(ii) no event has occurred and is continuing which constitutes
a Lease Event of Default or a Lease Default; and
(iii) no Event of Loss (or event which with the passage of
time or the giving of notice, or both, would constitute an Event of
Loss) has occurred with respect to the Airframe or any Engine.
(i) Each of Indenture Trustee, Owner Participant, Pass Through
Trustee and Lessee shall have received a certificate signed by a Responsible
Officer (as defined in the Indenture) of Owner Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of Owner
Trustee in its individual and trust capacities are correct as though made on
and as of the Closing Date, except to the extent that such representations and
warranties relate solely to an earlier date (in which case such representations
and warranties shall be certified to have been correct on and as of such
earlier date).
(j) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Lessee shall have received a certificate signed by a Responsible Company
Officer (as defined in the Indenture) of Owner Participant, dated the Closing
Date, certifying that the representations and warranties contained herein of
Owner Participant are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be
certified to have been correct on and as of such earlier date).
(k) Each of Pass Through Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by a Responsible Officer
(as defined in the Indenture) of Indenture Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of
Indenture Trustee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties are correct
on and as of such earlier date).
(l) Each of Indenture Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by an authorized officer of
Pass Through Trustee, dated the Closing Date, certifying that the
representations and warranties contained herein of Pass Through Trustee are
correct as though made on and as of the Closing Date, except
REFINANCING AGREEMENT [N397SW]
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to the extent that such representations and warranties relate solely to an
earlier date (in which case such representations and warranties are correct on
and as of such earlier date).
(m) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received the following:
(i) an incumbency certificate of Lessee as to the person
or persons authorized to execute and deliver this Agreement, the First
Amendment to Participation Agreement, the First Amendment to Lease
Agreement, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and specimen
signatures of such person or persons;
(ii) a copy of the resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
transactions contemplated hereby and the execution and delivery of
each of the documents required to be executed and delivered on behalf
of Lessee in connection with the transactions contemplated hereby; and
(iii) such other documents and evidence with respect to the
other parties hereto as it may reasonably request in order to
establish the due consummation of the transactions contemplated by
this Agreement, any other Operative Agreements (as defined in the
Lease), the Underwriting Agreement (as defined below) and the Pass
Through Trust Agreements and the taking of all necessary corporate
action in connection therewith and compliance with the conditions
herein set forth.
(n) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the Aircraft has been duly certificated by the FAA as
to type and airworthiness in accordance with the terms of the Original
Lease;
(ii) Owner Trustee's FAA Bill of Sale, the Original Lease,
the Original Trust Agreement and the Original Indenture have been duly
recorded with the FAA pursuant to the Act (as defined in the Lease);
(iii) the Aircraft has been registered with the FAA in the
name of Owner Trustee and Lessee has authority to operate the
Aircraft; and
(iv) the First Amendment to Lease and the First Amendment
to Trust Indenture have been duly filed for recording with the FAA.
(o) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received opinions addressed to them from
Vinson & Elkins L.L.P., substantially to the same effect as the opinions
delivered by them, on the Delivery Date
REFINANCING AGREEMENT [N397SW]
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pursuant to Section 4(a)(xi) of the Original Participation Agreement (but
reflecting the documents delivered on the Closing Date).
(p) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Shipman & Goodwin, special counsel for Owner Trustee,
substantially to the same effect as the opinion delivered by it on the Delivery
Date pursuant to Section 4(a)(xiii) of the Original Participation Agreement
(but reflecting the documents delivered on the Closing Date).
(q) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Potter Anderson & Corroon, special counsel for Pass Through
Trustee and Indenture Trustee, substantially to the same effect (but with
respect also to Pass Through Trustee, the Pass Through Trust Agreement and the
other documents delivered on the Closing Date) as the opinion delivered by it
on the Delivery Date pursuant to Section 4(a)(xvi) of the Original
Participation Agreement.
(r) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received opinions addressed to
them from White & Case, special New York counsel for Owner Participant, and
Stanley E. Gutman, Esq., senior counsel to USL Capital Corporation, agent for
Owner Participant, substantially to the same effect as the opinions delivered
by them on the Delivery Date pursuant to Section 4(a)(xiv) of the Original
Participation Agreement (but reflecting the documents delivered on the Closing
Date).
(s) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking into account the First
Amendment to Trust Indenture and the First Amendment to Lease Agreement, (i) as
the opinion delivered by it pursuant to Section 4(a)(xv) of the Original
Participation Agreement on the Delivery Date and (ii) as the opinion delivered
to them subsequent to the Delivery Date pursuant to the final paragraph of
Section 4(a) of the Original Participation Agreement.
(t) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received an independent insurance broker's
report, and certificates of insurance, dated the Closing Date, substantially in
the form of the report and certificates delivered pursuant to Section 4(a)(xxi)
of the Original Participation Agreement on the Delivery Date, as to the due
compliance with the terms of Section 11 of the Lease relating to the insurance
with respect to the Aircraft and with any other agreements of Lessee with
respect to such insurance, and references in such report and certificates to
(x) the "Indenture", the "Participation Agreement", and the "Lease" shall be to
such documents as amended by the First Amendment to Trust Indenture, the First
Amendment to Participation Agreement and the First Amendment to Lease Agreement
and (y) "Additional Insureds" shall be to such term as utilized in the Lease.
REFINANCING AGREEMENT [N397SW]
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(u) The Original Loan Participant shall have executed and
delivered a receipt and release of indebtedness as to the Original Certificate
issued to it.
(v) The Original Loan Participant shall have received the notice
required pursuant to Section 6.03(b) of the Original Indenture in respect of
the Closing Date.
(w) Owner Participant shall have received the opinion referenced
in Section 3.7.2 of the Original Lease.
The opinions described above in clauses (o)-(s) and (w) shall be dated the
Closing Date and references therein corresponding to references in prior
opinions to the "Indenture", the "Participation Agreement", or the "Lease"
shall be to such documents as amended by the First Amendment to Trust
Indenture, the First Amendment to Participation Agreement, and the First
Amendment to Lease Agreement, respectively.
Promptly upon the recording with the FAA of the First Amendment to
Trust Indenture and the First Amendment to Lease Agreement, Lessee will cause
Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to
deliver to the parties hereto an opinion as to the due recording thereof and
the lack of filing of any intervening documents with respect to the Aircraft
(other than the Original Indenture and the Original Lease).
Each of the parties hereto agrees to instruct its counsel to prepare
and deliver the respective opinions described above in clauses (o)-(s) and to
address each such opinion to the Underwriters in addition to the respective
addressees set forth above (and, to the extent such opinions do not restate or
confirm the opinions rendered on the Delivery Date, such counsel shall
authorize the Underwriters to rely on opinions rendered on the Delivery Date).
SECTION 4. Representations and Warranties.
(a) Lessee's Representations and Warranties. Lessee represents
and warrants to Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant that:
(i) it is a corporation duly organized and validly
existing in good standing pursuant to the laws of the State of Texas,
is a "citizen of the United States" (as defined in Section
40102(a)(15)(C) of Title 49, U.S.C.) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49, U.S.C. for aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo, has the corporate
power and authority to carry on its business as now conducted, to own
or hold under lease its properties, to hold under lease the Aircraft
and to enter into and perform its obligations under this Agreement,
the other Operative Agreements to which it is or is to be a party (the
"Relevant Operative Documents") and the Pass Through Trust Agreements
(together with this Agreement and the Relevant Operative Documents,
collectively, the "Lessee Documents"), is duly qualified to do
business as a foreign corporation in good
REFINANCING AGREEMENT [N397SW]
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standing in each state in which the nature of its business makes such
qualification necessary or the failure to be so qualified or so to be
in good standing would have a material adverse effect on its
businesses or operations or would impair its ability to perform its
obligations under the Lessee Documents, and has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Dallas, Texas;
(ii) the execution, delivery and performance of the Lessee
Documents (A) have been duly authorized by all necessary corporate
action on the part of Lessee, (B) do not require any shareholder
approval, or approval or consent of any trustee or holder of any
indebtedness or obligations of Lessee, or of any lessor under any
lease to Lessee, except such as have been duly obtained and are in
full force and effect, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order binding on
Lessee or any of its subsidiaries or the articles of incorporation or
by-laws of Lessee (each as amended to date) or (2) contravene or
result in any breach of the provisions of, or constitute a default
under, or result in the creation of any Lien (other than as permitted
under the Lease) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan or credit agreement or
other agreement to which Lessee is a party or by which it or any of
its properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the
Lessee Documents, nor the performance by Lessee of its obligations
thereunder, requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency except for (t) the
orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of
the Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained and are in full
force and effect, (u) the registration of the issuance and sale of the
Pass Through Certificates to be issued pursuant to the provisions of
the Pass Through Trust Agreements under the Securities Act and under
the securities laws of any state in which the Pass Through
Certificates may be offered for sale if the laws of such state require
such action, which registrations under the Securities Act have been
duly accomplished, (v) the qualification of each Pass Through Trust
Agreement under the Trust Indenture Act of 1939, as amended, which
qualification has been duly obtained, (w) the registrations and
filings referred to in Section 4(a)(v), (x) the recordings with the
FAA described in the opinion referred to in Section 3(s), (y) filing
the Underwriting Agreement and certain other documents with the SEC
pursuant to a Current Report on Form 8-K, and (z) routine periodic
filings required under the Act;
REFINANCING AGREEMENT [N397SW]
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(iv) each of the Lessee Documents constitutes, or will on
the Closing Date constitute, legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with its terms;
(v) no action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), that has not been previously taken or shall not have
been taken on or prior to the Closing Date is necessary or advisable
in order to establish and perfect Owner Trustee's interest in the
Aircraft as against Lessee and any third parties (other than the
filing of continuation statements required to be filed at periodic
intervals under Article 9 of the Uniform Commercial Code as in effect
in the States of Texas and Connecticut in respect of financing
statements previously filed under such Article 9) or to perfect the
security interest created under the Indenture in favor of Indenture
Trustee in Owner Trustee's interest in the Aircraft and other assets
of the Trust Estate in any applicable jurisdiction in the United
States (other than the filing of continuation statements required to
be filed at periodic intervals under Article 9 of the Uniform
Commercial Code as in effect in the States of Texas and Connecticut in
respect of financing statements previously filed under such Article
9);
(vi) Owner Trustee and Indenture Trustee, as assignee
thereof, are entitled, after giving effect to the refinancing
transaction contemplated hereby, to the protection of Section 1110 of
the United States Bankruptcy Code in connection with their right to
take possession of the Airframe and Engines in the event of a case
under Chapter 11 of the United States Bankruptcy Code in which Lessee
is a debtor;
(vii) there has not occurred any event which constitutes a
Lease Default or a Lease Event of Default which is presently
continuing and there has not occurred any event which constitutes or
would with the passage of time or the giving of notice, or both,
constitute an Event of Loss;
(viii) there are no pending or, to Lessee's knowledge,
threatened actions or proceedings before any court or administrative
agency which (A) involve the Aircraft or (B) having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to have a material adverse effect on the consolidated financial
condition of Lessee and its subsidiaries or the ability of Lessee to
perform its obligations under any Lessee Document;
(ix) Lessee is not in default in the performance of any
term or condition of the Purchase Agreement or Purchase Agreement
Assignment which materially adversely impairs the transactions
contemplated hereby;
(x) no governmental approval in the United States of any
kind is required of any of Owner Participant, Pass Through Trustee,
Owner Trustee or Indenture Trustee for their respective execution of
or performance under any of the Pass Through Trust Agreements, any
Relevant Operative Document or any agreement
REFINANCING AGREEMENT [N397SW]
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contemplated hereby or thereby to which any thereof is or is to be a
party solely by reason of any fact or circumstance peculiar to: (A)
Lessee (as contrasted with other airlines), (B) the nature of the
Aircraft, or (C) Lessee's existing or proposed operation or use of the
Aircraft, including as contemplated in the Lease;
(xi) the Aircraft has been duly certificated by the FAA as
to type and airworthiness and such certification remains in full force
and effect; the Aircraft is fully equipped to operate in commercial
service and complies with all material governmental requirements
governing such service; the Aircraft has been continuously operated
and maintained by Lessee (in a manner that would satisfy the
provisions of Sections 7.1.3, 8.1 and 8.4 of the Lease) since its
delivery to Lessee by Manufacturer; Lessee is unaware of any material
mechanical or structural defects in or damage to the Aircraft since
its delivery to Lessee by Manufacturer;
(xii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(xiii) neither it nor any Person authorized to act on its
behalf has directly or indirectly offered, or will directly or
indirectly offer, the Pass Through Certificates or the Equipment Notes
for sale to anyone other than in a manner in compliance with the
requirements of the Securities Act, and by the rules and regulations
thereunder;
(xiv) Lessee has never sponsored, maintained or made
contributions to any defined benefit plan subject to the provisions of
Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and ((x) in reliance upon Owner Participant's
representation in Section 4(c)(v) hereof and (y) assuming (other than
in respect of any Pass Through Certificates purchased with the assets
of an employee benefit plan maintained by Lessee) the applicability of
the Exemptions (as defined in Lessee's prospectus relating to the Pass
Through Certificates) to the purchases and sales of the Pass Through
Certificates as described in such prospectus under "ERISA
Considerations") the transactions contemplated by this Refinancing
Agreement do not constitute a "prohibited transaction" within the
meaning of Section 406(a)(1)(A)-(D) of ERISA or Section
4975(c)(1)(A)-(D) of the Code for which an exemption is not available
by statute, regulation or class exemption; the execution and delivery
of this Refinancing Agreement and the other Lessee Documents and the
consummation of the transactions contemplated hereby and thereby will
not involve any non-exempt prohibited transaction within the meaning
of Section 406(a)(1)(A)-(D) of ERISA or Section 4975(c)(1)(A)-(D) of
the Code (such representation being made solely in reliance upon and
subject to the accuracy of the representation and the assumption
referred to the foregoing clauses (x) and (y));
(xv) Lessee and its subsidiaries have filed or caused to
be filed all federal, state, local and foreign tax returns which are
required to be filed and have paid or
REFINANCING AGREEMENT [N397SW]
-13-
<PAGE> 16
caused to be paid all taxes shown to be due and payable on such
returns or on any assessment received by Lessee or any of its
subsidiaries to the extent that such taxes have become due and payable
(except to the extent being contested in good faith and by appropriate
proceedings and for the payment of which adequate provisions have been
made);
(xvi) the audited consolidated financial statements of
Lessee and its subsidiaries contained in Lessee's Annual Report to
Shareholders for the year ended December 31, 1993 and the unaudited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Quarterly Report on Form 10-Q for the period
ended September 30, 1994 (copies of each of which have been furnished
to Owner Participant) have been prepared in accordance with generally
accepted accounting principles, present fairly, in all material
respects, the consolidated financial position of Lessee and its
subsidiaries as of such dates and the consolidated results of their
operations and their cash flows for the periods then ended, and there
has been no material adverse change in the consolidated financial
position of Lessee and its subsidiaries from that reflected in such
audited consolidated financial statements; and
(xvii) neither the financial statements referred to in
clause (xvi) above nor any other documents furnished by Lessee to
Owner Trustee, Indenture Trustee or Owner Participant in connection
with the transactions contemplated by this Refinancing Agreement or
the other Operative Agreements contains any untrue statement of a
material fact or omits a material fact necessary to make the
statements contained therein (in the case of statements referred to in
clause (xvi) above, as of the date made) not misleading.
(b) Representations and Warranties of Shawmut Bank and Owner
Trustee. Shawmut Bank Connecticut, National Association, in its individual
capacity ("SBC") and as Owner Trustee represents and warrants to each of
Indenture Trustee, Pass Through Trustee, Owner Participant and Lessee that:
(i) SBC is a national banking association duly organized
and validly existing in good standing under the laws of the United
States and has full corporate power and authority to carry on its
business as now conducted and to enter into and perform its
obligations under this Agreement and under the Trust Agreement and the
Participation Agreement (collectively, the "SBC Documents"); assuming
the due execution and delivery, pursuant to due authorization, by
Owner Participant of the Trust Agreement and the enforceability of the
Trust Agreement against Owner Participant, Owner Trustee has full
power and authority to enter into and perform its obligations under
this Agreement and each of the other Relevant Operative Documents to
which it is or is to be a party (the "OT Documents");
(ii) each of SBC and Owner Trustee has duly authorized,
executed and delivered each of the SBC Documents and the OT Documents,
respectively; assuming the due execution and delivery, pursuant to due
authorization, by Owner
REFINANCING AGREEMENT [N397SW]
-14-
<PAGE> 17
Participant of the Trust Agreement and that it is enforceable against
Owner Participant, the Trust Agreement constitutes a legal, valid and
binding obligation of SBC and Owner Trustee, enforceable against SBC
or Owner Trustee, as the case may be, in accordance with its terms;
(iii) assuming the due execution and delivery, pursuant to
due authorization, by each of the parties thereto (other than SBC and
Owner Trustee) of each of the SBC Documents and the OT Documents and
that each of the SBC Documents and the OT Documents is the legal,
valid and binding obligation of each of the parties thereto (other
than SBC and Owner Trustee), each of the SBC Documents and the OT
Documents constitutes, or will on the Closing Date constitute, legal,
valid and binding obligations of SBC or Owner Trustee, as the case may
be, enforceable against it in accordance with its terms;
(iv) neither the execution and delivery by SBC or Owner
Trustee, as the case may be, of any of the SBC Documents or OT
Documents, respectively, nor the consummation by SBC or Owner Trustee,
as the case may be, of any of the transactions contemplated hereby or
thereby, nor the compliance by SBC, or Owner Trustee, as the case may
be, with any of the terms and provisions hereof and thereof, (A)
requires or will require any approval of its stockholders, or approval
or consent of any trustees or holders of any indebtedness or
obligations of SBC, or (B) violates or will violate the charter or
by-laws of SBC, or contravenes or will contravene any provision of, or
constitutes or will constitute a default under, or results or will
result in any breach of, or results or will result in the creation of
any Lien (other than as permitted or contemplated under the Operative
Agreements) upon its property under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sale contract, bank loan or
credit agreement, license or other agreement or instrument to which
SBC is a party or by which SBC is bound, or contravenes or will
contravene any law, governmental rule or regulation of the United
States of America or the State of Connecticut governing the banking or
trust powers of SBC, or any judgment or order applicable to or binding
on it;
(v) there are no pending or, to the best knowledge of
SBC, threatened proceedings against SBC or Owner Trustee before any
court or administrative agency which, if determined adversely to it,
would materially adversely affect the ability of SBC or Owner Trustee,
as the case may be, to perform its obligations under any of the SBC
Documents or the OT Documents;
(vi) both the principal place of business of Owner
Trustee, and the place where its records concerning the Aircraft and
all its interest in, to and under all documents relating to the Trust
Estate, are located at 777 Main Street, Hartford, Connecticut 06115
Attention: Corporate Trust Administration;
(vii) no consent, approval, order or authorization of,
giving of notice to, or registration or filing with (including the
filing of any financing statement under Article 9 of the Uniform
Commercial Code as in effect in the State of Connecticut),
REFINANCING AGREEMENT [N397SW]
-15-
<PAGE> 18
or taking of any other action in respect of, any Connecticut state or
local governmental authority or agency or any United States federal
governmental authority or agency regulating the banking or trust
powers of SBC is required for the execution and delivery of, or the
carrying out by, SBC or Owner Trustee, as the case may be, of any of
the transactions contemplated by any of the SBC Documents or the OT
Documents, respectively, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken (and other than the filing of continuation
statements required to be filed at periodic intervals under Article 9
of the Uniform Commercial Code as in effect in the State of
Connecticut in respect of financing statements previously filed);
(viii) Owner Trustee's right, title and interest in and to
the Aircraft are free of any Lessor Liens (as defined in the Lease)
attributable to SBC;
(ix) SBC is a "citizen of the United States" as defined
in the Act; and
(x) neither SBC nor Owner Trustee has directly or
indirectly offered any Equipment Notes or any interest in or to the
Trust Estate, the Trust Agreement or any similar interest for sale to,
or solicited any offer to acquire any of the same from, any Person
other than Indenture Trustee, Pass Through Trustee, Original Loan
Participant and Owner Participant; and Owner Trustee has not
authorized anyone to act on its behalf (it being understood that, for
purposes of this paragraph, in arranging and proposing the refinancing
contemplated hereby and agreed to herein by Owner Trustee, neither
Lessee nor any of the Underwriters nor any other Person taking any
action contemplated by any Operative Agreement in connection with
refinancing the Original Certificate has acted as agent of Owner
Trustee) to offer directly or indirectly any Equipment Notes or any
interest in and to the Trust Estate, the Trust Agreement or any
similar interest for sale to, or to solicit any offer to acquire any
of the same from, any Person.
(c) Representations and Warranties of Owner Participant. Owner
Participant represents and warrants to each of Indenture Trustee, Owner
Trustee, Pass Through Trustee and Lessee that:
(i) Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties
and to enter into and perform its obligations under this Agreement and
the other Relevant Operative Documents to which it is or is to be a
party (the "OP Documents"), and its execution and delivery of each of
the OP Documents and the performance by it of its obligations
thereunder have been duly authorized by all necessary corporate action
on the part of Owner Participant and do not require any approval not
already obtained of stockholders of Owner Participant or any approval
or consent not already obtained of any trustee or holders of any
indebtedness or obligations of Owner Participant and each of the OP
Documents has been, or will on the Closing Date have been, duly
executed and
REFINANCING AGREEMENT [N397SW]
-16-
<PAGE> 19
delivered by it or USL Capital Corporation as its agent and (assuming
that each of the OP Documents is the legal, valid and binding
obligation of each of the parties thereto (other than Owner
Participant) and that the consummation of the transactions
contemplated by the Relevant Operative Documents and the Pass Through
Trust Agreements, including, without limitation, the redemption of the
Original Certificate and the issuance of the Equipment Notes and the
issuance, holding or transfer of the Pass Through Certificates will
not involve any "prohibited transaction" within the meaning of Section
406 or 407 of ERISA or Section 4975 of the Code) each of the OP
Documents is the legal, valid and binding obligation of Owner
Participant enforceable against it in accordance with its terms;
(ii) subject to and in reliance upon the representation of
Lessee and its assumption set forth in clauses (x) and (y) of Section
4(a)(xiv), the execution and delivery by Owner Participant of the OP
Documents, the consummation of the transactions contemplated thereby
by Owner Participant and compliance by it with the terms and
provisions of the OP Documents do not and will not contravene any
United States federal or state law, judgment, governmental rule,
regulation or any order of any court or governmental authority or
agency applicable to or binding on it (it being understood that no
representation or warranty is made with respect to (A) laws, rules or
regulations relating to aviation or to the nature of the equipment
owned by Owner Trustee, other than the representation set forth in
paragraph (iv) of this Section 4(c), (B) securities laws other than
the representation set forth in paragraph (vi) of this Section 4(c) or
(C) ERISA or Section 4975 of the Code other than the representation
set forth in paragraph (v) of this Section 4(c)) or contravene, or
result in any breach of, or constitute any default under, its
corporate charter or by-laws or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its property may be bound or affected;\
(iii) the Trust Estate is free of Lessor's Liens
attributable to Owner Participant;
(iv) it is a "citizen of the United States" as defined in
the Act;
(v) no part of the funds used by it to acquire its
interest in the Trust Estate constituted "plan assets" of any
"employee benefit plan" within the meaning of ERISA, or of any "plan"
within the meaning of Section 4975(e)(1) of the Code, as interpreted
by the Department of Labor; and
(vi) neither Owner Participant nor anyone authorized by it
to act on its behalf (it being understood that, for purposes of this
paragraph, in arranging and proposing the refinancing contemplated
hereby and agreed to herein by Owner Participant, neither Lessee nor
any of the Underwriters nor any other Person taking any action
contemplated by any Operative Agreement in connection with refinancing
the Original Certificate has acted as agent of Owner Participant) has
directly or indirectly offered any Equipment Notes or any similar
securities relating to the
REFINANCING AGREEMENT [N397SW]
-17-
<PAGE> 20
Aircraft for sale to, or solicited any offer to acquire any of the
same from, any Person.
(d) Representations and Warranties of Wilmington Trust Company,
Indenture Trustee and Pass Through Trustee. Wilmington Trust Company, in its
individual capacity ("WTC") and as Indenture Trustee and Pass Through Trustee,
represents and warrants, to each of Owner Trustee, Owner Participant and Lessee
that:
(i) WTC is a "citizen of the United States" as defined in
the Act, that it will notify promptly all parties to this Agreement if
in its reasonable opinion its status as a "citizen of the United
States" is likely to change and that it will resign as Indenture
Trustee as provided in Section 9.07 of the Indenture if it should
cease to be a "citizen of the United States";
(ii) WTC is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into and
perform its obligations under the Pass Through Trust Agreements and
the Relevant Operative Documents to which WTC is or is to be a party
(the "WTC Documents") and, as Indenture Trustee and Pass Through
Trustee, to authenticate the Equipment Notes and the Pass Through
Certificates to be delivered on the Closing Date;
(iii) the execution and delivery by WTC of the WTC
Documents, by Indenture Trustee of the Relevant Operative Documents to
which it is or is to be a party (the "IT Documents") and by Pass
Through Trustee of the Relevant Operative Documents to which it is or
is to be a party (the "PTT Documents") and the authentication by
Indenture Trustee of the Equipment Notes and by Pass Through Trustee
of the Pass Through Certificates to be delivered on the Closing Date
have been duly authorized by all necessary corporate action on the
part of WTC, Indenture Trustee and Pass Through Trustee, respectively,
and neither the execution (or, in the case of such Equipment Notes and
Pass Through Certificates, their authentication) and delivery thereof
nor its performance of any of the terms and provisions thereof will
violate any federal or Delaware law or regulation relating to the
banking or trust powers of WTC or any judgment or order binding on it
or contravene or result in any breach of, or constitute any default
under the charter or by-laws of WTC or the provisions of any
indenture, mortgage, contract or other agreement to which any of WTC,
Indenture Trustee or Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the WTC Documents, the IT Documents and the
PTT Documents has been, or will on the Closing Date have been, duly
executed (or, in the case of the Equipment Notes and the Pass Through
Certificates, authenticated) and delivered by WTC, Indenture Trustee
and Pass Through Trustee, respectively;
(v) assuming that each of the WTC Documents, the IT
Documents and the PTT Documents is the legal, valid and binding
obligation of each of the parties
REFINANCING AGREEMENT [N397SW]
-18-
<PAGE> 21
thereto (other than WTC, Indenture Trustee and Pass Through Trustee,
respectively), each of the WTC Documents, the IT Documents and the PTT
Documents is, or will on the Closing Date be, the legal, valid and
binding obligation of WTC, Indenture Trustee or Pass Through Trustee,
respectively, enforceable against it in accordance with its terms;
provided, however, that the representations made in this subparagraph
(v) are made only by WTC as to the WTC Documents, by Indenture Trustee
as to the IT Documents and by Pass Through Trustee as to the PTT
Documents, respectively;
(vi) neither the execution and delivery by WTC, Indenture
Trustee or Pass Through Trustee of any of the WTC Documents, the IT
Documents or the PTT Documents, respectively, nor the consummation by
WTC, Indenture Trustee or Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or
approval of, the giving of notice to, or the registration with, or the
taking of any other action with respect to, any governmental authority
or agency pursuant to any law of the State of Delaware or the United
States regulating WTC's banking, trust or fiduciary powers;
(vii) there are no pending or threatened actions or
proceedings against any of WTC, Indenture Trustee or Pass Through
Trustee before any court or administrative agency which individually
or in the aggregate, if determined adversely to it, would materially
adversely affect the ability of WTC, Indenture Trustee or Pass Through
Trustee to perform its obligations under any of the WTC Documents, the
IT Documents or the PTT Documents;
(viii) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreement of the Pass Through
Certificates contemplated hereby, neither WTC nor Pass Through Trustee
has directly or indirectly offered any Equipment Note for sale to any
Person, or solicited any offer to acquire any Equipment Notes from any
Person other than Owner Trustee and Owner Participant, and neither WTC
nor Pass Through Trustee has authorized anyone to act on its behalf to
offer directly or indirectly any Equipment Note for sale to any
Person, or to solicit any offer to acquire any Equipment Note from any
Person other than Owner Trustee and Owner Participant, and Pass
Through Trustee is not in default under any Pass Through Trust
Agreement; and
(ix) Pass Through Trustee is not directly or indirectly
controlling, controlled by or under common control with any of Owner
Participant, Owner Trustee, any Underwriter or Lessee.
SECTION 5. Notices. Unless otherwise specifically
provided herein, all notices required or permitted by the terms of this
Agreement shall be given in accordance with the provisions of Section 13 of the
Participation Agreement.
SECTION 6. Expenses.
REFINANCING AGREEMENT [N397SW]
-19-
<PAGE> 22
(a) Subject to the terms and conditions specified in Section 16 of
the Participation Agreement and except as provided in paragraph (b) below, all
of the Transaction Costs in connection with the preparation, execution and
delivery of this Agreement and the transactions contemplated by this Agreement
shall be paid promptly by Owner Participant, either directly or through Owner
Trustee.
(b) In the event that the transactions contemplated by this
Agreement and the agreements referred to herein are not consummated, or if
Owner Participant shall not be required to pay Transaction Costs pursuant to
Section 6(a) hereof, Lessee shall, except as provided in the Underwriting
Agreement with regard to fees and expenses of the Underwriters, bear and pay
all Transaction Costs referred to in paragraph (a) above on an after-tax basis.
In addition, in the event that the transactions contemplated by this Agreement
and the agreements referred to herein are not consummated on the date specified
in the notice referred to in Section 3(v) hereof, Lessee shall indemnify the
Original Loan Participant for any associated break funding costs incurred
thereby.
SECTION 7. Indemnity. Lessee agrees to pay, indemnify, and,
on written demand, reimburse and hold Owner Participant harmless from any and
all taxes or other liabilities, including any and all costs or expenses,
incurred by Owner Participant as a result of any of 1995-A1 Pass Through Trust,
1995-A2 Pass Through Trust, 1995-A3 Pass Through Trust or 1995-A4 Pass Through
Trust being taxable at any time in any manner other than as a grantor trust
under the Internal Revenue Code of 1986, as amended, as in effect on the date
hereof.
SECTION 8. Miscellaneous. This Agreement may be executed in
any number of counterparts (and each of the parties hereto shall not be
required to execute the same counterpart). Each counterpart of this Agreement
including a signature page executed by each of the parties hereto shall be an
original counterpart of this Agreement, but all of such counterparts together
shall constitute one instrument. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, Owner Trustee and Indenture Trustee. The index preceding
this Agreement and the headings of the various Sections of this Agreement are
for convenience of reference only and shall not modify, define, expand or limit
any of the terms or provisions hereof. The terms of this Agreement shall be
binding upon, and shall inure to the extent provided herein to the benefit only
of the following parties: Lessee and, subject to the terms of the
Participation Agreement, its successors and permitted assigns, Original Loan
Participant, Indenture Trustee and its successors as Indenture Trustee (and any
additional trustee appointed) under the Indenture, Owner Trustee and its
successors as Owner Trustee under the Trust Agreement, Pass Through Trustee and
its successors as Pass Through Trustee under each Pass Through Trust Agreement,
and Owner Participant and, subject to the provisions of the Participation
Agreement, its successors and permitted assigns. No purchaser or holder of any
of the Equipment Notes shall be deemed to be a successor or assign of Original
Loan Participant
REFINANCING AGREEMENT [N397SW]
-20-
<PAGE> 23
or to have any rights or benefits hereunder. Every representation or warranty
contained herein as to the enforceability of any document shall be deemed to be
made subject to the effects of applicable bankruptcy, insolvency and similar
laws affecting the enforcement of creditors' rights generally and of general
principles of equity. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
REFINANCING AGREEMENT [N397SW]
-21-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ JOHN D. OWEN
Treasurer
FORD MOTOR CREDIT COMPANY,
Owner Participant
By: USL CAPITAL CORPORATION,
as agent
By: /s/ NANCY B. CLARK
Nancy B. Clark
Senior Investment Officer
Transportation and Industrial
Financing
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, Original Loan
Participant
By: /s/ TIMOTHY C. HINTZ
Vice President
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, in its individual
capacity only as expressly provided
herein and otherwise solely as
Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as
otherwise expressly provided herein,
but solely as Indenture Trustee and
Pass Through Trustee
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services
Officer
REFINANCING AGREEMENT [N397SW]
-22-
<PAGE> 25
Exhibit A to
Refinancing Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N397SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A1 July 1, 1997 $429,824.20 6.16% * Serial
1995-A2 July 1, 1998 $456,301.30 6.29% * Serial
1995-A3 January 1, 2013 $18,513,253.78 7.22% October 4, 2007 Installment
1995-A4 July 1, 2016 $4,150,203.14 7.64% January 4, 2016 Installment
</TABLE>
_____________
* Not applicable.
REFINANCING AGREEMENT [N397SW]
A-1
<PAGE> 26
Exhibit A-1 to
Refinancing Agreement
Payment Dates and Payment Percentages and Amounts
REFINANCING AGREEMENT [N397SW]
A-1-1
<PAGE> 27
Exhibit A-2 to
Refinancing Agreement
Issuance of SWA 1995 Trust N397SW Certificates
The SWA 1995 Trust N397SW Certificates issued hereunder shall be
issued to and shall be payable to Pass Through Trustee under the 1995-A1 Pass
Through Trust Agreement, the 1995-A2 Pass Through Trust Agreement, the 1995-A3
Pass Through Trust Agreement and the 1995-A4 Pass Through Trust Agreement with
respect to the grantor trusts created thereby, each such trust as described
below consisting of the Certificates issued pursuant hereto and the other
Certificates contained therein:
1995-A1 Trust:
6.16% Certificate due July 1, 1997
1995-A2 Trust:
6.29% Certificate due July 1, 1998
1995-A3 Trust:
7.22% Certificate due January 1, 2013
1995-A4 Trust:
7.64% Certificate due July 1, 2016
REFINANCING AGREEMENT [N397SW]
A-2-1
<PAGE> 28
Exhibit B to
Refinancing Agreement
Form of
First Amendment to Trust Indenture
[See Doc. 1.03]
REFINANCING AGREEMENT [N397SW]
B-1
<PAGE> 29
Exhibit C to
Refinancing Agreement
Form of
First Amendment to Sale and Lease Agreement
[SEE DOC. 1.02]
REFINANCING AGREEMENT [N397SW]
C-1
<PAGE> 30
Exhibit D to
Refinancing Agreement
Form of
First Amendment to Participation Agreement
[SEE DOC. 1.01]
REFINANCING AGREEMENT [N397SW]
D-1
<PAGE> 1
EXHIBIT 4.52
REFINANCING AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO., as Lessee
NATIONSBANK, N.A.,
as Owner Participant
BANK OF AMERICA ILLINOIS,
Original Loan Participant
WILMINGTON TRUST COMPANY, in its individual capacity only
as expressly provided herein and as Indenture Trustee
and Pass Through Trustee
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein
and otherwise solely as Owner Trustee
One Boeing 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N602SW)
<PAGE> 2
INDEX TO REFINANCING AGREEMENT
(Southwest Airlines 1995 Trust N602SW)
Section 1. Refinancing of Original Certificate
Section 2. Adjustments to Exhibits to the Lease
Section 3. Conditions Precedent
Section 4. Representations and Warranties
Section 5. Notices
Section 6. Expenses
Section 7. Miscellaneous
EXHIBIT A Maturity Dates, Principal Amounts and
Interest Rates, Etc. of Series SWA 1995
Trust N602SW Certificates
EXHIBIT A-1 Payment Dates and Payment Percentages and Amounts
EXHIBIT A-2 Issuance of SWA 1995 Trust N602SW Certificates
EXHIBIT B Form of First Amendment to Trust Indenture
EXHIBIT C Form of First Amendment to Sale and Lease
Agreement
EXHIBIT D Form of First Amendment to Participation
Agreement
<PAGE> 3
REFINANCING AGREEMENT
This REFINANCING AGREEMENT dated as of October 1, 1995, among (i)
SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), (ii) NATIONSBANK, N.A.,
a national banking association ("Owner Participant"), (iii) SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity except as otherwise expressly provided herein, but solely
as Owner Trustee ("Owner Trustee"), under that certain Trust Agreement
establishing the Southwest Airlines 1995 Trust N602SW and dated as of July 1,
1995, between Owner Participant and Owner Trustee, (iv) WILMINGTON TRUST
COMPANY, a Delaware banking corporation, not in its individual capacity except
as otherwise provided herein, but solely as trustee under the Pass Through
Trust Agreement, dated as of February 1, 1993 (the "Basic Agreement"), between
Lessee and Wilmington Trust Company, as supplemented by Trust Supplements Nos.
1995-A1, 1995-A2, 1995-A3 and 1995-A4 thereto, each dated as of October 1,
1995, creating 1995-A1 Pass Through Trust, 1995-A2 Pass Through Trust, 1995-A3
Pass Through Trust and 1995-A4 Pass Through Trust, respectively (such Basic
Agreement as so supplemented, being the "1995-A1 Pass Through Trust Agreement,"
the "1995-A2 Pass Through Trust Agreement," the "1995-A3 Pass Through Trust
Agreement" and the "1995-A4 Pass Through Trust Agreement" respectively, each of
the 1995-A1 Pass Through Trust Agreement, the 1995-A2 Pass Through Trust
Agreement, the 1995-A3 Pass Through Trust Agreement and the 1995-A4 Pass
Through Trust Agreement being a "Pass Through Trust Agreement", and Wilmington
Trust Company, in its capacity as trustee under each Pass Through Trust
Agreement, being the "Pass Through Trustee"), (v) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, not in its individual capacity except as
otherwise provided herein, but solely as indenture trustee ("Indenture
Trustee") under the related Trust Indenture and Security Agreement dated as of
July 1, 1995, as supplemented, between Indenture Trustee and Owner Trustee and
(vi) BANK OF AMERICA ILLINOIS, an Illinois banking corporation ("Original Loan
Participant"),
W I T N E S S E T H:
WHEREAS, Lessee, Owner Participant, Owner Trustee, Original Loan
Participant and Indenture Trustee entered into a Participation Agreement, dated
as of July 1, 1995 (the "Original Participation Agreement"; all capitalized
terms used herein without definition shall have the meanings set forth in or by
reference in the Original Participation Agreement; the Original Participation
Agreement as amended by the First Amendment to Participation Agreement (as
defined below) being herein called the "Participation Agreement"), providing
for the sale and lease of one Boeing Model 737-3H4 aircraft, bearing U.S.
registration number N602SW;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Participant entered into a Trust Agreement
establishing the Southwest Airlines 1995 Trust N602SW and dated as of July 1,
1995 (the "Trust Agreement") with Owner Trustee in its individual capacity,
pursuant to which Trust Agreement the Owner Trustee agreed, among other things,
to hold the Trust Estate defined in Section 1.01 of such Trust Agreement for
the benefit of Owner Participant thereunder;
REFINANCING AGREEMENT [N602SW]
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WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Indenture Trustee entered into a
Trust Indenture and Security Agreement relating to the Aircraft, dated as of
July 1, 1995 (such Trust Indenture and Security Agreement as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement, dated
July 13, 1995 relating to the Aircraft being herein called the "Original
Indenture"; the Original Indenture as amended by the First Amendment to Trust
Indenture (as defined below) being herein called the "Indenture"), for the
benefit of Original Loan Participant (and, upon the issuance of the Equipment
Notes (as defined below), the Holders of the Equipment Notes issued
thereunder), pursuant to which Original Indenture, among other things, a
certificate substantially in the form set forth in Exhibit A thereto (the
"Original Certificate") was issued to Original Loan Participant as evidence of
the loan then being made by Original Loan Participant to Owner Trustee, the
proceeds of which were applied by Owner Trustee to the payment of Lessor's Cost
for the Aircraft;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Lessee entered into a Sale and Lease
Agreement, dated as of July 1, 1995 relating to the Aircraft (such Sale and
Lease Agreement as supplemented by Sale and Lease Agreement Supplement No. One
dated July 13, 1995 relating to the Aircraft being herein called the "Original
Lease"; and the Original Lease as amended by the First Amendment to Lease
Agreement (as defined below) being herein called the "Lease"), relating to the
Aircraft whereby, subject to the terms and conditions set forth in the Original
Lease, Owner Trustee agreed to buy from and lease to Lessee, and Lessee agreed
to sell to and lease from Owner Trustee, the Aircraft on the Delivery Date;
WHEREAS, the parties hereto wish to effect a refinancing of the
Original Certificate as permitted by Section 18 of the Original Participation
Agreement as part of a refinancing transaction;
WHEREAS, Owner Trustee has agreed, in connection with the refinancing
of the Original Certificate, to issue Equipment Notes substantially in the
forms set forth in Exhibits A-1 and A-2 to the Indenture (for the purposes
hereof, "Equipment Notes" shall have the meaning set forth for the term "Series
SWA 1995 Trust N602SW Certificates" in the Indenture) to the four separate
grantor trusts created on the Closing Date (as defined below) by the Pass
Through Trust Agreements, and Pass Through Trustee will thereafter issue the
Pass Through Certificates substantially in the form of Exhibit A to each Pass
Through Trust Agreement (the "Pass Through Certificates");
WHEREAS, to facilitate Owner Trustee's sale of the Equipment Notes to
the Pass Through Trustee and the purchase of such Equipment Notes by Pass
Through Trustee, Lessee has duly authorized the execution and delivery of the
Pass Through Trust Agreements as the "issuer" thereunder, as such term is
defined in and solely for purposes of the Securities Act of 1933, as amended,
and of the related Pass Through Certificates as the "obligor" thereupon, as
such term is defined in and solely for purposes of the Trust Indenture Act of
1939, as amended, and is undertaking to perform certain administrative and
ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustee;
REFINANCING AGREEMENT [N602SW]
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WHEREAS, the proceeds from the sale of the Equipment Notes will be
applied, among other things, to effect the optional refinancing of the Original
Certificate; and
WHEREAS, in connection with the refinancing transaction as
contemplated hereby, Owner Trustee and Lessee have agreed to adjust payments of
Interim Rent, Basic Rent, Stipulated Loss Values and Termination Values, to
adjust the Special Purchase Price, to adjust the debt amortization schedule on
the Refinancing Date in accordance with Section 18 of the Original
Participation Agreement, and to amend Exhibits B-1, B-2, C and E of the Lease
so as to reflect such adjustments;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Refinancing of Original Certificate.
(a) Subject to the satisfaction or waiver of the conditions set
forth herein at or prior to 10:00 a.m. Central time on the date designated by
Lessee, on behalf of Owner Trustee, pursuant to Section 18 of the Original
Participation Agreement or at such other date and time agreed to by the parties
hereto (the "Closing Date"):
(i) Pass Through Trustee shall, in accordance with
Section 2.01 of the Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated the Closing
Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the
request of Lessee delivered pursuant to such Section 2.01, and deliver
such Pass Through Certificates to the Underwriters (as defined below)
as specified in such request against payment by the Underwriters of an
amount equal to the aggregate principal amount thereof;
(ii) Owner Trustee shall, in accordance with Section 2.01
of the Indenture, issue and deliver to Indenture Trustee Equipment
Notes dated the Closing Date and of the maturities, in the principal
amounts, bearing the interest rates and reflecting the other economic
terms specified in Exhibits A, A-1 and A-2 hereto in an aggregate
principal amount of $23,563,679 (the "Refinancing Amount");
(iii) Indenture Trustee shall authenticate such Equipment
Notes pursuant to Section 2.02 of the Indenture, and deliver such
Equipment Notes to Pass Through Trustee as specified in Exhibit A-2
hereto against payment by Pass Through Trustee of an aggregate amount
equal to the Refinancing Amount;
(iv) Owner Trustee shall on the Closing Date pay to
Indenture Trustee, for the account of Owner Participant, an amount
equal to accrued interest and, subject to Lessee's obligations under
Section 3.4 of the Original Lease, Break Amount (as defined in the
Original Indenture), if any, owing to the Original Loan Participant on
the Closing Date; and
REFINANCING AGREEMENT [N602SW]
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(v) Indenture Trustee shall disburse to Original Loan
Participant the amount of principal, interest and Break Amount, if
any, owing to Original Loan Participant on the Closing Date with
respect to the Original Certificate in connection with the refinancing
of the Original Certificate in accordance with Sections 2.08 and 15.03
of the Original Indenture and Section 18 of the Original Participation
Agreement.
Owner Participant, by its execution and delivery hereof, requests and directs
Owner Trustee, in accordance with Section 5.02 of the Trust Agreement, to
execute and deliver this Agreement, the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture and to take all actions necessary or desirable to effect the
issuance of the Equipment Notes and the refinancing of the Original
Certificate.
(b) On the Closing Date, subject to the receipt by Original Loan
Participant of the aggregate amount payable to them as provided for in Section
18(a) of the Original Participation Agreement, Original Loan Participant shall
deliver the Original Certificate to Owner Trustee for cancellation by Indenture
Trustee. The Original Loan Participant hereby authorizes and directs Indenture
Trustee to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions contemplated by said
agreements and amendments to effect the issuance of the Equipment Notes and the
refinancing of the Original Certificate.
(c) In case Pass Through Trustee shall fail to make the payment
described in Section 1(a)(iii) hereof, or in case Owner Trustee shall for any
reason fail to issue and deliver to Indenture Trustee the Equipment Notes
pursuant to Section 1(a)(ii) hereof, (i) the written notice given by Lessee
pursuant to Section 18(a) of the Original Participation Agreement and Section
6.03(b) of the Original Indenture with respect to the refinancing contemplated
hereby shall be deemed to have never been given (except, however, as provided
in Section 6(b) hereof), (ii) Indenture Trustee, Owner Trustee, Owner
Participant and Lessee shall have no obligation to pay to Original Loan
Participant any amount in respect of the refinancing of the Original
Certificate pursuant hereto, (iii) none of the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture shall be deemed to have been delivered and (iv) the Original
Certificate shall remain outstanding and in full force and effect and shall
continue to be subject to the terms of the Original Indenture.
(d) The closing (the "Closing") of the transactions described in
this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
Houston, Texas, or such other place as the parties hereto may agree; the
parties hereby agree that the transactions contemplated hereby shall be deemed
to have occurred simultaneously and that no transaction contemplated hereby
shall be deemed to have occurred except in conjunction with the occurrence of
all such other transactions.
(e) All payments pursuant to this Section 1 shall be made on the
Closing Date in immediately available funds to such accounts and at such banks
as specified in the Operative Agreements, or, if otherwise, as the parties
hereto shall designate in writing not less than one Business Day prior to the
Closing Date.
REFINANCING AGREEMENT [N602SW]
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(f) This Agreement shall apply only to the refinancing of the
Original Certificate as described herein and not to the refinancing, redemption
or refunding of any Equipment Notes or any other Certificate (as defined in the
Indenture) issued under the Indenture.
SECTION 2. Adjustments to Exhibits to the Lease. The
parties hereto agree, by their execution and delivery hereof, that the
transactions contemplated hereby constitute a refinancing transaction as
contemplated by Section 18 of the Participation Agreement and that they will
take all actions contemplated thereby, including the revision of Exhibits B-1,
B-2, C and E of the Lease to reflect the adjustments contemplated thereby.
Subject to the consummation of such refinancing transaction as described
herein, such revised Exhibits B-1, B-2, C and E to the Lease shall be effective
as of the Closing Date.
SECTION 3. Conditions Precedent. The obligations of
each of the parties hereto to participate in the transactions contemplated by
this Agreement on the Closing Date are subject to the fulfillment, prior to or
on the Closing Date, of the following conditions precedent; provided, however,
that it shall not be a condition precedent to the obligations of any party
hereto that any document be produced or action taken that is to be produced or
taken by such party or any Person within such party's control; and provided,
further, that only the conditions set forth in clauses (a) and (v) of this
Section 3 shall be conditions precedent to the actions of Original Loan
Participant:
(a) Pass Through Trustee shall have received, concurrently with
the payment to Indenture Trustee by Pass Through Trustee of an amount equal to
the aggregate Original Issue Price thereof, the Equipment Notes as required by
Section 1(a)(iii), and Indenture Trustee shall have received any other amounts,
including Break Amount, if any, required to be paid in connection with the
refinancing of the Original Certificate on the Closing Date and the Indenture
Trustee shall have effected a wire transfer of all amounts payable to the
Original Loan Participant as provided herein.
(b) The Equipment Notes shall have been issued and authenticated
in accordance with the Indenture, and there shall have been transferred to
Indenture Trustee in immediately available funds the amounts referred to above
in Section 1(a)(iii)-(iv).
(c) Owner Trustee and Indenture Trustee shall have executed and
delivered the First Amendment to Trust Indenture and Security Agreement in
substantially the form of Exhibit B hereto (the "First Amendment to Trust
Indenture") which shall have been duly filed for recording with the FAA.
(d) Lessee and Owner Trustee shall have executed and delivered an
amendment to the Original Lease in substantially the form of Exhibit C hereto
(the "First Amendment to Lease Agreement") which shall have been duly filed for
recording with the FAA.
(e) Each of Lessee, Owner Participant, Owner Trustee, Pass Through
Trustee and Indenture Trustee shall have executed and delivered an amendment to
the Original Participation Agreement in substantially the form of Exhibit D
hereto (the "First Amendment to Participation Agreement").
REFINANCING AGREEMENT [N602SW]
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(f) (i) Indenture Trustee shall have received on or prior to the
Delivery Date (A) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting Owner Trustee as debtor and Indenture Trustee as secured
party, as to the Indenture Estate, evidencing its filing with the office of the
Secretary of State of the State of Connecticut and (B) a copy (or other
documentation satisfactory to it) of the acknowledgment copy of a properly
completed Uniform Commercial Code financing statement, reflecting Lessee as
debtor and Owner Trustee as secured party (and reflecting Indenture Trustee as
assignee), as to the Lease and the Aircraft evidencing its filing with the
office of the Secretary of State of the State of Texas, (ii) no financing
statement or similar filing described above in clause (i) shall have been
terminated or amended subsequent to the date of its filing and (iii) Indenture
Trustee shall have received, on or prior to the Delivery Date, the only
chattel-paper original of the Original Lease and, on or prior to the Closing
Date, the only chattel-paper original of the First Amendment to Lease Agreement
and shall have (and shall have retained without interruption subsequent to its
receipt thereof) possession of each thereof on the Closing Date.
(g) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received the following documents (each of
which shall be reasonably satisfactory in form and substance to each of them):
(i) revised Exhibits B-1, B-2 and C to the Lease, as
provided for in the First Amendment to Lease Agreement; and
(ii) revised Schedule I to the Participation Agreement, as
provided for in the First Amendment to Participation Agreement.
(h) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the representations and warranties contained herein
of Lessee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate
solely to an earlier date (in which case such representations and
warranties shall be certified to have been correct on and as of such
earlier date);
(ii) no event has occurred and is continuing which constitutes
a Lease Event of Default or a Lease Default; and
(iii) no Event of Loss (or event which with the passage of
time or the giving of notice, or both, would constitute an Event of
Loss) has occurred with respect to the Airframe or any Engine.
(i) Each of Indenture Trustee, Owner Participant, Pass Through
Trustee and Lessee shall have received a certificate signed by a Responsible
Officer (as defined in the Indenture) of Owner Trustee, dated the Closing Date,
certifying that the representations and warranties
REFINANCING AGREEMENT [N602SW]
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contained herein of Owner Trustee in its individual and trust capacities are
correct as though made on and as of the Closing Date, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case such representations and warranties shall be certified to have been
correct on and as of such earlier date).
(j) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Lessee shall have received a certificate signed by a Responsible Company
Officer (as defined in the Indenture) of Owner Participant, dated the Closing
Date, certifying that the representations and warranties contained herein of
Owner Participant are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be
certified to have been correct on and as of such earlier date).
(k) Each of Pass Through Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by a Responsible Officer
(as defined in the Indenture) of Indenture Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of
Indenture Trustee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties are correct
on and as of such earlier date).
(l) Each of Indenture Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by an authorized officer of
Pass Through Trustee, dated the Closing Date, certifying that the
representations and warranties contained herein of Pass Through Trustee are
correct as though made on and as of the Closing Date, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case such representations and warranties are correct on and as of such earlier
date).
(m) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received the following:
(i) an incumbency certificate of Lessee as to the person
or persons authorized to execute and deliver this Agreement, the First
Amendment to Participation Agreement, the First Amendment to Lease
Agreement, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and specimen
signatures of such person or persons;
(ii) a copy of the resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
transactions contemplated hereby and the execution and delivery of
each of the documents required to be executed and delivered on behalf
of Lessee in connection with the transactions contemplated hereby; and
(iii) such other documents and evidence with respect to the
other parties hereto as it may reasonably request in order to
establish the due consummation of the transactions contemplated by
this Agreement, any other Operative Agreements (as defined in the
Lease), the Underwriting Agreement (as defined below) and the Pass
REFINANCING AGREEMENT [N602SW]
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Through Trust Agreements and the taking of all necessary corporate
action in connection therewith and compliance with the conditions
herein set forth.
(n) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the Aircraft has been duly certificated by the FAA as
to type and airworthiness in accordance with the terms of the Original
Lease;
(ii) Owner Trustee's FAA Bill of Sale, the Original Lease,
the Original Trust Agreement and the Original Indenture have been duly
recorded with the FAA pursuant to the Act (as defined in the Lease);
(iii) the Aircraft has been registered with the FAA in the
name of Owner Trustee and Lessee has authority to operate the
Aircraft; and
(iv) the First Amendment to Lease and the First Amendment
to Trust Indenture have been duly filed for recording with the FAA.
(o) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received opinions addressed to them from
Deborah Ackerman, Associate General Counsel of Lessee, substantially to the
same effect as the opinions delivered by her, on the Delivery Date pursuant to
Section 4(a)(xi) of the Original Participation Agreement (but reflecting the
documents delivered on the Closing Date).
(p) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Shipman & Goodwin, special counsel for Owner Trustee,
substantially to the same effect as the opinion delivered by it on the Delivery
Date pursuant to Section 4(a)(xiii) of the Original Participation Agreement
(but reflecting the documents delivered on the Closing Date).
(q) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Potter Anderson & Corroon, special counsel for Pass Through
Trustee and Indenture Trustee, substantially to the same effect (but with
respect also to Pass Through Trustee, the Pass Through Trust Agreement and the
other documents delivered on the Closing Date) as the opinion delivered by it
on the Delivery Date pursuant to Section 4(a)(xvi) of the Original
Participation Agreement.
(r) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received opinions addressed to
them from Morgan, Lewis & Bockius, special counsel for Owner Participant, and
in-house or other corporate counsel to Owner Participant, substantially to the
same effect as the opinions delivered on the Delivery Date pursuant to Section
4(a)(xiv) of the Original Participation Agreement (but reflecting the documents
delivered on the Closing Date).
REFINANCING AGREEMENT [N602SW]
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(s) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking into account the First
Amendment to Trust Indenture and the First Amendment to Lease Agreement, (i) as
the opinion delivered by it pursuant to Section 4(a)(xv) of the Original
Participation Agreement on the Delivery Date and (ii) as the opinion delivered
to them subsequent to the Delivery Date pursuant to the final paragraph of
Section 4(a) of the Original Participation Agreement.
(t) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received an independent insurance broker's
report, and certificates of insurance, dated the Closing Date, substantially in
the form of the report and certificates delivered pursuant to Section 4(a)(xxi)
of the Original Participation Agreement on the Delivery Date, as to the due
compliance with the terms of Section 11 of the Lease relating to the insurance
with respect to the Aircraft and with any other agreements of Lessee with
respect to such insurance, and references in such report and certificates to
(x) the "Indenture", the "Participation Agreement", and the "Lease" shall be to
such documents as amended by the First Amendment to Trust Indenture, the First
Amendment to Participation Agreement and the First Amendment to Lease Agreement
and (y) "Additional Insureds" shall be to such term as utilized in the Lease.
(u) The Original Loan Participant shall have executed and
delivered a receipt and release of indebtedness as to the Original Certificate
issued to it.
(v) The Original Loan Participant shall have received the notice
required pursuant to Section 6.03(b) of the Original Indenture in respect of
the Closing Date.
(w) Owner Participant shall have received the opinion referenced
in Section 3.7.2 of the Original Lease.
The opinions described above in clauses (o)-(s) and (w) shall be dated the
Closing Date and references therein corresponding to references in prior
opinions to the "Indenture", the "Participation Agreement", or the "Lease"
shall be to such documents as amended by the First Amendment to Trust
Indenture, the First Amendment to Participation Agreement, and the First
Amendment to Lease Agreement, respectively.
Promptly upon the recording with the FAA of the First Amendment to
Trust Indenture and the First Amendment to Lease Agreement, Lessee will cause
Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to
deliver to the parties hereto an opinion as to the due recording thereof and
the lack of filing of any intervening documents with respect to the Aircraft
(other than the Original Indenture and the Original Lease).
Each of the parties hereto agrees to instruct its counsel to prepare
and deliver the respective opinions described above in clauses (o)-(s) and to
address each such opinion to the Underwriters in addition to the respective
addressees set forth above (and, to the extent such
REFINANCING AGREEMENT [N602SW]
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opinions do not restate or confirm the opinions rendered on the Delivery Date,
such counsel shall authorize the Underwriters to rely on opinions rendered on
the Delivery Date).
SECTION 4. Representations and Warranties.
(a) Lessee's Representations and Warranties. Lessee represents
and warrants to Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant that:
(i) it is a corporation duly organized and validly
existing in good standing pursuant to the laws of the State of Texas,
is a "citizen of the United States" (as defined in Section
40102(a)(15)(C) of Title 49, U.S.C.) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49, U.S.C. for aircraft capable of carrying 10
or more individuals or 6,000 pounds or more of cargo, has the
corporate power and authority to carry on its business as now
conducted, to own or hold under lease its properties, to hold under
lease the Aircraft and to enter into and perform its obligations under
this Agreement, the other Operative Agreements to which it is or is to
be a party (the "Relevant Operative Documents") and the Pass Through
Trust Agreements (together with this Agreement and the Relevant
Operative Documents, collectively, the "Lessee Documents"), is duly
qualified to do business as a foreign corporation in good standing in
each state in which the nature of its business makes such
qualification necessary or the failure to be so qualified or so to be
in good standing would have a material adverse effect on its
businesses or operations or would impair its ability to perform its
obligations under the Lessee Documents, and has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Dallas, Texas;
(ii) the execution, delivery and performance of the Lessee
Documents (A) have been duly authorized by all necessary corporate
action on the part of Lessee, (B) do not require any shareholder
approval, or approval or consent of any trustee or holder of any
indebtedness or obligations of Lessee, or of any lessor under any
lease to Lessee, except such as have been duly obtained and are in
full force and effect, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order binding on
Lessee or any of its subsidiaries or the articles of incorporation or
by-laws of Lessee (each as amended to date) or (2) contravene or
result in any breach of the provisions of, or constitute a default
under, or result in the creation of any Lien (other than as permitted
under the Lease) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan or credit agreement or
other agreement to which Lessee is a party or by which it or any of
its properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the
Lessee Documents, nor the performance by Lessee of its obligations
thereunder, requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency except for (t) the
orders, permits, waivers, exemptions,
REFINANCING AGREEMENT [N602SW]
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authorizations and approvals of the regulatory authorities having
jurisdiction over the operation of the Aircraft by Lessee, which
orders, permits, waivers, exemptions, authorizations and approvals
have been duly obtained and are in full force and effect, (u) the
registration of the issuance and sale of the Pass Through Certificates
to be issued pursuant to the provisions of the Pass Through Trust
Agreements under the Securities Act and under the securities laws of
any state in which the Pass Through Certificates may be offered for
sale if the laws of such state require such action, which
registrations under the Securities Act have been duly accomplished,
(v) the qualification of each Pass Through Trust Agreement under the
Trust Indenture Act of 1939, as amended, which qualification has been
duly obtained, (w) the registrations and filings referred to in
Section 4(a)(v), (x) the recordings with the FAA described in the
opinion referred to in Section 3(s), (y) filing the Underwriting
Agreement and certain other documents with the SEC pursuant to a
Current Report on Form 8-K, and (z) routine periodic filings required
under the Act;
(iv) each of the Lessee Documents constitutes, or will on
the Closing Date constitute, legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with its terms;
(v) no action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), that has not been previously taken or shall not have
been taken on or prior to the Closing Date is necessary or advisable
in order to establish and perfect Owner Trustee's interest in the
Aircraft as against Lessee and any third parties (other than the
filing of continuation statements required to be filed at periodic
intervals under Article 9 of the Uniform Commercial Code as in effect
in the States of Texas and Connecticut in respect of financing
statements previously filed under such Article 9) or to perfect the
security interest created under the Indenture in favor of Indenture
Trustee in Owner Trustee's interest in the Aircraft and other assets
of the Trust Estate in any applicable jurisdiction in the United
States (other than the filing of continuation statements required to
be filed at periodic intervals under Article 9 of the Uniform
Commercial Code as in effect in the States of Texas and Connecticut in
respect of financing statements previously filed under such Article
9);
(vi) Owner Trustee, as lessor under the Lease, and
Indenture Trustee, as assignee thereof, are entitled, after giving
effect to the refinancing transaction contemplated hereby, to the
protection of Section 1110 of the United States Bankruptcy Code in
connection with their right to take possession of the Airframe and
Engines in the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor;
(vii) there has not occurred any event which constitutes a
Lease Default or a Lease Event of Default which is presently
continuing and there has not occurred any event which constitutes or
would with the passage of time or the giving of notice, or both,
constitute an Event of Loss;
REFINANCING AGREEMENT [N602SW]
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(viii) there are no pending or, to Lessee's knowledge,
threatened actions or proceedings before any court or administrative
agency which (A) involve the Aircraft or (B) having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to have a material adverse effect on the consolidated financial
condition of Lessee and its subsidiaries or the ability of Lessee to
perform its obligations under any Lessee Document;
(ix) Lessee is not in default in the performance of any
term or condition of the Purchase Agreement or Purchase Agreement
Assignment which materially adversely impairs the transactions
contemplated hereby;
(x) no governmental approval in the United States of any
kind is required of any of the Participants, Pass Through Trustee,
Owner Trustee or Indenture Trustee for their respective execution of
or performance under any of the Pass Through Trust Agreements, any
Relevant Operative Document or any agreement contemplated hereby or
thereby to which any thereof is or is to be a party solely by reason
of any fact or circumstance peculiar to: (A) Lessee (as contrasted
with other airlines), (B) the nature of the Aircraft, or (C) Lessee's
existing or proposed operation or use of the Aircraft;
(xi) the Aircraft has been duly certificated by the FAA as
to type and airworthiness and such certification remains in full force
and effect;
(xii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(xiii) neither it nor any Person authorized to act on its
behalf has directly or indirectly offered the Pass Through
Certificates or the Equipment Notes for sale to anyone other than in a
manner in compliance with the requirements of the Securities Act, and
by the rules and regulations thereunder; and
(xiv) Lessee has never sponsored, maintained or made
contributions to any defined benefit plan subject to the provisions of
Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) Representations and Warranties of Shawmut Bank and Owner
Trustee. Shawmut Bank Connecticut, National Association, in its individual
capacity ("SBC") and as Owner Trustee represents and warrants to each of
Indenture Trustee, Pass Through Trustee, Owner Participant and Lessee that:
(i) SBC is a national banking association duly organized
and validly existing in good standing under the laws of the United
States and has full corporate power and authority to carry on its
business as now conducted and to enter into and perform its
obligations under this Agreement and under the Trust Agreement and the
Participation Agreement (collectively, the "SBC Documents"); assuming
the due execution and delivery, pursuant to due authorization, by
Owner Participant of the Trust Agreement and
REFINANCING AGREEMENT [N602SW]
-12-
<PAGE> 15
the enforceability of the Trust Agreement against Owner Participant,
Owner Trustee has full power and authority to enter into and perform
its obligations under this Agreement and each of the other Relevant
Operative Documents to which it is or is to be a party (the "OT
Documents");
(ii) each of SBC and Owner Trustee has duly authorized,
executed and delivered each of the SBC Documents and the OT Documents,
respectively; assuming the due execution and delivery, pursuant to due
authorization, by Owner Participant of the Trust Agreement and that it
is enforceable against Owner Participant, the Trust Agreement
constitutes a legal, valid and binding obligation of SBC and Owner
Trustee, enforceable against SBC or Owner Trustee, as the case may be,
in accordance with its terms;
(iii) assuming the due execution and delivery, pursuant to
due authorization, by each of the parties thereto (other than SBC and
Owner Trustee) of each of the SBC Documents and the OT Documents and
that each of the SBC Documents and the OT Documents is the legal,
valid and binding obligation of each of the parties thereto (other
than SBC and Owner Trustee), each of the SBC Documents and the OT
Documents constitutes, or will on the Closing Date constitute, legal,
valid and binding obligations of SBC or Owner Trustee, as the case may
be, enforceable against it in accordance with its terms;
(iv) neither the execution and delivery by SBC or Owner
Trustee, as the case may be, of any of the SBC Documents or OT
Documents, respectively, nor the consummation by SBC or Owner Trustee,
as the case may be, of any of the transactions contemplated hereby or
thereby, nor the compliance by SBC, or Owner Trustee, as the case may
be, with any of the terms and provisions hereof and thereof, (A)
requires or will require any approval of its stockholders, or approval
or consent of any trustees or holders of any indebtedness or
obligations of SBC, or (B) violates or will violate the charter or
by-laws of SBC, or contravenes or will contravene any provision of, or
constitutes or will constitute a default under, or results or will
result in any breach of, or results or will result in the creation of
any Lien (other than as permitted under the Lease) upon its property
under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sale contract, bank loan or credit agreement, license or
other agreement or instrument to which SBC is a party or by which SBC
is bound, or contravenes or will contravene any law, governmental rule
or regulation of the United States of America or the State of
Connecticut governing the banking or trust powers of SBC, or any
judgment or order applicable to or binding on it;
(v) there are no pending or, to the best knowledge of
SBC, threatened actions or proceedings against SBC or Owner Trustee
before any court or administrative agency which, if determined
adversely to it, would materially adversely affect the ability of SBC
or Owner Trustee, as the case may be, to perform its obligations under
any of the SBC Documents or the OT Documents;
REFINANCING AGREEMENT [N602SW]
-13-
<PAGE> 16
(vi) both the principal place of business of Owner
Trustee, and the place where its records concerning the Aircraft and
all its interest in, to and under all documents relating to the Trust
Estate, are located at 777 Main Street, Hartford, Connecticut 06115
Attention: Corporate Trust Administration;
(vii) no consent, approval, order or authorization of,
giving of notice to, or registration or filing with (including the
filing of any financing statement under Article 9 of the Uniform
Commercial Code as in effect in the State of Connecticut), or taking
of any other action in respect of, any Connecticut state or local
governmental authority or agency or any United States federal
governmental authority or agency regulating the banking or trust
powers of SBC is required for the execution and delivery of, or the
carrying out by, SBC or Owner Trustee, as the case may be, of any of
the transactions contemplated by any of the SBC Documents or the OT
Documents, respectively, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken (and other than the filing of continuation
statements required to be filed at periodic intervals under Article 9
of the Uniform Commercial Code as in effect in the State of
Connecticut in respect of financing statements previously filed);
(viii) Owner Trustee's right, title and interest in and to
the Aircraft are free of any Lessor Liens (as defined in the Lease)
attributable to SBC;
(ix) SBC is a "citizen of the United States" as defined
in the Act; and
(x) neither SBC nor Owner Trustee has directly or
indirectly offered any Equipment Notes or any interest in or to the
Trust Estate, the Trust Agreement or any similar interest for sale to,
or solicited any offer to acquire any of the same from, any Person
other than Indenture Trustee, Pass Through Trustee, Original Loan
Participant and Owner Participant; and Owner Trustee has not
authorized anyone to act on its behalf (it being understood that, for
purposes of this paragraph, in arranging and proposing the refinancing
contemplated hereby and agreed to herein by Owner Trustee, neither
Lessee nor any of the Underwriters has acted as agent of Owner
Trustee) to offer directly or indirectly any Equipment Notes or any
interest in and to the Trust Estate, the Trust Agreement or any
similar interest for sale to, or to solicit any offer to acquire any
of the same from, any Person.
(c) Representations and Warranties of Owner Participant. Owner
Participant represents and warrants to each of Indenture Trustee, Owner
Trustee, Pass Through Trustee and Lessee that:
(i) Owner Participant is a national banking association
duly organized and validly existing in good standing under the laws of
the United States and has the corporate power and authority to carry
on its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Agreement and the other Relevant Operative Documents to which it is or
is to be a party (the "OP Documents"), and its execution and delivery
of each of the OP Documents and
REFINANCING AGREEMENT [N602SW]
-14-
<PAGE> 17
the performance by it of its obligations thereunder have been duly
authorized by all necessary corporate action on the part of Owner
Participant and do not require any approval not already obtained of
stockholders of Owner Participant or any approval or consent not
already obtained of any trustee or holders of any indebtedness or
obligations of Owner Participant and each of the OP Documents has
been, or will on the Closing Date have been, duly executed and
delivered by it and (assuming that each of the OP Documents is the
legal, valid and binding obligation of each of the parties thereto
(other than Owner Participant) and that the consummation of the
transactions contemplated by the Relevant Operative Documents and the
Pass Through Trust Agreements, including, without limitation, the
redemption of the Original Certificate and the issuance of the
Equipment Notes and the issuance, holding or transfer of the Pass
Through Certificates will not involve any "prohibited transaction"
within the meaning of Section 406 or 407 of ERISA or Section 4975 of
the Code) each of the OP Documents is the legal, valid and binding
obligation of Owner Participant enforceable against it in accordance
with its terms;
(ii) the execution and delivery by Owner Participant of
the OP Documents, the consummation of the transactions contemplated
thereby by Owner Participant and compliance by it with the terms and
provisions of the OP Documents do not and will not contravene any
United States federal or state law, judgment, governmental rule,
regulation or any order of any court or governmental authority or
agency applicable to or binding on it (it being understood that no
representation or warranty is made with respect to (A) laws, rules or
regulations relating to aviation or to the nature of the equipment
owned by Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of Owner Participant under
applicable aviation law or (B) ERISA or Section 4975 of the Code other
than the representation set forth in paragraph (v) of this Section
4(c)) or contravene, or result in any breach of, or constitute any
default under, its corporate charter or by-laws or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement or any agreement or instrument to which
it is a party or by which it or any of its property may be bound or
affected;
(iii) the Trust Estate is free of Lessor Liens attributable
to Owner Participant;
(iv) it is a "citizen of the United States" as defined in
the Act;
(v) no part of the funds used by it to make its
investment pursuant to Section 1 of the Original Participation
Agreement constituted "plan assets" of any "employee benefit plan"
within the meaning of ERISA, or of any "plan" within the meaning of
Section 4975(e)(1) of the Code, as interpreted by the Department of
Labor; and
(vi) neither Owner Participant nor anyone authorized by it
to act on its behalf (it being understood that, for purposes of this
paragraph, in arranging and proposing the refinancing contemplated
hereby and agreed to herein by Owner Participant, neither Lessee nor
any of the Underwriters has acted as agent of Owner Participant) has
directly
REFINANCING AGREEMENT [N602SW]
-15-
<PAGE> 18
or indirectly offered any Equipment Notes or any interest in or any
similar interest for sale to, or solicited any offer to acquire any of
the same from, any Person.
(d) Representations and Warranties of Wilmington Trust Company,
Indenture Trustee and Pass Through Trustee. Wilmington Trust Company, in its
individual capacity ("WTC") and as Indenture Trustee and Pass Through Trustee,
represents and warrants, to each of Owner Trustee, Owner Participant and Lessee
that:
(i) WTC is a "citizen of the United States" as defined in
the Act, that it will notify promptly all parties to this Agreement if
in its reasonable opinion its status as a "citizen of the United
States" is likely to change and that it will resign as Indenture
Trustee as provided in Section 9.07 of the Indenture if it should
cease to be a "citizen of the United States";
(ii) WTC is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into and
perform its obligations under the Pass Through Trust Agreements and
the Relevant Operative Documents to which WTC is or is to be a party
(the "WTC Documents") and, as Indenture Trustee and Pass Through
Trustee, to authenticate the Equipment Notes and the Pass Through
Certificates to be delivered on the Closing Date;
(iii) the execution and delivery by WTC of the WTC
Documents, by Indenture Trustee of the Relevant Operative Documents to
which it is or is to be a party (the "IT Documents") and by Pass
Through Trustee of the Relevant Operative Documents to which it is or
is to be a party (the "PTT Documents") and the authentication by
Indenture Trustee of the Equipment Notes and by Pass Through Trustee
of the Pass Through Certificates to be delivered on the Closing Date
have been duly authorized by all necessary corporate action on the
part of WTC, Indenture Trustee and Pass Through Trustee, respectively,
and neither the execution (or, in the case of such Equipment Notes and
Pass Through Certificate, their authentication) and delivery thereof
nor its performance of any of the terms and provisions thereof will
violate any federal or Delaware law or regulation relating to the
banking or trust powers of WTC or any judgment or order binding on it
or contravene or result in any breach of, or constitute any default
under the charter or by-laws of WTC or the provisions of any
indenture, mortgage, contract or other agreement to which any of WTC,
Indenture Trustee or Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the WTC Documents, the IT Documents and the
PTT Documents has been, or will on the Closing Date have been, duly
executed (or, in the case of the Equipment Notes and the Pass Through
Certificates, authenticated) and delivered by WTC, Indenture Trustee
and Pass Through Trustee, respectively;
(v) assuming that each of the WTC Documents, the IT
Documents and the PTT Documents is the legal, valid and binding
obligation of each of the parties thereto (other than WTC, Indenture
Trustee and Pass Through Trustee, respectively), each of
REFINANCING AGREEMENT [N602SW]
-16-
<PAGE> 19
the WTC Documents, the IT Documents and the PTT Documents is, or will
on the Closing Date be, the legal, valid and binding obligation of
WTC, Indenture Trustee or Pass Through Trustee, respectively,
enforceable against it in accordance with its terms; provided,
however, that the representations made in this subparagraph (v) are
made only by WTC as to the WTC Documents, by Indenture Trustee as to
the IT Documents and by Pass Through Trustee as to the PTT Documents,
respectively;
(vi) neither the execution and delivery by WTC, Indenture
Trustee or Pass Through Trustee of any of the WTC Documents, the IT
Documents or the PTT Documents, respectively, nor the consummation by
WTC, Indenture Trustee or Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or
approval of, the giving of notice to, or the registration with, or the
taking of any other action with respect to, any governmental authority
or agency pursuant to any law of the State of Delaware or the United
States regulating WTC's banking, trust or fiduciary powers;
(vii) there are no pending or threatened actions or
proceedings against any of WTC, Indenture Trustee or Pass Through
Trustee before any court or administrative agency which individually
or in the aggregate, if determined adversely to it, would materially
adversely affect the ability of WTC, Indenture Trustee or Pass Through
Trustee to perform its obligations under any of the WTC Documents, the
IT Documents or the PTT Documents;
(viii) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreement of the Pass Through
Certificates contemplated hereby, neither WTC nor Pass Through Trustee
has directly or indirectly offered any Equipment Note for sale to any
Person, or solicited any offer to acquire any Equipment Notes from any
Person other than Owner Trustee and Owner Participant, and neither WTC
nor Pass Through Trustee has authorized anyone to act on its behalf to
offer directly or indirectly any Equipment Note for sale to any
Person, or to solicit any offer to acquire any Equipment Note from any
Person other than Owner Trustee and Owner Participant, and Pass
Through Trustee is not in default under any Pass Through Trust
Agreement; and
(ix) Pass Through Trustee is not directly or indirectly
controlling, controlled by or under common control with any of Owner
Participant, Owner Trustee, any Underwriter or Lessee.
SECTION 5. Notices. Unless otherwise specifically
provided herein, all notices required or permitted by the terms of this
Agreement shall be given in accordance with the provisions of Section 13 of the
Participation Agreement.
SECTION 6. Expenses.
(a) As more fully specified in Section 16 of the Participation
Agreement and except as provided in paragraph (b) below, all of the Transaction
Costs in connection with the preparation, execution and delivery of this
Agreement and the transactions contemplated by this
REFINANCING AGREEMENT [N602SW]
-17-
<PAGE> 20
Agreement shall be paid promptly by Owner Participant, either directly or
through Owner Trustee.
(b) In the event that the transactions contemplated by this
Agreement and the agreements referred to herein are not consummated, Lessee
shall, except as provided in the Underwriting Agreement with regard to fees and
expenses of the Underwriters, bear and pay all Transaction Costs referred to in
paragraph (a) above on an after-tax basis. In addition, in the event that the
transactions contemplated by this Agreement and the agreements referred to
herein are not consummated on the date specified in the notice referred to in
Section 3(v) hereof, Lessee shall indemnify the Original Loan Participant for
any associated break funding costs incurred thereby.
SECTION 7. Miscellaneous. This Agreement may be executed in
any number of counterparts (and each of the parties hereto shall not be
required to execute the same counterpart). Each counterpart of this Agreement
including a signature page executed by each of the parties hereto shall be an
original counterpart of this Agreement, but all of such counterparts together
shall constitute one instrument. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, Owner Trustee and Indenture Trustee. The index preceding
this Agreement and the headings of the various Sections of this Agreement are
for convenience of reference only and shall not modify, define, expand or limit
any of the terms or provisions hereof. The terms of this Agreement shall be
binding upon, and shall inure to the extent provided herein to the benefit only
of the following parties: Lessee and, subject to the terms of the
Participation Agreement, its successors and permitted assigns, Original Loan
Participant, Indenture Trustee and its successors as Indenture Trustee (and any
additional trustee appointed) under the Indenture, Owner Trustee and its
successors as Owner Trustee under the Trust Agreement, Pass Through Trustee and
its successors as Pass Through Trustee under each Pass Through Trust Agreement,
and Owner Participant and, subject to the provisions of the Participation
Agreement, its successors and permitted assigns. No purchaser or holder of any
of the Equipment Notes shall be deemed to be a successor or assign of Original
Loan Participant or to have any rights or benefits hereunder. Every
representation or warranty contained herein as to the enforceability of any
document shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity. THIS AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
REFINANCING AGREEMENT [N602SW]
-18-
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ JOHN D. OWEN
Treasurer
NATIONSBANK, N.A.,
Owner Participant
By: /s/ GEORGE L. ROBINSON, JR.
Vice President
BANK OF AMERICA ILLINOIS,
Original Loan Participant
By: /s/ TIMOTHY C. HINTZ
Managing Director
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, in its individual
capacity only as expressly provided
herein and otherwise solely as
Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Vice President
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as
otherwise expressly provided
herein, but solely as Indenture
Trustee and Pass Through Trustee
By: /s/ DAVID A. VANASKEY, JR.
Senior Financial Services Officer
REFINANCING AGREEMENT [N602SW]
-19-
<PAGE> 22
Exhibit A to
Refinancing Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N602SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A1 July 1, 1997 $428,307 6.16% * Serial
1995-A2 July 1, 1998 $454,690 6.29% * Serial
1995-A3 January 1, 2013 $18,069,063 7.22% October 4, 2007 Installment
1995-A4 January 1, 2018 $4,611,619 7.64% January 4, 2016 Installment
</TABLE>
* Not applicable.
REFINANCING AGREEMENT [602SW]
A-1
<PAGE> 23
Exhibit A-1 to
Refinancing Agreement
Payment Dates and Payment Percentages and Amounts
REFINANCING AGREEMENT [602SW]
A-1-1
<PAGE> 24
Exhibit A-2 to
Refinancing Agreement
Issuance of SWA 1995 Trust N602SW Certificates
The SWA 1995 Trust N602SW Certificates issued hereunder shall be
issued to and shall be payable to Pass Through Trustee under the 1995-A1 Pass
Through Trust Agreement, the 1995-A2 Pass Through Trust Agreement, the 1995-A3
Pass Through Trust Agreement and the 1995-A4 Pass Through Trust Agreement with
respect to the grantor trusts created thereby, each such trust as described
below consisting of the Certificates issued pursuant hereto and the other
Certificates contained therein:
1995-A1 Trust:
6.16% Certificate due July 1, 1997
1995-A2 Trust:
6.29% Certificate due July 1, 1998
1995-A3 Trust:
7.22% Certificate due January 1, 2013
1995-A4 Trust:
7.64% Certificate due January 1, 2018
REFINANCING AGREEMENT [602SW]
A-2-1
<PAGE> 25
Exhibit B to
Refinancing Agreement
Form of
First Amendment to Trust Indenture
[SEE DOC. 1.03]
REFINANCING AGREEMENT [N602SW]
B-1
<PAGE> 26
Exhibit C to
Refinancing Agreement
Form of
First Amendment to Sale and Lease Agreement
[SEE DOC. 1.02]
REFINANCING AGREEMENT [N602SW]
C-1
<PAGE> 27
Exhibit D to
Refinancing Agreement
Form of
First Amendment to Participation Agreement
[SEE DOC. 1.01]
REFINANCING AGREEMENT [N602SW]
D-1
<PAGE> 1
EXHIBIT 4.53
REFINANCING AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO., as Lessee
BANC ONE ARIZONA LEASING CORPORATION,
as Owner Participant
BANK OF AMERICA ILLINOIS,
Original Loan Participant
WILMINGTON TRUST COMPANY, in its individual capacity only
as expressly provided herein and as Indenture Trustee
and Pass Through Trustee
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein
and otherwise solely as Owner Trustee
One Boeing 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N603SW)
<PAGE> 2
INDEX TO REFINANCING AGREEMENT
(Southwest Airlines 1995 Trust N603SW)
Section 1. Refinancing of Original Certificate
Section 2. Adjustments to Exhibits to the Lease
Section 3. Conditions Precedent
Section 4. Representations and Warranties
Section 5. Notices
Section 6. Expenses
Section 7. Miscellaneous
EXHIBIT A Maturity Dates, Principal Amounts and
Interest Rates, Etc. of Series SWA 1995
Trust N603SW Certificates
EXHIBIT A-1 Payment Dates and Payment Percentages and Amounts
EXHIBIT A-2 Issuance of SWA 1995 Trust N603SW Certificates
EXHIBIT B Form of First Amendment to Trust Indenture
EXHIBIT C Form of First Amendment to Sale and Lease
Agreement
EXHIBIT D Form of First Amendment to Participation
Agreement
<PAGE> 3
REFINANCING AGREEMENT
This REFINANCING AGREEMENT dated as of October 1, 1995, among (i)
SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), (ii) BANC ONE ARIZONA
LEASING CORPORATION, an Arizona corporation ("Owner Participant"), (iii)
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity except as otherwise expressly provided herein,
but solely as Owner Trustee ("Owner Trustee"), under that certain Trust
Agreement establishing the Southwest Airlines 1995 Trust N603SW and dated as of
July 1, 1995, between Owner Participant and Owner Trustee, (iv) WILMINGTON
TRUST COMPANY, a Delaware banking corporation, not in its individual capacity
except as otherwise provided herein, but solely as trustee under the Pass
Through Trust Agreement, dated as of February 1, 1993 (the "Basic Agreement"),
between Lessee and Wilmington Trust Company, as supplemented by Trust
Supplements Nos. 1995-A1, 1995-A2, 1995-A3 and 1995-A4 thereto, each dated as
of October 1, 1995, creating 1995-A1 Pass Through Trust, 1995-A2 Pass Through
Trust, 1995-A3 Pass Through Trust and 1995-A4 Pass Through Trust, respectively
(such Basic Agreement as so supplemented, being the "1995-A1 Pass Through Trust
Agreement," the "1995-A2 Pass Through Trust Agreement," the "1995-A3 Pass
Through Trust Agreement" and the "1995-A4 Pass Through Trust Agreement,"
respectively, each of the 1995-A1 Pass Through Trust Agreement, the 1995-A2
Pass Through Trust Agreement, the 1995-A3 Pass Through Trust Agreement and the
1995-A4 Pass Through Trust Agreement being a "Pass Through Trust Agreement",
and Wilmington Trust Company, in its capacity as trustee under each Pass
Through Trust Agreement, being the "Pass Through Trustee"), (v) WILMINGTON
TRUST COMPANY, a Delaware banking corporation, not in its individual capacity
except as otherwise provided herein, but solely as indenture trustee
("Indenture Trustee") under the related Trust Indenture and Security Agreement
dated as of July 1, 1995, as supplemented, between Indenture Trustee and Owner
Trustee and (vi) BANK OF AMERICA ILLINOIS, an Illinois banking corporation
("Original Loan Participant"),
W I T N E S S E T H:
WHEREAS, Lessee, Owner Participant, Owner Trustee, Original Loan
Participant and Indenture Trustee entered into a Participation Agreement, dated
as of July 1, 1995 (the "Original Participation Agreement"; all capitalized
terms used herein without definition shall have the meanings set forth in or by
reference in the Original Participation Agreement; the Original Participation
Agreement as amended by the First Amendment to Participation Agreement (as
defined below) being herein called the "Participation Agreement"), providing
for the sale and lease of one Boeing Model 737-3H4 aircraft, bearing U.S.
registration number N603SW;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Participant entered into a Trust Agreement
establishing the Southwest Airlines 1995 Trust N603SW and dated as of July 1,
1995 (the "Trust Agreement") with Owner Trustee in its individual capacity,
pursuant to which Trust Agreement the Owner Trustee agreed, among other things,
to hold the Trust Estate defined in Section 1.01 of such Trust Agreement for
the benefit of Owner Participant thereunder;
REFINANCING AGREEMENT [N603SW]
-1-
<PAGE> 4
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Indenture Trustee entered into a
Trust Indenture and Security Agreement relating to the Aircraft, dated as of
July 1, 1995 (such Trust Indenture and Security Agreement as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement, dated
July 13, 1995 relating to the Aircraft being herein called the "Original
Indenture"; the Original Indenture as amended by the First Amendment to Trust
Indenture (as defined below) being herein called the "Indenture"), for the
benefit of Original Loan Participant (and, upon the issuance of the Equipment
Notes (as defined below), the Holders of the Equipment Notes issued
thereunder), pursuant to which Original Indenture, among other things, a
certificate substantially in the form set forth in Exhibit A thereto (the
"Original Certificate") was issued to Original Loan Participant as evidence of
the loan then being made by Original Loan Participant to Owner Trustee, the
proceeds of which were applied by Owner Trustee to the payment of Lessor's Cost
for the Aircraft;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Lessee entered into a Sale and Lease
Agreement, dated as of July 1, 1995 relating to the Aircraft (such Sale and
Lease Agreement as supplemented by Sale and Lease Agreement Supplement No. One
dated July 13, 1995 relating to the Aircraft being herein called the "Original
Lease"; and the Original Lease as amended by the First Amendment to Lease
Agreement (as defined below) being herein called the "Lease"), relating to the
Aircraft whereby, subject to the terms and conditions set forth in the Original
Lease, Owner Trustee agreed to buy from and lease to Lessee, and Lessee agreed
to sell to and lease from Owner Trustee, the Aircraft on the Delivery Date;
WHEREAS, the parties hereto wish to effect a refinancing of the
Original Certificate as permitted by Section 18 of the Original Participation
Agreement as part of a refinancing transaction;
WHEREAS, Owner Trustee has agreed, in connection with the refinancing
of the Original Certificate, to issue Equipment Notes substantially in the
forms set forth in Exhibits A-1 and A-2 to the Indenture (for the purposes
hereof, "Equipment Notes" shall have the meaning set forth for the term "Series
SWA 1995 Trust N603SW Certificates" in the Indenture) to the four separate
grantor trusts created on the Closing Date (as defined below) by the Pass
Through Trust Agreements, and Pass Through Trustee will thereafter issue the
Pass Through Certificates substantially in the form of Exhibit A to each Pass
Through Trust Agreement (the "Pass Through Certificates");
WHEREAS, to facilitate Owner Trustee's sale of the Equipment Notes to
the Pass Through Trustee and the purchase of such Equipment Notes by Pass
Through Trustee, Lessee has duly authorized the execution and delivery of the
Pass Through Trust Agreements as the "issuer" thereunder, as such term is
defined in and solely for purposes of the Securities Act of 1933, as amended,
and of the related Pass Through Certificates as the "obligor" thereupon, as
such term is defined in and solely for purposes of the Trust Indenture Act of
1939, as amended, and is undertaking to perform certain administrative and
ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustee;
REFINANCING AGREEMENT [N603SW]
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WHEREAS, the proceeds from the sale of the Equipment Notes will be
applied, among other things, to effect the optional refinancing of the Original
Certificate; and
WHEREAS, in connection with the refinancing transaction as
contemplated hereby, Owner Trustee and Lessee have agreed to adjust payments of
Interim Rent, Basic Rent, Stipulated Loss Values and Termination Values, to
adjust the Special Purchase Price, to adjust the debt amortization schedule on
the Refinancing Date in accordance with Section 18 of the Original
Participation Agreement, and to amend Exhibits B-1, B-2, C and E of the Lease
so as to reflect such adjustments;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Refinancing of Original Certificate.
(a) Subject to the satisfaction or waiver of the conditions set
forth herein at or prior to 10:00 a.m. Central time on the date designated by
Lessee, on behalf of Owner Trustee, pursuant to Section 18 of the Original
Participation Agreement or at such other date and time agreed to by the parties
hereto (the "Closing Date"):
(i) Pass Through Trustee shall, in accordance with
Section 2.01 of the Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated the Closing
Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the
request of Lessee delivered pursuant to such Section 2.01, and deliver
such Pass Through Certificates to the Underwriters (as defined below)
as specified in such request against payment by the Underwriters of an
amount equal to the aggregate principal amount thereof;
(ii) Owner Trustee shall, in accordance with Section 2.01
of the Indenture, issue and deliver to Indenture Trustee Equipment
Notes dated the Closing Date and of the maturities, in the principal
amounts, bearing the interest rates and reflecting the other economic
terms specified in Exhibits A, A-1 and A-2 hereto in an aggregate
principal amount of $23,842,723 (the "Refinancing Amount");
(iii) Indenture Trustee shall authenticate such Equipment
Notes pursuant to Section 2.02 of the Indenture, and deliver such
Equipment Notes to Pass Through Trustee as specified in Exhibit A-2
hereto against payment by Pass Through Trustee of an aggregate amount
equal to the Refinancing Amount;
(iv) Owner Trustee shall on the Closing Date pay to
Indenture Trustee, for the account of Owner Participant, an amount
equal to accrued interest and, subject to Lessee's obligations under
Section 3.4 of the Original Lease, Break Amount (as defined in the
Original Indenture), if any, owing to the Original Loan Participant on
the Closing Date; and
REFINANCING AGREEMENT [N603SW]
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(v) Indenture Trustee shall disburse to Original Loan
Participant the amount of principal, interest and Break Amount, if
any, owing to Original Loan Participant on the Closing Date with
respect to the Original Certificate in connection with the refinancing
of the Original Certificate in accordance with Sections 2.08 and 15.03
of the Original Indenture and Section 18 of the Original Participation
Agreement.
Owner Participant, by its execution and delivery hereof, requests and directs
Owner Trustee, in accordance with Section 5.02 of the Trust Agreement, to
execute and deliver this Agreement, the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture and to take all actions necessary or desirable to effect the
issuance of the Equipment Notes and the refinancing of the Original
Certificate.
(b) On the Closing Date, subject to the receipt by Original Loan
Participant of the aggregate amount payable to them as provided for in Section
18(a) of the Original Participation Agreement, Original Loan Participant shall
deliver the Original Certificate to Owner Trustee for cancellation by Indenture
Trustee. The Original Loan Participant hereby authorizes and directs Indenture
Trustee to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions contemplated by said
agreements and amendments to effect the issuance of the Equipment Notes and the
refinancing of the Original Certificate.
(c) In case Pass Through Trustee shall fail to make the payment
described in Section 1(a)(iii) hereof, or in case Owner Trustee shall for any
reason fail to issue and deliver to Indenture Trustee the Equipment Notes
pursuant to Section 1(a)(ii) hereof, (i) the written notice given by Lessee
pursuant to Section 18(a) of the Original Participation Agreement and Section
6.03(b) of the Original Indenture with respect to the refinancing contemplated
hereby shall be deemed to have never been given (except, however, as provided
in Section 6(b) hereof), (ii) Indenture Trustee, Owner Trustee, Owner
Participant and Lessee shall have no obligation to pay to Original Loan
Participant any amount in respect of the refinancing of the Original
Certificate pursuant hereto, (iii) none of the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture shall be deemed to have been delivered and (iv) the Original
Certificate shall remain outstanding and in full force and effect and shall
continue to be subject to the terms of the Original Indenture.
(d) The closing (the "Closing") of the transactions described in
this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
Houston, Texas, or such other place as the parties hereto may agree; the
parties hereby agree that the transactions contemplated hereby shall be deemed
to have occurred simultaneously and that no transaction contemplated hereby
shall be deemed to have occurred except in conjunction with the occurrence of
all such other transactions.
(e) All payments pursuant to this Section 1 shall be made on the
Closing Date in immediately available funds to such accounts and at such banks
as specified in the Operative Agreements, or, if otherwise, as the parties
hereto shall designate in writing not less than one Business Day prior to the
Closing Date.
REFINANCING AGREEMENT [N603SW]
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(f) This Agreement shall apply only to the refinancing of the
Original Certificate as described herein and not to the refinancing, redemption
or refunding of any Equipment Notes or any other Certificate (as defined in the
Indenture) issued under the Indenture.
SECTION 2. Adjustments to Exhibits to the Lease. The
parties hereto agree, by their execution and delivery hereof, that the
transactions contemplated hereby constitute a refinancing transaction as
contemplated by Section 18 of the Participation Agreement and that they will
take all actions contemplated thereby, including the revision of Exhibits B-1,
B-2, C and E of the Lease to reflect the adjustments contemplated thereby.
Subject to the consummation of such refinancing transaction as described
herein, such revised Exhibits B-1, B-2, C and E to the Lease shall be effective
as of the Closing Date.
SECTION 3. Conditions Precedent. The obligations of
each of the parties hereto to participate in the transactions contemplated by
this Agreement on the Closing Date are subject to the fulfillment, prior to or
on the Closing Date, of the following conditions precedent; provided, however,
that it shall not be a condition precedent to the obligations of any party
hereto that any document be produced or action taken that is to be produced or
taken by such party or any Person within such party's control; and provided,
further, that only the conditions set forth in clauses (a) and (v) of this
Section 3 shall be conditions precedent to the actions of Original Loan
Participant:
(a) Pass Through Trustee shall have received, concurrently with
the payment to Indenture Trustee by Pass Through Trustee of an amount equal to
the aggregate Original Issue Price thereof, the Equipment Notes as required by
Section 1(a)(iii), and Indenture Trustee shall have received any other amounts,
including Break Amount, if any, required to be paid in connection with the
refinancing of the Original Certificate on the Closing Date and the Indenture
Trustee shall have effected a wire transfer of all amounts payable to the
Original Loan Participant as provided herein.
(b) The Equipment Notes shall have been issued and authenticated
in accordance with the Indenture, and there shall have been transferred to
Indenture Trustee in immediately available funds the amounts referred to above
in Section 1(a)(iii)-(iv).
(c) Owner Trustee and Indenture Trustee shall have executed and
delivered the First Amendment to Trust Indenture and Security Agreement in
substantially the form of Exhibit B hereto (the "First Amendment to Trust
Indenture") which shall have been duly filed for recording with the FAA.
(d) Lessee and Owner Trustee shall have executed and delivered an
amendment to the Original Lease in substantially the form of Exhibit C hereto
(the "First Amendment to Lease Agreement") which shall have been duly filed for
recording with the FAA.
(e) Each of Lessee, Owner Participant, Owner Trustee, Pass Through
Trustee and Indenture Trustee shall have executed and delivered an amendment to
the Original Participation Agreement in substantially the form of Exhibit D
hereto (the "First Amendment to Participation Agreement").
REFINANCING AGREEMENT [N603SW]
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(f) (i) Indenture Trustee shall have received on or prior to the
Delivery Date (A) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting Owner Trustee as debtor and Indenture Trustee as secured
party, as to the Indenture Estate, evidencing its filing with the office of the
Secretary of State of the State of Connecticut and (B) a copy (or other
documentation satisfactory to it) of the acknowledgment copy of a properly
completed Uniform Commercial Code financing statement, reflecting Lessee as
debtor and Owner Trustee as secured party (and reflecting Indenture Trustee as
assignee), as to the Lease and the Aircraft evidencing its filing with the
office of the Secretary of State of the State of Texas, (ii) no financing
statement or similar filing described above in clause (i) shall have been
terminated or amended subsequent to the date of its filing and (iii) Indenture
Trustee shall have received, on or prior to the Delivery Date, the only
chattel-paper original of the Original Lease and, on or prior to the Closing
Date, the only chattel-paper original of the First Amendment to Lease Agreement
and shall have (and shall have retained without interruption subsequent to its
receipt thereof) possession of each thereof on the Closing Date.
(g) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received the following documents (each of
which shall be reasonably satisfactory in form and substance to each of them):
(i) revised Exhibits B-1, B-2 and C to the Lease, as
provided for in the First Amendment to Lease Agreement; and
(ii) revised Schedule I to the Participation Agreement, as
provided for in the First Amendment to Participation Agreement.
(h) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the representations and warranties contained herein
of Lessee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate
solely to an earlier date (in which case such representations and
warranties shall be certified to have been correct on and as of such
earlier date);
(ii) no event has occurred and is continuing which constitutes
a Lease Event of Default or a Lease Default; and
(iii) no Event of Loss (or event which with the passage of
time or the giving of notice, or both, would constitute an Event of
Loss) has occurred with respect to the Airframe or any Engine.
(i) Each of Indenture Trustee, Owner Participant, Pass Through
Trustee and Lessee shall have received a certificate signed by a Responsible
Officer (as defined in the Indenture) of Owner Trustee, dated the Closing Date,
certifying that the representations and warranties
REFINANCING AGREEMENT [N603SW]
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contained herein of Owner Trustee in its individual and trust capacities are
correct as though made on and as of the Closing Date, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case such representations and warranties shall be certified to have been
correct on and as of such earlier date).
(j) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Lessee shall have received a certificate signed by a Responsible Company
Officer (as defined in the Indenture) of Owner Participant, dated the Closing
Date, certifying that the representations and warranties contained herein of
Owner Participant are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be
certified to have been correct on and as of such earlier date).
(k) Each of Pass Through Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by a Responsible Officer
(as defined in the Indenture) of Indenture Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of
Indenture Trustee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties are correct
on and as of such earlier date).
(l) Each of Indenture Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by an authorized officer of
Pass Through Trustee, dated the Closing Date, certifying that the
representations and warranties contained herein of Pass Through Trustee are
correct as though made on and as of the Closing Date, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case such representations and warranties are correct on and as of such earlier
date).
(m) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received the following:
(i) an incumbency certificate of Lessee as to the person
or persons authorized to execute and deliver this Agreement, the First
Amendment to Participation Agreement, the First Amendment to Lease
Agreement, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and specimen
signatures of such person or persons;
(ii) a copy of the resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
transactions contemplated hereby and the execution and delivery of
each of the documents required to be executed and delivered on behalf
of Lessee in connection with the transactions contemplated hereby; and
(iii) such other documents and evidence with respect to the
other parties hereto as it may reasonably request in order to
establish the due consummation of the transactions contemplated by
this Agreement, any other Operative Agreements (as defined in the
Lease), the Underwriting Agreement (as defined below) and the Pass
REFINANCING AGREEMENT [N603SW]
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Through Trust Agreements and the taking of all necessary corporate
action in connection therewith and compliance with the conditions
herein set forth.
(n) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the Aircraft has been duly certificated by the FAA as
to type and airworthiness in accordance with the terms of the Original
Lease;
(ii) Owner Trustee's FAA Bill of Sale, the Original Lease,
the Original Trust Agreement and the Original Indenture have been duly
recorded with the FAA pursuant to the Act (as defined in the Lease);
(iii) the Aircraft has been registered with the FAA in the
name of Owner Trustee and Lessee has authority to operate the
Aircraft; and
(iv) the First Amendment to Lease and the First Amendment
to Trust Indenture have been duly filed for recording with the FAA.
(o) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received opinions addressed to them from
Deborah Ackerman, Associate General Counsel of Lessee, substantially to the
same effect as the opinions delivered by her, on the Delivery Date pursuant to
Section 4(a)(xi) of the Original Participation Agreement (but reflecting the
documents delivered on the Closing Date).
(p) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Shipman & Goodwin, special counsel for Owner Trustee,
substantially to the same effect as the opinion delivered by it on the Delivery
Date pursuant to Section 4(a)(xiii) of the Original Participation Agreement
(but reflecting the documents delivered on the Closing Date).
(q) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Potter Anderson & Corroon, special counsel for Pass Through
Trustee and Indenture Trustee, substantially to the same effect (but with
respect also to Pass Through Trustee, the Pass Through Trust Agreement and the
other documents delivered on the Closing Date) as the opinion delivered by it
on the Delivery Date pursuant to Section 4(a)(xvi) of the Original
Participation Agreement.
(r) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received opinions addressed to
them from Morgan, Lewis & Bockius, special counsel for Owner Participant, and
in-house or other corporate counsel to Owner Participant, substantially to the
same effect as the opinions delivered on the Delivery Date pursuant to Section
4(a)(xiv) of the Original Participation Agreement (but reflecting the documents
delivered on the Closing Date).
REFINANCING AGREEMENT [N603SW]
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(s) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking into account the First
Amendment to Trust Indenture and the First Amendment to Lease Agreement, (i) as
the opinion delivered by it pursuant to Section 4(a)(xv) of the Original
Participation Agreement on the Delivery Date and (ii) as the opinion delivered
to them subsequent to the Delivery Date pursuant to the final paragraph of
Section 4(a) of the Original Participation Agreement.
(t) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received an independent insurance broker's
report, and certificates of insurance, dated the Closing Date, substantially in
the form of the report and certificates delivered pursuant to Section 4(a)(xxi)
of the Original Participation Agreement on the Delivery Date, as to the due
compliance with the terms of Section 11 of the Lease relating to the insurance
with respect to the Aircraft and with any other agreements of Lessee with
respect to such insurance, and references in such report and certificates to
(x) the "Indenture", the "Participation Agreement", and the "Lease" shall be to
such documents as amended by the First Amendment to Trust Indenture, the First
Amendment to Participation Agreement and the First Amendment to Lease Agreement
and (y) "Additional Insureds" shall be to such term as utilized in the Lease.
(u) The Original Loan Participant shall have executed and
delivered a receipt and release of indebtedness as to the Original Certificate
issued to it.
(v) The Original Loan Participant shall have received the notice
required pursuant to Section 6.03(b) of the Original Indenture in respect of
the Closing Date.
(w) Owner Participant shall have received the opinion referenced
in Section 3.7.2 of the Original Lease.
The opinions described above in clauses (o)-(s) and (w) shall be dated the
Closing Date and references therein corresponding to references in prior
opinions to the "Indenture", the "Participation Agreement", or the "Lease"
shall be to such documents as amended by the First Amendment to Trust
Indenture, the First Amendment to Participation Agreement, and the First
Amendment to Lease Agreement, respectively.
Promptly upon the recording with the FAA of the First Amendment to
Trust Indenture and the First Amendment to Lease Agreement, Lessee will cause
Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to
deliver to the parties hereto an opinion as to the due recording thereof and
the lack of filing of any intervening documents with respect to the Aircraft
(other than the Original Indenture and the Original Lease).
Each of the parties hereto agrees to instruct its counsel to prepare
and deliver the respective opinions described above in clauses (o)-(s) and to
address each such opinion to the Underwriters in addition to the respective
addressees set forth above (and, to the extent such
REFINANCING AGREEMENT [N603SW]
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opinions do not restate or confirm the opinions rendered on the Delivery Date,
such counsel shall authorize the Underwriters to rely on opinions rendered on
the Delivery Date).
SECTION 4. Representations and Warranties.
(a) Lessee's Representations and Warranties. Lessee represents
and warrants to Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant that:
(i) it is a corporation duly organized and validly
existing in good standing pursuant to the laws of the State of Texas,
is a "citizen of the United States" (as defined in Section
40102(a)(15)(C) of Title 49, U.S.C.) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49, U.S.C. for aircraft capable of carrying 10
or more individuals or 6,000 pounds or more of cargo, has the
corporate power and authority to carry on its business as now
conducted, to own or hold under lease its properties, to hold under
lease the Aircraft and to enter into and perform its obligations under
this Agreement, the other Operative Agreements to which it is or is to
be a party (the "Relevant Operative Documents") and the Pass Through
Trust Agreements (together with this Agreement and the Relevant
Operative Documents, collectively, the "Lessee Documents"), is duly
qualified to do business as a foreign corporation in good standing in
each state in which the nature of its business makes such
qualification necessary or the failure to be so qualified or so to be
in good standing would have a material adverse effect on its
businesses or operations or would impair its ability to perform its
obligations under the Lessee Documents, and has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Dallas, Texas;
(ii) the execution, delivery and performance of the Lessee
Documents (A) have been duly authorized by all necessary corporate
action on the part of Lessee, (B) do not require any shareholder
approval, or approval or consent of any trustee or holder of any
indebtedness or obligations of Lessee, or of any lessor under any
lease to Lessee, except such as have been duly obtained and are in
full force and effect, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order binding on
Lessee or any of its subsidiaries or the articles of incorporation or
by-laws of Lessee (each as amended to date) or (2) contravene or
result in any breach of the provisions of, or constitute a default
under, or result in the creation of any Lien (other than as permitted
under the Lease) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan or credit agreement or
other agreement to which Lessee is a party or by which it or any of
its properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the
Lessee Documents, nor the performance by Lessee of its obligations
thereunder, requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency except for (t) the
orders, permits, waivers, exemptions,
REFINANCING AGREEMENT [N603SW]
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authorizations and approvals of the regulatory authorities having
jurisdiction over the operation of the Aircraft by Lessee, which
orders, permits, waivers, exemptions, authorizations and approvals
have been duly obtained and are in full force and effect, (u) the
registration of the issuance and sale of the Pass Through Certificates
to be issued pursuant to the provisions of the Pass Through Trust
Agreements under the Securities Act and under the securities laws of
any state in which the Pass Through Certificates may be offered for
sale if the laws of such state require such action, which
registrations under the Securities Act have been duly accomplished,
(v) the qualification of each Pass Through Trust Agreement under the
Trust Indenture Act of 1939, as amended, which qualification has been
duly obtained, (w) the registrations and filings referred to in
Section 4(a)(v), (x) the recordings with the FAA described in the
opinion referred to in Section 3(s), (y) filing the Underwriting
Agreement and certain other documents with the SEC pursuant to a
Current Report on Form 8-K, and (z) routine periodic filings required
under the Act;
(iv) each of the Lessee Documents constitutes, or will on
the Closing Date constitute, legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with its terms;
(v) no action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), that has not been previously taken or shall not have
been taken on or prior to the Closing Date is necessary or advisable
in order to establish and perfect Owner Trustee's interest in the
Aircraft as against Lessee and any third parties (other than the
filing of continuation statements required to be filed at periodic
intervals under Article 9 of the Uniform Commercial Code as in effect
in the States of Texas and Connecticut in respect of financing
statements previously filed under such Article 9) or to perfect the
security interest created under the Indenture in favor of Indenture
Trustee in Owner Trustee's interest in the Aircraft and other assets
of the Trust Estate in any applicable jurisdiction in the United
States (other than the filing of continuation statements required to
be filed at periodic intervals under Article 9 of the Uniform
Commercial Code as in effect in the States of Texas and Connecticut in
respect of financing statements previously filed under such Article
9);
(vi) Owner Trustee, as lessor under the Lease, and
Indenture Trustee, as assignee thereof, are entitled, after giving
effect to the refinancing transaction contemplated hereby, to the
protection of Section 1110 of the United States Bankruptcy Code in
connection with their right to take possession of the Airframe and
Engines in the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor;
(vii) there has not occurred any event which constitutes a
Lease Default or a Lease Event of Default which is presently
continuing and there has not occurred any event which constitutes or
would with the passage of time or the giving of notice, or both,
constitute an Event of Loss;
REFINANCING AGREEMENT [N603SW]
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(viii) there are no pending or, to Lessee's knowledge,
threatened actions or proceedings before any court or administrative
agency which (A) involve the Aircraft or (B) having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to have a material adverse effect on the consolidated financial
condition of Lessee and its subsidiaries or the ability of Lessee to
perform its obligations under any Lessee Document;
(ix) Lessee is not in default in the performance of any
term or condition of the Purchase Agreement or Purchase Agreement
Assignment which materially adversely impairs the transactions
contemplated hereby;
(x) no governmental approval in the United States of any
kind is required of any of the Participants, Pass Through Trustee,
Owner Trustee or Indenture Trustee for their respective execution of
or performance under any of the Pass Through Trust Agreements, any
Relevant Operative Document or any agreement contemplated hereby or
thereby to which any thereof is or is to be a party solely by reason
of any fact or circumstance peculiar to: (A) Lessee (as contrasted
with other airlines), (B) the nature of the Aircraft, or (C) Lessee's
existing or proposed operation or use of the Aircraft;
(xi) the Aircraft has been duly certificated by the FAA as
to type and airworthiness and such certification remains in full force
and effect;
(xii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(xiii) neither it nor any Person authorized to act on its
behalf has directly or indirectly offered the Pass Through
Certificates or the Equipment Notes for sale to anyone other than in a
manner in compliance with the requirements of the Securities Act, and
by the rules and regulations thereunder; and
(xiv) Lessee has never sponsored, maintained or made
contributions to any defined benefit plan subject to the provisions of
Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) Representations and Warranties of Shawmut Bank and Owner
Trustee. Shawmut Bank Connecticut, National Association, in its individual
capacity ("SBC") and as Owner Trustee represents and warrants to each of
Indenture Trustee, Pass Through Trustee, Owner Participant and Lessee that:
(i) SBC is a national banking association duly organized
and validly existing in good standing under the laws of the United
States and has full corporate power and authority to carry on its
business as now conducted and to enter into and perform its
obligations under this Agreement and under the Trust Agreement and the
Participation Agreement (collectively, the "SBC Documents"); assuming
the due execution and delivery, pursuant to due authorization, by
Owner Participant of the Trust Agreement and
REFINANCING AGREEMENT [N603SW]
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the enforceability of the Trust Agreement against Owner Participant,
Owner Trustee has full power and authority to enter into and perform
its obligations under this Agreement and each of the other Relevant
Operative Documents to which it is or is to be a party (the "OT
Documents");
(ii) each of SBC and Owner Trustee has duly authorized,
executed and delivered each of the SBC Documents and the OT Documents,
respectively; assuming the due execution and delivery, pursuant to due
authorization, by Owner Participant of the Trust Agreement and that it
is enforceable against Owner Participant, the Trust Agreement
constitutes a legal, valid and binding obligation of SBC and Owner
Trustee, enforceable against SBC or Owner Trustee, as the case may be,
in accordance with its terms;
(iii) assuming the due execution and delivery, pursuant to
due authorization, by each of the parties thereto (other than SBC and
Owner Trustee) of each of the SBC Documents and the OT Documents and
that each of the SBC Documents and the OT Documents is the legal,
valid and binding obligation of each of the parties thereto (other
than SBC and Owner Trustee), each of the SBC Documents and the OT
Documents constitutes, or will on the Closing Date constitute, legal,
valid and binding obligations of SBC or Owner Trustee, as the case may
be, enforceable against it in accordance with its terms;
(iv) neither the execution and delivery by SBC or Owner
Trustee, as the case may be, of any of the SBC Documents or OT
Documents, respectively, nor the consummation by SBC or Owner Trustee,
as the case may be, of any of the transactions contemplated hereby or
thereby, nor the compliance by SBC, or Owner Trustee, as the case may
be, with any of the terms and provisions hereof and thereof, (A)
requires or will require any approval of its stockholders, or approval
or consent of any trustees or holders of any indebtedness or
obligations of SBC, or (B) violates or will violate the charter or
by-laws of SBC, or contravenes or will contravene any provision of, or
constitutes or will constitute a default under, or results or will
result in any breach of, or results or will result in the creation of
any Lien (other than as permitted under the Lease) upon its property
under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sale contract, bank loan or credit agreement, license or
other agreement or instrument to which SBC is a party or by which SBC
is bound, or contravenes or will contravene any law, governmental rule
or regulation of the United States of America or the State of
Connecticut governing the banking or trust powers of SBC, or any
judgment or order applicable to or binding on it;
(v) there are no pending or, to the best knowledge of
SBC, threatened actions or proceedings against SBC or Owner Trustee
before any court or administrative agency which, if determined
adversely to it, would materially adversely affect the ability of SBC
or Owner Trustee, as the case may be, to perform its obligations under
any of the SBC Documents or the OT Documents;
REFINANCING AGREEMENT [N603SW]
-13-
<PAGE> 16
(vi) both the principal place of business of Owner
Trustee, and the place where its records concerning the Aircraft and
all its interest in, to and under all documents relating to the Trust
Estate, are located at 777 Main Street, Hartford, Connecticut 06115
Attention: Corporate Trust Administration;
(vii) no consent, approval, order or authorization of,
giving of notice to, or registration or filing with (including the
filing of any financing statement under Article 9 of the Uniform
Commercial Code as in effect in the State of Connecticut), or taking
of any other action in respect of, any Connecticut state or local
governmental authority or agency or any United States federal
governmental authority or agency regulating the banking or trust
powers of SBC is required for the execution and delivery of, or the
carrying out by, SBC or Owner Trustee, as the case may be, of any of
the transactions contemplated by any of the SBC Documents or the OT
Documents, respectively, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken (and other than the filing of continuation
statements required to be filed at periodic intervals under Article 9
of the Uniform Commercial Code as in effect in the State of
Connecticut in respect of financing statements previously filed);
(viii) Owner Trustee's right, title and interest in and to
the Aircraft are free of any Lessor Liens (as defined in the Lease)
attributable to SBC;
(ix) SBC is a "citizen of the United States" as defined
in the Act; and
(x) neither SBC nor Owner Trustee has directly or
indirectly offered any Equipment Notes or any interest in or to the
Trust Estate, the Trust Agreement or any similar interest for sale to,
or solicited any offer to acquire any of the same from, any Person
other than Indenture Trustee, Pass Through Trustee, Original Loan
Participant and Owner Participant; and Owner Trustee has not
authorized anyone to act on its behalf (it being understood that, for
purposes of this paragraph, in arranging and proposing the refinancing
contemplated hereby and agreed to herein by Owner Trustee, neither
Lessee nor any of the Underwriters has acted as agent of Owner
Trustee) to offer directly or indirectly any Equipment Notes or any
interest in and to the Trust Estate, the Trust Agreement or any
similar interest for sale to, or to solicit any offer to acquire any
of the same from, any Person.
(c) Representations and Warranties of Owner Participant. Owner
Participant represents and warrants to each of Indenture Trustee, Owner
Trustee, Pass Through Trustee and Lessee that:
(i) Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of the State of
Arizona and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties
and to enter into and perform its obligations under this Agreement and
the other Relevant Operative Documents to which it is or is to be a
party (the "OP Documents"), and its execution and delivery of each of
the OP Documents and the
REFINANCING AGREEMENT [N603SW]
-14-
<PAGE> 17
performance by it of its obligations thereunder have been duly
authorized by all necessary corporate action on the part of Owner
Participant and do not require any approval not already obtained of
stockholders of Owner Participant or any approval or consent not
already obtained of any trustee or holders of any indebtedness or
obligations of Owner Participant and each of the OP Documents has
been, or will on the Closing Date have been, duly executed and
delivered by it and (assuming that each of the OP Documents is the
legal, valid and binding obligation of each of the parties thereto
(other than Owner Participant) and that the consummation of the
transactions contemplated by the Relevant Operative Documents and the
Pass Through Trust Agreements, including, without limitation, the
redemption of the Original Certificate and the issuance of the
Equipment Notes and the issuance, holding or transfer of the Pass
Through Certificates will not involve any "prohibited transaction"
within the meaning of Section 406 or 407 of ERISA or Section 4975 of
the Code) each of the OP Documents is the legal, valid and binding
obligation of Owner Participant enforceable against it in accordance
with its terms;
(ii) the execution and delivery by Owner Participant of
the OP Documents, the consummation of the transactions contemplated
thereby by Owner Participant and compliance by it with the terms and
provisions of the OP Documents do not and will not contravene any
United States federal or state law, judgment, governmental rule,
regulation or any order of any court or governmental authority or
agency applicable to or binding on it (it being understood that no
representation or warranty is made with respect to (A) laws, rules or
regulations relating to aviation or to the nature of the equipment
owned by Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of Owner Participant under
applicable aviation law or (B) ERISA or Section 4975 of the Code other
than the representation set forth in paragraph (v) of this Section
4(c)) or contravene, or result in any breach of, or constitute any
default under, its corporate charter or by-laws or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement or any agreement or instrument to which
it is a party or by which it or any of its property may be bound or
affected;
(iii) the Trust Estate is free of Lessor Liens attributable
to Owner Participant;
(iv) it is a "citizen of the United States" as defined in
the Act;
(v) no part of the funds used by it to make its
investment pursuant to Section 1 of the Original Participation
Agreement constituted "plan assets" of any "employee benefit plan"
within the meaning of ERISA, or of any "plan" within the meaning of
Section 4975(e)(1) of the Code, as interpreted by the Department of
Labor; and
(vi) neither Owner Participant nor anyone authorized by it
to act on its behalf (it being understood that, for purposes of this
paragraph, in arranging and proposing the refinancing contemplated
hereby and agreed to herein by Owner Participant, neither Lessee nor
any of the Underwriters has acted as agent of Owner Participant) has
directly or indirectly offered any Equipment Notes or any interest in
or any similar interest for sale to, or solicited any offer to acquire
any of the same from, any Person.
REFINANCING AGREEMENT [N603SW]
-15-
<PAGE> 18
(d) Representations and Warranties of Wilmington Trust Company,
Indenture Trustee and Pass Through Trustee. Wilmington Trust Company, in its
individual capacity ("WTC") and as Indenture Trustee and Pass Through Trustee,
represents and warrants, to each of Owner Trustee, Owner Participant and Lessee
that:
(i) WTC is a "citizen of the United States" as defined in
the Act, that it will notify promptly all parties to this Agreement if
in its reasonable opinion its status as a "citizen of the United
States" is likely to change and that it will resign as Indenture
Trustee as provided in Section 9.07 of the Indenture if it should
cease to be a "citizen of the United States";
(ii) WTC is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into and
perform its obligations under the Pass Through Trust Agreements and
the Relevant Operative Documents to which WTC is or is to be a party
(the "WTC Documents") and, as Indenture Trustee and Pass Through
Trustee, to authenticate the Equipment Notes and the Pass Through
Certificates to be delivered on the Closing Date;
(iii) the execution and delivery by WTC of the WTC
Documents, by Indenture Trustee of the Relevant Operative Documents to
which it is or is to be a party (the "IT Documents") and by Pass
Through Trustee of the Relevant Operative Documents to which it is or
is to be a party (the "PTT Documents") and the authentication by
Indenture Trustee of the Equipment Notes and by Pass Through Trustee
of the Pass Through Certificates to be delivered on the Closing Date
have been duly authorized by all necessary corporate action on the
part of WTC, Indenture Trustee and Pass Through Trustee, respectively,
and neither the execution (or, in the case of such Equipment Notes and
Pass Through Certificate, their authentication) and delivery thereof
nor its performance of any of the terms and provisions thereof will
violate any federal or Delaware law or regulation relating to the
banking or trust powers of WTC or any judgment or order binding on it
or contravene or result in any breach of, or constitute any default
under the charter or by-laws of WTC or the provisions of any
indenture, mortgage, contract or other agreement to which any of WTC,
Indenture Trustee or Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the WTC Documents, the IT Documents and the
PTT Documents has been, or will on the Closing Date have been, duly
executed (or, in the case of the Equipment Notes and the Pass Through
Certificates, authenticated) and delivered by WTC, Indenture Trustee
and Pass Through Trustee, respectively;
(v) assuming that each of the WTC Documents, the IT
Documents and the PTT Documents is the legal, valid and binding
obligation of each of the parties thereto (other than WTC, Indenture
Trustee and Pass Through Trustee, respectively), each of the WTC
Documents, the IT Documents and the PTT Documents is, or will on the
Closing Date be, the legal, valid and binding obligation of WTC,
Indenture Trustee or Pass Through Trustee, respectively, enforceable
against it in accordance with its terms;
REFINANCING AGREEMENT [N603SW]
-16-
<PAGE> 19
provided, however, that the representations made in this subparagraph
(v) are made only by WTC as to the WTC Documents, by Indenture Trustee
as to the IT Documents and by Pass Through Trustee as to the PTT
Documents, respectively;
(vi) neither the execution and delivery by WTC, Indenture
Trustee or Pass Through Trustee of any of the WTC Documents, the IT
Documents or the PTT Documents, respectively, nor the consummation by
WTC, Indenture Trustee or Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or
approval of, the giving of notice to, or the registration with, or the
taking of any other action with respect to, any governmental authority
or agency pursuant to any law of the State of Delaware or the United
States regulating WTC's banking, trust or fiduciary powers;
(vii) there are no pending or threatened actions or
proceedings against any of WTC, Indenture Trustee or Pass Through
Trustee before any court or administrative agency which individually
or in the aggregate, if determined adversely to it, would materially
adversely affect the ability of WTC, Indenture Trustee or Pass Through
Trustee to perform its obligations under any of the WTC Documents, the
IT Documents or the PTT Documents;
(viii) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreement of the Pass Through
Certificates contemplated hereby, neither WTC nor Pass Through Trustee
has directly or indirectly offered any Equipment Note for sale to any
Person, or solicited any offer to acquire any Equipment Notes from any
Person other than Owner Trustee and Owner Participant, and neither WTC
nor Pass Through Trustee has authorized anyone to act on its behalf to
offer directly or indirectly any Equipment Note for sale to any
Person, or to solicit any offer to acquire any Equipment Note from any
Person other than Owner Trustee and Owner Participant, and Pass
Through Trustee is not in default under any Pass Through Trust
Agreement; and
(ix) Pass Through Trustee is not directly or indirectly
controlling, controlled by or under common control with any of Owner
Participant, Owner Trustee, any Underwriter or Lessee.
SECTION 5. Notices. Unless otherwise specifically
provided herein, all notices required or permitted by the terms of this
Agreement shall be given in accordance with the provisions of Section 13 of the
Participation Agreement.
SECTION 6. Expenses.
(a) As more fully specified in Section 16 of the Participation
Agreement and except as provided in paragraph (b) below, all of the Transaction
Costs in connection with the preparation, execution and delivery of this
Agreement and the transactions contemplated by this Agreement shall be paid
promptly by Owner Participant, either directly or through Owner Trustee.
REFINANCING AGREEMENT [N603SW]
-17-
<PAGE> 20
(b) In the event that the transactions contemplated by this
Agreement and the agreements referred to herein are not consummated, Lessee
shall, except as provided in the Underwriting Agreement with regard to fees and
expenses of the Underwriters, bear and pay all Transaction Costs referred to in
paragraph (a) above on an after-tax basis. In addition, in the event that the
transactions contemplated by this Agreement and the agreements referred to
herein are not consummated on the date specified in the notice referred to in
Section 3(v) hereof, Lessee shall indemnify the Original Loan Participant for
any associated break funding costs incurred thereby.
SECTION 7. Miscellaneous. This Agreement may be executed in
any number of counterparts (and each of the parties hereto shall not be
required to execute the same counterpart). Each counterpart of this Agreement
including a signature page executed by each of the parties hereto shall be an
original counterpart of this Agreement, but all of such counterparts together
shall constitute one instrument. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, Owner Trustee and Indenture Trustee. The index preceding
this Agreement and the headings of the various Sections of this Agreement are
for convenience of reference only and shall not modify, define, expand or limit
any of the terms or provisions hereof. The terms of this Agreement shall be
binding upon, and shall inure to the extent provided herein to the benefit only
of the following parties: Lessee and, subject to the terms of the
Participation Agreement, its successors and permitted assigns, Original Loan
Participant, Indenture Trustee and its successors as Indenture Trustee (and any
additional trustee appointed) under the Indenture, Owner Trustee and its
successors as Owner Trustee under the Trust Agreement, Pass Through Trustee and
its successors as Pass Through Trustee under each Pass Through Trust Agreement,
and Owner Participant and, subject to the provisions of the Participation
Agreement, its successors and permitted assigns. No purchaser or holder of any
of the Equipment Notes shall be deemed to be a successor or assign of Original
Loan Participant or to have any rights or benefits hereunder. Every
representation or warranty contained herein as to the enforceability of any
document shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity. THIS AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
REFINANCING AGREEMENT [N603SW]
-18-
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By: /s/ JOHN D. OWEN
Treasurer
BANC ONE ARIZONA LEASING
CORPORATION,
Owner Particpant
By: /s/ SUE BADDEN
Vice President
BANK OF AMERICA ILLINOIS,
Original Loan Participant
By: /s/ TIMOTHY C. HINTZ
Title: Managing Director
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
REFINANCING AGREEMENT [N603SW]
-19-
<PAGE> 22
Exhibit A to
Refinancing Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N603SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A1 July 1, 1997 $525,230 6.16% * Serial
1995-A2 July 1, 1998 $557,584 6.29% * Serial
1995-A3 July 1, 2013 $22,306,624 7.22% October 4, 2007 Installment
1995-A4 January 1, 2018 $453,285 7.64% January 4, 2016 Installment
</TABLE>
_____________
* Not applicable.
REFINANCING AGREEMENT [603SW]
A-1
<PAGE> 23
Exhibit A-1 to
Refinancing Agreement
Payment Dates and Payment Percentages and Amounts
REFINANCING AGREEMENT [603SW]
A-1-1
<PAGE> 24
Exhibit A-2 to
Refinancing Agreement
Issuance of SWA 1995 Trust N603SW Certificates
The SWA 1995 Trust N603SW Certificates issued hereunder shall be
issued to and shall be payable to Pass Through Trustee under the 1995-A1 Pass
Through Trust Agreement, the 1995-A2 Pass Through Trust Agreement, the 1995-A3
Pass Through Trust Agreement and the 1995-A4 Pass Through Trust Agreement with
respect to the grantor trusts created thereby, each such trust as described
below consisting of the Certificates issued pursuant hereto and the other
Certificates contained therein:
1995-A1 Trust:
6.16% Certificate due July 1, 1997
1995-A2 Trust:
6.29% Certificate due July 1, 1998
1995-A3 Trust:
7.22% Certificate due July 1, 2013
1995-A4 Trust:
7.64% Certificate due January 1, 2018
REFINANCING AGREEMENT [603SW]
A-2-1
<PAGE> 25
Exhibit B to
Refinancing Agreement
Form of
First Amendment to Trust Indenture
[SEE DOC. 1.03]
REFINANCING AGREEMENT [N603SW]
B-1
<PAGE> 26
Exhibit C to
Refinancing Agreement
Form of
First Amendment to Sale and Lease Agreement
[SEE DOC. 1.02]
REFINANCING AGREEMENT [N603SW]
C-1
<PAGE> 27
Exhibit D to
Refinancing Agreement
Form of
First Amendment to Participation Agreement
[SEE DOC. 1.01]
REFINANCING AGREEMENT [N603SW]
D-1
<PAGE> 1
EXHIBIT 4.54
REFINANCING AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO., as Lessee
AMSOUTH LEASING CORPORATION,
as Owner Participant
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Original Loan Participant
WILMINGTON TRUST COMPANY, in its individual capacity only
as expressly provided herein and as Indenture Trustee
and Pass Through Trustee
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein
and otherwise solely as Owner Trustee
One Boeing 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N604SW)
<PAGE> 2
INDEX TO REFINANCING AGREEMENT
(Southwest Airlines 1995 Trust N604SW)
Section 1. Refinancing of Original Certificate
Section 2. Adjustments to Exhibits to the Lease
Section 3. Conditions Precedent
Section 4. Representations and Warranties
Section 5. Notices
Section 6. Expenses
Section 7. Miscellaneous
EXHIBIT A Maturity Dates, Principal Amounts and
Interest Rates, Etc. of Series SWA 1995
Trust N604SW Certificates
EXHIBIT A-1 Installment Payment Dates and Installment
Payment Percentages and Amounts
EXHIBIT A-2 Issuance of SWA 1995 Trust N604SW Certificates
EXHIBIT B Form of First Amendment to Trust Indenture
EXHIBIT C Form of First Amendment to Sale and Lease
Agreement
EXHIBIT D Form of First Amendment to Participation
Agreement
<PAGE> 3
REFINANCING AGREEMENT
This REFINANCING AGREEMENT dated as of October 1, 1995, among (i)
SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), (ii) AMSOUTH LEASING
CORPORATION, an Alabama corporation ("Owner Participant"), (iii) SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity except as otherwise expressly provided herein, but solely
as Owner Trustee ("Owner Trustee"), under that certain Trust Agreement
establishing the Southwest Airlines 1995 Trust N604SW and dated as of August 1,
1995, between Owner Participant and Owner Trustee, (iv) WILMINGTON TRUST
COMPANY, a Delaware banking corporation, not in its individual capacity except
as otherwise provided herein, but solely as trustee under the Pass Through
Trust Agreement, dated as of February 1, 1993 (the "Basic Agreement"), between
Lessee and Wilmington Trust Company, as supplemented by Trust Supplements Nos.
1995-A3 and 1995-A4 thereto, each dated as of October 1, 1995, creating 1995-A3
Pass Through Trust and 1995-A4 Pass Through Trust, respectively (such Basic
Agreement as so supplemented, being the "1995-A3 Pass Through Trust Agreement"
and the "1995-A4 Pass Through Trust Agreement", respectively, each of the
1995-A3 Pass Through Trust Agreement and the 1995-A4 Pass Through Trust
Agreement being a "Pass Through Trust Agreement", and Wilmington Trust Company,
in its capacity as trustee under each Pass Through Trust Agreement, being the
"Pass Through Trustee"), (v) WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity except as otherwise provided
herein, but solely as indenture trustee ("Indenture Trustee") under the related
Trust Indenture and Security Agreement dated as of August 1, 1995, as
supplemented, between Indenture Trustee and Owner Trustee and (vi) TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association ("Original
Loan Participant"),
W I T N E S S E T H:
WHEREAS, Lessee, Owner Participant, Owner Trustee, Original Loan
Participant and Indenture Trustee entered into a Participation Agreement, dated
as of August 1, 1995 (the "Original Participation Agreement"; all capitalized
terms used herein without definition shall have the meanings set forth in or by
reference in the Original Participation Agreement; the Original Participation
Agreement as amended by the First Amendment to Participation Agreement (as
defined below) being herein called the "Participation Agreement"), providing
for the sale and lease of one Boeing Model 737-3H4 aircraft, bearing U.S.
registration number N604SW;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Participant entered into a Trust Agreement
establishing the Southwest Airlines 1995 Trust N604SW and dated as of August 1,
1995 (the "Trust Agreement") with Owner Trustee in its individual capacity,
pursuant to which Trust Agreement the Owner Trustee agreed, among other things,
to hold the Trust Estate defined in Section 1.01 of such Trust Agreement for
the benefit of Owner Participant thereunder;
REFINANCING AGREEMENT [N604SW]
-1-
<PAGE> 4
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Indenture Trustee entered into a
Trust Indenture and Security Agreement relating to the Aircraft, dated as of
August 1, 1995 (such Trust Indenture and Security Agreement as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement, dated
August 25, 1995 relating to the Aircraft being herein called the "Original
Indenture"; the Original Indenture as amended by the First Amendment to Trust
Indenture (as defined below) being herein called the "Indenture"), for the
benefit of Original Loan Participant (and, upon the issuance of the Equipment
Notes (as defined below), the Holders of the Equipment Notes issued
thereunder), pursuant to which Original Indenture, among other things, a
certificate substantially in the form set forth in Exhibit A thereto (the
"Original Certificate") was issued to Original Loan Participant as evidence of
the loan then being made by Original Loan Participant to Owner Trustee, the
proceeds of which were applied by Owner Trustee to the payment of Lessor's Cost
for the Aircraft;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Lessee entered into a Sale and Lease
Agreement, dated as of August 1, 1995 relating to the Aircraft (such Sale and
Lease Agreement as supplemented by Sale and Lease Agreement Supplement No. One
dated August 25, 1995 relating to the Aircraft being herein called the
"Original Lease"; and the Original Lease as amended by the First Amendment to
Lease Agreement (as defined below) being herein called the "Lease"), relating
to the Aircraft whereby, subject to the terms and conditions set forth in the
Original Lease, Owner Trustee agreed to buy from and lease to Lessee, and
Lessee agreed to sell to and lease from Owner Trustee, the Aircraft on the
Delivery Date;
WHEREAS, the parties hereto wish to effect a refinancing of the
Original Certificate as permitted by Section 18 of the Original Participation
Agreement as part of a refinancing transaction;
WHEREAS, Owner Trustee has agreed, in connection with the refinancing
of the Original Certificate, to issue Equipment Notes substantially in the
forms set forth in Exhibits A-1 and A-2 to the Indenture (for the purposes
hereof, "Equipment Notes" shall have the meaning set forth for the term "Series
SWA 1995 Trust N604SW Certificates" in the Indenture) to the two separate
grantor trusts created on the Closing Date (as defined below) by the Pass
Through Trust Agreements, and Pass Through Trustee will thereafter issue the
Pass Through Certificates substantially in the form of Exhibit A to each Pass
Through Trust Agreement (the "Pass Through Certificates");
WHEREAS, to facilitate Owner Trustee's sale of the Equipment Notes to
the Pass Through Trustee and the purchase of such Equipment Notes by Pass
Through Trustee, Lessee has duly authorized the execution and delivery of the
Pass Through Trust Agreements as the "issuer" thereunder, as such term is
defined in and solely for purposes of the Securities Act of 1933, as amended,
and of the related Pass Through Certificates as the "obligor" thereupon, as
such term is defined in and solely for purposes of the Trust Indenture Act of
1939, as amended, and is undertaking to perform certain administrative
REFINANCING AGREEMENT [N604SW]
-2-
<PAGE> 5
and ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustee;
WHEREAS, the proceeds from the sale of the Equipment Notes will be
applied, among other things, to effect the optional refinancing of the Original
Certificate; and
WHEREAS, in connection with the refinancing transaction as
contemplated hereby, Owner Trustee and Lessee have agreed to adjust payments of
Interim Rent, Basic Rent, Stipulated Loss Values and Termination Values, to
adjust the Special Purchase Price, to adjust the debt amortization schedule on
the Refinancing Date in accordance with Section 18 of the Original
Participation Agreement, and to amend Exhibits B-1, B-2, C and E of the Lease
so as to reflect such adjustments;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Refinancing of Original Certificate.
(a) Subject to the satisfaction or waiver of the conditions set
forth herein at or prior to 10:00 a.m. Central time on the date designated by
Lessee, on behalf of Owner Trustee, pursuant to Section 18 of the Original
Participation Agreement or at such other date and time agreed to by the parties
hereto (the "Closing Date"):
(i) Pass Through Trustee shall, in accordance with
Section 2.01 of the Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated the Closing
Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the
request of Lessee delivered pursuant to such Section 2.01, and deliver
such Pass Through Certificates to the Underwriters (as defined below)
as specified in such request against payment by the Underwriters of an
amount equal to the aggregate principal amount thereof;
(ii) Owner Trustee shall, in accordance with Section 2.01
of the Indenture, issue and deliver to Indenture Trustee Equipment
Notes dated the Closing Date and of the maturities, in the principal
amounts, bearing the interest rates and reflecting the other economic
terms specified in Exhibits A, A-1 and A-2 hereto in an aggregate
principal amount of $24,376,578.00 the "Refinancing Amount");
(iii) Indenture Trustee shall authenticate such Equipment
Notes pursuant to Section 2.02 of the Indenture, and deliver such
Equipment Notes to Pass Through Trustee as specified in Exhibit A-2
hereto against payment by Pass Through Trustee of an aggregate amount
equal to the Refinancing Amount;
(iv) Owner Trustee shall on the Closing Date pay to
Indenture Trustee, for the account of Owner Participant, an amount
equal to accrued interest and, subject
REFINANCING AGREEMENT [N604SW]
-3-
<PAGE> 6
to Lessee's obligations under Section 3.4 of the Original Lease, Break
Amount (as defined in the Original Indenture), if any, owing to the
Original Loan Participant on the Closing Date; and
(v) Indenture Trustee shall disburse to Original Loan
Participant the amount of principal, interest and Break Amount, if
any, owing to Original Loan Participant on the Closing Date with
respect to the Original Certificate in connection with the refinancing
of the Original Certificate in accordance with Sections 2.08 and 15.03
of the Original Indenture and Section 18 of the Original Participation
Agreement.
Owner Participant, by its execution and delivery hereof, requests and directs
Owner Trustee, in accordance with Section 5.02 of the Trust Agreement, to
execute and deliver this Agreement, the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture and to take all actions necessary or desirable to effect the
issuance of the Equipment Notes and the refinancing of the Original
Certificate.
(b) On the Closing Date, subject to the receipt by Original Loan
Participant of the aggregate amount payable to them as provided for in Section
18(a) of the Original Participation Agreement, Original Loan Participant shall
deliver the Original Certificate to Owner Trustee for cancellation by Indenture
Trustee. The Original Loan Participant hereby authorizes and directs Indenture
Trustee to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions contemplated by said
agreements and amendments to effect the issuance of the Equipment Notes and the
refinancing of the Original Certificate.
(c) In case Pass Through Trustee shall fail to make the payment
described in Section 1(a)(iii) hereof, or in case Owner Trustee shall for any
reason fail to issue and deliver to Indenture Trustee the Equipment Notes
pursuant to Section 1(a)(ii) hereof, (i) the written notice given by Lessee
pursuant to Section 18(a) of the Original Participation Agreement and Section
6.03(b) of the Original Indenture with respect to the refinancing contemplated
hereby shall be deemed to have never been given (except, however, as provided
in Section 6(b) hereof), (ii) Indenture Trustee, Owner Trustee, Owner
Participant and Lessee shall have no obligation to pay to Original Loan
Participant any amount in respect of the refinancing of the Original
Certificate pursuant hereto, (iii) none of the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture shall be deemed to have been delivered and (iv) the Original
Certificate shall remain outstanding and in full force and effect and shall
continue to be subject to the terms of the Original Indenture.
(d) The closing (the "Closing") of the transactions described in
this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
Houston, Texas, or such other place as the parties hereto may agree; the
parties hereby agree that the transactions contemplated hereby shall be deemed
to have occurred simultaneously and that no
REFINANCING AGREEMENT [N604SW]
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transaction contemplated hereby shall be deemed to have occurred except in
conjunction with the occurrence of all such other transactions.
(e) All payments pursuant to this Section 1 shall be made on the
Closing Date in immediately available funds to such accounts and at such banks
as specified in the Operative Agreements, or, if otherwise, as the parties
hereto shall designate in writing not less than one Business Day prior to the
Closing Date.
(f) This Agreement shall apply only to the refinancing of the
Original Certificate as described herein and not to the refinancing, redemption
or refunding of any Equipment Notes or any other Certificate (as defined in the
Indenture) issued under the Indenture.
SECTION 2. Adjustments to Exhibits to the Lease. The
parties hereto agree, by their execution and delivery hereof, that the
transactions contemplated hereby constitute a refinancing transaction as
contemplated by Section 18 of the Participation Agreement and that they will
take all actions contemplated thereby, including the revision of Exhibits B-1,
B-2, C and E of the Lease to reflect the adjustments contemplated thereby.
Subject to the consummation of such refinancing transaction as described
herein, such revised Exhibits B-1, B-2, C and E to the Lease shall be effective
as of the Closing Date.
SECTION 3. Conditions Precedent. The obligations of
each of the parties hereto to participate in the transactions contemplated by
this Agreement on the Closing Date are subject to the fulfillment, prior to or
on the Closing Date, of the following conditions precedent; provided, however,
that it shall not be a condition precedent to the obligations of any party
hereto that any document be produced or action taken that is to be produced or
taken by such party or any Person within such party's control; and provided,
further, that only the conditions set forth in clauses (a) and (v) of this
Section 3 shall be conditions precedent to the actions of Original Loan
Participant:
(a) Pass Through Trustee shall have received, concurrently with
the payment to Indenture Trustee by Pass Through Trustee of an amount equal to
the aggregate Original Issue Price thereof, the Equipment Notes as required by
Section 1(a)(iii), and Indenture Trustee shall have received any other amounts,
including Break Amount, if any, required to be paid in connection with the
refinancing of the Original Certificate on the Closing Date and the Indenture
Trustee shall have effected a wire transfer of all amounts payable to the
Original Loan Participant as provided herein.
(b) The Equipment Notes shall have been issued and authenticated
in accordance with the Indenture, and there shall have been transferred to
Indenture Trustee in immediately available funds the amounts referred to above
in Section 1(a)(iii)-(iv).
(c) Owner Trustee and Indenture Trustee shall have executed and
delivered the First Amendment to Trust Indenture and Security Agreement in
substantially the form of Exhibit B hereto (the "First Amendment to Trust
Indenture") which shall have been duly filed for recording with the FAA.
REFINANCING AGREEMENT [N604SW]
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(d) Lessee and Owner Trustee shall have executed and delivered an
amendment to the Original Lease in substantially the form of Exhibit C hereto
(the "First Amendment to Lease Agreement") which shall have been duly filed for
recording with the FAA.
(e) Each of Lessee, Owner Participant, Owner Trustee, Pass Through
Trustee and Indenture Trustee shall have executed and delivered an amendment to
the Original Participation Agreement in substantially the form of Exhibit D
hereto (the "First Amendment to Participation Agreement").
(f) (i) Indenture Trustee shall have received on or prior to the
Delivery Date (A) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting Owner Trustee as debtor and Indenture Trustee as secured
party, as to the Indenture Estate, evidencing its filing with the office of the
Secretary of State of the State of Connecticut and (B) a copy (or other
documentation satisfactory to it) of the acknowledgment copy of a properly
completed Uniform Commercial Code financing statement, reflecting Lessee as
debtor and Owner Trustee as secured party (and reflecting Indenture Trustee as
assignee), as to the Lease and the Aircraft evidencing its filing with the
office of the Secretary of State of the State of Texas, (ii) no financing
statement or similar filing described above in clause (i) shall have been
terminated or amended subsequent to the date of its filing and (iii) Indenture
Trustee shall have received, on or prior to the Delivery Date, the only
chattel-paper original of the Original Lease and, on or prior to the Closing
Date, the only chattel-paper original of the First Amendment to Lease Agreement
and shall have (and shall have retained without interruption subsequent to its
receipt thereof) possession of each thereof on the Closing Date.
(g) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received the following documents (each of
which shall be reasonably satisfactory in form and substance to each of them):
(i) revised Exhibits B-1, B-2 and C to the Lease, as
provided for in the First Amendment to Lease Agreement; and
(ii) revised Schedule I to the Participation Agreement, as
provided for in the First Amendment to Participation Agreement.
(h) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the representations and warranties contained herein
of Lessee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate
solely to an earlier date (in which case such representations and
warranties shall be certified to have been correct on and as of such
earlier date);
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(ii) no event has occurred and is continuing which constitutes
a Lease Event of Default or a Lease Default; and
(iii) no Event of Loss (or event which with the passage of
time or the giving of notice, or both, would constitute an Event of
Loss) has occurred with respect to the Airframe or any Engine.
(i) Each of Indenture Trustee, Owner Participant, Pass Through
Trustee and Lessee shall have received a certificate signed by a Responsible
Officer (as defined in the Indenture) of Owner Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of Owner
Trustee in its individual and trust capacities are correct as though made on
and as of the Closing Date, except to the extent that such representations and
warranties relate solely to an earlier date (in which case such representations
and warranties shall be certified to have been correct on and as of such
earlier date).
(j) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Lessee shall have received a certificate signed by a Responsible Company
Officer (as defined in the Indenture) of Owner Participant, dated the Closing
Date, certifying that the representations and warranties contained herein of
Owner Participant are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be
certified to have been correct on and as of such earlier date).
(k) Each of Pass Through Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by a Responsible Officer
(as defined in the Indenture) of Indenture Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of
Indenture Trustee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties are correct
on and as of such earlier date).
(l) Each of Indenture Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by an authorized officer of
Pass Through Trustee, dated the Closing Date, certifying that the
representations and warranties contained herein of Pass Through Trustee are
correct as though made on and as of the Closing Date, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case such representations and warranties are correct on and as of such earlier
date).
(m) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received the following:
(i) an incumbency certificate of Lessee as to the person
or persons authorized to execute and deliver this Agreement, the First
Amendment to Participation Agreement, the First Amendment to Lease
Agreement, and any other
REFINANCING AGREEMENT [N604SW]
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documents to be executed on behalf of Lessee in connection with the
transactions contemplated hereby and specimen signatures of such
person or persons;
(ii) a copy of the resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
transactions contemplated hereby and the execution and delivery of
each of the documents required to be executed and delivered on behalf
of Lessee in connection with the transactions contemplated hereby; and
(iii) such other documents and evidence with respect to the
other parties hereto as it may reasonably request in order to
establish the due consummation of the transactions contemplated by
this Agreement, any other Operative Agreements (as defined in the
Lease), the Underwriting Agreement (as defined below) and the Pass
Through Trust Agreements and the taking of all necessary corporate
action in connection therewith and compliance with the conditions
herein set forth.
(n) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the Aircraft has been duly certificated by the FAA as
to type and airworthiness in accordance with the terms of the Original
Lease;
(ii) Owner Trustee's FAA Bill of Sale, the Original Lease,
the Original Trust Agreement and the Original Indenture have been duly
recorded with the FAA pursuant to the Act (as defined in the Lease);
(iii) the Aircraft has been registered with the FAA in the
name of Owner Trustee and Lessee has authority to operate the
Aircraft; and
(iv) the First Amendment to Lease and the First Amendment
to Trust Indenture have been duly filed for recording with the FAA.
(o) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received opinions addressed to them from
Deborah Ackerman, Associate General Counsel of Lessee, substantially to the
same effect as the opinions delivered by her, on the Delivery Date pursuant to
Section 4(a)(xi) of the Original Participation Agreement (but reflecting the
documents delivered on the Closing Date).
(p) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Shipman & Goodwin, special counsel for Owner Trustee,
substantially to the same effect as the opinion delivered by it on the Delivery
Date pursuant to Section 4(a)(xiii) of the Original Participation Agreement
(but reflecting the documents delivered on the Closing Date).
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(q) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Potter Anderson & Corroon, special counsel for Pass Through
Trustee and Indenture Trustee, substantially to the same effect (but with
respect also to Pass Through Trustee, the Pass Through Trust Agreement and the
other documents delivered on the Closing Date) as the opinion delivered by it
on the Delivery Date pursuant to Section 4(a)(xvi) of the Original
Participation Agreement.
(r) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received opinions addressed to
them from Chadbourne & Parke LLP, special counsel for Owner Participant, and
in-house or other corporate counsel to Owner Participant, substantially to the
same effect as the opinions delivered on the Delivery Date pursuant to Section
4(a)(xiv) of the Original Participation Agreement (but reflecting the documents
delivered on the Closing Date).
(s) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking into account the First
Amendment to Trust Indenture and the First Amendment to Lease Agreement, (i) as
the opinion delivered by it pursuant to Section 4(a)(xv) of the Original
Participation Agreement on the Delivery Date and (ii) as the opinion delivered
to them subsequent to the Delivery Date pursuant to the final paragraph of
Section 4(a) of the Original Participation Agreement.
(t) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received an independent insurance broker's
report, and certificates of insurance, dated the Closing Date, substantially in
the form of the report and certificates delivered pursuant to Section 4(a)(xxi)
of the Original Participation Agreement on the Delivery Date, as to the due
compliance with the terms of Section 11 of the Lease relating to the insurance
with respect to the Aircraft and with any other agreements of Lessee with
respect to such insurance, and references in such report and certificates to
(x) the "Indenture", the "Participation Agreement", and the "Lease" shall be to
such documents as amended by the First Amendment to Trust Indenture, the First
Amendment to Participation Agreement and the First Amendment to Lease Agreement
and (y) "Additional Insureds" shall be to such term as utilized in the Lease.
(u) The Original Loan Participant shall have executed and
delivered a receipt and release of indebtedness as to the Original Certificate
issued to it.
(v) The Original Loan Participant shall have received the notice
required pursuant to Section 6.03(b) of the Original Indenture in respect of
the Closing Date.
(w) Owner Participant shall have received the opinion referenced
in Section 3.7.2 of the Original Lease.
REFINANCING AGREEMENT [N604SW]
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The opinions described above in clauses (o)-(s) and (w) shall be dated the
Closing Date and references therein corresponding to references in prior
opinions to the "Indenture", the "Participation Agreement", or the "Lease"
shall be to such documents as amended by the First Amendment to Trust
Indenture, the First Amendment to Participation Agreement, and the First
Amendment to Lease Agreement, respectively.
Promptly upon the recording with the FAA of the First Amendment to
Trust Indenture and the First Amendment to Lease Agreement, Lessee will cause
Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to
deliver to the parties hereto an opinion as to the due recording thereof and
the lack of filing of any intervening documents with respect to the Aircraft
(other than the Original Indenture and the Original Lease).
Each of the parties hereto agrees to instruct its counsel to prepare
and deliver the respective opinions described above in clauses (o)-(s) and to
address each such opinion to the Underwriters in addition to the respective
addressees set forth above (and, to the extent such opinions do not restate or
confirm the opinions rendered on the Delivery Date, such counsel shall
authorize the Underwriters to rely on opinions rendered on the Delivery Date).
SECTION 4. Representations and Warranties.
(a) Lessee's Representations and Warranties. Lessee represents
and warrants to Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant that:
(i) it is a corporation duly organized and validly
existing in good standing pursuant to the laws of the State of Texas,
is a "citizen of the United States" (as defined in Section
40102(a)(15)(C) of Title 49, U.S.C.) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49, U.S.C. for aircraft capable of carrying 10
or more individuals or 6,000 pounds or more of cargo, has the
corporate power and authority to carry on its business as now
conducted, to own or hold under lease its properties, to hold under
lease the Aircraft and to enter into and perform its obligations under
this Agreement, the other Operative Agreements to which it is or is to
be a party (the "Relevant Operative Documents") and the Pass Through
Trust Agreements (together with this Agreement and the Relevant
Operative Documents, collectively, the "Lessee Documents"), is duly
qualified to do business as a foreign corporation in good standing in
each state in which the nature of its business makes such
qualification necessary or the failure to be so qualified or so to be
in good standing would have a material adverse effect on its
businesses or operations or would impair its ability to perform its
obligations under the Lessee Documents, and has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Dallas, Texas;
(ii) the execution, delivery and performance of the Lessee
Documents (A) have been duly authorized by all necessary corporate
action on the part of
REFINANCING AGREEMENT [N604SW]
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Lessee, (B) do not require any shareholder approval, or approval or
consent of any trustee or holder of any indebtedness or obligations of
Lessee, or of any lessor under any lease to Lessee, except such as
have been duly obtained and are in full force and effect, and (C) do
not and will not (1) contravene any law, judgment, governmental rule,
regulation or order binding on Lessee or any of its subsidiaries or
the articles of incorporation or by-laws of Lessee (each as amended to
date) or (2) contravene or result in any breach of the provisions of,
or constitute a default under, or result in the creation of any Lien
(other than as permitted under the Lease) upon any property of Lessee
under, its articles of incorporation or by-laws, or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
lease, note or bond purchase agreement, license, bank loan or credit
agreement or other agreement to which Lessee is a party or by which it
or any of its properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the
Lessee Documents, nor the performance by Lessee of its obligations
thereunder, requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency except for (t) the
orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of
the Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained and are in full
force and effect, (u) the registration of the issuance and sale of the
Pass Through Certificates to be issued pursuant to the provisions of
the Pass Through Trust Agreements under the Securities Act and under
the securities laws of any state in which the Pass Through
Certificates may be offered for sale if the laws of such state require
such action, which registrations under the Securities Act have been
duly accomplished, (v) the qualification of each Pass Through Trust
Agreement under the Trust Indenture Act of 1939, as amended, which
qualification has been duly obtained, (w) the registrations and
filings referred to in Section 4(a)(v), (x) the recordings with the
FAA described in the opinion referred to in Section 3(s), (y) filing
the Underwriting Agreement and certain other documents with the SEC
pursuant to a Current Report on Form 8-K, and (z) routine periodic
filings required under the Act;
(iv) each of the Lessee Documents constitutes, or will on
the Closing Date constitute, legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with its terms;
(v) no action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), that has not been previously taken or shall not have
been taken on or prior to the Closing Date is necessary or advisable
in order to establish and perfect Owner Trustee's interest in the
Aircraft as against Lessee and any third parties (other than the
filing of continuation statements required to be filed at periodic
intervals under Article 9 of the Uniform
REFINANCING AGREEMENT [N604SW]
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Commercial Code as in effect in the States of Texas and Connecticut in
respect of financing statements previously filed under such Article 9)
or to perfect the security interest created under the Indenture in
favor of Indenture Trustee in Owner Trustee's interest in the Aircraft
and other assets of the Trust Estate in any applicable jurisdiction in
the United States (other than the filing of continuation statements
required to be filed at periodic intervals under Article 9 of the
Uniform Commercial Code as in effect in the States of Texas and
Connecticut in respect of financing statements previously filed under
such Article 9);
(vi) Owner Trustee, as lessor under the Lease, and
Indenture Trustee, as assignee thereof, are entitled, after giving
effect to the refinancing transaction contemplated hereby, to the
protection of Section 1110 of the United States Bankruptcy Code in
connection with their right to take possession of the Airframe and
Engines in the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor;
(vii) there has not occurred any event which constitutes a
Lease Default or a Lease Event of Default which is presently
continuing and there has not occurred any event which constitutes or
would with the passage of time or the giving of notice, or both,
constitute an Event of Loss;
(viii) there are no pending or, to Lessee's knowledge,
threatened actions or proceedings before any court or administrative
agency which (A) involve the Aircraft or (B) having regard to both the
size of the claim and the possibility of an adverse determination, are
likely to have a material adverse effect on the consolidated financial
condition of Lessee and its subsidiaries or the ability of Lessee to
perform its obligations under any Lessee Document;
(ix) Lessee is not in default in the performance of any
term or condition of the Purchase Agreement or Purchase Agreement
Assignment which materially adversely impairs the transactions
contemplated hereby;
(x) no governmental approval in the United States of any
kind is required of any of the Participants, Pass Through Trustee,
Owner Trustee or Indenture Trustee for their respective execution of
or performance under any of the Pass Through Trust Agreements, any
Relevant Operative Document or any agreement contemplated hereby or
thereby to which any thereof is or is to be a party solely by reason
of any fact or circumstance peculiar to: (A) Lessee (as contrasted
with other airlines), (B) the nature of the Aircraft, or (C) Lessee's
existing or proposed operation or use of the Aircraft;
(xi) the Aircraft has been duly certificated by the FAA as
to type and airworthiness and such certification remains in full force
and effect;
REFINANCING AGREEMENT [N604SW]
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(xii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(xiii) neither it nor any Person authorized to act on its
behalf has directly or indirectly offered the Pass Through
Certificates or the Equipment Notes for sale to anyone other than in a
manner in compliance with the requirements of the Securities Act, and
by the rules and regulations thereunder; and
(xiv) Lessee has never sponsored, maintained or made
contributions to any defined benefit plan subject to the provisions of
Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) Representations and Warranties of Shawmut Bank and Owner
Trustee. Shawmut Bank Connecticut, National Association, in its individual
capacity ("SBC") and as Owner Trustee represents and warrants to each of
Indenture Trustee, Pass Through Trustee, Owner Participant and Lessee that:
(i) SBC is a national banking association duly organized
and validly existing in good standing under the laws of the United
States and has full corporate power and authority to carry on its
business as now conducted and to enter into and perform its
obligations under this Agreement and under the Trust Agreement and the
Participation Agreement (collectively, the "SBC Documents"); assuming
the due execution and delivery, pursuant to due authorization, by
Owner Participant of the Trust Agreement and the enforceability of the
Trust Agreement against Owner Participant, Owner Trustee has full
power and authority to enter into and perform its obligations under
this Agreement and each of the other Relevant Operative Documents to
which it is or is to be a party (the "OT Documents");
(ii) each of SBC and Owner Trustee has duly authorized,
executed and delivered each of the SBC Documents and the OT Documents,
respectively; assuming the due execution and delivery, pursuant to due
authorization, by Owner Participant of the Trust Agreement and that it
is enforceable against Owner Participant, the Trust Agreement
constitutes a legal, valid and binding obligation of SBC and Owner
Trustee, enforceable against SBC or Owner Trustee, as the case may be,
in accordance with its terms;
(iii) assuming the due execution and delivery, pursuant to
due authorization, by each of the parties thereto (other than SBC and
Owner Trustee) of each of the SBC Documents and the OT Documents and
that each of the SBC Documents and the OT Documents is the legal,
valid and binding obligation of each of the parties thereto (other
than SBC and Owner Trustee), each of the SBC Documents and the OT
Documents constitutes, or will on the Closing Date constitute, legal,
valid and binding obligations of SBC or Owner Trustee, as the case may
be, enforceable against it in accordance with its terms;
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(iv) neither the execution and delivery by SBC or Owner
Trustee, as the case may be, of any of the SBC Documents or OT
Documents, respectively, nor the consummation by SBC or Owner Trustee,
as the case may be, of any of the transactions contemplated hereby or
thereby, nor the compliance by SBC, or Owner Trustee, as the case may
be, with any of the terms and provisions hereof and thereof, (A)
requires or will require any approval of its stockholders, or approval
or consent of any trustees or holders of any indebtedness or
obligations of SBC, or (B) violates or will violate the charter or
by-laws of SBC, or contravenes or will contravene any provision of, or
constitutes or will constitute a default under, or results or will
result in any breach of, or results or will result in the creation of
any Lien (other than as permitted under the Lease) upon its property
under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sale contract, bank loan or credit agreement, license or
other agreement or instrument to which SBC is a party or by which SBC
is bound, or contravenes or will contravene any law, governmental rule
or regulation of the United States of America or the State of
Connecticut governing the banking or trust powers of SBC, or any
judgment or order applicable to or binding on it;
(v) there are no pending or, to the best knowledge of
SBC, threatened actions or proceedings against SBC or Owner Trustee
before any court or administrative agency which, if determined
adversely to it, would materially adversely affect the ability of SBC
or Owner Trustee, as the case may be, to perform its obligations under
any of the SBC Documents or the OT Documents;
(vi) both the principal place of business of Owner
Trustee, and the place where its records concerning the Aircraft and
all its interest in, to and under all documents relating to the Trust
Estate, are located at 777 Main Street, Hartford, Connecticut 06115
Attention: Corporate Trust Administration;
(vii) no consent, approval, order or authorization of,
giving of notice to, or registration or filing with (including the
filing of any financing statement under Article 9 of the Uniform
Commercial Code as in effect in the State of Connecticut), or taking
of any other action in respect of, any Connecticut state or local
governmental authority or agency or any United States federal
governmental authority or agency regulating the banking or trust
powers of SBC is required for the execution and delivery of, or the
carrying out by, SBC or Owner Trustee, as the case may be, of any of
the transactions contemplated by any of the SBC Documents or the OT
Documents, respectively, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken (and other than the filing of continuation
statements required to be filed at periodic intervals under Article 9
of the Uniform Commercial Code as in effect in the State of
Connecticut in respect of financing statements previously filed);
(viii) Owner Trustee's right, title and interest in and to
the Aircraft are free of any Lessor Liens (as defined in the Lease)
attributable to SBC;
(ix) SBC is a "citizen of the United States" as defined
in the Act; and
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<PAGE> 17
(x) neither SBC nor Owner Trustee has directly or
indirectly offered any Equipment Notes or any interest in or to the
Trust Estate, the Trust Agreement or any similar interest for sale to,
or solicited any offer to acquire any of the same from, any Person
other than Indenture Trustee, Pass Through Trustee, Original Loan
Participant and Owner Participant; and Owner Trustee has not
authorized anyone to act on its behalf (it being understood that, for
purposes of this paragraph, in arranging and proposing the refinancing
contemplated hereby and agreed to herein by Owner Trustee, neither
Lessee nor any of the Underwriters has acted as agent of Owner
Trustee) to offer directly or indirectly any Equipment Notes or any
interest in and to the Trust Estate, the Trust Agreement or any
similar interest for sale to, or to solicit any offer to acquire any
of the same from, any Person.
(c) Representations and Warranties of Owner Participant. Owner
Participant represents and warrants to each of Indenture Trustee, Owner
Trustee, Pass Through Trustee and Lessee that:
(i) Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of the State of
Alabama and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties
and to enter into and perform its obligations under this Agreement and
the other Relevant Operative Documents to which it is or is to be a
party (the "OP Documents"), and its execution and delivery of each of
the OP Documents and the performance by it of its obligations
thereunder have been duly authorized by all necessary corporate action
on the part of Owner Participant and do not require any approval not
already obtained of stockholders of Owner Participant or any approval
or consent not already obtained of any trustee or holders of any
indebtedness or obligations of Owner Participant and each of the OP
Documents has been, or will on the Closing Date have been, duly
executed and delivered by it and (assuming that each of the OP
Documents is the legal, valid and binding obligation of each of the
parties thereto (other than Owner Participant)) each of the OP
Documents is the legal, valid and binding obligation of Owner
Participant enforceable against it in accordance with its terms;
(ii) the execution and delivery by Owner Participant of
the OP Documents, the consummation of the transactions contemplated
thereby by Owner Participant and compliance by it with the terms and
provisions of the OP Documents do not and will not contravene any
United States federal or state law, judgment, governmental rule,
regulation or any order of any court or governmental authority or
agency applicable to or binding on it (it being understood that no
representation or warranty is made with respect to (A) laws, rules or
regulations relating to aviation or to the nature of the equipment
owned by Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of Owner Participant under
applicable aviation law or (B) ERISA or Section 4975 of the Code other
than the representation set forth in paragraph (v) of this Section
4(c)) or contravene, or result in any breach of, or constitute any
default under, its corporate charter or by-laws or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
REFINANCING AGREEMENT [N604SW]
-15-
<PAGE> 18
bank loan or credit agreement or any agreement or instrument to which
it is a party or by which it or any of its property may be bound or
affected;
(iii) the Trust Estate is free of Lessor Liens attributable
to Owner Participant;
(iv) it is a "citizen of the United States" as defined in
the Act;
(v) no part of the funds used by it to make its
investment pursuant to Section 1 of the Original Participation
Agreement constituted "plan assets" of any "employee benefit plan"
within the meaning of ERISA, or of any "plan" within the meaning of
Section 4975(e)(1) of the Code, as interpreted by the Department of
Labor; and
(vi) neither Owner Participant nor anyone authorized by it
to act on its behalf (it being understood that, for purposes of this
paragraph, in arranging and proposing the refinancing contemplated
hereby and agreed to herein by Owner Participant, neither Lessee nor
any of the Underwriters has acted as agent of Owner Participant) has
directly or indirectly offered any Equipment Notes or any interest in
or any similar interest for sale to, or solicited any offer to acquire
any of the same from, any Person.
(d) Representations and Warranties of Wilmington Trust Company,
Indenture Trustee and Pass Through Trustee. Wilmington Trust Company, in its
individual capacity ("WTC") and as Indenture Trustee and Pass Through Trustee,
represents and warrants, to each of Owner Trustee, Owner Participant and Lessee
that:
(i) WTC is a "citizen of the United States" as defined in
the Act, that it will notify promptly all parties to this Agreement if
in its reasonable opinion its status as a "citizen of the United
States" is likely to change and that it will resign as Indenture
Trustee as provided in Section 9.07 of the Indenture if it should
cease to be a "citizen of the United States";
(ii) WTC is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into and
perform its obligations under the Pass Through Trust Agreements and
the Relevant Operative Documents to which WTC is or is to be a party
(the "WTC Documents") and, as Indenture Trustee and Pass Through
Trustee, to authenticate the Equipment Notes and the Pass Through
Certificates to be delivered on the Closing Date;
(iii) the execution and delivery by WTC of the WTC
Documents, by Indenture Trustee of the Relevant Operative Documents to
which it is or is to be a party (the "IT Documents") and by Pass
Through Trustee of the Relevant Operative Documents to which it is or
is to be a party (the "PTT Documents") and the authentication by
Indenture Trustee of the Equipment Notes and by Pass Through
REFINANCING AGREEMENT [N604SW]
-16-
<PAGE> 19
Trustee of the Pass Through Certificates to be delivered on the
Closing Date have been duly authorized by all necessary corporate
action on the part of WTC, Indenture Trustee and Pass Through Trustee,
respectively, and neither the execution (or, in the case of such
Equipment Notes and Pass Through Certificate, their authentication)
and delivery thereof nor its performance of any of the terms and
provisions thereof will violate any federal or Delaware law or
regulation relating to the banking or trust powers of WTC or any
judgment or order binding on it or contravene or result in any breach
of, or constitute any default under the charter or by-laws of WTC or
the provisions of any indenture, mortgage, contract or other agreement
to which any of WTC, Indenture Trustee or Pass Through Trustee is a
party or by which it or its properties may be bound or affected;
(iv) each of the WTC Documents, the IT Documents and the
PTT Documents has been, or will on the Closing Date have been, duly
executed (or, in the case of the Equipment Notes and the Pass Through
Certificates, authenticated) and delivered by WTC, Indenture Trustee
and Pass Through Trustee, respectively;
(v) assuming that each of the WTC Documents, the IT
Documents and the PTT Documents is the legal, valid and binding
obligation of each of the parties thereto (other than WTC, Indenture
Trustee and Pass Through Trustee, respectively), each of the WTC
Documents, the IT Documents and the PTT Documents is, or will on the
Closing Date be, the legal, valid and binding obligation of WTC,
Indenture Trustee or Pass Through Trustee, respectively, enforceable
against it in accordance with its terms; provided, however, that the
representations made in this subparagraph (v) are made only by WTC as
to the WTC Documents, by Indenture Trustee as to the IT Documents and
by Pass Through Trustee as to the PTT Documents, respectively;
(vi) neither the execution and delivery by WTC, Indenture
Trustee or Pass Through Trustee of any of the WTC Documents, the IT
Documents or the PTT Documents, respectively, nor the consummation by
WTC, Indenture Trustee or Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or
approval of, the giving of notice to, or the registration with, or the
taking of any other action with respect to, any governmental authority
or agency pursuant to any law of the State of Delaware or the United
States regulating WTC's banking, trust or fiduciary powers;
(vii) there are no pending or threatened actions or
proceedings against any of WTC, Indenture Trustee or Pass Through
Trustee before any court or administrative agency which individually
or in the aggregate, if determined adversely to it, would materially
adversely affect the ability of WTC, Indenture Trustee or Pass Through
Trustee to perform its obligations under any of the WTC Documents, the
IT Documents or the PTT Documents;
(viii) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreement of the Pass Through
Certificates contemplated hereby,
REFINANCING AGREEMENT [N604SW]
-17-
<PAGE> 20
neither WTC nor Pass Through Trustee has directly or indirectly
offered any Equipment Note for sale to any Person, or solicited any
offer to acquire any Equipment Notes from any Person other than Owner
Trustee and Owner Participant, and neither WTC nor Pass Through
Trustee has authorized anyone to act on its behalf to offer directly
or indirectly any Equipment Note for sale to any Person, or to solicit
any offer to acquire any Equipment Note from any Person other than
Owner Trustee and Owner Participant, and Pass Through Trustee is not
in default under any Pass Through Trust Agreement; and
(ix) Pass Through Trustee is not directly or indirectly
controlling, controlled by or under common control with any of Owner
Participant, Owner Trustee, any Underwriter or Lessee.
SECTION 5. Notices. Unless otherwise specifically
provided herein, all notices required or permitted by the terms of this
Agreement shall be given in accordance with the provisions of Section 13 of the
Participation Agreement.
SECTION 6. Expenses.
(a) As more fully specified in Section 16 of the Participation
Agreement and except as provided in paragraph (b) below, all of the Transaction
Costs in connection with the preparation, execution and delivery of this
Agreement and the transactions contemplated by this Agreement shall be paid
promptly by Owner Participant, either directly or through Owner Trustee.
(b) In the event that the transactions contemplated by this
Agreement and the agreements referred to herein are not consummated, Lessee
shall, except as provided in the Underwriting Agreement with regard to fees and
expenses of the Underwriters, bear and pay all Transaction Costs referred to in
paragraph (a) above on an after-tax basis. In addition, in the event that the
transactions contemplated by this Agreement and the agreements referred to
herein are not consummated on the date specified in the notice referred to in
Section 3(v) hereof, Lessee shall indemnify the Original Loan Participant for
any associated break funding costs incurred thereby.
SECTION 7. Miscellaneous. This Agreement may be executed in
any number of counterparts (and each of the parties hereto shall not be
required to execute the same counterpart). Each counterpart of this Agreement
including a signature page executed by each of the parties hereto shall be an
original counterpart of this Agreement, but all of such counterparts together
shall constitute one instrument. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, Owner Trustee and Indenture Trustee. The index preceding
this Agreement and the headings of the various Sections of this Agreement are
for convenience of reference only and shall not modify, define, expand
REFINANCING AGREEMENT [N604SW]
-18-
<PAGE> 21
or limit any of the terms or provisions hereof. The terms of this Agreement
shall be binding upon, and shall inure to the extent provided herein to the
benefit only of the following parties: Lessee and, subject to the terms of the
Participation Agreement, its successors and permitted assigns, Original Loan
Participant, Indenture Trustee and its successors as Indenture Trustee (and any
additional trustee appointed) under the Indenture, Owner Trustee and its
successors as Owner Trustee under the Trust Agreement, Pass Through Trustee and
its successors as Pass Through Trustee under each Pass Through Trust Agreement,
and Owner Participant and, subject to the provisions of the Participation
Agreement, its successors and permitted assigns. No purchaser or holder of any
of the Equipment Notes shall be deemed to be a successor or assign of Original
Loan Participant or to have any rights or benefits hereunder. Every
representation or warranty contained herein as to the enforceability of any
document shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity. THIS AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
REFINANCING AGREEMENT [N604SW]
-19-
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By: /s/ JOHN D. OWEN
Treasurer
AMSOUTH LEASING CORPORATION
Owner Particpant
By: /s/ CHARLES F. KISER
President
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
Original Loan Participant
By: /s/ MARK DENTON
Title: Senior Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
REFINANCING AGREEMENT [N604SW]
-20-
<PAGE> 23
Exhibit A to
Refinancing Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N604SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A3 July 1, 2013 $14,678,997.00 7.22% October 4, 2007 Installment
1995-A4 January 1, 2018 $ 9,697,581.00 7.64% January 4, 2016 Installment
</TABLE>
REFINANCING AGREEMENT [604SW]
A-1
<PAGE> 24
Exhibit A-1 to
Refinancing Agreement
Installment Payment Dates and Installment Payment Percentages and Amounts
REFINANCING AGREEMENT [604SW]
A-1-1
<PAGE> 25
Exhibit A-2 to
Refinancing Agreement
Issuance of SWA 1995 Trust N604SW Certificates
The SWA 1995 Trust N604SW Certificates issued hereunder shall be
issued to and shall be payable to Pass Through Trustee under the 1995-A3 Pass
Through Trust Agreement and the 1995-A4 Pass Through Trust Agreement with
respect to the grantor trusts created thereby, each such trust as described
below consisting of the Certificates issued pursuant hereto and the other
Certificates contained therein:
1995-A3 Trust:
7.22% Certificate due July 1, 2013
1995-A4 Trust:
7.64% Certificate due January 1, 2018
REFINANCING AGREEMENT [604SW]
A-2-1
<PAGE> 26
Exhibit B to
Refinancing Agreement
Form of
First Amendment to Trust Indenture
[SEE DOC. 1.03]
REFINANCING AGREEMENT [N604SW]
B-1
<PAGE> 27
Exhibit C to
Refinancing Agreement
Form of
First Amendment to Sale and Lease Agreement
[SEE DOC. 1.02]
REFINANCING AGREEMENT [N604SW]
C-1
<PAGE> 28
Exhibit D to
Refinancing Agreement
Form of
First Amendment to Participation Agreement
[SEE DOC. 1.01]
REFINANCING AGREEMENT [N604SW]
D-1
<PAGE> 1
EXHIBIT 4.55
REFINANCING AGREEMENT
Dated as of October 1, 1995
among
SOUTHWEST AIRLINES CO., as Lessee
BOT FINANCIAL & LEASING CORPORATION B-4,
as Owner Participant
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Original Loan Participant
WILMINGTON TRUST COMPANY, in its individual capacity only
as expressly provided herein and as Indenture Trustee
and Pass Through Trustee
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
in its individual capacity only as expressly provided herein
and otherwise solely as Owner Trustee
One Boeing 737-3H4 Aircraft
(Southwest Airlines 1995 Trust N605SW)
<PAGE> 2
INDEX TO REFINANCING AGREEMENT
(Southwest Airlines 1995 Trust N605SW)
Section 1. Refinancing of Original Certificate
Section 2. Adjustments to Exhibits to the Lease
Section 3. Conditions Precedent
Section 4. Representations and Warranties
Section 5. Notices
Section 6. Expenses
Section 7. Miscellaneous
EXHIBIT A Maturity Dates, Principal Amounts and
Interest Rates, Etc. of Series SWA 1995
Trust N605SW Certificates
EXHIBIT A-1 Installment Payment Dates and Installment
Payment Percentages and Amounts
EXHIBIT A-2 Issuance of SWA 1995 Trust N605SW Certificates
EXHIBIT B Form of First Amendment to Trust Indenture
EXHIBIT C Form of First Amendment to Sale and Lease
Agreement
EXHIBIT D Form of First Amendment to Participation
Agreement
<PAGE> 3
REFINANCING AGREEMENT
This REFINANCING AGREEMENT dated as of October 1, 1995, among (i)
SOUTHWEST AIRLINES CO., a Texas corporation ("Lessee"), (ii) BOT FINANCIAL &
LEASING CORPORATION B-4, a Massachusetts corporation ("Owner Participant"),
(iii) SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity except as otherwise expressly
provided herein, but solely as Owner Trustee ("Owner Trustee"), under that
certain Trust Agreement establishing the Southwest Airlines 1995 Trust N605SW
and dated as of August 1, 1995, between Owner Participant and Owner Trustee,
(iv) WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity except as otherwise provided herein, but solely as trustee
under the Pass Through Trust Agreement, dated as of February 1, 1993 (the
"Basic Agreement"), between Lessee and Wilmington Trust Company, as
supplemented by Trust Supplements Nos. 1995-A3 and 1995-A4 thereto, each dated
as of October 1, 1995, creating 1995-A3 Pass Through Trust and 1995-A4 Pass
Through Trust, respectively (such Basic Agreement as so supplemented, being the
"1995-A3 Pass Through Trust Agreement" and the "1995-A4 Pass Through Trust
Agreement," respectively, each of the 1995-A3 Pass Through Trust Agreement and
the 1995-A4 Pass Through Trust Agreement being a "Pass Through Trust
Agreement", and Wilmington Trust Company, in its capacity as trustee under each
Pass Through Trust Agreement, being the "Pass Through Trustee"), (v) WILMINGTON
TRUST COMPANY, a Delaware banking corporation, not in its individual capacity
except as otherwise provided herein, but solely as indenture trustee
("Indenture Trustee") under the related Trust Indenture and Security Agreement
dated as of August 1, 1995, as supplemented, between Indenture Trustee and
Owner Trustee and (vi) TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association ("Original Loan Participant"),
W I T N E S S E T H:
WHEREAS, Lessee, Owner Participant, Owner Trustee, Original Loan
Participant and Indenture Trustee entered into a Participation Agreement, dated
as of August 1, 1995 (the "Original Participation Agreement"; all capitalized
terms used herein without definition shall have the meanings set forth in or by
reference in the Original Participation Agreement; the Original Participation
Agreement as amended by the First Amendment to Participation Agreement (as
defined below) being herein called the "Participation Agreement"), providing
for the sale and lease of one Boeing Model 737-3H4 aircraft, bearing U.S.
registration number N605SW;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Participant entered into a Trust Agreement
establishing the Southwest Airlines 1995 Trust N605SW and dated as of August 1,
1995 (the "Trust Agreement") with Owner Trustee in its individual capacity,
pursuant to which Trust Agreement the Owner Trustee agreed, among other things,
to hold the Trust Estate defined in Section 1.01 of such Trust Agreement for
the benefit of Owner Participant thereunder;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Indenture Trustee entered into a
Trust Indenture and Security
REFINANCING AGREEMENT [N605SW]
-1-
<PAGE> 4
Agreement relating to the Aircraft, dated as of August 1, 1995 (such Trust
Indenture and Security Agreement as supplemented by Trust Agreement and Trust
Indenture and Security Agreement Supplement, dated August 25, 1995 relating to
the Aircraft being herein called the "Original Indenture"; the Original
Indenture as amended by the First Amendment to Trust Indenture (as defined
below) being herein called the "Indenture"), for the benefit of Original Loan
Participant (and, upon the issuance of the Equipment Notes (as defined below),
the Holders of the Equipment Notes issued thereunder), pursuant to which
Original Indenture, among other things, a certificate substantially in the form
set forth in Exhibit A thereto (the "Original Certificate") was issued to
Original Loan Participant as evidence of the loan then being made by Original
Loan Participant to Owner Trustee, the proceeds of which were applied by Owner
Trustee to the payment of Lessor's Cost for the Aircraft;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Lessee entered into a Sale and Lease
Agreement, dated as of August 1, 1995 relating to the Aircraft (such Sale and
Lease Agreement as supplemented by Sale and Lease Agreement Supplement No. One
dated August 25, 1995 relating to the Aircraft being herein called the
"Original Lease"; and the Original Lease as amended by the First Amendment to
Lease Agreement (as defined below) being herein called the "Lease"), relating
to the Aircraft whereby, subject to the terms and conditions set forth in the
Original Lease, Owner Trustee agreed to buy from and lease to Lessee, and
Lessee agreed to sell to and lease from Owner Trustee, the Aircraft on the
Delivery Date;
WHEREAS, the parties hereto wish to effect a refinancing of the
Original Certificate as permitted by Section 18 of the Original Participation
Agreement as part of a refinancing transaction;
WHEREAS, Owner Trustee has agreed, in connection with the refinancing
of the Original Certificate, to issue Equipment Notes substantially in the
forms set forth in Exhibits A-1 and A-2 to the Indenture (for the purposes
hereof, "Equipment Notes" shall have the meaning set forth for the term "Series
SWA 1995 Trust N605SW Certificates" in the Indenture) to the two separate
grantor trusts created on the Closing Date (as defined below) by the Pass
Through Trust Agreements, and Pass Through Trustee will thereafter issue the
Pass Through Certificates substantially in the form of Exhibit A to each Pass
Through Trust Agreement (the "Pass Through Certificates");
WHEREAS, to facilitate Owner Trustee's sale of the Equipment Notes to
the Pass Through Trustee and the purchase of such Equipment Notes by Pass
Through Trustee, Lessee has duly authorized the execution and delivery of the
Pass Through Trust Agreements as the "issuer" thereunder, as such term is
defined in and solely for purposes of the Securities Act of 1933, as amended,
and of the related Pass Through Certificates as the "obligor" thereupon, as
such term is defined in and solely for purposes of the Trust Indenture Act of
1939, as amended, and is undertaking to perform certain administrative and
ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustee;
WHEREAS, the proceeds from the sale of the Equipment Notes will be
applied, among other things, to effect the optional refinancing of the Original
Certificate; and
REFINANCING AGREEMENT [N605SW]
-2-
<PAGE> 5
WHEREAS, in connection with the refinancing transaction as
contemplated hereby, Owner Trustee and Lessee have agreed to adjust payments of
Interim Rent, Basic Rent, Stipulated Loss Values and Termination Values, to
adjust the Special Purchase Price, to adjust the debt amortization schedule on
the Refinancing Date in accordance with Section 18 of the Original
Participation Agreement, and to amend Exhibits B-1, B-2, C and E of the Lease
so as to reflect such adjustments;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Refinancing of Original Certificate.
(a) Subject to the satisfaction or waiver of the conditions set
forth herein at or prior to 10:00 a.m. Central time on the date designated by
Lessee, on behalf of Owner Trustee, pursuant to Section 18 of the Original
Participation Agreement or at such other date and time agreed to by the parties
hereto (the "Closing Date"):
(i) Pass Through Trustee shall, in accordance with
Section 2.01 of the Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated the Closing
Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the
request of Lessee delivered pursuant to such Section 2.01, and deliver
such Pass Through Certificates to the Underwriters (as defined below)
as specified in such request against payment by the Underwriters of an
amount equal to the aggregate principal amount thereof;
(ii) Owner Trustee shall, in accordance with Section 2.01
of the Indenture, issue and deliver to Indenture Trustee Equipment
Notes dated the Closing Date and of the maturities, in the principal
amounts, bearing the interest rates and reflecting the other economic
terms specified in Exhibits A, A-1 and A-2 hereto in an aggregate
principal amount of $24,673,256.00 (the "Refinancing Amount");
(iii) Indenture Trustee shall authenticate such Equipment
Notes pursuant to Section 2.02 of the Indenture, and deliver such
Equipment Notes to Pass Through Trustee as specified in Exhibit A-2
hereto against payment by Pass Through Trustee of an aggregate amount
equal to the Refinancing Amount;
(iv) Owner Trustee shall on the Closing Date pay to
Indenture Trustee, for the account of Owner Participant, an amount
equal to accrued interest and, subject to Lessee's obligations under
Section 3.4 of the Original Lease, Break Amount (as defined in the
Original Indenture), if any, owing to the Original Loan Participant on
the Closing Date; and
(v) Indenture Trustee shall disburse to Original Loan
Participant the amount of principal, interest and Break Amount, if
any, owing to Original Loan Participant on the Closing Date with
respect to the Original Certificate in connection with the
REFINANCING AGREEMENT [N605SW]
-3-
<PAGE> 6
refinancing of the Original Certificate in accordance with Sections
2.08 and 15.03 of the Original Indenture and Section 18 of the
Original Participation Agreement.
Owner Participant, by its execution and delivery hereof, requests and directs
Owner Trustee, in accordance with Section 5.02 of the Trust Agreement, to
execute and deliver this Agreement, the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture and to take all actions necessary or desirable to effect the
issuance of the Equipment Notes and the refinancing of the Original
Certificate.
(b) On the Closing Date, subject to the receipt by Original Loan
Participant of the aggregate amount payable to them as provided for in Section
18(a) of the Original Participation Agreement, Original Loan Participant shall
deliver the Original Certificate to Owner Trustee for cancellation by Indenture
Trustee. The Original Loan Participant hereby authorizes and directs Indenture
Trustee to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions contemplated by said
agreements and amendments to effect the issuance of the Equipment Notes and the
refinancing of the Original Certificate.
(c) In case Pass Through Trustee shall fail to make the payment
described in Section 1(a)(iii) hereof, or in case Owner Trustee shall for any
reason fail to issue and deliver to Indenture Trustee the Equipment Notes
pursuant to Section 1(a)(ii) hereof, (i) the written notice given by Lessee
pursuant to Section 18(a) of the Original Participation Agreement and Section
6.03(b) of the Original Indenture with respect to the refinancing contemplated
hereby shall be deemed to have never been given (except, however, as provided
in Section 6(b) hereof), (ii) Indenture Trustee, Owner Trustee, Owner
Participant and Lessee shall have no obligation to pay to Original Loan
Participant any amount in respect of the refinancing of the Original
Certificate pursuant hereto, (iii) none of the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture shall be deemed to have been delivered and (iv) the Original
Certificate shall remain outstanding and in full force and effect and shall
continue to be subject to the terms of the Original Indenture.
(d) The closing (the "Closing") of the transactions described in
this Agreement shall take place at the offices of Vinson & Elkins L.L.P.,
Houston, Texas, or such other place as the parties hereto may agree; the
parties hereby agree that the transactions contemplated hereby shall be deemed
to have occurred simultaneously and that no transaction contemplated hereby
shall be deemed to have occurred except in conjunction with the occurrence of
all such other transactions.
(e) All payments pursuant to this Section 1 shall be made on the
Closing Date in immediately available funds to such accounts and at such banks
as specified in the Operative Agreements, or, if otherwise, as the parties
hereto shall designate in writing not less than one Business Day prior to the
Closing Date.
(f) This Agreement shall apply only to the refinancing of the
Original Certificate as described herein and not to the refinancing, redemption
or refunding of any Equipment Notes or any other Certificate (as defined in the
Indenture) issued under the Indenture.
REFINANCING AGREEMENT [N605SW]
-4-
<PAGE> 7
SECTION 2. Adjustments to Exhibits to the Lease. The
parties hereto agree, by their execution and delivery hereof, that the
transactions contemplated hereby constitute a refinancing transaction as
contemplated by Section 18 of the Participation Agreement and that they will
take all actions contemplated thereby, including the revision of Exhibits B-1,
B-2, C and E of the Lease to reflect the adjustments contemplated thereby.
Subject to the consummation of such refinancing transaction as described
herein, such revised Exhibits B-1, B-2, C and E to the Lease shall be effective
as of the Closing Date.
SECTION 3. Conditions Precedent. The obligations of
each of the parties hereto to participate in the transactions contemplated by
this Agreement on the Closing Date are subject to the fulfillment, prior to or
on the Closing Date, of the following conditions precedent; provided, however,
that it shall not be a condition precedent to the obligations of any party
hereto that any document be produced or action taken that is to be produced or
taken by such party or any Person within such party's control; and provided,
further, that only the conditions set forth in clauses (a) and (v) of this
Section 3 shall be conditions precedent to the actions of Original Loan
Participant:
(a) Pass Through Trustee shall have received, concurrently with
the payment to Indenture Trustee by Pass Through Trustee of an amount equal to
the aggregate Original Issue Price thereof, the Equipment Notes as required by
Section 1(a)(iii), and Indenture Trustee shall have received any other amounts,
including Break Amount, if any, required to be paid in connection with the
refinancing of the Original Certificate on the Closing Date and the Indenture
Trustee shall have effected a wire transfer of all amounts payable to the
Original Loan Participant as provided herein.
(b) The Equipment Notes shall have been issued and authenticated
in accordance with the Indenture, and there shall have been transferred to
Indenture Trustee in immediately available funds the amounts referred to above
in Section 1(a)(iii)-(iv).
(c) Owner Trustee and Indenture Trustee shall have executed and
delivered the First Amendment to Trust Indenture and Security Agreement in
substantially the form of Exhibit B hereto (the "First Amendment to Trust
Indenture") which shall have been duly filed for recording with the FAA.
(d) Lessee and Owner Trustee shall have executed and delivered an
amendment to the Original Lease in substantially the form of Exhibit C hereto
(the "First Amendment to Lease Agreement") which shall have been duly filed for
recording with the FAA.
(e) Each of Lessee, Owner Participant, Owner Trustee, Pass Through
Trustee and Indenture Trustee shall have executed and delivered an amendment to
the Original Participation Agreement in substantially the form of Exhibit D
hereto (the "First Amendment to Participation Agreement").
(f) (i) Indenture Trustee shall have received on or prior to the
Delivery Date (A) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting Owner Trustee as debtor
REFINANCING AGREEMENT [N605SW]
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and Indenture Trustee as secured party, as to the Indenture Estate, evidencing
its filing with the office of the Secretary of State of the State of
Connecticut and (B) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting Lessee as debtor and Owner Trustee as secured party (and
reflecting Indenture Trustee as assignee), as to the Lease and the Aircraft
evidencing its filing with the office of the Secretary of State of the State of
Texas, (ii) no financing statement or similar filing described above in clause
(i) shall have been terminated or amended subsequent to the date of its filing
and (iii) Indenture Trustee shall have received, on or prior to the Delivery
Date, the only chattel-paper original of the Original Lease and, on or prior to
the Closing Date, the only chattel-paper original of the First Amendment to
Lease Agreement and shall have (and shall have retained without interruption
subsequent to its receipt thereof) possession of each thereof on the Closing
Date.
(g) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received the following documents (each of
which shall be reasonably satisfactory in form and substance to each of them):
(i) revised Exhibits B-1, B-2 and C to the Lease, as
provided for in the First Amendment to Lease Agreement; and
(ii) revised Schedule I to the Participation Agreement, as
provided for in the First Amendment to Participation Agreement.
(h) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the representations and warranties contained herein
of Lessee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate
solely to an earlier date (in which case such representations and
warranties shall be certified to have been correct on and as of such
earlier date);
(ii) no event has occurred and is continuing which constitutes
a Lease Event of Default or a Lease Default; and
(iii) no Event of Loss (or event which with the passage of
time or the giving of notice, or both, would constitute an Event of
Loss) has occurred with respect to the Airframe or any Engine.
(i) Each of Indenture Trustee, Owner Participant, Pass Through
Trustee and Lessee shall have received a certificate signed by a Responsible
Officer (as defined in the Indenture) of Owner Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of Owner
Trustee in its individual and trust capacities are correct as though made on
and as of the Closing Date, except to the extent that such representations and
warranties
REFINANCING AGREEMENT [N605SW]
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relate solely to an earlier date (in which case such representations and
warranties shall be certified to have been correct on and as of such earlier
date).
(j) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Lessee shall have received a certificate signed by a Responsible Company
Officer (as defined in the Indenture) of Owner Participant, dated the Closing
Date, certifying that the representations and warranties contained herein of
Owner Participant are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be
certified to have been correct on and as of such earlier date).
(k) Each of Pass Through Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by a Responsible Officer
(as defined in the Indenture) of Indenture Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of
Indenture Trustee are correct as though made on and as of the Closing Date,
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties are correct
on and as of such earlier date).
(l) Each of Indenture Trustee, Owner Trustee, Owner Participant
and Lessee shall have received a certificate signed by an authorized officer of
Pass Through Trustee, dated the Closing Date, certifying that the
representations and warranties contained herein of Pass Through Trustee are
correct as though made on and as of the Closing Date, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case such representations and warranties are correct on and as of such earlier
date).
(m) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received the following:
(i) an incumbency certificate of Lessee as to the person
or persons authorized to execute and deliver this Agreement, the First
Amendment to Participation Agreement, the First Amendment to Lease
Agreement, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and specimen
signatures of such person or persons;
(ii) a copy of the resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
transactions contemplated hereby and the execution and delivery of
each of the documents required to be executed and delivered on behalf
of Lessee in connection with the transactions contemplated hereby; and
(iii) such other documents and evidence with respect to the
other parties hereto as it may reasonably request in order to
establish the due consummation of the transactions contemplated by
this Agreement, any other Operative Agreements (as defined in the
Lease), the Underwriting Agreement (as defined below) and the Pass
Through Trust Agreements and the taking of all necessary corporate
action in connection therewith and compliance with the conditions
herein set forth.
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(n) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee
and Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing
Date, certifying that:
(i) the Aircraft has been duly certificated by the FAA as
to type and airworthiness in accordance with the terms of the Original
Lease;
(ii) Owner Trustee's FAA Bill of Sale, the Original Lease,
the Original Trust Agreement and the Original Indenture have been duly
recorded with the FAA pursuant to the Act (as defined in the Lease);
(iii) the Aircraft has been registered with the FAA in the
name of Owner Trustee and Lessee has authority to operate the
Aircraft; and
(iv) the First Amendment to Lease and the First Amendment
to Trust Indenture have been duly filed for recording with the FAA.
(o) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received opinions addressed to them from
Deborah Ackerman, Associate General Counsel of Lessee, substantially to the
same effect as the opinions delivered by her, on the Delivery Date pursuant to
Section 4(a)(xi) of the Original Participation Agreement (but reflecting the
documents delivered on the Closing Date).
(p) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Shipman & Goodwin, special counsel for Owner Trustee,
substantially to the same effect as the opinion delivered by it on the Delivery
Date pursuant to Section 4(a)(xiii) of the Original Participation Agreement
(but reflecting the documents delivered on the Closing Date).
(q) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Potter Anderson & Corroon, special counsel for Pass Through
Trustee and Indenture Trustee, substantially to the same effect (but with
respect also to Pass Through Trustee, the Pass Through Trust Agreement and the
other documents delivered on the Closing Date) as the opinion delivered by it
on the Delivery Date pursuant to Section 4(a)(xvi) of the Original
Participation Agreement.
(r) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received opinions addressed to
them from Chadbourne & Parke LLP, special counsel for Owner Participant, and
in-house or other corporate counsel to Owner Participant, substantially to the
same effect as the opinions delivered on the Delivery Date pursuant to Section
4(a)(xiv) of the Original Participation Agreement (but reflecting the documents
delivered on the Closing Date).
(s) Each of Indenture Trustee, Owner Trustee, Pass Through
Trustee, Owner Participant and Lessee shall have received an opinion addressed
to them from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City,
Oklahoma, substantially to the same effect taking
REFINANCING AGREEMENT [N605SW]
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into account the First Amendment to Trust Indenture and the First Amendment to
Lease Agreement, (i) as the opinion delivered by it pursuant to Section
4(a)(xv) of the Original Participation Agreement on the Delivery Date and (ii)
as the opinion delivered to them subsequent to the Delivery Date pursuant to
the final paragraph of Section 4(a) of the Original Participation Agreement.
(t) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee
and Owner Participant shall have received an independent insurance broker's
report, and certificates of insurance, dated the Closing Date, substantially in
the form of the report and certificates delivered pursuant to Section 4(a)(xxi)
of the Original Participation Agreement on the Delivery Date, as to the due
compliance with the terms of Section 11 of the Lease relating to the insurance
with respect to the Aircraft and with any other agreements of Lessee with
respect to such insurance, and references in such report and certificates to
(x) the "Indenture", the "Participation Agreement", and the "Lease" shall be to
such documents as amended by the First Amendment to Trust Indenture, the First
Amendment to Participation Agreement and the First Amendment to Lease Agreement
and (y) "Additional Insureds" shall be to such term as utilized in the Lease.
(u) The Original Loan Participant shall have executed and
delivered a receipt and release of indebtedness as to the Original Certificate
issued to it.
(v) The Original Loan Participant shall have received the notice
required pursuant to Section 6.03(b) of the Original Indenture in respect of
the Closing Date.
(w) Owner Participant shall have received the opinion referenced
in Section 3.7.2 of the Original Lease.
The opinions described above in clauses (o)-(s) and (w) shall be dated the
Closing Date and references therein corresponding to references in prior
opinions to the "Indenture", the "Participation Agreement", or the "Lease"
shall be to such documents as amended by the First Amendment to Trust
Indenture, the First Amendment to Participation Agreement, and the First
Amendment to Lease Agreement, respectively.
Promptly upon the recording with the FAA of the First Amendment to
Trust Indenture and the First Amendment to Lease Agreement, Lessee will cause
Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to
deliver to the parties hereto an opinion as to the due recording thereof and
the lack of filing of any intervening documents with respect to the Aircraft
(other than the Original Indenture and the Original Lease).
Each of the parties hereto agrees to instruct its counsel to prepare
and deliver the respective opinions described above in clauses (o)-(s) and to
address each such opinion to the Underwriters in addition to the respective
addressees set forth above (and, to the extent such opinions do not restate or
confirm the opinions rendered on the Delivery Date, such counsel shall
authorize the Underwriters to rely on opinions rendered on the Delivery Date).
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SECTION 4. Representations and Warranties.
(a) Lessee's Representations and Warranties. Lessee represents
and warrants to Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant that:
(i) it is a corporation duly organized and validly
existing in good standing pursuant to the laws of the State of Texas,
is a "citizen of the United States" (as defined in Section
40102(a)(15)(C) of Title 49, U.S.C.) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of Title 49, U.S.C. for aircraft capable of carrying 10
or more individuals or 6,000 pounds or more of cargo, has the
corporate power and authority to carry on its business as now
conducted, to own or hold under lease its properties, to hold under
lease the Aircraft and to enter into and perform its obligations under
this Agreement, the other Operative Agreements to which it is or is to
be a party (the "Relevant Operative Documents") and the Pass Through
Trust Agreements (together with this Agreement and the Relevant
Operative Documents, collectively, the "Lessee Documents"), is duly
qualified to do business as a foreign corporation in good standing in
each state in which the nature of its business makes such
qualification necessary or the failure to be so qualified or so to be
in good standing would have a material adverse effect on its
businesses or operations or would impair its ability to perform its
obligations under the Lessee Documents, and has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Dallas, Texas;
(ii) the execution, delivery and performance of the Lessee
Documents (A) have been duly authorized by all necessary corporate
action on the part of Lessee, (B) do not require any shareholder
approval, or approval or consent of any trustee or holder of any
indebtedness or obligations of Lessee, or of any lessor under any
lease to Lessee, except such as have been duly obtained and are in
full force and effect, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order binding on
Lessee or any of its subsidiaries or the articles of incorporation or
by-laws of Lessee (each as amended to date) or (2) contravene or
result in any breach of the provisions of, or constitute a default
under, or result in the creation of any Lien (other than as permitted
under the Lease) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan or credit agreement or
other agreement to which Lessee is a party or by which it or any of
its properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the
Lessee Documents, nor the performance by Lessee of its obligations
thereunder, requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency except for (t) the
orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of
the Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained and are in full
force and effect,
REFINANCING AGREEMENT [N605SW]
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<PAGE> 13
(u) the registration of the issuance and sale of the Pass Through
Certificates to be issued pursuant to the provisions of the Pass
Through Trust Agreements under the Securities Act and under the
securities laws of any state in which the Pass Through Certificates
may be offered for sale if the laws of such state require such action,
which registrations under the Securities Act have been duly
accomplished, (v) the qualification of each Pass Through Trust
Agreement under the Trust Indenture Act of 1939, as amended, which
qualification has been duly obtained, (w) the registrations and
filings referred to in Section 4(a)(v), (x) the recordings with the
FAA described in the opinion referred to in Section 3(s), (y) filing
the Underwriting Agreement and certain other documents with the SEC
pursuant to a Current Report on Form 8-K, and (z) routine periodic
filings required under the Act;
(iv) each of the Lessee Documents constitutes, or will on
the Closing Date constitute, legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with its terms;
(v) no action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), that has not been previously taken or shall not have
been taken on or prior to the Closing Date is necessary or advisable
in order to establish and perfect Owner Trustee's interest in the
Aircraft as against Lessee and any third parties (other than the
filing of continuation statements required to be filed at periodic
intervals under Article 9 of the Uniform Commercial Code as in effect
in the States of Texas and Connecticut in respect of financing
statements previously filed under such Article 9) or to perfect the
security interest created under the Indenture in favor of Indenture
Trustee in Owner Trustee's interest in the Aircraft and other assets
of the Trust Estate in any applicable jurisdiction in the United
States (other than the filing of continuation statements required to
be filed at periodic intervals under Article 9 of the Uniform
Commercial Code as in effect in the States of Texas and Connecticut in
respect of financing statements previously filed under such Article
9);
(vi) Owner Trustee, as lessor under the Lease, and
Indenture Trustee, as assignee thereof, are entitled, after giving
effect to the refinancing transaction contemplated hereby, to the
protection of Section 1110 of the United States Bankruptcy Code in
connection with their right to take possession of the Airframe and
Engines in the event of a case under Chapter 11 of the United States
Bankruptcy Code in which Lessee is a debtor;
(vii) there has not occurred any event which constitutes a
Lease Default or a Lease Event of Default which is presently
continuing and there has not occurred any event which constitutes or
would with the passage of time or the giving of notice, or both,
constitute an Event of Loss;
(viii) there are no pending or, to Lessee's knowledge,
threatened actions or proceedings before any court or administrative
agency which (A) involve the Aircraft or (B) having regard to both the
size of the claim and the possibility of an adverse
REFINANCING AGREEMENT [N605SW]
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<PAGE> 14
determination, are likely to have a material adverse effect on the
consolidated financial condition of Lessee and its subsidiaries or the
ability of Lessee to perform its obligations under any Lessee
Document;
(ix) Lessee is not in default in the performance of any
term or condition of the Purchase Agreement or Purchase Agreement
Assignment which materially adversely impairs the transactions
contemplated hereby;
(x) no governmental approval in the United States of any
kind is required of any of the Participants, Pass Through Trustee,
Owner Trustee or Indenture Trustee for their respective execution of
or performance under any of the Pass Through Trust Agreements, any
Relevant Operative Document or any agreement contemplated hereby or
thereby to which any thereof is or is to be a party solely by reason
of any fact or circumstance peculiar to: (A) Lessee (as contrasted
with other airlines), (B) the nature of the Aircraft, or (C) Lessee's
existing or proposed operation or use of the Aircraft;
(xi) the Aircraft has been duly certificated by the FAA as
to type and airworthiness and such certification remains in full force
and effect;
(xii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(xiii) neither it nor any Person authorized to act on its
behalf has directly or indirectly offered the Pass Through
Certificates or the Equipment Notes for sale to anyone other than in a
manner in compliance with the requirements of the Securities Act, and
by the rules and regulations thereunder; and
(xiv) Lessee has never sponsored, maintained or made
contributions to any defined benefit plan subject to the provisions of
Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) Representations and Warranties of Shawmut Bank and Owner
Trustee. Shawmut Bank Connecticut, National Association, in its individual
capacity ("SBC") and as Owner Trustee represents and warrants to each of
Indenture Trustee, Pass Through Trustee, Owner Participant and Lessee that:
(i) SBC is a national banking association duly organized
and validly existing in good standing under the laws of the United
States and has full corporate power and authority to carry on its
business as now conducted and to enter into and perform its
obligations under this Agreement and under the Trust Agreement and the
Participation Agreement (collectively, the "SBC Documents"); assuming
the due execution and delivery, pursuant to due authorization, by
Owner Participant of the Trust Agreement and the enforceability of the
Trust Agreement against Owner Participant, Owner Trustee has full
power and authority to enter into and perform its obligations under
this Agreement
REFINANCING AGREEMENT [N605SW]
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and each of the other Relevant Operative Documents to which it is or
is to be a party (the "OT Documents");
(ii) each of SBC and Owner Trustee has duly authorized,
executed and delivered each of the SBC Documents and the OT Documents,
respectively; assuming the due execution and delivery, pursuant to due
authorization, by Owner Participant of the Trust Agreement and that it
is enforceable against Owner Participant, the Trust Agreement
constitutes a legal, valid and binding obligation of SBC and Owner
Trustee, enforceable against SBC or Owner Trustee, as the case may be,
in accordance with its terms;
(iii) assuming the due execution and delivery, pursuant to
due authorization, by each of the parties thereto (other than SBC and
Owner Trustee) of each of the SBC Documents and the OT Documents and
that each of the SBC Documents and the OT Documents is the legal,
valid and binding obligation of each of the parties thereto (other
than SBC and Owner Trustee), each of the SBC Documents and the OT
Documents constitutes, or will on the Closing Date constitute, legal,
valid and binding obligations of SBC or Owner Trustee, as the case may
be, enforceable against it in accordance with its terms;
(iv) neither the execution and delivery by SBC or Owner
Trustee, as the case may be, of any of the SBC Documents or OT
Documents, respectively, nor the consummation by SBC or Owner Trustee,
as the case may be, of any of the transactions contemplated hereby or
thereby, nor the compliance by SBC, or Owner Trustee, as the case may
be, with any of the terms and provisions hereof and thereof, (A)
requires or will require any approval of its stockholders, or approval
or consent of any trustees or holders of any indebtedness or
obligations of SBC, or (B) violates or will violate the charter or
by-laws of SBC, or contravenes or will contravene any provision of, or
constitutes or will constitute a default under, or results or will
result in any breach of, or results or will result in the creation of
any Lien (other than as permitted under the Lease) upon its property
under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sale contract, bank loan or credit agreement, license or
other agreement or instrument to which SBC is a party or by which SBC
is bound, or contravenes or will contravene any law, governmental rule
or regulation of the United States of America or the State of
Connecticut governing the banking or trust powers of SBC, or any
judgment or order applicable to or binding on it;
(v) there are no pending or, to the best knowledge of
SBC, threatened actions or proceedings against SBC or Owner Trustee
before any court or administrative agency which, if determined
adversely to it, would materially adversely affect the ability of SBC
or Owner Trustee, as the case may be, to perform its obligations under
any of the SBC Documents or the OT Documents;
(vi) both the principal place of business of Owner
Trustee, and the place where its records concerning the Aircraft and
all its interest in, to and under all documents
REFINANCING AGREEMENT [N605SW]
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<PAGE> 16
relating to the Trust Estate, are located at 777 Main Street,
Hartford, Connecticut 06115 Attention: Corporate Trust
Administration;
(vii) no consent, approval, order or authorization of,
giving of notice to, or registration or filing with (including the
filing of any financing statement under Article 9 of the Uniform
Commercial Code as in effect in the State of Connecticut), or taking
of any other action in respect of, any Connecticut state or local
governmental authority or agency or any United States federal
governmental authority or agency regulating the banking or trust
powers of SBC is required for the execution and delivery of, or the
carrying out by, SBC or Owner Trustee, as the case may be, of any of
the transactions contemplated by any of the SBC Documents or the OT
Documents, respectively, other than any such consent, approval, order,
authorization, registration, notice or action as has been duly
obtained, given or taken (and other than the filing of continuation
statements required to be filed at periodic intervals under Article 9
of the Uniform Commercial Code as in effect in the State of
Connecticut in respect of financing statements previously filed);
(viii) Owner Trustee's right, title and interest in and to
the Aircraft are free of any Lessor Liens (as defined in the Lease)
attributable to SBC;
(ix) SBC is a "citizen of the United States" as defined in
the Act; and
(x) neither SBC nor Owner Trustee has directly or
indirectly offered any Equipment Notes or any interest in or to the
Trust Estate, the Trust Agreement or any similar interest for sale to,
or solicited any offer to acquire any of the same from, any Person
other than Indenture Trustee, Pass Through Trustee, Original Loan
Participant and Owner Participant; and Owner Trustee has not
authorized anyone to act on its behalf (it being understood that, for
purposes of this paragraph, in arranging and proposing the refinancing
contemplated hereby and agreed to herein by Owner Trustee, neither
Lessee nor any of the Underwriters has acted as agent of Owner
Trustee) to offer directly or indirectly any Equipment Notes or any
interest in and to the Trust Estate, the Trust Agreement or any
similar interest for sale to, or to solicit any offer to acquire any
of the same from, any Person.
(c) Representations and Warranties of Owner Participant. Owner
Participant represents and warrants to each of Indenture Trustee, Owner
Trustee, Pass Through Trustee and Lessee that:
(i) Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of the Commonwealth
of Massachusetts and has the corporate power and authority to carry on
its business as now conducted, to own or hold under lease its
properties and to enter into and perform its obligations under this
Agreement and the other Relevant Operative Documents to which it is or
is to be a party (the "OP Documents"), and its execution and delivery
of each of the OP Documents and the performance by it of its
obligations thereunder have been duly authorized by all necessary
corporate action on the part of Owner Participant and do not require
any
REFINANCING AGREEMENT [N605SW]
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approval not already obtained of stockholders of Owner Participant or
any approval or consent not already obtained of any trustee or holders
of any indebtedness or obligations of Owner Participant and each of
the OP Documents has been, or will on the Closing Date have been, duly
executed and delivered by it and (assuming that each of the OP
Documents is the legal, valid and binding obligation of each of the
parties thereto (other than Owner Participant)) each of the OP
Documents is the legal, valid and binding obligation of Owner
Participant enforceable against it in accordance with its terms;
(ii) the execution and delivery by Owner Participant of
the OP Documents, the consummation of the transactions contemplated
thereby by Owner Participant and compliance by it with the terms and
provisions of the OP Documents do not and will not contravene any
United States federal or state law, judgment, governmental rule,
regulation or any order of any court or governmental authority or
agency applicable to or binding on it (it being understood that no
representation or warranty is made with respect to (A) laws, rules or
regulations relating to aviation or to the nature of the equipment
owned by Owner Trustee, other than such laws, rules or regulations
relating to the citizenship requirements of Owner Participant under
applicable aviation law or (B) ERISA or Section 4975 of the Code other
than the representation set forth in paragraph (v) of this Section
4(c)) or contravene, or result in any breach of, or constitute any
default under, its corporate charter or by-laws or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
bank loan or credit agreement or any agreement or instrument to which
it is a party or by which it or any of its property may be bound or
affected;
(iii) the Trust Estate is free of Lessor Liens attributable
to Owner Participant;
(iv) although it is not a "citizen of the United States"
as defined in 49 U.S.C. Section 40102(a)(15)(C) it has, however,
entered into the Trust Agreement, pursuant to Article XII of which it
has transferred to Owner Trustee the Control Rights (as such term is
defined in the Trust Agreement) to assure that such Control Rights
will be controlled by a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) and that Owner
Participant shall have no power to influence or limit the exercise of
Owner Trustee's authority in respect thereof under the Trust
Agreement; and Article XII of the Trust Agreement complies with the
provisions of Section 47.7(c) of the FAA Regulations and the affidavit
of Owner Trustee in the form attached as Exhibit 1 to the Trust
Agreement and submitted to the FAA in connection therewith is true and
correct in all material respects;
(v) no part of the funds used by it to make its
investment pursuant to Section 1 of the Original Participation
Agreement constituted "plan assets" of any "employee benefit plan"
within the meaning of ERISA, or of any "plan" within the meaning of
Section 4975(e)(1) of the Code, as interpreted by the Department of
Labor; and
(vi) neither Owner Participant nor anyone authorized by it
to act on its behalf (it being understood that, for purposes of this
paragraph, in arranging and proposing the
REFINANCING AGREEMENT [N605SW]
-15-
<PAGE> 18
refinancing contemplated hereby and agreed to herein by Owner
Participant, neither Lessee nor any of the Underwriters has acted as
agent of Owner Participant) has directly or indirectly offered any
Equipment Notes or any interest in or any similar interest for sale
to, or solicited any offer to acquire any of the same from, any
Person.
(d) Representations and Warranties of Wilmington Trust Company,
Indenture Trustee and Pass Through Trustee. Wilmington Trust Company, in its
individual capacity ("WTC") and as Indenture Trustee and Pass Through Trustee,
represents and warrants, to each of Owner Trustee, Owner Participant and Lessee
that:
(i) WTC is a "citizen of the United States" as defined in
the Act, that it will notify promptly all parties to this Agreement if
in its reasonable opinion its status as a "citizen of the United
States" is likely to change and that it will resign as Indenture
Trustee as provided in Section 9.07 of the Indenture if it should
cease to be a "citizen of the United States";
(ii) WTC is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into and
perform its obligations under the Pass Through Trust Agreements and
the Relevant Operative Documents to which WTC is or is to be a party
(the "WTC Documents") and, as Indenture Trustee and Pass Through
Trustee, to authenticate the Equipment Notes and the Pass Through
Certificates to be delivered on the Closing Date;
(iii) the execution and delivery by WTC of the WTC
Documents, by Indenture Trustee of the Relevant Operative Documents to
which it is or is to be a party (the "IT Documents") and by Pass
Through Trustee of the Relevant Operative Documents to which it is or
is to be a party (the "PTT Documents") and the authentication by
Indenture Trustee of the Equipment Notes and by Pass Through Trustee
of the Pass Through Certificates to be delivered on the Closing Date
have been duly authorized by all necessary corporate action on the
part of WTC, Indenture Trustee and Pass Through Trustee, respectively,
and neither the execution (or, in the case of such Equipment Notes and
Pass Through Certificate, their authentication) and delivery thereof
nor its performance of any of the terms and provisions thereof will
violate any federal or Delaware law or regulation relating to the
banking or trust powers of WTC or any judgment or order binding on it
or contravene or result in any breach of, or constitute any default
under the charter or by-laws of WTC or the provisions of any
indenture, mortgage, contract or other agreement to which any of WTC,
Indenture Trustee or Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the WTC Documents, the IT Documents and the
PTT Documents has been, or will on the Closing Date have been, duly
executed (or, in the case of the Equipment Notes and the Pass Through
Certificates, authenticated) and delivered by WTC, Indenture Trustee
and Pass Through Trustee, respectively;
REFINANCING AGREEMENT [N605SW]
-16-
<PAGE> 19
(v) assuming that each of the WTC Documents, the IT
Documents and the PTT Documents is the legal, valid and binding
obligation of each of the parties thereto (other than WTC, Indenture
Trustee and Pass Through Trustee, respectively), each of the WTC
Documents, the IT Documents and the PTT Documents is, or will on the
Closing Date be, the legal, valid and binding obligation of WTC,
Indenture Trustee or Pass Through Trustee, respectively, enforceable
against it in accordance with its terms; provided, however, that the
representations made in this subparagraph (v) are made only by WTC as
to the WTC Documents, by Indenture Trustee as to the IT Documents and
by Pass Through Trustee as to the PTT Documents, respectively;
(vi) neither the execution and delivery by WTC, Indenture
Trustee or Pass Through Trustee of any of the WTC Documents, the IT
Documents or the PTT Documents, respectively, nor the consummation by
WTC, Indenture Trustee or Pass Through Trustee of any of the
transactions contemplated hereby or thereby, requires the consent or
approval of, the giving of notice to, or the registration with, or the
taking of any other action with respect to, any governmental authority
or agency pursuant to any law of the State of Delaware or the United
States regulating WTC's banking, trust or fiduciary powers;
(vii) there are no pending or threatened actions or
proceedings against any of WTC, Indenture Trustee or Pass Through
Trustee before any court or administrative agency which individually
or in the aggregate, if determined adversely to it, would materially
adversely affect the ability of WTC, Indenture Trustee or Pass Through
Trustee to perform its obligations under any of the WTC Documents, the
IT Documents or the PTT Documents;
(viii) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreement of the Pass Through
Certificates contemplated hereby, neither WTC nor Pass Through Trustee
has directly or indirectly offered any Equipment Note for sale to any
Person, or solicited any offer to acquire any Equipment Notes from any
Person other than Owner Trustee and Owner Participant, and neither WTC
nor Pass Through Trustee has authorized anyone to act on its behalf to
offer directly or indirectly any Equipment Note for sale to any
Person, or to solicit any offer to acquire any Equipment Note from any
Person other than Owner Trustee and Owner Participant, and Pass
Through Trustee is not in default under any Pass Through Trust
Agreement; and
(ix) Pass Through Trustee is not directly or indirectly
controlling, controlled by or under common control with any of Owner
Participant, Owner Trustee, any Underwriter or Lessee.
SECTION 5. Notices. Unless otherwise specifically
provided herein, all notices required or permitted by the terms of this
Agreement shall be given in accordance with the provisions of Section 13 of the
Participation Agreement.
SECTION 6. Expenses.
REFINANCING AGREEMENT [N605SW]
-17-
<PAGE> 20
(a) As more fully specified in Section 16 of the Participation
Agreement and except as provided in paragraph (b) below, all of the Transaction
Costs in connection with the preparation, execution and delivery of this
Agreement and the transactions contemplated by this Agreement shall be paid
promptly by Owner Participant, either directly or through Owner Trustee.
(b) In the event that the transactions contemplated by this
Agreement and the agreements referred to herein are not consummated, Lessee
shall, except as provided in the Underwriting Agreement with regard to fees and
expenses of the Underwriters, bear and pay all Transaction Costs referred to in
paragraph (a) above on an after-tax basis. In addition, in the event that the
transactions contemplated by this Agreement and the agreements referred to
herein are not consummated on the date specified in the notice referred to in
Section 3(v) hereof, Lessee shall indemnify the Original Loan Participant for
any associated break funding costs incurred thereby.
SECTION 7. Miscellaneous. This Agreement may be executed in
any number of counterparts (and each of the parties hereto shall not be
required to execute the same counterpart). Each counterpart of this Agreement
including a signature page executed by each of the parties hereto shall be an
original counterpart of this Agreement, but all of such counterparts together
shall constitute one instrument. Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification
is sought; and no such termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy thereof shall have been
delivered to Lessee, Owner Trustee and Indenture Trustee. The index preceding
this Agreement and the headings of the various Sections of this Agreement are
for convenience of reference only and shall not modify, define, expand or limit
any of the terms or provisions hereof. The terms of this Agreement shall be
binding upon, and shall inure to the extent provided herein to the benefit only
of the following parties: Lessee and, subject to the terms of the
Participation Agreement, its successors and permitted assigns, Original Loan
Participant, Indenture Trustee and its successors as Indenture Trustee (and any
additional trustee appointed) under the Indenture, Owner Trustee and its
successors as Owner Trustee under the Trust Agreement, Pass Through Trustee and
its successors as Pass Through Trustee under each Pass Through Trust Agreement,
and Owner Participant and, subject to the provisions of the Participation
Agreement, its successors and permitted assigns. No purchaser or holder of any
of the Equipment Notes shall be deemed to be a successor or assign of Original
Loan Participant or to have any rights or benefits hereunder. Every
representation or warranty contained herein as to the enforceability of any
document shall be deemed to be made subject to the effects of applicable
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally and of general principles of equity. THIS AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
REFINANCING AGREEMENT [N605SW]
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By: /s/ JOHN D. OWEN
Treasurer
BOT FINANCIAL & LEASING
CORPORATION B-4,
Owner Particpant
By: /s/ GARY P. CLINTON
Senior Vice President
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
Original Loan Participant
By: /s/ MARK DENTON
Title: Senior Vice President
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, in its
individual capacity only as
expressly provided herein and
otherwise solely as Owner Trustee
By: /s/ PHILIP G. KANE, JR.
Title: Vice President
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By: /s/ DAVID A. VANASKEY, JR.
Title: Senior Financial Services Officer
REFINANCING AGREEMENT [N605SW]
-19-
<PAGE> 22
Exhibit A to
Refinancing Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1995 Trust N605SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1995-A3 January 1, 2013 $15,250,103.00 7.22% October 4, 2007 Installment
1995-A4 January 1, 2018 $9,423,153.00 7.64% January 4, 2016 Installment
</TABLE>
REFINANCING AGREEMENT [605SW]
A-1
<PAGE> 23
Exhibit A-1 to
Refinancing Agreement
Installment Payment Dates and Installment Payment Percentages and Amounts
REFINANCING AGREEMENT [605SW]
A-1-1
<PAGE> 24
Exhibit A-2 to
Refinancing Agreement
Issuance of SWA 1995 Trust N605SW Certificates
The SWA 1995 Trust N605SW Certificates issued hereunder shall be
issued to and shall be payable to Pass Through Trustee under the 1995-A3 Pass
Through Trust Agreement and the 1995-A4 Pass Through Trust Agreement with
respect to the grantor trusts created thereby, each such trust as described
below consisting of the Certificates issued pursuant hereto and the other
Certificates contained therein:
1995-A3 Trust:
7.22% Certificate due January 1, 2013
1995-A4 Trust:
7.64% Certificate due January 1, 2018
REFINANCING AGREEMENT [605SW]
A-2-1
<PAGE> 25
Exhibit B to
Refinancing Agreement
Form of
First Amendment to Trust Indenture
[SEE DOC. 1.03]
REFINANCING AGREEMENT [N605SW]
B-1
<PAGE> 26
Exhibit C to
Refinancing Agreement
Form of
First Amendment to Sale and Lease Agreement
[SEE DOC. 1.02]
REFINANCING AGREEMENT [N605SW]
C-1
<PAGE> 27
Exhibit D to
Refinancing Agreement
Form of
First Amendment to Participation Agreement
[SEE DOC. 1.01]
REFINANCING AGREEMENT [N605SW]
D-1
