<PAGE> 1
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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 4, 1996
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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<PAGE> 2
Item 7. Financial Statements and Exhibits.
(c). 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 its prospectus dated May 9, 1995 contained therein, as
supplemented by the prospectus supplement dated September 4, 1996 relating to
$146,195,000 of Pass Through Certificates, Series 1996-A to be issued on or
about September 18, 1996.
Exhibits
Exhibit 1.4 - Underwriting Agreement dated September 4, 1996
relating to the issuance of Pass Through
Certificates, Series 1996-A.
Exhibit 4.56 - Forms of Pass Through Trust Supplements Nos. 1996-A1
and 1996-A2 to be entered into between Southwest and
the Trustee relating to the Pass Through
Certificates, Series 1996-A.
Exhibit 4.57* - Participation Agreement entered into as of August 1,
1996 among Southwest, the Owner Participant, the Loan
Trustee, the Trustee and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration Nos.
N625SW, N626SW, N627SW, N628SW, N635SW and N636WN.
Exhibit 4.58 * - Trust Agreement entered into as of August 1, 1996
between the Owner Participant and the Owner Trustee
with respect to Boeing 737-3H4 Aircraft, Registration
Nos. N625SW, N626SW, N627SW, N628SW, N635SW and
N636WN.
Exhibit 4.59 * - Form of Trust Indenture and Security Agreement to be
entered into as of August 1, 1996 between the Owner
Trustee and the Loan Trustee relating to the
Equipment Notes with respect to Boeing 737-3H4
Aircraft, Registration Nos. N625SW, N626SW, N627SW,
N628SW, N635SW and N636WN.
Exhibit 4.60 * - Form of Sale and Lease Agreement to be entered into
as of August 1, 1996 between Southwest and the Owner
Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N625SW, N626SW, N627SW, N628SW,
N635SW and N636WN.
Exhibit 4.61* - Form of Equipment Notes to be issued with respect to
Boeing 737-3H4 Aircraft, Registration Nos. N625SW,
N626SW, N627SW, N628SW, N635SW and N636WN (included
in Exhibit 4.59 as Exhibit A-1 thereto).
*The financing of each of the identified Aircraft pursuant to Pass
Through Certificates, Series 1996-A is documented separately. Pursuant to
Instruction 2 to Item 601 of Regulation S-K, the registrant has filed the
indicated documents for one of these Aircraft only. The documents for the
other Aircraft are substantially identical in all material respects, except for
the information identifying the Aircraft in question, the name of the trust
established to own such Aircraft and as set forth below.
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<TABLE>
<CAPTION>
Lessor's Cost
-------------------------- Late Day of
Aircraft Owner Equity Loan Base Lease
Tail No. Participant Investment Amount Term
- -------- ----------- ---------- ------ -------------
<S> <C> <C> <C> <C>
N625SW . . . . . . . . NationsBank, N.A. $9,160,000 $23,840,000 January 2, 2020
N626SW . . . . . . . . MetLife Capital, L.P. 8,341,500 24,658,500 January 2, 2020
N627SW . . . . . . . . MetLife Capital Corp. 8,341,500 24,658,500 January 2, 2020
N628SW . . . . . . . . AmSouth Leasing Corp. 8,651,000 24,349,000 May 6, 2021
N635SW . . . . . . . . KBWA Leasing Corp. 8,655,500 24,344,500 November 2, 2020
N636WN . . . . . . . . KBWA Leasing Corp. 8,655,500 24,344,500 November 2, 2020
</TABLE>
<TABLE>
<CAPTION>
Special Ins. Special
Purchase Option Payment Purchase
Aircraft Date (Lease Option
Tail No. (Lease Section 18.2(b)) Section 11.2, 3.2) (PA Section 8(aa))
-------- ----------------------- ------------------ ------------------
<S> <C> <C> <C>
N625SW . . . . . . . . . . . . . . . January 2, 2015
N626SW . . . . . . . . . . . . . . . January 2, 2015
N627SW . . . . . . . . . . . . . . . January 2, 2015
N628SW . . . . . . . . . . . . . . . January 2, 2018 * **
N635SW . . . . . . . . . . . . . . . January 2, 2017 * **
N636WN . . . . . . . . . . . . . . . January 2, 2017 * **
</TABLE>
- ---------------
* The $4,000,000 loss payable amount reduces to $2,000,000 if Southwest's
unsecured senior long-term debt securities are not rated Investment Grade.
** Requires, as condition to Southwest's election, that Owner Trustee receive
evidence that it has a second priority and perfected security interest in
the Aircraft.
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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.
September 16, 1996 By: /s/ Gary C. Kelly
-----------------------------------
Gary C. Kelly
Vice President -- Finance
and Chief Financial Officer
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<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
Exhibit 1.4 - Underwriting Agreement dated September 4, 1996 relating to
the issuance of Pass Through Certificates, Series 1996-A.
Exhibit 4.56 - Forms of Pass Through Trust Supplements Nos. 1996-A1 and
1996-A2 to be entered into between Southwest and the Trustee
relating to the Pass Through Certificates, Series 1996-A.
Exhibit 4.57 - Participation Agreement entered into as of August 1, 1996
among Southwest, the Owner Participant, the Loan Trustee, the
Trustee and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration Nos. N625SW, N626SW, N627SW, N628SW,
N635SW and N636WN.
Exhibit 4.58 - Trust Agreement entered into as of August 1, 1996 between the
Owner Participant and the Owner Trustee with respect to
Boeing 737-3H4 Aircraft, Registration Nos. N625SW, N626SW,
N627SW, N628SW, N635SW and N636WN.
Exhibit 4.59 - Form of Trust Indenture and Security Agreement to be entered
into as of August 1, 1996 between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes with respect to
Boeing 737-3H4 Aircraft, Registration Nos. N625SW, N626SW,
N627SW, N628SW, N635SW and N636WN.
Exhibit 4.60 - Form of Sale and Lease Agreement to be entered into as of
August 1, 1996 between Southwest and the Owner Trustee with
respect to Boeing 737-3H4 Aircraft, Registration Nos. N625SW,
N626SW, N627SW, N628SW, N635SW and N636WN.
Exhibit 4.61 - Form of Equipment Notes to be issued with respect to Boeing
737-3H4 Aircraft, Registration Nos. N625SW, N626SW, N627SW,
N628SW, N635SW and N636WN (included in Exhibit 4.59 as
Exhibit A-1 thereto).
</TABLE>
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<PAGE> 1
EXHIBIT 1.4
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1996-A1
Pass Through Certificates, Series 1996-A2
UNDERWRITING AGREEMENT
September 4, 1996
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
SALOMON BROTHERS INC
c/o MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, New York 10036
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 to be entered into by the Company,
in each case to finance a portion of the payment by such Owner Trustees of the
purchase price for specified aircraft that will be 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") a registration statement on Form S-3 (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 statement has 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
the above-referenced registration statement in the form in which it 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").
<PAGE> 3
3
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 to each related series of Equipment Notes,
provided, however, that as used herein the term "Operative Agreements" shall
include the Pass Through Agreements, the Note Purchase Agreements and the
Leases, Trust Indentures and other Operative Agreements to be executed after
the Closing Time (as defined in Section 3) but prior to October 1, 1996, as
contemplated in the Note Purchase Agreements. For avoidance of doubt, the term
"Note Purchase Agreements" means the Participation Agreements dated as of
August 1, 1996 among the Company, the Owner Participant named therein, the
Trustee, the Owner Trustee and the Indenture Trustee.
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
<PAGE> 4
4
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 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.
(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
<PAGE> 5
5
"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.
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.
<PAGE> 6
6
(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.
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
<PAGE> 7
7
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 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) Earning 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.
<PAGE> 8
8
(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.
(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.
(j) Note Purchase Agreements. With respect to any Equipment
Notes to be issued after the Closing Time, the Company shall deliver to you a
copy of each opinion required to be delivered under the related Note Purchase
Agreement, dated as of the date of delivery, and addressed to you.
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
<PAGE> 9
9
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.
(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.
<PAGE> 10
10
(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 such documents, upon due execution and delivery by
the Company at or after the Closing Time as contemplated by the
Note Purchase Agreements, 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 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.
<PAGE> 11
11
(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 or is to be 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 North Carolina and Texas, have been made or obtained
and are in full force and effect, and (A) except for any filings
or recordings with the FAA (as to which no opinion need be given)
and (B) with respect to any Equipment Notes to be issued after
the Closing Time, except for any filings or recordings to be made
after the Closing Time, as contemplated by the Note Purchase
Agreements.
(xi) The execution and delivery by the Company of this
Agreement, the Pass Through Agreements and the other Operative
Agreements to which the Company is or is to be 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
known to such counsel 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.
(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
<PAGE> 12
12
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 (except for the financial statements, schedules and other
financial or statistical data included therein, as to which such
counsel need express no opinion), 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 other 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 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 not comment), 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
<PAGE> 13
13
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 be 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 not comment), 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 not comment), 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 federal income tax purposes, but rather,
each will be classified as a grantor trust under
<PAGE> 14
14
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 and subject to consummation of the
transactions contemplated by the Note Purchase Agreements at or
after 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, will be 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 as contemplated
by the Note Purchase Agreements and subject to any limitations of
applicable state 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> 15
15
(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
<PAGE> 16
16
in the Registration Statement, and other specified procedures and
inquiries, nothing has come to their attention that caused them to
believe that:
(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
<PAGE> 17
17
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 Note Purchase
Agreements. At the Closing Time, all conditions precedent specified in each
Note Purchase Agreement with respect to the financing of the Equipment Notes to
be issued at the Closing Time shall have been satisfied at the Closing Time;
the representations and warranties of the Company contained in each such Note
Purchase Agreement 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 such Note Purchase
Agreement, 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;
<PAGE> 18
18
(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 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.
<PAGE> 19
19
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
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
<PAGE> 20
20
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 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
<PAGE> 21
21
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:
(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.
<PAGE> 22
22
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.
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,
<PAGE> 23
23
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 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> 24
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/ Gary Kelly
-----------------------------
Name: Gary Kelly
Title: Vice President - Finance
CONFIRMED AND ACCEPTED, as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
SALOMON BROTHERS INC
By: Morgan Stanley & Co. Incorporated
By: /Gerard Pasiucco/
-----------------------------------
Name: Gerard Pasiucco
Title: Managing Director
<PAGE> 25
Exhibit A
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1996-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 1996-A1 $113,136,000 7.67% January 2, 2014 100% .65%
Series 1996-A2 33,059,000 8.00% January 2, 2021 100% .65%
------------
Total $146,195,000
</TABLE>
* Each of the Underwriters severally and not jointly agrees to purchase
approximately 331/3% of the Aggregate Amount of each Series.
<PAGE> 26
Schedule I
to
Underwriting
Agreement
Dated: September 4, 1996
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1996-A
<TABLE>
<CAPTION>
AGGREGATE AMOUNT AGGREGATE AMOUNT
OF PASS THROUGH OF PASS THROUGH
CERTIFICATES, CERTIFICATES,
UNDERWRITER SERIES 1996-A1 SERIES 1996-A2
- ----------- -------------- --------------
<S> <C> <C>
MORGAN STANLEY & CO.
INCORPORATED $37,712,000 $11,021,000
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED 37,712,000 11,019,000
SALOMON BROTHERS INC 37,712,000 11,019,000
------------ -----------
Total $113,136,000 $33,059,000
</TABLE>
<PAGE> 27
Schedule II
to
Underwriting
Agreement
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1996-A1
Pass Through Certificates, Series 1996-A2
Dated: September 4, 1996
To: Southwest Airlines Co.
2702 Love Field Drive
Dallas, Texas 75235
Re: Underwriting Agreement dated September 4, 1996.
Title of Offered Certificates: Pass Through Certificates, Series 1996-A1
and 1996-A2.
Current ratings: A/A1/A by S&P, Moody's, and Duff & Phelps,
respectively.
Interest rate: Series 1996-A1 . . . . . . . . . . 7.67%
Series 1996-A2 . . . . . . . . . . 8.00%
Interest payable: January 2 and July 2 of each year,
commencing on January 2, 1997.
Public offering price: 100%, plus accrued interest, if any, from
September 18, 1996.
Purchase price: 100%, plus accrued interest, if any, from
September 18, 1996.
Closing date and location: September 18, 1996 at 9:00 a.m., Dallas time
Southwest Airlines Co.
2702 Love Field Drive
Dallas, TX 75235
Location for checking
Offered Certificates: The Depository Trust Company
New York, New York
Listing requirement: None
Other terms and conditions: None
<PAGE> 28
II-2
Exceptions, if any, to
Section 5(h) of the
Underwriting Agreement: None
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
SALOMON BROTHERS INC
By: Morgan Stanley & Co. Incorporated
By: /Gerard Pasiucco/
----------------------------------
Name: Gerard Pasiucco
Title: Managing Director
Accepted:
SOUTHWEST AIRLINES CO.
By: /s/ Gary Kelly
-----------------------------
Name: Gary Kelly
Title: Vice President - Finance
<PAGE> 1
EXHIBIT 4.56
TRUST SUPPLEMENT NO. 1996-A1
DATED AS OF SEPTEMBER 1, 1996
TO
PASS THROUGH TRUST AGREEMENT
DATED AS OF FEBRUARY 1, 1993
SOUTHWEST AIRLINES CO.
AND
WILMINGTON TRUST COMPANY, AS TRUSTEE
$113,136,000.00
<PAGE> 2
TRUST SUPPLEMENT
This Trust Supplement No. 1996-A1, dated as of September 1, 1996 (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 six Owner Trustees, each acting on behalf of an Owner
Participant, has agreed to issue, on a non-recourse basis, Equipment Notes,
among other things, to finance all or a portion of the outstanding debt portion
of the purchase price of the aircraft to be 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
"1996-A1 Trust") for the benefit of the Certificateholders, and the initial
Certificateholders as the grantors of the 1996-A1 Trust, by their respective
acceptances of the Certificates, join in the creation of this 1996-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. 1996-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 1996-A1" (hereinafter defined as the "Series 1996-A1 Certificates").
Each Certificate represents a Fractional Undivided Interest in the 1996-A1
Trust created hereby. The terms and conditions applicable to the Series
1996-A1 Certificates are as follows:
1. The aggregate principal amount of the Series 1996-A1
Certificates that shall be authenticated under the Agreement (except for Series
1996-A1 Certificates authenticated and delivered pursuant to Section 3.03, 3.04
or 3.05 of the Basic Agreement) upon their initial issuance is $113,136,000.
2. The Cut-off Date is September 30, 1996.
3. The Regular Distribution Dates with respect to any payment
of Scheduled Payments are January 2 and July 2 in each year, commencing January
2, 1997, 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 1996-A1 Certificates shall be in the form
attached hereto as Exhibit A. The Series 1996-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 1996-A1 Certificates shall be
used to purchase the Equipment Notes in the principal amounts specified below:
TRUST SUPPLEMENT NO. 1996-A1
-2-
<PAGE> 4
<TABLE>
<CAPTION>
Equipment Note Principal Amount Maturity
-------------- ---------------- --------
<S> <C> <C>
Series 1996 N625SW $19,469,000 January 2, 2014
Series 1996 N626SW $19,890,000 January 2, 2014
Series 1996 N627SW $19,890,000 January 2, 2014
Series 1996 N628SW $15,987,000 January 2, 2014
Series 1996 N635SW $18,950,000 January 2, 2014
Series 1996 N636WN $18,950,000 January 2, 2014
</TABLE>
8. Each of six 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 finance the 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 N625SW 27701
1 Boeing 737-3H4 N626SW 27702
1 Boeing 737-3H4 N627SW 27935
1 Boeing 737-3H4 N628SW 27703
1 Boeing 737-3H4 N635SW 27708
1 Boeing 737-3H4 N636WN 27709
</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
1996 Trust N625SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N626SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N627SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N628SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N635SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N636WN) dated as of August 1, 1996, as
supplemented.
TRUST SUPPLEMENT NO. 1996-A1
-3-
<PAGE> 5
(b) Each of the following Leases:
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N625W), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N626SW), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N627SW), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N628SW), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N635SW), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N636WN), dated as of August 1, 1996, as supplemented.
(c) Each of the following Participation Agreements:
Participation Agreement (Southwest Airlines 1996 Trust
N625SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N626SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N627SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N628SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N635SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N636WN), dated as of August 1, 1996.
(d) Each of the following Trust Agreements:
Trust Agreement (Southwest Airlines 1996 Trust N625SW)
dated as of August 1, 1996, as supplemented;
TRUST SUPPLEMENT NO. 1996-A1
-4-
<PAGE> 6
Trust Agreement (Southwest Airlines 1996 Trust N626SW)
dated as of August 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1996 Trust N627SW)
dated as of August 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1996 Trust N628SW)
dated as of August 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1996 Trust N635SW)
dated as of August 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1996 Trust N636WN)
dated as of August 1, 1996, as supplemented.
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.
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
1996-A1 CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE.
TRUST SUPPLEMENT NO. 1996-A1
-5-
<PAGE> 7
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. 1996-A1
-6-
<PAGE> 8
IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust
Supplement to be duly executed by their respective officers thereto duly
authorized, as of the day and year first above written.
SOUTHWEST AIRLINES CO.
By
-----------------------------------
Treasurer
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Trustee
By
-----------------------------------
Title:
TRUST SUPPLEMENT NO. 1996-A1
-7-
<PAGE> 9
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 1996-A1 PASS THROUGH TRUST
Pass Through
Certificate, Series 1996-A1
Final Distribution Date: January 2, 2014
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
1996-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. 1996-A1 thereto dated as of September 1, 1996 (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 1996-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 or, pending the acquisition thereof,
certain cash or Specified Investments (the "Trust Property"). Each issue of
the Equipment Notes, when issued, will be 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. 1996-A1
A-1
<PAGE> 10
Subject to and in accordance with the terms of the Agreement, from funds
then available to the Trustee, there will be distributed on January 2 and July
2 in each year, commencing January 2, 1997 (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 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, 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 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
TRUST SUPPLEMENT NO. 1996-A1
A-2
<PAGE> 11
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.
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.
TRUST SUPPLEMENT NO. 1996-A1
A-3
<PAGE> 12
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
SOUTHWEST AIRLINES 1996-A1
PASS THROUGH TRUST
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Trustee
By:
-----------------------------------
Title:
--------------------------------
Dated:
--------------------
TRUST SUPPLEMENT NO. 1996-A1
A-4
<PAGE> 13
[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. 1996-A1
A-5
<PAGE> 14
EXHIBIT B
TRUST SUPPLEMENT NO. 1996-A1
Dated as of September 1, 1996
[DTC LETTER OF REPRESENTATIONS]
TRUST SUPPLEMENT NO. 1996-A1
B-1
<PAGE> 15
EXHIBIT C
TRUST SUPPLEMENT NO. 1996-A1
Dated as of September 1, 1996
Scheduled Payments
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
- ---------------------- ----------------------
<S> <C>
January 2, 1997 0.542359638
January 2, 1998 1.933276764
January 2, 1999 2.094427061
January 2, 2000 8.142778603
January 2, 2001 4.450682365
January 2, 2002 3.330465104
January 2, 2003 3.615826085
January 2, 2004 3.868531679
January 2, 2005 3.679214397
January 2, 2006 4.069960048
January 2, 2007 4.452721503
January 2, 2008 5.947927273
January 2, 2009 8.042414439
January 2, 2010 8.628224438
January 2, 2011 9.152545609
January 2, 2012 10.448704214
January 2, 2013 11.282079975
January 2, 2014 6.317860805
-------------
100.000000000
=============
</TABLE>
TRUST SUPPLEMENT NO. 1996-A1
C-1
<PAGE> 16
EXHIBIT 4.56
TRUST SUPPLEMENT NO. 1996-A2
DATED AS OF SEPTEMBER 1, 1996
TO
PASS THROUGH TRUST AGREEMENT
DATED AS OF FEBRUARY 1, 1993
SOUTHWEST AIRLINES CO.
AND
WILMINGTON TRUST COMPANY, AS TRUSTEE
$33,059,000.00
<PAGE> 17
TRUST SUPPLEMENT
This Trust Supplement No. 1996-A2, dated as of September 1, 1996 (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 six Owner Trustees, each acting on behalf of an Owner
Participant, has agreed to issue, on a non-recourse basis, Equipment Notes,
among other things, to finance all or a portion of the outstanding debt portion
of the purchase price of the aircraft to be 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
"1996-A2 Trust") for the benefit of the Certificateholders, and the initial
Certificateholders as the grantors of the 1996-A2 Trust, by their respective
acceptances of the Certificates, join in the creation of this 1996-A2 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. 1996-A2
-1-
<PAGE> 18
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 1996-A2" (hereinafter defined as the "Series 1996-A2 Certificates").
Each Certificate represents a Fractional Undivided Interest in the 1996-A2
Trust created hereby. The terms and conditions applicable to the Series
1996-A2 Certificates are as follows:
1. The aggregate principal amount of the Series 1996-A2
Certificates that shall be authenticated under the Agreement (except for Series
1996-A2 Certificates authenticated and delivered pursuant to Section 3.03, 3.04
or 3.05 of the Basic Agreement) upon their initial issuance is $33,059,000.
2. The Cut-off Date is September 30, 1996.
3. The Regular Distribution Dates with respect to any payment
of Scheduled Payments are January 2 and July 2 in each year, commencing January
2, 1997, 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 1996-A2 Certificates shall be in the form
attached hereto as Exhibit A. The Series 1996-A2 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 1996-A2 Certificates shall be
used to purchase the Equipment Notes in the principal amounts specified below:
TRUST SUPPLEMENT NO. 1996-A2
-2-
<PAGE> 19
<TABLE>
<CAPTION>
Equipment Note Principal Amount Maturity
-------------- ---------------- --------
<S> <C> <C>
Series 1996 N625SW $ 4,371,000 July 2, 2019
Series 1996 N626SW $ 4,768,500 July 2, 2019
Series 1996 N627SW $ 4,768,500 July 2, 2019
Series 1996 N628SW $ 8,362,000 January 2, 2021
Series 1996 N635SW $ 5,394,500 January 2, 2020
Series 1996 N636WN $ 5,394,500 January 2, 2020
</TABLE>
8. Each of six 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 finance the 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 N625SW 27701
1 Boeing 737-3H4 N626SW 27702
1 Boeing 737-3H4 N627SW 27935
1 Boeing 737-3H4 N628SW 27703
1 Boeing 737-3H4 N635SW 27708
1 Boeing 737-3H4 N636WN 27709
</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
1996 Trust N625SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N626SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N627SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N628SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N635SW) dated as of August 1, 1996, as
supplemented;
Trust Indenture and Security Agreement (Southwest Airlines
1996 Trust N636WN) dated as of August 1, 1996, as
supplemented.
TRUST SUPPLEMENT NO. 1996-A2
-3-
<PAGE> 20
(b) Each of the following Leases:
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N625W), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N626SW), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N627SW), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N628SW), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N635SW), dated as of August 1, 1996, as supplemented;
Sale and Lease Agreement (Southwest Airlines 1996 Trust
N636WN), dated as of August 1, 1996, as supplemented.
(c) Each of the following Participation Agreements:
Participation Agreement (Southwest Airlines 1996 Trust
N625SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N626SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N627SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N628SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N635SW), dated as of August 1, 1996;
Participation Agreement (Southwest Airlines 1996 Trust
N636WN), dated as of August 1, 1996.
(d) Each of the following Trust Agreements:
Trust Agreement (Southwest Airlines 1996 Trust N625SW)
dated as of August 1, 1996, as supplemented;
TRUST SUPPLEMENT NO. 1996-A2
-4-
<PAGE> 21
Trust Agreement (Southwest Airlines 1996 Trust N626SW)
dated as of August 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1996 Trust N627SW)
dated as of August 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1996 Trust N628SW)
dated as of August 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1996 Trust N635SW)
dated as of August 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1996 Trust N636WN)
dated as of August 1, 1996, as supplemented.
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.
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
1996-A2 CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE.
TRUST SUPPLEMENT NO. 1996-A2
-5-
<PAGE> 22
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. 1996-A2
-6-
<PAGE> 23
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
-----------------------------------
Treasurer
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Trustee
By
-----------------------------------
Title:
-------------------------------
TRUST SUPPLEMENT NO. 1996-A2
-7-
<PAGE> 24
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 1996-A2 PASS THROUGH TRUST
Pass Through
Certificate, Series 1996-A2
Final Distribution Date: January 2, 2021
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
1996-A2 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. 1996-A2 thereto dated as of September 1, 1996 (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 1996-A2" (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 or, pending the acquisition thereof,
certain cash or Specified Investments (the "Trust Property"). Each issue of
the Equipment Notes, when issued, will be 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. 1996-A2
A-1
<PAGE> 25
Subject to and in accordance with the terms of the Agreement, from funds
then available to the Trustee, there will be distributed on January 2 and July
2 in each year, commencing January 2, 1997 (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 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, 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 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
TRUST SUPPLEMENT NO. 1996-A2
A-2
<PAGE> 26
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.
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.
TRUST SUPPLEMENT NO. 1996-A2
A-3
<PAGE> 27
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
SOUTHWEST AIRLINES 1996-A2
PASS THROUGH TRUST
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Trustee
By:
-----------------------------------
Title:
---------------------------------
Dated:
--------------------
TRUST SUPPLEMENT NO. 1996-A2
A-4
<PAGE> 28
[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. 1996-A2
A-5
<PAGE> 29
EXHIBIT B
TRUST SUPPLEMENT NO. 1996-A2
Dated as of September 1, 1996
[DTC LETTER OF REPRESENTATIONS]
TRUST SUPPLEMENT NO. 1996-A2
B-1
<PAGE> 30
EXHIBIT C
TRUST SUPPLEMENT NO. 1996-A2
Dated as of September 1, 1996
Scheduled Payments
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
- ---------------------- ----------------------
<S> <C>
January 2, 2014 3.918457909
January 2, 2016 6.343310445
January 2, 2017 9.578617018
July 2, 2017 0.256250945
January 2, 2018 33.406080039
July 2, 2018 1.129435252
January 2, 2019 30.952312532
July 2, 2019 11.124174960
January 2, 2020 3.271544814
January 2, 2021 0.019816086
-------------
100.000000000
=============
</TABLE>
TRUST SUPPLEMENT NO. 1996-A2
C-1
<PAGE> 1
EXHIBIT 4.57
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
dated as of August 1, 1996
among
SOUTHWEST AIRLINES CO.,
Lessee,
NATIONSBANK, N.A.,
Owner Participant,
WILMINGTON TRUST COMPANY,
in its capacity as
Pass Through Trustee under each
of the Pass Through Trust Agreements
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
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 1996 TRUST N625SW
- --------------------------------------------------------------------------------
<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. . . . . . . . . . . . . . . . . . . . . . 7
(ii) No Change in Law. . . . . . . . . . . . . . . . . 7
(iii) Pass Through Trustees' 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 Owner Trustee's Counsel. . . . . . . . 11
(xiii) Opinions of Owner Participant's Counsel. . . . . 11
(xiv) Opinion of Oklahoma City Counsel. . . . . . . . . 11
(xv) Opinion of Indenture Trustee's Counsel. . . . . . 11
(xvi) Lessee's Bringdown Certificate. . . . . . . . . . 11
(xvii) Appraisal. . . . . . . . . . . . . . . . . . . . 11
(xviii) Insurance Certificates. . . . . . . . . . . . . . 11
(xix) No Event of Loss. . . . . . . . . . . . . . . . . 11
(xx) No Proceedings. . . . . . . . . . . . . . . . . . 12
(xxi) Bringdown of Other Parties' Representations
and Warranties. . . . . . . . . . . . . . . . . . 12
(xxii) Opinion of Owner Participant's Tax Counsel. . . . 12
(xxiii) No Tax Law Change. . . . . . . . . . . . . . . . 12
(xxiv) Copy of Appraisal. . . . . . . . . . . . . . . . 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. . . . . . . . . . 14
(ii) Corporate Authorization, Etc. . . . . . . . . . . 15
(iii) Governmental Approvals. . . . . . . . . . . . . . 15
(iv) Valid Agreements. . . . . . . . . . . . . . . . . 15
(v) No Proceedings. . . . . . . . . . . . . . . . . . 15
(vi) Taxes. . . . . . . . . . . . . . . . . . . . . . 16
(vii) Financial Condition. . . . . . . . . . . . . . . 16
</TABLE>
PARTICIPATION AGREEMENT [N625SW]
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
(viii) Registration and Recordation. . . . . . . . . . . 16
(ix) Chief Executive Office; Name. . . . . . . . . . . 16
(x) Securities Laws. . . . . . . . . . . . . . . . . 16
(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. . . . . . . . . . . . . . 17
(xvii) Condition of Aircraft. . . . . . . . . . . . . . 18
(xviii) Use of Proceeds. . . . . . . . . . . . . . . . . 18
(xix) No Federal Approvals. . . . . . . . . . . . . . . 18
(xx) Section 1110. . . . . . . . . . . . . . . . . . . 18
(b) General Tax Indemnity. . . . . . . . . . . . . . . . . . 18
(i) Indemnity. . . . . . . . . . . . . . . . . . . . 18
(ii) Exceptions. . . . . . . . . . . . . . . . . . . . 19
(iii) Calculation. . . . . . . . . . . . . . . . . . . 20
(iv) Notice and Contest. . . . . . . . . . . . . . . . 21
(v) Withholdings. . . . . . . . . . . . . . . . . . . 23
(vi) . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . 23
(i) Indemnity. . . . . . . . . . . . . . . . . . . . 23
(ii) Exceptions. . . . . . . . . . . . . . . . . . . . 24
(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. . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 8. Other Representations, Warranties, Covenants and
Indemnities. . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Securities Laws. . . . . . . . . . . . . . . . . . . . . 27
(b) Citizenship. . . . . . . . . . . . . . . . . . . . . . . 28
(c) Chief Executive Office of FUNB. . . . . . . . . . . . . . 28
(d) [Intentionally Omitted]. . . . . . . . . . . . . . . . . 29
(e) Actions of Pass Through Trustee. . . . . . . . . . . . . 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 Wilmington Trust Company
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
</TABLE>
PARTICIPATION AGREEMENT [N625SW]
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<TABLE>
<S> <C>
(o) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 34
(p) FUNB'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) Trust Agreement Not Terminated. . . . . . . . . . . . . . 37
(x) [Intentionally Reserved]. . . . . . . . . . . . . . . . . 37
(y) Discharge of Trust Indenture. . . . . . . . . . . . . . . 37
(z) Permitted Investments. . . . . . . . . . . . . . . . . . 37
(aa) Special Purchase Option. . . . . . . . . . . . . . . . . 38
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . 39
SECTION 9. Payments to Lessee of Trust Indenture Monies. . . . . . . . . 39
SECTION 10. Other Documents; Amendment. . . . . . . . . . . . . . . . . . 39
SECTION 11. Certain Covenants of Lessee. . . . . . . . . . . . . . . . . . 40
(a) Further Assurances. . . . . . . . . . . . . . . . . . . . 40
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . 40
(c) FAA Filings. . . . . . . . . . . . . . . . . . . . . . . 40
(d) Annual Compliance Opinions . . . . . . . . . . . . . . . 41
(e) Engine Purchase Agreement. . . . . . . . . . . . . . . . 41
(f) Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 41
(g) Corporate Existence. . . . . . . . . . . . . . . . . . . 42
(h) No Certificate Ownership. . . . . . . . . . . . . . . . . 42
SECTION 12. Ownership of Aircraft. . . . . . . . . . . . . . . . . . . . . 42
SECTION 13. Notices; Consent to Jurisdiction. . . . . . . . . . . . . . . 42
SECTION 14. Change of Situs of Owner Trust. . . . . . . . . . . . . . . . 43
SECTION 15. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) Consents under Lease and Trust Indenture. . . . . . . . . 44
(b) Survival. . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Counterparts; Waivers; Governing Law. . . . . . . . . . . 44
(d) No Recourse Against Owner Trustee. . . . . . . . . . . . 45
(e) Duties Limited. . . . . . . . . . . . . . . . . . . . . . 45
(f) Binding on Parties and Successors. . . . . . . . . . . . 45
(g) Enforceability Representations. . . . . . . . . . . . . . 45
(h) Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . 45
(i) Copies. . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 16. Transaction Costs; Invoices and Payment of Expenses. . . . . . 46
SECTION 17. Optional Redemption of Certificates. . . . . . . . . . . . . . 47
</TABLE>
PARTICIPATION AGREEMENT [N625SW]
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<TABLE>
<S> <C>
SECTION 18. Section 1110 Compliance. . . . . . . . . . . . . . . . . . . 50
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
EXHIBIT A - Form of Guaranty
EXHIBIT B - Form of Assignment and Assumption
EXHIBIT C - Form of Trust Indenture and Security Agreement to be executed on
the Delivery Date
EXHIBIT D - Form of Sale and Lease Agreement to be executed on the Delivery
Date
</TABLE>
PARTICIPATION AGREEMENT [N625SW]
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of August 1, 1996 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) NATIONSBANK, N.A., a national banking association (the "Owner
Participant"), (iii) FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national
banking association, in its individual capacity, only as expressly provided
herein (in such capacity, "FUNB") and otherwise, solely as Owner Trustee under
the Trust Agreement (in such capacity, the "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 Pass
Through Trust Agreements ("Pass Through Trustee") and as Holder.
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, and has sold one such aircraft having U.S. Registration No. N625SW
and Manufacturer's serial number 27701 to Lessee which is the subject of this
Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, 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 will enter
into the Trust Indenture in the form attached hereto as Exhibit C 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 each Pass
Through Trustee as Holder, 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
PARTICIPATION AGREEMENT [N625SW]
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WHEREAS, in connection with the foregoing, each Pass Through Trustee
will issue the Pass Through Certificates substantially in the form of Exhibit A
to each Pass Through Trust Agreement; and
WHEREAS, to facilitate Owner Trustee's sale of the Certificates to the
Pass Through Trustee and the purchase of such Certificates by the applicable
Pass Through Trustee, Lessee will duly authorize the execution and delivery of
one or more 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; and
WHEREAS, pending the purchase of the Certificates, the proceeds from the
sale of the Pass Through Certificates will be held in the Escrow Account (as
defined in Section 2.02(b) of the Pass Through Trust Agreement) and thereafter,
on the Delivery Date, applied to effect the purchase of the Certificates and in
turn the purchase of the Aircraft from the Lessee pursuant to the Sale and
Lease Agreement to be executed and delivered by Lessee and Owner Trustee on the
Delivery Date in the form attached hereto as Exhibit D (as completed pursuant
to Section 4(a)(v)(1), the "Lease"); and on the Delivery Date 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, on the Delivery Date
the Owner Trustee and Lessee will enter into the Lease whereby, subject to the
terms and conditions set forth therein, on the Delivery Date the Owner Trustee
will purchase the Aircraft from Lessee and lease the same back to Lessee, and
Lessee will sell the Aircraft to the Owner Trustee and 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," "Pass
Through Trustee," "Owner Trustee" and "Indenture Trustee" shall have the
further meanings attributed thereto in the form of Lease attached hereto as
Exhibit D, 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 such form of
Lease or the form of Trust Indenture attached hereto as Exhibit C. 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.
PARTICIPATION AGREEMENT [N625SW]
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(b) Subject to the terms and conditions of this Agreement, (i)
each of the Pass Through Trustees 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, 1996,
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, 1996. Each Pass Through Trustee shall, in accordance with Section 2.01 of
the applicable Pass Through Trust Agreement, execute, authenticate and deliver
Pass Through Certificates, dated a date not later than the Delivery Date and of
the maturities, in the principal amounts, bearing the interest rates and of the
other economic terms specified in the request of the Company delivered pursuant
to such Section 2.01, and deliver such Pass Through Certificates to Morgan
Stanley & Co., Incorporated as representative of the Underwriters (the
"Underwriters") of the public offering of the Pass Through Certificates, as
specified in such request against payment by the Underwriters of an amount
equal to the aggregate principal amount of its Loan. 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 each of the Pass Through
Trustees, the amount of its Loan is hereinafter called such Participant's
"Commitment" for the Aircraft. In case any 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 Participants 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 Participants
shall remain subject to the terms and conditions set forth in this Agreement.
(c) Owner Participant has delivered to Babcock & Brown
Financial Corporation ("Babcock & Brown") a computer file containing the
parameters for determining (1) the rent schedules, Stipulated Loss Value
schedule, Termination Value schedule, the expiration date of the Base Lease
Term and purchase option dates and amounts to be contained in the Lease, and
(2) the amount of each Participant's Commitment, based on an assumed interest
rate and other assumptions. The parties hereto agree that such parameters will
be adjusted to reflect any differences between (3) the assumptions on which
such computer file is based and (4) the actual interest rates realized on the
issuance of the Pass Through Certificates and the other actual facts and
circumstances in respect of the transactions contemplated by this Agreement for
the purposes of determining (5) the dates and amounts required to complete the
Lease (including the Basic Rent, Stipulated Loss Values and Termination Values)
and (6) the amount of the Owner Participant's Commitment, the amount of each
Loan, the aggregate principal amount of the Certificates, such parameters to be
applied to maintain Net Economic Return and minimize the Net Present Value of
Rents to the extent possible consistent with maintaining Net Economic Return.
(d) In the event that Owner 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
PARTICIPATION AGREEMENT [N625SW]
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event the Defaulting Participant will have no further right to participate in
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 (d),
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 and the
Indenture Trustee 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, and (ii) (A) 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, (B) such substituted financial
institution shall enter into amendments to the Trust Agreement, in form and
substance satisfactory to the Owner Trustee, and the Indenture Trustee 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 (C) 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. 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 Owner Participant pursuant to
this paragraph (d) 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, each of the Pass
Through Trustees 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, 1996, which notice shall specify
the amount of each Participant's Commitment for the Aircraft. As to each
Participant, the making of its Commitment for such Aircraft available in the
manner required by this Section 2 shall constitute a waiver of such notice.
The Owner Trustee and the Indenture Trustee shall be deemed to have waived such
notice if the Owner Trustee shall have received from the Owner Participant
funds in the full amount of the Owner Participant's Commitment and the proceeds
of the sale of the Certificates in the full amount of each Pass Through
Trustee'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 1996 Trust N625SW Certificates which shall be
delivered simultaneously to each of the Pass Through Trustees. 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.
PARTICIPATION AGREEMENT [N625SW]
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The Owner Participant agrees to make its Commitment available to
First Union National Bank of North Carolina, Charlotte, North Carolina, Account
No. 465946, ABA No. 053000219, Reference: Southwest Airlines 1996 Trust
N625SW, and the Pass Through Trustees agree to make their Commitment available
to the Indenture Trustee at the Indenture Trustee's account no. 40376-0, 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, 1996. 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.
"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Pass
Through Trustees, the rate per annum borne by the Series SWA 1996 Trust N625SW
Certificate in respect of which such 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.
FUNB 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 Owner
Participant, use reasonable efforts to invest, at the risk, expense and
direction of Lessee, the funds received by it from the Owner Participant 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 FUNB or a
bank or other financial
PARTICIPATION AGREEMENT [N625SW]
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<PAGE> 11
institution having capital, surplus and undivided profits of at least
$100,000,000; provided, that title to the underlying obligations shall pass to
FUNB and that such underlying securities shall be segregated in a custodial or
trust account of or for the benefit of FUNB. Any such obligations purchased by
FUNB, whether directly or through a repurchase agreement, shall be held in
trust by FUNB (but not as part of the Trust Estate or Trust Indenture Estate)
for the benefit of the Owner Participant. Lessee shall, on the Delayed
Delivery Date or the date the funds furnished by the Owner Participant are
required to be returned to the Owner Participant, as the case may be, reimburse
FUNB for the benefit of the Owner 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 account of the Owner
Participant (such income and profits to be credited against Lessee's obligation
to reimburse the Owner Participant for the loss of use of funds made available
to FUNB) and all other income and profits and all losses on the investment of
such funds shall be for the account of Lessee; and FUNB 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 and the Indenture Trustee, upon their respective receipts in full of
the Owner Participant's and the Pass Through Trustees' Commitments 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 and the Indenture Trustee acting on behalf of the Owner
Participant (in regard to item (a) below) and to the Owner Trustee (in regard
to items (b) - (f) below):
(a) to pay to Lessee the Lessor's Cost in the manner set forth
in Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
(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, the
Lease, the Trust Indenture, a Lease Supplement and a Trust Supplement, in each
case covering the Aircraft;
(e) to borrow the Loan from the Pass Through Trustees to
finance a portion of Lessor's Cost and to issue to the Pass Through Trustees
Series SWA 1996 Trust N625SW Certificates in an aggregate principal amount
equal to the amount borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be taken
by the Owner Trustee on the Delivery Date by the terms of any Operative
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
PARTICIPATION AGREEMENT [N625SW]
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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),
(xvii), (xxi) (insofar as it relates to the Pass Through Trustees), (xxii) and
(xxiii) shall not be conditions precedent to the obligation of the Pass Through
Trustees, and paragraphs (iv), (xiii), (xxi) (insofar as it relates to the
Owner Participant) and (xxiv) shall not be conditions 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 Pass Through Trustees, 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 Pass Through Trustees or the Owner Participant to make
their respective Commitments available or, in the case of any Pass
Through Trustee, to acquire a Series SWA 1996 Trust N625SW Certificate
or to realize the benefits of the security afforded by the Trust
Indenture.
(iii) PASS THROUGH TRUSTEES' COMMITMENT. In the case of
the Owner Participant, the Pass Through Trustees shall have made
available the amount of their respective Commitments for the Aircraft in
accordance with Section 1 hereof.
(iv) OWNER PARTICIPANT'S COMMITMENT. In the case of the
Pass Through Trustees, 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 applicable Pass Through Trustee shall receive an executed
original of its Series SWA 1996 Trust N625SW 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 the Lessee and the Owner Participant shall receive copies of the
Tax Indemnity Agreement:
(1) the Lease, with all the blanks in the form
of Lease attached hereto as Exhibit D completed by the insertion
of appropriate dates and amounts conforming to the computer file
referred to in Section 1(c) adjusted as contemplated therein;
(2) a Lease Supplement covering the Aircraft and
dated the Delivery Date;
PARTICIPATION AGREEMENT [N625SW]
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(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;
(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 1996 Trust N625SW
Certificates;
(11) the Manufacturer's Consent; and
(12) the Pass Through Trust Agreements.
(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 Pass Through Trustees 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 [N625SW]
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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 Pass Through
Trustees 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), FUNB 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), FUNB and the Owner Participant,
respectively, which authorize the execution, delivery and
performance by the Indenture Trustee (in its individual
capacity), FUNB 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), each Pass Through Trustee
and FUNB as 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, or any state thereof, 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.
PARTICIPATION AGREEMENT [N625SW]
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(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 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, 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.
PARTICIPATION AGREEMENT [N625SW]
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(xii) 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 Moore & Van Allen,
PLLC, counsel for the Owner Trustee.
(xiii) OPINIONS OF OWNER PARTICIPANT'S COUNSEL. Each Pass
Through Trustee shall have received a favorable opinion, in form and
substance satisfactory to it, addressed to the Indenture Trustee, the
Pass Through Trustees, the Owner Trustee and Lessee from (a) Morgan,
Lewis & Bockius 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 organization and due authorization
and execution of the Operative Agreements to which the Owner Participant
is a party.
(xiv) 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.
(xv) 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.
(xvi) 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), (xix) and (xx) (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).
(xvii) 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 II hereto.
(xviii) 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.
(xix) 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.
PARTICIPATION AGREEMENT [N625SW]
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(xx) 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.
(xxi) 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 1996 Trust N625SW Certificates 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.
(xxii) OPINION OF OWNER PARTICIPANT'S TAX COUNSEL. The
Owner Participant shall have received from Morgan, Lewis & Bockius 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.
(xxiii) NO TAX LAW CHANGE. In the opinion of the
Owner Participant and its special counsel, there shall have been, since
two days prior to the date of execution of this Agreement, 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.
(xxiv) COPY OF APPRAISAL. The Pass Through Trustees shall
have received a letter from Aero Economics, Inc. to the effect that the
fair market value of the Aircraft on the Delivery Date is not less than
125% of the aggregate amount of the Loans.
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 Pass Through Trustees, 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
PARTICIPATION AGREEMENT [N625SW]
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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) and 4(a)(xx) 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 1996
Trust N625SW 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), FUNB 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), FUNB and the Owner Participant, respectively, which authorize
the execution, delivery and performance by the Indenture Trustee (in its
individual capacity), FUNB 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), FUNB 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), and 4(a)(xv), 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.
PARTICIPATION AGREEMENT [N625SW]
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(vii) In the opinion of Lessee and its counsel, there
shall have been, since the date of execution of this Agreement, 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 Pass
Through Trustees', the Owner Participant's or the Indenture Trustee's interest
who agree to hold such information confidential, in accordance with this
Section 5, (B) to the aforementioned prospective and permitted transferees',
the Owner Trustee's, the Pass Through Trustees', 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, in accordance
with this Section 5, (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 Pass Through Trustees, 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, 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), 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
PARTICIPATION AGREEMENT [N625SW]
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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) 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
PARTICIPATION AGREEMENT [N625SW]
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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,
1995 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 June 30, 1996 (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, 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; NAME. 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 or change of its name.
(x) SECURITIES LAWS. Neither Lessee nor anyone acting
on behalf of Lessee has directly or indirectly offered (A) any
beneficial interest or security relating to the ownership of the
Aircraft or the Lease 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
Owner Participant and not more than 21 other leasing companies or other
institutional investors (in the case of such beneficial interest or
securities), or (B)
PARTICIPATION AGREEMENT [N625SW]
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(assuming the accuracy of the representations in Sections 8(a), 8(k)(vi)
and 8(p)(viii)), any interest in the Trust Estate, the Trust Indenture
Estate, the estate created by the Pass Through Trust Agreement or any of
the Certificates, Pass Through Certificates, or any similar interest or
security, 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
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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, any
Pass Through Trustee, 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 except that for purposes of this
Section 7(b)(i) an Indemnified Party shall not include any Holder),
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
PARTICIPATION AGREEMENT [N625SW]
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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
and each Pass Through Certificate or the issuance, reissuance,
acquisition, redemption, expiration or subsequent transfer thereof under
the Trust Indenture 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, or Premium
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.
(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 (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
PARTICIPATION AGREEMENT [N625SW]
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(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.
(iii) CALCULATION. Lessee agrees that, with respect to
any payment or indemnity pursuant to Section 7(b)(i) or Section 7(c)
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
PARTICIPATION AGREEMENT [N625SW]
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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 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
PARTICIPATION AGREEMENT [N625SW]
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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 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.
PARTICIPATION AGREEMENT [N625SW]
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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) 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 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.
(vi) Wherever the phrase "Operative Agreement" or "Operative
Agreements" is used in this Section 7(b), such phrase includes each Pass
Through Trust Agreement.
(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,
PARTICIPATION AGREEMENT [N625SW]
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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) return of possession of the Aircraft by Lessee to Lessor and
acceptance on behalf of 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
PARTICIPATION AGREEMENT [N625SW]
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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 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.
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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). 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 and are payable by the Owner Participant 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.
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(v) Wherever the phrase "Operative Agreement" or
"Operative Agreements" is used in this Section 7(c) such phrase includes
each Pass Through Trust Agreement.
(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
in accordance with Section 9.1 of the Lease 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 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
PARTICIPATION AGREEMENT [N625SW]
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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 FUNB, 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 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 Pass Through Trustees, 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). FUNB, in its individual capacity, agrees
that if at any time a responsible officer of FUNB shall obtain actual knowledge
that FUNB 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 FUNB. FUNB 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 Charlotte, North Carolina (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 Charlotte, North Carolina. FUNB in its individual
capacity agrees that it will not change the location of such office to a
location outside of
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Charlotte, North Carolina, without 10 days' prior written notice to Lessee,
Indenture Trustee, the Pass Through Trustees and the Owner Participant.
(d) [INTENTIONALLY OMITTED].
(e) ACTIONS OF PASS THROUGH TRUSTEE. (i) Each 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 to so direct the
Indenture Trustee from Certificateholders holding the same percentage of
Certificates evidencing Fractional Undivided Interests in the Trust
holding the Certificates.
(ii) Lessee and each 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) Each 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.
(iv) For purposes of this subparagraph (e), the terms
"Direction", "Certificateholders", "Certificates", "Fractional Undivided
Interests" and "Trust" shall have the meanings attributed to them in the
relevant Pass Through Trust Agreement.
(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 its jurisdiction of organization, and has the
corporate power and authority to carry on its business as now conducted,
to own or hold under lease its properties and to enter into and perform
its obligations under the Owner Participant 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 Lessee in Section 7(a)(xv), neither the
execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions
PARTICIPATION AGREEMENT [N625SW]
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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;
(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 FUNB 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
PARTICIPATION AGREEMENT [N625SW]
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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 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 WILMINGTON TRUST COMPANY
IN INDIVIDUAL CAPACITY. Wilmington Trust Company 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, this Agreement and each Pass
Through Trust Agreement and, in its capacity as Indenture Trustee and
Pass Through Trustee, respectively, to authenticate the Certificates and
the Pass Through Certificates;
PARTICIPATION AGREEMENT [N625SW]
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(iii) the Indenture Trustee Agreements, and the
authentication of the Certificates and the Pass Through 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 or Pass Through Trustee, as
the case may be, of this Agreement, and each Pass Through Trust
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) except for the issuance and sale pursuant to the
respective Pass Through Trust Agreement of the Pass Through Certificate,
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 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
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Agreement and, in the case of the Indenture Trustee and Lessee, the Owner
Participant's obligations hereunder, or (C) any other corporation, limited
liability company 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 Pass Through Trustees 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 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.
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(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. FUNB 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. With respect to the initial sale of
the Pass Through Certificates as contemplated by Section 1(b) the Lessee
covenants that it will engage an underwriter that has been issued a Prohibited
Transaction Exemption (such as Prohibited Transaction Exemption 89-89, 90-24 or
90-29 or any other comparable exemption) and that the Lessee will use its best
efforts to structure the sale of the Pass Through Certificates so that the
conditions of such Prohibited Transaction Exemptions are satisfied.
(p) FUNB'S REPRESENTATIONS AND WARRANTIES. FUNB, 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
FUNB, as the case may be;
(ii) the Trust Estate is free and clear of Lessor Liens
attributable to FUNB 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 FUNB 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 FUNB 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 FUNB 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
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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 North Carolina 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 FUNB 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
FUNB 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 FUNB, threatened, against FUNB 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 FUNB 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 FUNB, 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 North Carolina governmental authority
or agency pursuant to any federal or North Carolina law governing the
banking or trust powers of FUNB; 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
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and Use Tax Certificate of Resale reflecting Owner Trustee's Texas or
North Carolina 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, 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) 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
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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 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) TRUST AGREEMENT NOT TERMINATED. Each of the parties hereto
acknowledges that the bankruptcy, death or incapacity of the Owner Participant
will not terminate the Trust Agreement, nor entitle such person's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Estate, nor
otherwise effect the rights, obligations and liabilities of the parties hereto.
No creditor of the Owner Participant shall obtain legal title to or exercise
legal or equitable remedies with respect to the Trust Estate as a result of the
Owner Participant's status. No transfer, by operation of law or otherwise, of
any right, title and interest of the Owner Participant in and to its beneficial
interest in the Trust Estate shall operate to terminate the Trust Agreement or
the Trusts created thereby.
(x) [INTENTIONALLY RESERVED].
(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
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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.
(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, 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.
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(bb) TRANSFERS OF DEBT INTERESTS. Except in connection with any
transfer pursuant to Section 17 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, warrants and covenants 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, warranties
and covenants in the preceding sentence.
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. 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, 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 an executed copy of the Trust Agreement and hereby consents in all
respects to the execution and delivery of the Trust Agreement on the date
hereof and the execution and delivery of the Trust Indenture on the Delivery
Date in the form of Exhibit C hereto 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, subject to the execution and
delivery of the Trust Indenture on the Delivery Date, 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
PARTICIPATION AGREEMENT [N625SW]
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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 subject to the execution and delivery of the Trust Indenture on the
Delivery Date, 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 FUNB'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 1997, 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 (A) a
corporation organized and existing under the laws of the United States
of America or any state thereof or the District of Columbia, (B) a
"citizen of the United States" as defined in the Act, and (C) a United
States certificated air carrier, such that Owner Trustee will have the
benefit of Section 1110 of the United States Bankruptcy Code to the
extent Owner Trustee had such benefit immediately prior to such
consolidation or merger;
(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 and each Pass Through Trust
Agreement 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
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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 and
each Pass Through Trust Agreement 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 and each Pass Through
Trust 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) NO CERTIFICATE OWNERSHIP. Lessee agrees that it will not,
at any time, hold any Certificates or Pass Through 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
PARTICIPATION AGREEMENT [N625SW]
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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
Pass Through Trustee, 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 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
PARTICIPATION AGREEMENT [N625SW]
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<PAGE> 49
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)(xii) 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, Pass Through Trustee and any Holder provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, Pass
Through Trustees' and any Holder'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 or the Pass
Through Trust Agreements, 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
PARTICIPATION AGREEMENT [N625SW]
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STATE OF NEW YORK. 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.
(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
PARTICIPATION AGREEMENT [N625SW]
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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) COPIES. Lessee shall furnish to the Indenture Trustee
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished to the Owner Trustee under the
Lease, to the extent that the same shall not have been furnished directly to
the Indenture Trustee pursuant to the Lease.
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 initial
issuance of the Pass Through Certificates, the reasonable and actual fees,
expenses and disbursements of (1) Potter Anderson & Corroon, special counsel
for the Indenture Trustee and Pass Through Trustee, (2) Moore & Van Allen,
PLLC, counsel for the Owner Trustee, (3) Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, (4) Shearman & Sterling, special counsel
for the Underwriters to the extent not paid by the Underwriters, and (5) Vinson
& Elkins L.L.P., special counsel for Lessee, but only to the extent of their
expenses and disbursements, (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 and the Pass Through Trustee under the Pass Through
Trust Agreement, (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 expenses of the Owner Participant relating to the transactions
contemplated hereby, excluding the fees and expenses of Owner Participant's
counsel, (viii) the placement or underwriting fees, commissions and expenses,
if any, in placing the Pass Through Certificates and all costs and expenses
associated with the public offering, pursuant thereto, and (ix) 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 the percentage of Lessor's Cost set forth in
Section 3.7.1 of the Lease incurred in connection with the closing of this
transaction on the Delivery Date (y) and 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) (vii) 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,
PARTICIPATION AGREEMENT [N625SW]
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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.
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 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
PARTICIPATION AGREEMENT [N625SW]
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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) Basic Rent payable in respect of the period from and
after the Refinancing Date shall be as provided in the Refinancing
Information, (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 1996 Trust N625SW 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
and any related loan or commitment fees;
(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, together with
payment in full of all other amounts then payable to such Holder and the
Indenture Trustee hereunder or under the Trust Indenture; and
(7) the Owner Participant's obligations under this
Section 17(a) may be discharged by the appointment of an investment
banker satisfactory to Lessee.
(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
PARTICIPATION AGREEMENT [N625SW]
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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.
(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 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.
PARTICIPATION AGREEMENT [N625SW]
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SECTION 18. 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 [N625SW]
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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:
-----------------------------------
Treasurer
NATIONSBANK, N.A.,
Owner Participant
By:
-----------------------------------
Vice President
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, in its individual
capacity only as expressly provided
herein and otherwise solely as Owner
Trustee,
By:
-----------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as
otherwise expressly provided herein,
but solely as Indenture Trustee
By:
-----------------------------------
Title:
WILMINGTON TRUST COMPANY, not in
its individual capacity, except as
otherwise expressly provided herein,
but solely as Pass Through Trustee
By:
-----------------------------------
Title:
PARTICIPATION AGREEMENT [N625SW]
<PAGE> 57
SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee: Owner Trustee:
- ------ -------------
Southwest Airlines Co. First Union National Bank of North Carolina
2702 Love Field Drive 230 South Tryon Street, 9th Floor
P.O. Box 36611 Charlotte, NC 28288-1179
Dallas, Texas 75235-1611 Attn: Bond Administration
Attn: Treasurer Telecopy: (704) 383-7316
Telecopy: (214) 792-4022 Payment Instructions:
Payment Instructions: First Union National Bank of North Carolina
Southwest Airlines Co. 230 South Tryon Street, 9th Floor
Bank One Dallas Charlotte, NC 28288-1179
ABA No. 11100614 ABA No. 053000219
Account No. 98120109 Account No. 465946
Reference: N625SW Attn: Bond Administration - Pablo de la Canal
Reference: Southwest Airlines
Owner Participant:
- -----------------
NationsBank, N.A. Indenture Trustee and Pass Through Trustee:
c/o NationsBanc Lease Investments, Inc. ------------------------------------------
NationsBanc Corp. Center, 12th Floor Wilmington Trust Company
101 North Tryon Street Rodney Square North
NC-1007-12-01 1100 North Market Street
Charlotte, NC 28255 Wilmington, Delaware 19890-0001
Telecopy: (704) 386-3271 Attn: Corporate Trust Administration
Attn: Alison Dubbs Telecopy: (302) 651-8882
Payment Instructions: Payment Instructions:
NationsBank of North Carolina Wilmington Trust Company
ABA No. 053000196 Wilmington, Delaware
For the account of ABA No. 031100092
NationsBanc For the account of Southwest Airlines 1996-1
Lease Investments, Inc. Account No. 40376-0
Account No. 001608249 Reference: N625SW
Reference: Southwest Airlines Attn: David A. Vanaskey
Corporate Trust Administration
</TABLE>
PARTICIPATION AGREEMENT [N625SW]
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<PAGE> 58
SCHEDULE II
Appraisal
1. The fair market value of the Aircraft on the Delivery Date is equal to
Lessor's Cost.
2. On the Delivery Date, the Aircraft is reasonably estimated to have:
(A) a useful life of at least 125% of the Base Lease Term;
(B) a residual value as of the end of the Base Lease Term of at least
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 the Special Purchase Option Date.
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 reasonably be requested by Owner Participant.
PARTICIPATION AGREEMENT [N625SW]
S-2
<PAGE> 59
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 Pass Through
Trustees 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], Wilmington Trust
Company, as the Pass Through Trustees, First Union National Bank of North
Carolina, 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 August 1, 1996 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 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
PARTICIPATION AGREEMENT [N625SW]
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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, 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
PARTICIPATION AGREEMENT [N625SW]
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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 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.
PARTICIPATION AGREEMENT [N625SW]
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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;
(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.
PARTICIPATION AGREEMENT [N625SW]
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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.
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.
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 [N625SW]
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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 [N625SW]
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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 August 1, 1996, among Southwest
Airlines Co., as Lessee, NationsBank, N.A., as Owner Participant, Wilmington
Trust Company, as Pass Through Trustee, First Union National Bank of North
Carolina, 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 August 1, 1996 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, Pass Through Trustee 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 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
PARTICIPATION AGREEMENT [N625SW]
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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 Pass Through
Trustees from and against any reduction in the amount payable out of the Trust
Estate to the Pass Through Trustees, and any other losses, costs or expenses
incurred by the Pass Through Trustees 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:
(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;
PARTICIPATION AGREEMENT [N625SW]
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(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
Lessee in Section 7(a)(xv) of the Participation Agreement, and compliance with
the covenants of Section 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;
(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
PARTICIPATION AGREEMENT [N625SW]
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(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.
PARTICIPATION AGREEMENT [N625SW]
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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 [N625SW]
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EXHIBIT 4.58
- --------------------------------------------------------------------------------
TRUST AGREEMENT
dated as of August 1, 1996
between
NATIONSBANK, N.A.,
Owner Participant
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Owner Trustee
-------------------------------
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1996 TRUST N625SW
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATIONOF 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. . . . . . . . . . . . . . . . . . . . . . 4
(d) Excluded Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Legal Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.02 Method of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
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<TABLE>
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ARTICLE V
DUTIES OF THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.01 Notice of Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.02 Action Upon Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.03 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 5.04 No Duties Except as Specified in Trust Agreement or Instructions. . . . . . . . . . . . . . . . . 6
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6.03 No Representations or Warranties as to Certain Matters. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.04 No Segregation of Monies; Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.05 Reliance Upon Certificates, Counsel and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.06 Not Acting in Individual Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.07 Fees and Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.08 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VII
INDEMNIFICATION OF FUNBBY OWNER PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 7.01 Owner Participant to Indemnify FUNB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
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ARTICLE VIII
TRANSFER OF THE OWNER PARTICIPANT'S INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 8.01 Transfer of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IX
SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 9.01 Resignation of Owner Trustee: Appointment of Successor. . . . . . . . . . . . . . . . . . . . 11
(a) Resignation or Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Execution and Delivery of Documents, Etc. . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 9.02 Co-Trustees and Separate Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE X
SUPPLEMENTS AND AMENDMENTSTO TRUST AGREEMENT AND OTHER AGREEMENTS . . . . . . . . . . . . . . . 13
SECTION 10.01 Supplements and Amendments and Delivery Thereof. . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Delivery of Amendments and Supplements to Certain Parties. . . . . . . . . . . . . . . . 13
SECTION 10.02 Discretion as to Execution of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 10.03 Distribution of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 10.04 Absence of Requirement as to Form. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 11.01 Termination of Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 11.02 Owner Participant Has No Legal Title in Trust Estate. . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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<TABLE>
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SECTION 11.03 Assignment, Sale, Etc. of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.04 Trust Agreement for Benefit of Certain Parties Only. . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.05 [Intentionally reserved for potential future use]. . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.06 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.07 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.08 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.09 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11.10 Binding Effect, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.11 Headings; References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11.13 Performance by the Owner Participant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
TRUST AGREEMENT [N625SW]
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TRUST AGREEMENT
This TRUST AGREEMENT, dated as of August 1, 1996, is between
NATIONSBANK, N.A., a national banking association, and FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association (in its individual
capacity, together with its successors and permitted assigns, "FUNB", 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. N625SW and Manufacturer's serial number 27701, 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 [N625SW]
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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.
SECTION 2.02 DECLARATION OF TRUST. FUNB 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.
TRUST AGREEMENT [N625SW]
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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 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 Pass Through
Trustees 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 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,
TRUST AGREEMENT [N625SW]
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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 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.
TRUST AGREEMENT [N625SW]
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(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.
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
TRUST AGREEMENT [N625SW]
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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.
FUNB 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.
TRUST AGREEMENT [N625SW]
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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. FUNB 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. FUNB 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
FUNB 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 FUNB 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 FUNB 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
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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 FUNB 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 FUNB 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 FUNB, 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 FUNB or
by the Owner Trustee, as the case may be, and except that FUNB 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 FUNB or the
Owner Trustee, as the case may be, and that this Trust Agreement constitutes
the legal, valid and binding obligation of FUNB or the Owner Trustee, as the
case may be, enforceable against FUNB 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
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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 FUNB 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
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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.
ARTICLE VII
INDEMNIFICATION OF FUNB
BY OWNER PARTICIPANT
SECTION 7.01 OWNER PARTICIPANT TO INDEMNIFY FUNB. 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 FUNB 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 FUNB 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 FUNB 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 FUNB (or from the
failure of FUNB 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 FUNB
of its covenant in the last sentence of Section 5.04 hereof or a breach by FUNB
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 FUNB 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 FUNB 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 FUNB
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, FUNB 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
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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, FUNB 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, FUNB 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 Owner Trustee in the
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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 FUNB may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which FUNB shall be a
party, or any corporation to which substantially all the corporate trust
business of FUNB 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;
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(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 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.
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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.
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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.
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.
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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
1996 Trust N625SW."
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. THIS TRUST AGREEMENT HAS BEEN DELIVERED IN THE
STATE OF NEW YORK.
SECTION 11.13 PERFORMANCE BY THE OWNER PARTICIPANT. Any
obligation of FUNB 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 [N625SW]
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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.
NATIONSBANK, N.A.
By:
----------------------------------
Vice President
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
----------------------------------
Corporate Trust Officer
TRUST AGREEMENT [N625SW]
<PAGE> 1
EXHIBIT 4.59
- --------------------------------------------------------------------------------
TRUST INDENTURE
AND SECURITY AGREEMENT
dated as of August 1, 1996
between
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
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 1996 TRUST N625SW
- --------------------------------------------------------------------------------
Southwest Airlines Co.
Series SWA 1996 Trust N625SW Certificates
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.02 Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 2
THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.01. Certificates; Title and Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.02. Execution and Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.04. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.05. Holder Lists; Ownership of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 14
Section 2.07. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.08. Payment on Certificates; Defaulted Principal and Interest. . . . . . . . . . . . . . . . 14
Section 2.09. Payment from Indenture Estate Only. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.10. Execution, Delivery and Dating of Certificates upon Issuance. . . . . . . . . . . . . . . 16
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATIONOF FUNDS IN THE INDENTURE . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.01. [Reserved for Potential Future Use]. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.02. Payment in Case of Redemption of Certificates. . . . . . . . . . . . . . . . . . . . . . 17
Section 3.03. Application of Rent When No Indenture Event of Default Is
Continuing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.04. Application of Certain Payments in Case of Requisition or Event of
Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.05. Payments During Continuance of Indenture Event of Default. . . . . . . . . . . . . . . . 19
Section 3.06. Payments for Which Application Is Provided in Other Documents. . . . . . . . . . . . . . 20
Section 3.07. Payments for Which No Application Is Otherwise Provided. . . . . . . . . . . . . . . . . 20
Section 3.08. Application of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 4
COVENANTS OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.01. Covenants of the Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.02. Covenants of First Union National Bank of North Carolina. . . . . . . . . . . . . . . . . 22
</TABLE>
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ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASEOF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING CONTINUATION
OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.01. Disposition, Substitution and Release of Property Included in the
Indenture Estate During Continuation of Lease. . . . . . . . . . . . . . . . . . . . . . 22
Section 5.02. Certificates in Respect of Replacement Aircraft and Engines. . . . . . . . . . . . . . . 23
ARTICLE 6
REDEMPTION OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.01. Redemption of Certificates upon Certain Events. . . . . . . . . . . . . . . . . . . . . . 23
Section 6.02. Redemption or Purchase of Certificates Upon Certain Indenture Events
of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.03. Notice of Redemption to Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.04. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.05. Certificates Payable on Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 7
MATTERS CONCERNING THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.01. Repayment of Monies for Certificate Payments Held by the Indenture Trustee. 25
Section 7.02. [Reserved for Potential Future Use]. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.03. Assumption of Obligations of Owner Trustee by the Company. . . . . . . . . . . . . . . . 26
ARTICLE 8
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.01. Indenture Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.02. Acceleration; Rescission and Annulment. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.03. Other Remedies Available to Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . 30
Section 8.04. Waiver of Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.05. Waiver of Existing Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.06. Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.07. Limitation on Suits by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.08. Rights of Holders to Receive Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.09. Indenture Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 9
INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.01. Duties of Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.02. Rights of Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent;
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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Section 9.05. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.06. Compensation and Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.07. Replacement of Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.08. Successor Indenture Trustee, Agents by Merger, Etc. . . . . . . . . . . . . . . . . . . . 41
Section 9.09. Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.10. Trustee's Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.11. Withholding Taxes; Information Reporting. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.12. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.13. Certain Rights of Owner Trustee and Owner Participant. . . . . . . . . . . . . . . . . . 42
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;TERMINATION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 43
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance; Termination
of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.02. Survival of Certain Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.03. Monies to Be Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.04. Monies to Be Returned to Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.05. Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 11
AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.01. Amendments to this Agreement Without Consent of Holders. . . . . . . . . . . . . . . . . 46
Section 11.02. Amendments to this Agreement with Consent of Holders. . . . . . . . . . . . . . . . . . . 47
Section 11.03. Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.04. Notation on or Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.05. Indenture Trustee Protected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.06. Amendments, Waivers, Etc. of Other Operative Agreements. . . . . . . . . . . . . . . . . 48
Section 11.07. Trust Supplement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 12.01. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 12.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.03. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.04. Rules by Indenture Trustee and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.05. Non-Business Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.06. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.07. No Recourse Against Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.08. Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.09. [Reserved for Potential Future Use].52
Section 12.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
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ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 13.01. Actions to Be Taken upon Termination of Lease. . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
EXHIBITS
Exhibit A-1 - Form of Series SWA 1996 Trust N625SW Installment
Certificates
Exhibit A-2 - Form of Series SWA 1996 Trust N625SW Serial
Certificates
Exhibit B - Maturity Dates, Principal Amounts and Interest Rates
on Series SWA 1996 Trust N625SW Certificates
Exhibit B-1 - Installment Payment Dates and Installment Payment
Percentages
Exhibit B-2 - Issuance of Series SWA 1996 Trust N625SW
Certificates
Exhibit C - [FORM OF] Trust Agreement and Trust Indenture and
Security Agreement Supplement
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
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TRUST INDENTURE AND SECURITY AGREEMENT
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of
August 1, 1996, is between FIRST UNION NATIONAL BANK OF NORTH CAROLINA, 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
1996 Trust N625SW Certificates evidencing the loans made by the Pass Through
Trustees to finance the Owner Trustee's payment of Lessor's Cost as provided in
the Participation Agreement, 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;
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, 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,
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
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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;
(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
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
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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 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
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
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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.
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;
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(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.
"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, each of the Indenture Trustee
and the Pass Through Trustees and (ii) thereafter, the Owner Trustee, has its
principal place of business; and the city and state in which the Indenture
Trustee, Pass Through Trustee or the Owner Trustee, as the case may be,
receives and disburses funds.
"Certificate" or "Certificates" means any certificate or other
debt instrument issued under this Agreement.
"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.
"Defaulted Installment" shall have the meaning specified
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
in Section 2.08.
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"Defeasance Trustee" shall have the meaning specified therefor
in Section 10.05.
"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 or 17 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, or their
respective Affiliates, 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, (ix) any right to demand, collect, sue or otherwise
receive and enforce the payment of any amount described in clauses (i) through
(viii) above, and (x) the rights under Sections 9.13 and 11.06 hereof.
"Federal Aviation Act" means Subtitle VII of Title 49, U.S.C.,
as amended.
"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.
"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.
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"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 substantially in
the form of Exhibit A-1, should any such Certificate be issued hereunder.
"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.
"Installment Payment Percentage" means, with respect to each
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-l.
"Interest Payment Date" means each July 2 and January 2
commencing on January 2, 1997.
"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.
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"Maturity Date" means, with respect to the Series SWA 1996
Trust N625SW Certificates, each of the dates specified in Exhibit B as a
maturity date of such Certificates.
"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.
"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) Moore & Van Allen PLLC or (y) other counsel designated by the Owner
Trustee and who shall be reasonably satisfactory to the Indenture Trustee.
"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 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 First Union National Bank of North
Carolina, not in its individual capacity, except as expressly provided herein,
but solely as trustee under the Trust Agreement,
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and each other Person which may from time to time be acting as Owner Trustee in
accordance with the provisions of the Operative Agreements.
"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 Trust Supplements, whether one or more,
Nos. 1996-A dated as of September 1, 1996, 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.
"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 1996 Trust
N625SW 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 1996 Trust N625SW Certificate, the date set forth as the "Premium
Termination Date" in Exhibit B hereto.
"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
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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 First Union National
Bank of North Carolina, 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.
"Series SWA 1996 Trust N625SW 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.
"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
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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.
"Trust Office" means the principal corporate trust office of
the Owner Trustee located at 230 South Tryon Street, 9th Floor, Charlotte,
North Carolina 28288-1179, Attention: Bond 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. The
Certificates issued hereunder shall be designated as Series SWA 1996 Trust
N625SW Certificates. The Series SWA 1996 Trust N625SW Certificates shall be
substantially in the form set forth in Exhibit A-l or A-2. The Series SWA 1996
Trust N625SW 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 Exhibits
B, B-1 and B-2, as the case may be. The principal of each Certificate, other
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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 1996 Trust N625SW 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 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, 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 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.
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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, Certificates may be exchanged for an equal aggregate
initial principal amount of other Certificates of the same maturity and type,
dated the Delivery Date, and of any authorized denominations or transferred
upon surrender of the 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
Certificate is so surrendered for exchange, the Owner Trustee shall execute,
and the Indenture Trustee shall authenticate and deliver, the replacement
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
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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 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
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 all 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, Premium, if any, and interest on, and any
other amounts payable on or in respect of each Certificate or to the Holder
thereof hereunder. Payment on Series SWA 1996 Trust N625SW 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 1996 Trust N625SW Certificates) shall be paid
in Dollars on each Interest Payment Date or Installment Payment Date (other
than the Maturity Date of such Series SWA 1996 Trust N625SW 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
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due date to such Holder's address as it appears on the Register. Otherwise,
principal of Series SWA 1996 Trust N625SW 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 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 1996 Trust N625SW 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 1996 Trust
N625SW 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 1996 Trust N625SW 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
1996 Trust N625SW 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 1996
Trust
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N625SW 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.
(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, 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.
First Union National Bank of North Carolina, 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 First Union National Bank
of North Carolina, (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 First Union National Bank of North Carolina, 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, (ii) for its own willful misconduct or gross
negligence and (iii) failure to use ordinary care in the handling and
disbursing of funds. If a successor Owner Trustee is appointed in accordance
with the terms of the Trust Agreement and the Participation Agreement, such
successor Owner Trustee shall, without any further act, succeed to all of the
rights, duties, immunities and obligations hereunder, and its predecessor Owner
Trustee and First Union National Bank of North Carolina, shall be released from
all further duties and obligations hereunder, without prejudice to any claims
against First Union National Bank of North Carolina, or such predecessor Owner
Trustee for any default by First Union National Bank of North Carolina, 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 thereof. 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.
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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 received by the Indenture Trustee
from the Owner Trustee or, as assignee of the Owner Trustee, from the Company,
any payment of interest on overdue installments of Basic Rent, 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, 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, such other amounts payable to the Holders, and
without any preference or priority of one Certificate over another,
ratably according to the aggregate amount
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so due for interest, principal, Premium, 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 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
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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, 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, 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, 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, and such other amounts at the date fixed
by the Indenture Trustee for the distribution of such payments or
amounts; and
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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, or interest on such Certificate) due
hereunder or in respect of such Certificate, second, to the payment of Premium
or, 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.
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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, 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;
(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 be required to have been
furnished directly to 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
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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 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA. First Union National Bank of North Carolina, 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. First Union National Bank of North Carolina, 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
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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.
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 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 1996 Trust N625SW 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
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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) The Series SWA 1996 Trust N625SW 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); and the applicable Redemption Date for Certificates to be redeemed
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 its
rights under 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 be continuing for 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)
but excluding the applicable Redemption Date as determined below and all other
amounts payable to the Holders hereunder or under the Participation Agreement,
and, 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). 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. Notice of
redemption or purchase with respect to the Series SWA 1996 Trust N625SW
Certificates shall be given by the Indenture Trustee 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.
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Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
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 1996 Trust N625SW 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.
SECTION 7.02. [RESERVED FOR POTENTIAL FUTURE USE].
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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, 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) and Section 18.2 of the Lease, if applicable;
(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
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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 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;
(i) an opinion of Vinson & Elkins, LLP (or other tax
counsel reasonably acceptable to the Indenture Trustee) in form and substance
reasonably satisfactory to the Indenture Trustee, to the effect that no
Certificate Holder will be required to recognize gain or loss for tax purposes
in connection with the assumption of the debt by Lessee; and
(j) 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
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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 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 First
Union National Bank of North Carolina, 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 First Union National Bank of North Carolina, 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 First Union National Bank of North
Carolina, 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 reserved]
(e) any failure by the Owner Trustee or First Union
National Bank of North Carolina, to observe or perform any other
covenant or obligation of the Owner Trustee or First Union National
Bank of North Carolina, 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
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
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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 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
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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, 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 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.
(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
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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 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
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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.
(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 (other than those arising from a Lease Event of
Default), 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
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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 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
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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 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;
provided, further that if any Indenture Event of Default is as a result of the
Lessee being subject to bankruptcy proceedings under the Bankruptcy Code and
the Lease has been assumed by the Lessee pursuant to Section 365 of the
Bankruptcy Code (or any comparable successor provision), then the Indenture
Trustee shall not exercise any remedies against the Owner Trustee, so long as
no other Indenture Event of Default occurs and is continuing. 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
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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
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
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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 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
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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.
(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.
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(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 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
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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 (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, 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.
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
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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 Series SWA 1996 Trust N625SW 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 1996 Trust N625SW 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
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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 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.
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SECTION 9.11. WITHHOLDING TAXES; INFORMATION REPORTING.
The Indenture Trustee shall exclude and withhold from each distribution of
principal, Premium, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The 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;
(b) at all times (unless otherwise specified in the
Lease) 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 to
exercise rights and to give any notice, consent, waiver or approval
under Section 3.7 or (with respect to liability insurance for the
Owner Participant and Owner Trustee) 11, of the Lease and Section 17
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) to
effect cures pursuant to Section 20 of the Lease; provided that this
will not be deemed to cure the related Event of Default unless
permitted by the terms of Section 8.03(e)(i), 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, 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
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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
(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; 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;
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(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, 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 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.
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. 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:
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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 First Union National
Bank of North Carolina'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
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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 that is
authorized to transact in the State of New York the business of a
trust company and is 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 First Union National Bank of North Carolina.
"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
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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;
or
(8) 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 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,
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
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.
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(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 Sections 9.13 and 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),
4, 5 (but only insofar as
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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), 3.7, 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:
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
-49-
<PAGE> 55
Sections 1(b), 7 (insofar as such Section 7 relates to the Indenture
Trustee and the Holders), 8, 11, 13, 17, 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
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 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 Basic Rent or Supplemental Rent so
that the same is less than the payment of principal of, Premium, if
any, and interest on the Certificates, as the case may be, to be made
from such installment of any 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, 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, 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
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
-50-
<PAGE> 56
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, 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:
First Union National Bank of North Carolina
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Bond Administration
Telex: 684-3115 CHA FUN
Facsimile: (704) 383-7316
Telephone: (704) 383-5272
or if to any other Person, addressed to such Person as provided in the
Participation Agreement.
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
-51-
<PAGE> 57
(b) The Company, the Owner Trustee, the Indenture
Trustee, or the Owner Participant by notice to the others may designate
additional or different addresses for subsequent notices or communications.
(c) Any notice or communication to Holders of the Series
SWA 1996 Trust N625SW 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. 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.
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.
SECTION 12.09. [RESERVED FOR POTENTIAL FUTURE USE].
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
-52-
<PAGE> 58
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).
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
-53-
<PAGE> 59
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.
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, in its individual capacity
only as expressly provided herein
and otherwise solely as Owner Trustee
By:
-------------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as
otherwise expressly provided herein,
but solely as Indenture Trustee
By:
-------------------------------------
Title:
----------------------------------
TRUST INDENTURE AND SECURITY AGREEMENT [N625SW]
-54-
<PAGE> 60
Exhibit A-1 to Trust Indenture and
Security Agreement
Form of Series SWA 1996 Trust N625SW Installment Certificates
$ No.
------------------ -------------
Dated as of ______________ __, 199_
SERIES SWA 1996 TRUST N625SW CERTIFICATE
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1996
Issued in connection with Aircraft N625SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- --------------------- , 2
------------- ---
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, not in its individual
capacity, but solely as owner trustee (the "Owner Trustee") under that certain
Trust Agreement dated as of August 1, 1996, 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 ________________, 1996 or from the most recent date to
which interest has been paid or duly provided for, semiannually, on
_____________ and _______ in each year, commencing ____________________, 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 Trust Indenture
and Security Agreement dated as of August 1, 1996, 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
<PAGE> 61
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 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
A-1-2
<PAGE> 62
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> <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 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.
A-1-3
<PAGE> 63
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 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.
* * *
A-1-4
<PAGE> 64
IN WITNESS WHEREOF, the Owner Trustee has caused this instrument to be
duly executed under its corporate seal.
FIRST UNION NATIONAL
BANK OF NORTH CAROLINA,
not in its individual capacity, but
solely as Owner Trustee
By:
-------------------------------------
Title:
----------------------------------
Issue Date:
A-1-5
<PAGE> 65
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-1-6
<PAGE> 66
Exhibit A-2 to
Trust Indenture and
Security Agreement
Form of Series SWA 1996 Trust N625SW Serial Certificates
$ No.
------------------ -------------
Dated as of __________________ __, 199_
SERIES SWA 1996 TRUST N625SW CERTIFICATE
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Not in its Individual Capacity,
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of August 1, 1996
Issued in connection with Aircraft N625SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
- --------------------- , 2
------------- ---
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, not in its
individual capacity, but solely as owner trustee (the "Owner Trustee") under
that certain Trust Agreement dated as of August 1, 1996 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 ________________, 1996 or from the most recent date to
which interest has been paid or duly provided for, semiannually, on
_______________________ and ___________________ in each year, commencing
______________________, 1996, 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, 1996, 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> 67
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.
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.
A-2-2
<PAGE> 68
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.
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.
A-2-3
<PAGE> 69
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.
* * *
A-2-4
<PAGE> 70
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
not in its individual capacity, but
solely as Owner Trustee
By:
-------------------------------------
Title:
----------------------------------
Issue Date:
A-2-5
<PAGE> 71
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> 72
Exhibit B to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts and
Interest Rates of Series SWA 1996 Trust N625SW 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 1996 Trust N625SW
Certificates, if any shall be issued hereunder.]
<PAGE> 73
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>
</TABLE>
[To be completed at time of issuance of Series SWA 1996 Trust N625SW
Certificates, if any shall be issued hereunder.]
<TABLE>
<S> <C> <C>
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>
</TABLE>
[To be completed at time of issuance of Series SWA 1996 Trust N625SW
Certificates, if any shall be issued hereunder.]
<TABLE>
<S> <C> <C>
TOTAL 100.00000000 ________________
</TABLE>
<PAGE> 74
Exhibit B-2 to
Trust Indenture and
Security Agreement
Issuance of Series SWA 1996 Trust N625SW Certificates
The Series SWA 1996 Trust N625SW 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:
1996-A1 Trust:
7.67% Certificate due January 2, 2014
1996-A2 Trust:
8.00% Certificate due July 2, 2019
B-2
<PAGE> 75
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 ____________, 1996 (herein called the
"Supplement") of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, not in its
individual capacity, but solely as Owner Trustee (herein called the "Owner
Trustee"), under the Trust Agreement, dated as of August 1, 1996 (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, 1996 (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, 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 Holders from time to time of the
Certificates, upon the trusts created by the Trust
<PAGE> 76
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 N625SW 27701
</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 858329
CFM International CFM56-3-B1 859337
</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.
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
C-2
<PAGE> 77
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.
C-3
<PAGE> 78
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.
FIRST UNION NATIONAL
BANK OF NORTH CAROLINA,
not in its individual capacity, but
solely as Owner Trustee
By:
------------------------------------
Title:
---------------------------------
C-4
<PAGE> 1
EXHIBIT 4.60
- --------------------------------------------------------------------------------
SALE AND LEASE AGREEMENT
dated as of August 1, 1996
between
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
-----------------------------
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1996 TRUST N625SW
- --------------------------------------------------------------------------------
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3. Term and Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Lease Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Basic Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Additional Amounts on Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Supplemental Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Adjustment to Basic Rent, Stipulated Loss Value and Termination Value. . . . . . . . . . . . . . . . 15
3.7.1 Adjustments upon Payment by Lessor of Transaction Costs, Etc. . . . . . . . . . . . . . . 15
3.7.2 Recalculation Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain Agreements of
Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1 Lessor's Representations and Warranties; DISCLAIMER. . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Certain Agreements of Lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5. Return of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1 General Condition upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1.1 Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1.2 Free of Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1.3 Operating Configuration and Condition. . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1.4 Cleanliness and Operability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1.5 Parts and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Return of Other Engines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Return at End of Base Lease Term or Renewal Lease Term. . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Manuals; Service Bulletins, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.5 Failure to Return Aircraft or Engines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.6 Aid in Disposition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.7 Storage upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7. Registration, Operation, Possession, Subleasing and Records. . . . . . . . . . . . . . . . . . . . . 22
7.1 Registration and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
SALE AND LEASE AGREEMENT [N625SW]
-ii-
<PAGE> 3
<TABLE>
<S> <C> <C>
7.1.1 Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.2 Nameplate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.3 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1.4 Insurance Requirements; Government Requisition; Indemnity. . . . . . . . . . . . . . . . 22
7.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2.1 Interchange and Pooling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2.2 Testing and Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2.3 Civil Reserve Air Fleet Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.4 Installation of Engines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.5 Installation of Engines on Other Airframes. . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.6 Pooling of Parts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.7 Wet Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.8 Sublease to Permitted Air Carriers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.3 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3.2 Information and Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3.3 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations; Modifications
and Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.1 Maintenance Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1.2 Compliance with Government Requirements. . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 Replacement of Parts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 Pooling of Parts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 Alterations, Modifications and Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4.1 Mandatory Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4.2 Voluntary Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9. Voluntary Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Right of Termination upon Obsolescence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 Sale of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Retention by Lessor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Termination As to Engines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10. Loss, Destruction, Requisition, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1 Event of Loss with Respect to Airframe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.1 Lessee's Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.2 Replacement of Airframe and Engines. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.3 Payment of Stipulated Loss Value and Rent. . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.4 Stipulated Loss Value Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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10.1.5 Payment of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.6 Conditions to Replacement of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.6.1 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.6.2 Tax Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.6.3 Lessee's Obligations with Respect to Replacement Aircraft. . . . . . . . . . . 35
10.1.7 Recordation and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.8 Conveyance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2 Event of Loss with Respect to an Engine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2.1 Event of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2.2 Conditions; Lessee's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2.3 Recordation and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.4 Conveyance; Replacement Engine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2.5 No Reduction of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.3 Application of Certain Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3.1 Replacement of Airframe and Engines. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3.2 Replacement of Engine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3.3 Nonreplacement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.4 Requisition of Aircraft for Use by Governmental Authorities. . . . . . . . . . . . . . . . . . . . . 40
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.1 Public Liability and Property Damage Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.1.1 Type, Form and Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.1.2 Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2.3 Certain Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2.3.1 Additional Insureds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2.3.2 Payment of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3.3 Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.4 Deductibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.5 Government Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.3 General Policy Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
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11.3.6 Nonliability for Premiums. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.7 Identity of Insurers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.8 Fifty-fifty Clause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4 Application of Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.5 Certificates; Reports, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.6 Lessor's Right to Maintain Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.7 Insurance for Own Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.8 Self-Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 12. Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 13. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.1 In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.2 Security for Lessor's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 14. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.1 Failure to Pay Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.2 Specific Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.3 General Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.4 Misrepresentation and Breach of Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.5 Bankruptcy, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1.3.1 Liquidated Damages--Fair Market Rental Value. . . . . . . . . . . . . . . . . . 49
15.1.3.2 Liquidated Damages--Fair Market Sales Value. . . . . . . . . . . . . . . . . . 50
15.1.4 Liquidated Damages upon Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.1.5 Rescission and Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.2 Determination of Fair Market Rental Value and Fair Market Sales Value. . . . . . . . . . . . . . . . 51
15.3 No Waiver, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 16. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 17. Net Lease; Lessee's Obligations; No Setoff, Counterclaim, Etc. . . . . . . . . . . . . . . . . . . . 52
Section 18. Renewal and Purchase Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
18.1 Renewal Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
18.2 Purchase Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
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Section 19. Successor Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 20. Right to Perform for Lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 21. Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 22. Investment of Security Funds; Miscellaneous; Amendment. . . . . . . . . . . . . . . . . . . . . . . 58
22.1 Investment of Security Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
22.2 Miscellaneous; Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 23. Permitted Foreign Air Carriers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</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, EBO Installment Payment
Schedule and Special Purchase Price
EXHIBIT D Permitted Foreign Air Carriers
APPENDIX A Certain Return Conditions
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THIS SALE AND LEASE AGREEMENT, dated as of August 1, 1996, is between
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, 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 10, 1996, an AC Form 8050-2 Bill of Sale dated April
23, 1996, 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 NN011015.
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.
"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 [N625SW]
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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.
"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 January 2, 2020.
"Base Lease Term Commencement Date" means the Delivery Date.
"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.
"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 Charlotte, North Carolina,
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 to the Holders of Certificates, 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, (ii) in respect of any portion of Stipulated
SALE AND LEASE AGREEMENT [N625SW]
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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 (iii) 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).
"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 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.
SALE AND LEASE AGREEMENT [N625SW]
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"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.
"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.
SALE AND LEASE AGREEMENT [N625SW]
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"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) First Union National Bank of North
Carolina, 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 1996 Trust N625SW
Certificate (including without limitation the Pass Through Trustee), (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, in the case of the initial such supplement
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.
"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.
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"Lease Period" means the period commencing on the Base Lease Term
Commencement Date through January 2, 1997, and each six-month period commencing
on a January 2 or July 2, 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 Part IV to Exhibit C 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 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.
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"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 net 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 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 7.5%.
"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 Engine Purchase Agreement Assignment (if
any), 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.
"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 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
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
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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., and its successors and
permitted assigns.
"Owner Participant Agreements" means the Participation Agreement, the
Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means First Union National Bank of North Carolina, 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 Pass Through Trustee and
their respective successors and permitted assigns.
"Participation Agreement" means the Participation Agreement, dated as
of August 1, 1996, 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.
"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 separate Trust Supplement
No. 1996-A dated as of September 1, 1996 between Lessee and Pass Through
Trustee.
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"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, limited liability company, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"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 any of three successive periods of one, two or
three years each, not to exceed three years in the aggregate, 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.
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"Rent Payment Date" means each January 2 and July 2 during the Base
Lease Term and any Renewal Term, commencing with January 2, 1997.
"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; provided, however, that if such replacement engine is not a
CFM International Model 56- 3-B1 engine, such replacement engine must then be
commonly used in the commercial aviation industry on Boeing 737-300 airframes.
"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 net 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) 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. Stipulated Loss
SALE AND LEASE AGREEMENT [N625SW]
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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 and 3.5 hereof.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement, dated as
of August 1, 1996, 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 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. 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 attributable to it
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,
1996, between Owner Participant and First Union National Bank of North
Carolina, in its individual capacity, relating to the Aircraft.
"Trust Indenture" means the Trust Indenture and Security Agreement,
dated as of August 1, 1996, between Owner Trustee and Indenture Trustee,
relating to the Aircraft.
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"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, 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, 1996. 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.
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(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 Base Lease Term and each Renewal Term, if any.
3.3 BASIC RENT. 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 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 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.
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, 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, on the
Certificates and all amounts which
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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 ADDITIONAL 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, 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 available not later than 11:00 A.M., New
York City time, on the date due at the office of Lessor at 230 South Tryon
Street, 9th Floor, Charlotte, North Carolina 28288- 1179, Attention: Bond
Administration, Re: Southwest Airlines 1996 Trust N625SW, 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
SALE AND LEASE AGREEMENT [N625SW]
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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 and the
issuance of the Pass Through Certificates are equal to an amount which
is other than .921444% of Lessor's Cost, (b) a refinancing or
refunding of the Certificates pursuant to Section 17 of the
Participation Agreement occurs, or (c) any recalculation of Stipulated
Loss Value and Termination Value is required by the terms of the Tax
Indemnity Agreement, then in each case, the Basic Rent percentages set
forth in Exhibit C (in the case of (a) and (b)), 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),
prior to August 1, 1997, (ii) in the case of a recalculation pursuant
to clause (b), prior to the relevant Refinancing Date or (iii) in the
case of a recalculation pursuant to clause (c), prior to the Rent
Payment Date next following the event described in clause (c), 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
SALE AND LEASE AGREEMENT [N625SW]
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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 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 7.5%) as computed by Owner Participant to decrease by ten
basis points or more.
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
SALE AND LEASE AGREEMENT [N625SW]
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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 First Union National Bank of North
Carolina, 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 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 [N625SW]
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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; provided, however, that if such engine is not a CFM International
Model CFM 56-3-B1 engine, such engine must then be commonly used in the
commercial aviation industry on Boeing 737-300 airframes). 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
SALE AND LEASE AGREEMENT [N625SW]
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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 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.
SALE AND LEASE AGREEMENT [N625SW]
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<PAGE> 26
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 and all other
maintenance, service, inspection and overhaul records maintained by Lessee on
the Aircraft which are reasonably necessary to transition the Aircraft to a new
operator, 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
SALE AND LEASE AGREEMENT [N625SW]
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<PAGE> 27
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 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.
SALE AND LEASE AGREEMENT [N625SW]
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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 First Union National Bank of
North Carolina'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
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, 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, 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
SALE AND LEASE AGREEMENT [N625SW]
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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. (i) Subject the
Aircraft, Airframe or any Engine to normal interchange agreements
customary in the airline industry and entered into by Lessee 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, (ii)
permit any Permitted Sublessee to subject any Engine to normal
interchange agreements customary in the industry and entered into by
such Permitted Sublessee in the ordinary course of business with 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
(iii) subject or permit any Permitted Sublessee to subject 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 any 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 modifica-
SALE AND LEASE AGREEMENT [N625SW]
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tions 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 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;
SALE AND LEASE AGREEMENT [N625SW]
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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; and
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 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,
SALE AND LEASE AGREEMENT [N625SW]
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(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 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,
SALE AND LEASE AGREEMENT [N625SW]
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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 in
English 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 Pass Through Trustee 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 Pass Through Trustee and the Owner
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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 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
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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
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.
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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
faith, that the Aircraft either has become economically obsolete or is surplus
to Lessee's requirements. Lessee may revoke any notice of
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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 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), and
(iii) (without duplication) all other amounts (including, without limitation,
Premium, if any) owing by Lessee under this Lease or under any other Operative
Agreement. Upon such payment, Section 10.01 of the Trust Indenture shall be
satisfied, and, upon Indenture Trustee's release of such Engines from the Lien
of the
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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 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 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, 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 Pass Through Trustee
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
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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 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.
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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 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 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) the applicable provisions of Section 10.01 of the Trust
Indenture shall be satisfied 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 expense, a tax opinion of
Vinson & Elkins, LLP or other tax counsel selected by Lessee
and reasonably acceptable to Lessor, to the effect that the
Event of Loss or the Replacement of the Airframe or Aircraft
in connection therewith will not cause any
SALE AND LEASE AGREEMENT [N625SW]
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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 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
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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) the applicable provisions of
Section 10.01 of the Trust Indenture shall be satisfied, 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
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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;
(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;
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(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 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.
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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 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
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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);
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
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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:
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.
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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 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:
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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 Pass
Through Trustee 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 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 Pass Through Trustee 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 Basic Rent or Supplemental Rent payable in connection with
principal, interest, Premium due on the Certificates, within seven Business
Days from the due date thereof; or Lessee shall fail to make any other payments
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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;
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 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
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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)
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 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 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) 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 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 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)
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,
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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 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
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
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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. 214/792-4022), Attention: Treasurer, or at such other
address as Lessee shall from time to time designate in writing;
If to Lessor, at 230 South Tryon Street, 9th Floor, Charlotte, North
Carolina 28288-1179 (telecopy no. 704/383- 7316), Attention: Bond
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, 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
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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.
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, 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, 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, be final as to Lessor and Lessee. Lessee will not, 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 third Renewal Term or any prior Renewal Term
ending three 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). 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
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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).
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
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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
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 2, 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 Exhibit 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 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, 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.
SALE AND LEASE AGREEMENT [N625SW]
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<PAGE> 62
(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); 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
SALE AND LEASE AGREEMENT [N625SW]
-56-
<PAGE> 63
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, (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, and (g) the
Owner Trustee shall be entitled to the benefits of Sections 7.03(c), (d), (e),
(f) and (g) of the Trust Indenture to the extent applicable to its interest at
the time.
(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, 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
SALE AND LEASE AGREEMENT [N625SW]
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<PAGE> 64
(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 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
SALE AND LEASE AGREEMENT [N625SW]
-58-
<PAGE> 65
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. 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
SALE AND LEASE AGREEMENT [N625SW]
-59-
<PAGE> 66
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 [N625SW]
-60-
<PAGE> 67
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:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, not in its
individual capacity except as expressly
stated herein, and otherwise solely as
Owner Trustee under the Trust Agreement
By:
--------------------------------------
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By:
--------------------------------------
Treasurer
SALE AND LEASE AGREEMENT [N625SW]
<PAGE> 68
EXHIBIT A TO
LEASE AGREEMENT
SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____
THIS SALE AND LEASE AGREEMENT SUPPLEMENT NO. _____, dated
______________, _____ between FIRST UNION NATIONAL BANK OF NORTH CAROLINA, not
in its individual capacity but solely as Owner Trustee under that certain Trust
Agreement, dated as of August 1, 1996 (the "Trust Agreement"), between the
Owner Participant named therein and such Bank ("Lessor"), and SOUTHWEST
AIRLINES CO., a Texas corporation ("Lessee"),
RECITALS.
A. On June 10, 1996 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 NN011015;
B. Lessor and Lessee have heretofore entered into that certain
Sale and Lease Agreement dated as of August 1, 1996, 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.]
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:
A-1
<PAGE> 69
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 N625SW and Manufacturer's Serial
No. 27701; and
Engines: Two CFM International Model CFM56-3-B1 Engines installed
thereon bearing Engine Manufacturer's Serial Numbers as follows: 858329 and
859337.
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. 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.
5. 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.
A-2
<PAGE> 70
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:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, 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> 71
EXHIBIT B-1 TO
LEASE AGREEMENT
STIPULATED LOSS VALUE SCHEDULE
SLV
Determination Stipulated Loss Value
Date (% of Lessor's Cost)
------------------ ---------------------
[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> 72
EXHIBIT B-2 TO
LEASE AGREEMENT
TERMINATION VALUE SCHEDULE
TV
Determination Termination Value
Date (% of Lessor's Cost)
-------------- --------------------
[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> 73
EXHIBIT C TO
LEASE AGREEMENT
PART I
RENT PAYMENT SCHEDULE
Percentage of
Lessor's Cost
-------------------------------------
Rent Payment
Date Total Advance Arrears
-------------- ----- ------- -------
[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> 74
EXHIBIT C TO
LEASE AGREEMENT
PART II
EBO INSTALLMENT PAYMENT SCHEDULE
EBO Installment Percentage of
Payment Date Lessor's Cost
---------------- ---------------
[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
[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.]
% of Lessor's Cost
------------------
PART IV
LESSOR'S COST
[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.]
Lessor's Cost for the Delivered Aircraft is $
---------------------
C-2
N625SW
<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
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
