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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): May 21, 1998
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) 792-4000
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Item 7. Financial Statements and Exhibits.
The following documents are being filed in connection with, and
incorporated by reference into, Southwest Airlines Co.'s Registration Statement
on Form S-3 (File No. 333-29257), as declared effective on July 15, 1997,
relating to Pass Through Certificates, Series 1998-A.
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Exhibits
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Exhibit 1.3 - Form of Underwriting Agreement relating to the issuance of Pass
Through Certificates, Series 1998-A.
Exhibit 4.3 - Form of Pass Through Trust Supplement No. 1998-A between
Southwest and the Trustee relating to the Pass Through Certificates.
Exhibit 4.4 * - Form of Trust Agreement between the Owner Participant and the
Owner Trustee relating to the Equipment Notes with respect to
Boeing 737-3H4 Aircraft, Registration Nos. N620SW, N621SW,
N622SW and N623SW.
Exhibit 4.5 * - Form of Trust Indenture and Security Agreement between the
Owner Trustee and the Loan Trustee relating to the Equipment
Notes with respect to Boeing 737-3H4 Aircraft, Registration
Nos. N620SW, N621SW, N622SW and N623SW.
Exhibit 4.6 * - Form of First Amendment to Trust Indenture and Security
Agreement between the Owner Trustee and the Loan Trustee
relating to the Equipment Notes with respect to Boeing 737-3H4
Aircraft, Registration Nos. N620SW, N621SW, N622SW and
N623SW.
Exhibit 4.7 * - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and N623SW
(included as Exhibit A-1 in Exhibit 4.6).
Exhibit 4.8 * - Form of Participation Agreement among Southwest, the Owner
Participant, the Loan Trustee, the Original Loan Participant, and the
Owner Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and N623SW.
Exhibit 4.9 * - Form of First Amendment to Participation Agreement among
Southwest, the Owner Participant, the Owner Trustee, the Loan
Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and N623SW.
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Exhibit 4.10 * - Form of Sale and Lease Agreement between Southwest and the
Owner Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and N623SW.
Exhibit 4.11 * - Form of First Amendment to Sale and Lease Agreement between
Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration Nos. N620SW, N621SW, N622SW and
N623SW.
Exhibit 4.12 * - Form of Refinancing Agreement among Southwest, the Trustee, the
Owner Participant, the Owner Trustee, the Loan Trustee and the
Original Loan Participant relating to the Equipment Notes for each
of four Boeing 737-3H4 Aircraft, Registration Nos. N620SW,
N621SW, N622SW and N623SW.
Exhibit 23 - Consent of Independent Auditors
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*The financing of each of the identified aircraft pursuant to Pass
Through Certificates is documented separately. Pursuant to Instruction 2 to Item
601 of Regulation S-K, the Registrant has filed the form of the indicated
documents for one of these aircraft only -- specifically, the aircraft with
Registration No. N620SW (or, in the case of Exhibit 4.10, with Registration No.
N621SW). The documents for the other aircraft are identical except for the
information identifying the aircraft in question, the name of the trust
established to own such aircraft, and information relating to the identity of
the Owner Participant, which is C.C.& E.II, LLC with respect to the aircraft
with Registration No. N622SW and Chrysler Asset Management Corporation with
respect to the aircraft with Registration No. N623SW.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHWEST AIRLINES CO.
May 28, 1998 By: /s/ Gary C. Kelly
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Gary C. Kelly
Vice President -- Finance
and Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No. Description
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Exhibit 1.3 - Form of Underwriting Agreement relating to the issuance of Pass
Through Certificates, Series 1998-A.
Exhibit 4.3 - Form of Pass Through Trust Supplements No. 1998-A between
Southwest and the Trustee relating to the Pass Through Certificates.
Exhibit 4.4 * - Form of Trust Agreement between the Owner Participant and the
Owner Trustee relating to the Equipment Notes with respect to
Boeing 737-3H4 Aircraft, Registration Nos. N620SW, N621SW,
N622SW and N623SW.
Exhibit 4.5 * - Form of Trust Indenture and Security Agreement between the
Owner Trustee and the Loan Trustee relating to the Equipment
Notes with respect to Boeing 737-3H4 Aircraft, Registration Nos.
N620SW, N621SW, N622SW and N623SW.
Exhibit 4.6 * - Form of First Amendment to Trust Indenture and Security
Agreement between the Owner Trustee and the
Loan Trustee relating to the Equipment Notes
with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and
N623SW.
Exhibit 4.7 * - Form of Equipment Notes with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and N623SW
(included as Exhibit A-1 in Exhibit 4.6).
Exhibit 4.8 * - Form of Participation Agreement among Southwest, the Owner
Participant, the Loan Trustee, the Original Loan Participant, and the
Owner Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and N623SW.
Exhibit 4.9 * - Form of First Amendment to Participation Agreement among
Southwest, the Owner Participant, the Owner Trustee, the Loan
Trustee and the Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and N623SW.
Exhibit 4.10 * - Form of Sale and Lease Agreement between Southwest and the
Owner Trustee with respect to Boeing 737-3H4 Aircraft,
Registration Nos. N620SW, N621SW, N622SW and N623SW.
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Exhibit No. Description
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Exhibit 4.11 * - Form of First Amendment to Sale and Lease Agreement between
Southwest and the Owner Trustee with respect to Boeing 737-3H4
Aircraft, Registration Nos. N620SW, N621SW, N622SW and
N623SW.
Exhibit 4.12 * - Form of Refinancing Agreement among Southwest, the Trustee, the
Owner Participant, the Owner Trustee, the Loan Trustee and the
Original Loan Participant relating to the Equipment Notes for each
of four Boeing 737-3H4 Aircraft, Registration Nos. N620SW,
N621SW, N622SW and N623SW.
Exhibit 23 - Consent of Independent Auditors
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EXHIBIT 1.3
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1998-A
UNDERWRITING AGREEMENT
May 21, 1998
SALOMON BROTHERS INC
CHASE SECURITIES INC.
LEHMAN BROTHERS INC.
NATIONSBANK MONTGOMERY SECURITIES LLC
c/o SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Southwest Airlines Co., a Texas corporation (the "Company"), proposes
that Wilmington Trust Company, acting not in its individual capacity but solely
as pass through trustee (the "Trustee") under the Pass Through Trust Agreement
dated as of February 1, 1993 (the "Basic Agreement"), as supplemented for the
pass through certificates (the "Pass Through Certificates") to be purchased
hereunder by a Trust Supplement (a "Trust Supplement"), between the Company and
the Trustee (the Basic Agreement, as supplemented by the 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 amount and with the interest rate and final distribution
date 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.
The Pass Through Certificates will represent interests in a trust (a
"Pass Through Trust") established pursuant to the Pass Through Agreement to fund
the purchase of equipment notes
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("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 refinance a
portion of the payment by such Owner Trustees of the purchase price for
specified aircraft that have been leased by the Company (the "Aircraft"). Each
Equipment Note 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. 333-29257) for the
registration of pass through certificates, including the Offered Certificates,
and other securities 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").
Capitalized terms used but not otherwise defined in this Agreement
shall have the meanings specified in or pursuant to the Pass Through Agreement
or the Indenture relating to each Equipment Note.
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SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to you and to each Underwriter
named in Schedule I, as of the date hereof, as follows:
(i) Due Incorporation and Qualification. The Company has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Texas and has the corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus; the Company is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where those failures to so qualify in
the aggregate would not have a material adverse effect on the business,
properties, financial condition, results of operations or prospects of
the Company.
(ii) Registration Statement and Prospectus. The Company meets
the requirements for the use of Form S-3 under the 1933 Act
Regulations, and the Registration Statement has become effective under
the 1933 Act. At the time the Registration Statement became effective,
the Registration Statement complied, and as of the date hereof does
comply, in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and the 1939 Act and the rules and
regulations of the Commission promulgated thereunder. The Registration
Statement, at the time it became effective (and if an amendment to the
Registration Statement or an Annual Report on Form 10-K has been filed
by the Company with the Commission subsequent to the effectiveness of
the Registration Statement, then at the time of the most recent such
filing) did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and the Prospectus, as of
the date hereof, does not, and at all times subsequent hereto up to the
Closing Date referred to below will not, contain an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by an Underwriter expressly for use
in the Registration Statement or Prospectus or to that part of the
Registration Statement which constitutes the 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
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and with the other information in the Prospectus, at the time the
Registration Statement and any amendments thereto became effective and
as of the date hereof did not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were or are made, not
misleading.
(iv) Financial Statements. The consolidated financial
statements of the Company included or incorporated by reference in the
Prospectus and the Registration Statement present fairly the
consolidated financial position of the Company as of the dates
indicated and the results of operations, changes in stockholders'
equity and cash flows of the Company, for the respective periods
covered thereby, all in conformity with generally accepted accounting
principles applied, except as stated therein, on a consistent basis
throughout the entire period involved; and the financial schedules
included or incorporated by reference in the Registration Statement
meet the requirements of the 1933 Act Regulations or the 1934 Act
Regulations, as applicable, and fairly present the information required
to be shown therein. The selected consolidated financial data included
in the Prospectus present fairly the information shown therein and have
been compiled on a basis consistent with that of the audited
consolidated financial statements incorporated by reference in the
Registration Statement and the Prospectus.
(v) Material Changes or Material Transactions. Except as
stated in or contemplated by the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any material adverse
change in the financial condition or results of operations of the
Company and its subsidiaries, considered as one enterprise.
(vi) Status as Air Carrier. The Company is a "citizen of the
United States" within the meaning of Section 40102(a)(15)(C) of Title
49, U.S.C. and is a holder of an "air carrier operating certificate"
(herein so-called) issued by the Secretary of Transportation pursuant
to Chapter 447 of Title 49, U.S.C. for aircraft capable of carrying 10
or more individuals or 6,000 pounds or more of cargo.
(b) Additional Certifications. Any certificate signed by any officer of
the Company and delivered to you or to counsel for the Underwriters in
connection with an offering of the Offered Certificates shall be deemed a
representation and warranty by the Company to each Underwriter participating in
such offering as to the matters covered thereby on the date of such certificate
unless subsequently amended or supplemented subsequent thereto. None of the
foregoing applies to statements in or omissions from any of the aforementioned
documents based upon written information furnished to the Company by any
Underwriter specifically for use therein.
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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 5th
business day (unless postponed in accordance with the provisions of Section 10)
following the date hereof or at such other date, time or location specified in
Schedule II, or as otherwise shall be agreed upon by you and the Company (such
time and date being referred to as the "Closing Time"). Unless otherwise
specified in Schedule II, delivery of the Offered Certificates shall be made to
The Depository Trust Company for your account against payment by you of the
purchase price thereof to, or upon the order of, the Trustee (or such other
person as the Company may direct) by wire transfer of Federal funds or other
immediately available funds. Such Offered Certificates shall be registered in
the name of Cede & Co. or in such other names, and in such denominations, as you
may request in writing at least two business days prior to the Closing Time.
Such Offered Certificates, which may be in temporary form, will be made
available for examination and packaging by you in New York, New York, on or
before the first business day prior to the Closing Time, or at such other time
and place specified in Schedule II.
(b) As compensation to you for your commitments and obligations
hereunder in respect of the Offered Certificates, including your undertakings to
distribute Offered Certificates, the Owner Trustees will pay (or cause to be
paid) to you an amount equal to that percentage of the aggregate principal
amount of each Series of Offered Certificates purchased by you as set forth in
Exhibit A; provided that if the Owner Trustees do not pay such amounts when due,
the Company will pay such amounts and seek reimbursement from the Owner
Trustees. Such payment shall be made simultaneously with the payment by you to
the Trustee of the purchase price of the Offered Certificates as specified in
Sections 2 and 3(a) hereof. Payment of such compensation shall be made by wire
transfer of Federal or other immediately available funds.
SECTION 4. Offering by Underwriters.
It is understood that the several Underwriters propose to offer the
Offered Certificates for sale to the public as set forth in the Prospectus.
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SECTION 5. Agreements.
The Company covenants with the several Underwriters that:
(a) Prospectus Supplement. The Company has prepared a Preliminary
Prospectus containing such information as you and the Company have deemed
appropriate, and immediately following the execution of this Agreement, the
Company will prepare a Prospectus Supplement setting forth the principal amount
of the Offered Certificates covered thereby, the terms of the Offered
Certificates not otherwise specified in the Basic Prospectus, the names of the
Underwriters participating in the offering and the principal amount of the
Offered Certificates which each severally has agreed to purchase, the names of
the Underwriters acting as manager or co-managers in connection with the
offering, the price at which the Offered Certificates are to be purchased by the
Underwriters from the Trustee, the initial public offering price, the selling
concession and reallowance, if any, and such other information as you and the
Company deem appropriate in connection with the offering of the Offered
Certificates. The Company will promptly transmit copies of the Prospectus
Supplement to the Commission for filing pursuant to Rule 424 of the 1933 Act
Regulations and will furnish to the Underwriters named therein as many copies of
the Prospectus as you shall reasonably request.
(b) Notice of Certain Events. The Company will notify you immediately
(i) of the effectiveness of any amendment to the Registration Statement, (ii) of
the transmittal to the Commission for filing of any supplement to the Prospectus
or any document to be filed pursuant to the 1934 Act which will be incorporated
by reference in the Prospectus, (iii) of the receipt of any comments from the
Commission with respect to the Registration Statement, the Prospectus or the
Prospectus Supplement, (iv) of any request by the Commission for any amendment
to the Registration Statement or any amendment or supplement to the Prospectus
or for additional information, and (v) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company will use its best
efforts to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof as soon as possible.
(c) Notice of Certain Proposed Filings. For so long as a Prospectus is
required to be delivered in connection with the Offered Certificates, the
Company will give you notice of its intention to file or prepare any amendment
to the Registration Statement or any amendment or supplement to the Prospectus,
whether by the filing of documents pursuant to the 1934 Act, the 1933 Act or
otherwise (except for the Current Report on Form 8-K referred to in the
Prospectus Supplement under "Description of the Certificates"), and will furnish
you with copies of any such amendment or supplement or other documents proposed
to be filed or prepared a reasonable time in advance of such proposed filing or
preparation, as the case may be.
(d) Copies of the Registration Statement and the Prospectus. The
Company will deliver to you as many signed and conformed copies of the
Registration Statement (as originally filed) and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein and
documents incorporated by reference in the Prospectus) as you may reasonably
request. The
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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.
(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,
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until the Closing Time or such later date as the distribution of the Offered
Certificates is completed, but no longer than the period during which the
Prospectus is required to be delivered under the 1933 Act, will comply with the
provisions of Section 517.075 of the Florida blue sky law and, if applicable,
all regulations promulgated thereunder relating to issuers doing business with
Cuba.
SECTION 6. Conditions to the Obligations of Underwriters.
The several obligations of the Underwriters to purchase the Offered
Certificates pursuant to this Agreement will be subject at all times to the
accuracy of the representations and warranties on the part of the Company
herein, to the accuracy of the statements of the Company's officers made in any
certificate furnished pursuant to the provisions hereof, to the performance and
observance by the Company of all covenants and agreements contained herein, or
in Schedule II hereto, on its part to be performed and observed and to the
following additional conditions precedent:
(a) Stop Order; Ratings Change; etc. At the Closing Time, (i) the
Prospectus. and any supplement thereto, shall have been filed within the time
period required by Rule 424(b); (ii) no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission; and (iii) the
rating assigned as of the date of this Agreement by any "nationally recognized
statistical rating organization," as such term is defined for purposes of Rule
436(g) under the 1933 Act Regulations, to any debt securities of the Company
shall not have been lowered since the execution of this Agreement.
(b) Legal Opinions. At the Closing Time, you shall have received the
following opinions:
(1) Opinion of Company Counsel. The opinion or opinions of the
Associate General Counsel of the Company, dated as of such date, in
form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Texas, and the Company has corporate
power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus.
(ii) This Agreement has been duly authorized,
executed and delivered by the Company.
(iii) The Pass Through Agreement has been duly
authorized, executed and delivered by the Company and 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.
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(iv) The Pass Through Agreement constitutes the valid
and binding obligation of the Trustee, enforceable in
accordance with its terms, except as may be limited by
bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws affecting enforcement of
creditors' rights generally and by general principles of
equity.
(v) The Offered Certificates have been duly
authorized, executed, delivered and authenticated by the
Trustee pursuant to the Pass Through Agreement 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
Agreement 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 the Closing Time as contemplated by the
Refinancing Agreement, 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. ss. 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.
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<PAGE> 10
(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 Agreement
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 except for any filings or recordings with the FAA
(as to which no opinion need be given).
(xi) The execution and delivery by the Company of
this Agreement, the Pass Through Agreement 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 Agreement 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 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
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<PAGE> 11
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, the Pass Through Trust is not 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 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
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<PAGE> 12
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 Agreement), (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 Agreement),
(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) The Pass Through Trust created by the Pass
Through Agreement will not be classified as an association
taxable as a corporation for federal income tax purposes, but
rather, will be classified as a grantor trust under 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) 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
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<PAGE> 13
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.
Such opinion shall also confirm that In re Western Pacific Airlines,
Civil Action No. 98-K-358 (D.Colo. Mar. 10, 1998), was incorrectly
decided.
(c) Opinion of Counsel to the Underwriters. The opinion of Mayer, Brown
& Platt, 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:
(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.
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<PAGE> 14
(e) Comfort Letter. At the time of the execution of this Agreement and
at the Closing Time, you shall have received a letter from Ernst & Young LLP or
their successors as the Company's independent auditors (the "Independent
Auditors"), dated as of the date hereof and of the Closing Time, as the case may
be, in form and substance satisfactory to you to the effect that:
(i) they are independent auditors with respect to the Company
within the meaning of the 1933 Act and the 1933 Act Regulations;
(ii) in their opinion the consolidated financial statements
and schedules audited by them and incorporated by reference in the
Company's latest Annual Report on Form 10-K and included or
incorporated by reference in the Registration Statement and Prospectus
comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the 1933 Act Regulations or
the 1934 Act and the 1934 Act Regulations, as the case may be;
(iii) on the basis of a reading of the unaudited condensed
consolidated financial statements and schedules of the Company
contained in the Company's Quarterly Reports on Form 10-Q filed with
the Commission since the date of the Company's latest Annual Report on
Form 10-K and included or incorporated by reference in the Prospectus
and the Registration Statement, and the latest available unaudited
interim financial statements of the Company, inquiries of certain
officials of the Company responsible for financial and accounting
matters, a reading of the minute books of the Company since the date of
the latest audited consolidated financial statements of the Company
incorporated by reference in the Registration Statement, and other
specified procedures and inquiries, nothing has come to their attention
that caused them to believe that:
(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
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<PAGE> 15
Company included or incorporated by reference in the
Registration Statement and the Prospectus, except in all
instances for changes or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; or
(C) for the period from the date of the most recent
consolidated financial statements included or incorporated by
reference in the Registration Statement and the Prospectus to
such specified date, there was any decrease in operating
revenues, operating income, income before income taxes or net
income of the Company, in each case as compared with the
comparable period of the preceding year, except in all
instances for decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
and
(iv) in addition to their audit referred to in their reports
included or incorporated by reference in the Registration Statement and
the Prospectus and the review, inquiries and procedures referred to in
clause (iii) above, such letter shall state that Ernst & Young LLP has
performed other specified procedures, with respect to certain numerical
data and information included or incorporated by reference in the
Registration Statement and the Prospectus, as are reasonably requested
by an Underwriter and specified in such letter and have found such data
and information to be in agreement with the accounting records of or
analysis prepared by the Company.
(f) Satisfaction of Conditions Precedent in Note Purchase Agreements.
At the Closing Time, all conditions precedent specified in the Note Purchase
Agreements 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 the Note Purchase
Agreements shall be accurate as of the Closing Time (except to the extent that
they relate solely to an earlier date in which case they shall be accurate as of
such earlier date) and you shall have received a certificate of the Chief
Financial Officer, Treasurer or Assistant Treasurer of the Company, dated as of
the Closing Time, to such effect; and you shall have received a copy of each
opinion required to be delivered under the Refinancing 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
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<PAGE> 16
Closing Time, and such termination shall be without liability of any party to
any other party except as provided in Section 7 hereof. Notice of any such
cancellation shall be given to the Company in writing or by the telephone or
telegraph confirmed in writing. Notwithstanding any such termination, the
provisions of Sections 8 and 11 shall remain in effect.
SECTION 7. Payment of Expenses.
The Company will pay all expenses incident to the performance of its
obligations under this Agreement, including:
(i) the printing and filing of the Registration Statement and
all amendments thereto, the Preliminary Prospectus and the Prospectus
and any amendments or supplements thereto;
(ii) the preparation, printing, issuance and delivery of the
Offered Certificates;
(iii) the reasonable fees and disbursements of the Company's
accountants and counsel, of the Trustee, the Owner Trustees, and the
Indenture Trustee and their respective counsel, and of any issuing and
paying agent or transfer agent;
(iv) the qualification of the Offered Certificates under
securities laws in accordance with the provisions of Section 5(g),
including filing fees and, subject to Section 7(ix) below, 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 Agreement and the other Operative
Agreements, including all expenses incident to the performance of the
Company's obligations under the Pass Through Agreement and Indentures
and the Leases and each of the other agreements and instruments
referred to in the Indentures and the Refinancing Agreement;
(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
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<PAGE> 17
(ix) up to $50,000 of fees and disbursements of your counsel,
as heretofore agreed.
If this Agreement is terminated by you in accordance with the
provisions of Section 6 or clause (i) of Section 10 hereof, the Company shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters, or, in
any other case, the Underwriters will pay all of their own expenses, including
their fees of counsel, transfer taxes on resale of any of the Offered
Certificates and any advertising expenses connected with any offers they may
make.
SECTION 8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
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
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<PAGE> 18
amendment thereto) or the Prospectus (or any amendment or supplement thereto),
or made in reliance upon the Trustee's Form T-1 Statement of Eligibility and
Qualification under the 1939 Act filed as an exhibit to the Registration
Statement; and provided further that the foregoing indemnity agreement, with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Offered Certificates, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of the sale
of the Offered Certificates to such person, and if the Prospectus (as so amended
or supplemented) would have cured the defect giving rise to such losses, claims,
damages or liabilities, unless such failure to deliver the Prospectus was a
result of noncompliance by the Company with the provisions of Section 5(d) or
5(e) hereof; 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 such 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
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<PAGE> 19
that the underwriting discount appearing on Exhibit A hereto in respect of such
offering bears to the initial public offering price appearing thereon and the
Company is responsible for the balance; provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as the
Company.
SECTION 9. Default by an Underwriter.
If one or more of the Underwriters participating in an offering of
Offered Certificates shall fail at the Closing Time to purchase the Offered
Certificates which it or they are obligated to purchase hereunder (the
"Defaulted Certificates"), then you shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the nondefaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Certificates in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, during such 24 hours you shall not have
completed such arrangements for the purchase of all of the Defaulted
Certificates, then:
(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.
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<PAGE> 20
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 Mayer, Brown & Platt, 1675 Broadway, New
York, New York 10019, Attention: Barry P. Biggar. Notices to the Company shall
be directed to it at Southwest Airlines Co., 2702 Love Field Drive, Dallas,
Texas 75235, Attention of the Vice President-Finance, with copies thereof
directed to the Treasurer and Associate General Counsel.
-20-
<PAGE> 21
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.
-21-
<PAGE> 22
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/ John D. Owen
----------------------------
Name: John D. Owen
Title: Treasurer
CONFIRMED AND ACCEPTED, as of
the date first above written:
SALOMON BROTHERS INC
CHASE SECURITIES INC.
LEHMAN BROTHERS INC.
NATIONSBANK MONTGOMERY
SECURITIES LLC
By: Salomon Brothers Inc
By: /s/ Gregory P. Lee
----------------------------
Name: Gregory P. Lee
Title: Vice President
<PAGE> 23
Exhibit A
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1998-A
<TABLE>
<CAPTION>
AGGREGATE INTEREST FINAL PURCHASE UNDERWRITING
AMOUNT * RATE DISTRIBUTION PRICE DISCOUNTS AND
DATE COMMISSIONS
<C> <C> <C> <C> <C>
$95,531,435 6.53% January 2, 2019 100% .65%
</TABLE>
* The Underwriters severally and not jointly agree to purchase approximately 25%
of the Aggregate Amount.
<PAGE> 24
Schedule I
to
Underwriting
Agreement
Dated: May 21, 1998
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1998-A
<TABLE>
<CAPTION>
AGGREGATE AMOUNT
OF PASS THROUGH
CERTIFICATES,
UNDERWRITER SERIES 1998-A
----------- ----------------
<S> <C>
SALOMON BROTHERS INC $23,882,585.75
CHASE SECURITIES INC. $23,882,585.75
LEHMAN BROTHERS INC. $23,882,585.75
NATIONSBANK MONTGOMERY
SECURITIES LLC $23,882,585.75
Total $95,531,435.00
</TABLE>
<PAGE> 25
Schedule II
to
Underwriting
Agreement
SOUTHWEST AIRLINES CO.
Pass Through Certificates, Series 1998-A
Dated: May 21, 1998
To: Southwest Airlines Co.
2702 Love Field Drive
Dallas, Texas 75235
Re: Underwriting Agreement dated May 21, 1998
<TABLE>
<CAPTION>
<S> <C>
Title of Offered Certificates: Pass Through Certificates, Series 1998-A
Current ratings: A1/A by Moody's and S&P respectively.
Interest rate: 6.53%
Interest payable: January 2 and July
2 of each year, commencing
on July 2, 1998.
Public Offering price: 100%, plus accrued interest, if any, from
May 29, 1998
Purchase price: 100%, plus accrued interest, if any, from
May 29, 1998
Closing date: May 29, 1998 at 9:00 a.m., Central time
Location for checking
Offered Certificates: The Depository Trust Company
New York, New York
Listing requirement: None
Other terms and conditions: None
</TABLE>
<PAGE> 1
EXHIBIT 4.3
TRUST SUPPLEMENT NO. 1998-A
DATED AS OF MAY 1, 1998
TO
PASS THROUGH TRUST AGREEMENT
DATED AS OF FEBRUARY 1, 1993
SOUTHWEST AIRLINES CO.
AND
WILMINGTON TRUST COMPANY, AS TRUSTEE
$95,531,435
<PAGE> 2
TRUST SUPPLEMENT
This Trust Supplement No. 1998-A, dated as of May 1, 1998 (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 four 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 the outstanding debt portion of the
purchase price of the aircraft heretofore 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
"1998-A Trust") for the benefit of the Certificateholders, and the initial
Certificateholders as the grantors of the 1998-A Trust, by their respective
acceptances of the Certificates, join in the creation of this 1998-A 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. 1998-A
-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 1998-A" (hereinafter defined as the "Series 1998-A
Certificates"). Each Certificate represents a Fractional Undivided Interest in
the 1998-A Trust created hereby. The terms and conditions applicable to the
Series 1998-A Certificates are as follows:
1. The aggregate principal amount of the Series 1998-A
Certificates that shall be authenticated under the Agreement (except for Series
1998-A Certificates authenticated and delivered pursuant to Section 3.03, 3.04
or 3.05 of the Basic Agreement) upon their initial issuance is $95,531,435.
2. The Cut-off Date is June 15, 1998.
3. The Regular Distribution Dates with respect to any
payment of Scheduled Payments are January 2 and July 2 in each year, commencing
July 2, 1998, 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 1998-A Certificates shall be in the form
attached hereto as Exhibit A. The Series 1998-A 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 1998-A Certificates shall
be used to purchase the Equipment Notes in the principal amounts specified
below:
<TABLE>
<CAPTION>
Equipment Note Principal Amount Maturity
-------------- ---------------- --------
<S> <C> <C>
Series SWA 1998 N620SW $23,882,858.75 July 2, 2019
Series SWA 1998 N621SW $23,882,858.75 July 2, 2019
Series SWA 1998 N622SW $23,882,858.75 July 2, 2019
Series SWA 1998 N623SW $23,882,858.75 July 2, 2019
</TABLE>
TRUST SUPPLEMENT NO. 1998-A
-2-
<PAGE> 4
8. Each of four 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 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 N620SW 28036
1 Boeing 737-3H4 N621SW 28037
1 Boeing 737-3H4 N622SW 27932
1 Boeing 737-3H4 N623SW 27933
</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 1998 Trust N620SW) dated as of June 1, 1996,
as supplemented;
Trust Indenture and Security Agreement (Southwest
Airlines 1998 Trust N621SW) dated as of June 1,
1996, as supplemented;
Trust Indenture and Security Agreement (Southwest
Airlines 1998 Trust N622SW) dated as of June 1, 1996,
as supplemented;
Trust Indenture and Security Agreement (Southwest
Airlines 1998 Trust N623SW) dated as of June 1, 1996,
as supplemented;
(b) Each of the following Leases:
Sale and Lease Agreement (Southwest Airlines 1998
Trust N620W), dated as of June 1, 1996, as
supplemented;
Sale and Lease Agreement (Southwest Airlines 1998
Trust N621SW), dated as of June 1, 1996, as
supplemented;
Sale and Lease Agreement (Southwest Airlines 1998
Trust N622SW), dated as of June 1, 1996, as
supplemented;
Sale and Lease Agreement (Southwest Airlines 1998
Trust N623SW), dated as of June 1, 1996, as
supplemented;
(c) Each of the following Participation Agreements:
TRUST SUPPLEMENT NO. 1998-A
-3-
<PAGE> 5
Participation Agreement (Southwest Airlines 1998
Trust N620SW), dated as of June 1, 1996;
Participation Agreement (Southwest Airlines 1998
Trust N621SW), dated as of June 1, 1996;
Participation Agreement (Southwest Airlines 1998
Trust N622SW), dated as of June 1, 1996;
Participation Agreement (Southwest Airlines 1998
Trust N623SW), dated as of June 1, 1996;
(d) Each of the following Trust Agreements:
Trust Agreement (Southwest Airlines 1998 Trust
N620SW) dated as of June 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1998 Trust
N621SW) dated as of June 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1998 Trust
N622SW) dated as of June 1, 1996, as supplemented;
Trust Agreement (Southwest Airlines 1998 Trust
N623SW) dated as of June 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
TRUST SUPPLEMENT NO. 1998-A
-4-
<PAGE> 6
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
1998-A CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE.
Section 3.03. Execution in Counterparts. This Trust Supplement may
be executed in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one instrument.
TRUST SUPPLEMENT NO. 1998-A
-5-
<PAGE> 7
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. 1998-A
-6-
<PAGE> 8
EXHIBIT A
CUSIP NO. 84474 WAA 8 [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 as the registered owner
hereof, Cede & Co., has an interest herein.
SOUTHWEST AIRLINES 1998-A PASS THROUGH TRUST
Pass Through
Certificate, Series 1998-A
Final Distribution Date: July 2, 2019
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
1998-A 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. 1998-A thereto dated as of May 1, 1998 (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 1998-A" (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. 1998-A
A-1
<PAGE> 9
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 July 2, 1998 (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
TRUST SUPPLEMENT NO. 1998-A
A-2
<PAGE> 10
of the Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust. Any
such consent by the Certificateholder of this Certificate shall be conclusive
and binding on such Certificateholder and upon all future Certificateholders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof,
in certain limited circumstances, without the consent of the Certificateholders
of any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee in its capacity as Registrar, or
by any successor Registrar, duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such Certificateholder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of authorized denominations evidencing the same aggregate Fractional Undivided
Interest in the Trust will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $1,000 or integral multiples thereof except
that one Certificate may be in a denomination of less than $1,000. As provided
in the Agreement and subject to certain limitations therein set forth, the
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust, as
requested by the Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee shall require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the Trustee or the
Registrar may treat the Person in whose name this Certificate is registered as
the owner hereof for all purposes, and none of the Trustee, the Registrar, or
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant
to the Agreement and the disposition of all property held as part of the Trust
Property.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
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. 1998-A
A-3
<PAGE> 11
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
SOUTHWEST AIRLINES 1998-A
PASS THROUGH TRUST
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Trustee
By:
--------------------------------------
Title:
---------------------------------
Dated: May 29, 1998
TRUST SUPPLEMENT NO. 1998-A
A-4
<PAGE> 12
[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. 1998-A
A-5
<PAGE> 13
EXHIBIT B
TRUST SUPPLEMENT NO. 1998-A
Dated as of May 1, 1998
[DTC LETTER OF REPRESENTATIONS]
TRUST SUPPLEMENT NO. 1998-A
B-1
<PAGE> 14
EXHIBIT C
TRUST SUPPLEMENT NO. 1998-A
Dated as of May 1, 1998
Scheduled Payments
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
- ---------------------- ----------------------
<S> <C>
-----------------
100.000000000
=================
</TABLE>
TRUST SUPPLEMENT NO. 1998-A
C-1
<PAGE> 1
EXHIBIT 4.4
- --------------------------------------------------------------------------------
TRUST AGREEMENT
dated as of June 1, 1996
between
CHRYSLER FINANCIAL CORPORATION
Owner Participant
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Owner Trustee
---------------------------
One Boeing Model 737-3H4 Aircraft
SOUTHWEST AIRLINES 1996 TRUST N620SW
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AUTHORITY TO EXECUTE CERTAIN OPERATIVE AGREEMENTS;
DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01 Authority to Execute Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02 Declaration of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 APPLICATION
OF INCOME FROM THE TRUST ESTATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.01 Distribution of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Payments to the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Payments to Owner Trustee; Other Parties. . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Certain Distributions to the Owner Participant. . . . . . . . . . . . . . . . . . . . . . 4
(d) Excluded Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Legal Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.02 Method of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V
DUTIES OF THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.01 Notice of Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5.02 Action Upon Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 FUNB BY OWNER PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
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SECTION 7.01 Owner Participant to Indemnify FUNB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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 AMENDMENTS TO 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
</TABLE>
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<TABLE>
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SECTION 11.02 Owner Participant Has No Legal Title in Trust Estate. . . . . . . . . . . . . . . . . . . . . . 14
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 [N620SW]
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TRUST AGREEMENT
This TRUST AGREEMENT, dated as of June 1, 1996, is between
CHRYSLER FINANCIAL CORPORATION, a Michigan corporation, 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. N620SW and Manufacturer's serial number 28036, 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 [N620SW]
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"Owner Participant" means and includes (i) Chrysler Financial
Corporation, a Michigan corporation, as the original Owner Participant, and
(ii) the successors and permitted assigns of Chrysler Capital Corporation.
"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 [N620SW]
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ARTICLE III
PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT;
ISSUANCE OF CERTIFICATES
SECTION 3.01 PURCHASE OF CERTAIN RIGHTS IN THE AIRCRAFT.
The Owner Participant hereby authorizes and directs the Owner Trustee to, and
the Owner Trustee agrees for the benefit of the Owner Participant that it will,
on the Delivery Date, subject to due compliance with the terms of Section 3.02
hereof:
(a) purchase the Aircraft pursuant to the Lease;
(b) accept from Lessee the Lessee Warranty Bill of Sale
and the Lessee FAA Bill of Sale and the invoice furnished pursuant to
the Participation Agreement;
(c) execute and deliver a Lease Supplement covering the
Aircraft;
(d) execute and deliver each of the other Operative
Agreements to which the Owner Trustee is to be a party including,
without limitation, a Trust Supplement covering the Aircraft;
(e) execute, issue and deliver to the Original Loan
Participant one or more authenticated Certificates in the amounts and
otherwise as provided in Section 1 of the Participation Agreement;
(f) execute and deliver the financing statements referred
to in Section 4(a)(vi) of the Participation Agreement, together with
all other agreements, documents and instruments referred to in Section
4 of the Participation Agreement to which the Owner Trustee is to be a
party;
(g) effect the registration of the Aircraft in the name
of the Owner Trustee by filing or causing to be filed with the FAA:
(i) the Lessee FAA Bill of Sale; (ii) an application for registration
of the Aircraft in the name of the Owner Trustee (including, without
limitation, an affidavit from the Owner Trustee in 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
TRUST AGREEMENT [N620SW]
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to the following conditions precedent: (a) the Owner Participant shall have
made the full amount of its Commitment with respect to the Aircraft available
to the Owner Trustee, in immediately available funds, in accordance with
Sections 1 and 2 of the Participation Agreement; and (b) the Owner Participant
shall have notified the Owner Trustee that the terms and conditions of Section
4 of the Participation Agreement, insofar as they relate to conditions
precedent to performance by the Owner Participant of its obligations
thereunder, shall have been either fulfilled to the satisfaction of or waived
by the Owner Participant. The Owner Participant shall, by instructing the
Owner Trustee to release the funds then held by the Owner Trustee as provided
in Section 2 of the Participation Agreement, be deemed to have found
satisfactory to it, or waived, all such conditions precedent.
ARTICLE IV
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE TRUST ESTATE
SECTION 4.01 DISTRIBUTION OF PAYMENTS.
(a) PAYMENTS TO THE INDENTURE TRUSTEE. Until the Trust
Indenture shall have been discharged pursuant to Section 10.01 thereof or
defeased pursuant to Section 10.05 thereof, all Rent, insurance proceeds and
requisition or other payments of any kind included in the Trust Estate (other
than Excluded Payments and other than payments received from the Indenture
Trustee under the Trust Indenture) payable to the Owner Trustee shall be
payable directly to the Indenture Trustee (and any of the same which are
received by the Owner Trustee shall upon receipt be paid over to the Indenture
Trustee without deduction, set-off or adjustment of any kind) for distribution
in accordance with the provisions of Article III of the Trust Indenture;
provided, however, that any payments received by the Owner Trustee from (i) the
Lessee with respect to the Owner Trustee's fees and disbursements, or (ii) the
Owner Participant pursuant to Article VII hereof shall not be paid over to the
Indenture Trustee but shall be retained by the Owner Trustee and applied toward
the purpose for which such payments were made.
(b) PAYMENTS TO OWNER TRUSTEE; OTHER PARTIES. After the
Trust Indenture shall have been discharged pursuant to Section 10.01 thereof or
defeased pursuant to Section 10.05 thereof, any payment of the type referred to
in Section 4.01(a) hereof (other than Excluded Payments) received by the Owner
Trustee, any payments received from the Indenture Trustee other than as
specified in Section 4.01(c) or (d) hereof and any other amount received as
part of the Trust Estate and for the application or distribution of which no
provision is made herein, shall be distributed forthwith upon receipt by the
Owner Trustee in the following order of priority: first, so much of such
payment as shall be required to reimburse the Owner Trustee for any expenses
not otherwise reimbursed as to which the Owner Trustee is entitled to be so
reimbursed by the Owner Participant pursuant to the provisions hereof shall be
retained by the Owner Trustee; second, so 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
TRUST AGREEMENT [N620SW]
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shall, if paid to the Owner Trustee, be distributed by the Owner Trustee to the
Owner Participant in accordance with the provisions of Article III of the Trust
Indenture.
(d) EXCLUDED PAYMENTS. Any Excluded Payments received by
the Owner Trustee shall be paid by the Owner Trustee to the Person to whom such
Excluded Payments are payable under the provisions of the Participation
Agreement, the Tax Indemnity Agreement or the Lease.
(e) LEGAL TITLE. The Owner Participant shall have no
legal title to the Aircraft or any other portion of the Trust Estate.
SECTION 4.02 METHOD OF PAYMENTS. The Owner Trustee shall
make distributions or cause distributions to be made to (i) the Owner
Participant pursuant to this Article IV by transferring by wire transfer in
immediately available funds on the day received (or on the next succeeding
Business Day if the funds to be so distributed shall not have been received by
the Owner Trustee by 3:00 p.m., New York City time), the amount to be
distributed as provided in Schedule I to the Participation Agreement or to such
account or accounts of the Owner Participant as the Owner Participant may
designate from time to time in writing to the Owner Trustee and (ii) the
Indenture Trustee pursuant to this Article IV by transferring the amount to be
distributed to the Indenture Trustee in the manner specified in the Trust
Indenture.
ARTICLE V
DUTIES OF THE OWNER TRUSTEE
SECTION 5.01 NOTICE OF EVENT OF DEFAULT. If the Owner
Trustee shall have knowledge of a Lease Event of Default or Indenture Event of
Default (or an event which with the passage of time or the giving of notice or
both would constitute a Lease Event of Default or an Indenture Event of
Default), the Owner Trustee shall give to the Owner Participant and Lessee
prompt telephonic or facsimile notice thereof followed by prompt written
confirmation thereof by certified mail, postage prepaid, provided, that (i) in
the case of an event which with the passage of time would constitute an
Indenture Event of Default referred to in paragraph (b) of Section 8.01 of the
Trust Indenture, such notice shall in no event be furnished later than ten (10)
days after the Owner Trustee shall first have knowledge of such event and (ii)
in the case of a misrepresentation by the Owner Trustee which with the passage
of time would constitute an Indenture Event of Default referred to in paragraph
(c) of Section 8.01 of the Trust Indenture, such notice shall in no event be
furnished later than ten (10) days after the Owner Trustee shall first have
knowledge of such event. The notice shall set forth in reasonable detail the
facts or circumstances known to it with respect to such Lease Event of Default
or Indenture Event of Default. Subject to the terms of Section 5.03 hereof,
the Owner Trustee shall take such action or shall refrain from taking such
action, not 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
TRUST AGREEMENT [N620SW]
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Section 5.01 unless notified in writing thereof by the Indenture Trustee, the
Owner Participant or Lessee.
SECTION 5.02 ACTION UPON INSTRUCTIONS. Subject to the
terms of Sections 5.01 and 5.03 hereof and to the terms of the other Operative
Agreements, upon the written instructions at any time and from time to time of
the Owner Participant, the Owner Trustee will take such of the following
actions, not inconsistent with the provisions of the Lease and the Trust
Indenture, as may be specified in such instructions: (i) give such notice or
direction or exercise such right, remedy or power hereunder or take such other
actions under any of the Operative Agreements to which the Owner Trustee is a
party or in respect of all or any part of the Trust Estate as shall be
specified in such instructions; (ii) take such action to preserve or protect
the Trust Estate (including the discharge of Liens) as may be specified in such
instructions; (iii) approve as satisfactory to it all matters required by the
terms of the Lease or the other Operative Agreements to be satisfactory to the
Owner Trustee, it being understood that without written instructions of the
Owner Participant, the Owner Trustee shall not approve any such matter as
satisfactory to it; (iv) subject to the rights of Lessee under the Operative
Agreements, after the expiration or earlier termination of the Lease, convey
all of the Owner Trustee's right, title and interest in and to the Aircraft for
such amount, on such terms and to such purchaser or purchasers as shall be
designated in such instructions, or net lease the Aircraft to such lessee or
lessees and on such terms as shall be designated in such instructions or
deliver the Aircraft to the Owner Participant in accordance with such
instructions; and (v) take such other action as is requested by the Owner
Participant, which action is not inconsistent with the terms of the Operative
Agreements.
SECTION 5.03 INDEMNIFICATION. The Owner Trustee shall not
be required to take any action under Section 5.01 (other than the giving of the
notices referred to therein) or 5.02 hereof unless the Owner Trustee shall have
been indemnified by the Owner Participant, in manner and form satisfactory to
the Owner Trustee, against any liability, cost or expense (including reasonable
counsel fees and disbursements) which may be incurred in connection therewith
other than that which results from the willful misconduct or gross negligence
of the Owner Trustee; and, if the Owner Participant shall have directed the
Owner Trustee to take any such action or refrain from taking any action, the
Owner Participant agrees to furnish such indemnity as shall be required and, in
addition to the extent not otherwise paid pursuant to the provisions of the
Lease or of the Participation Agreement, to pay the reasonable fees and charges
of the Owner Trustee for the services performed or to be performed by it
pursuant to such direction. The Owner Trustee shall not be required to take
any action under Section 5.01 (other than the giving of the notices referred to
therein) or 5.02 hereof if the Owner Trustee shall reasonably determine, or
shall have been advised by counsel, that such action is contrary to the terms
of any of the Operative Agreements to which the Owner Trustee is a party, or is
otherwise contrary to law and the Owner Trustee shall have delivered to the
Owner Participant written notice of the basis of its refusal to act.
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
TRUST AGREEMENT [N620SW]
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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.
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
TRUST AGREEMENT [N620SW]
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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 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
TRUST AGREEMENT [N620SW]
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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 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.
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SECTION 6.07 FEES AND COMPENSATION. The Owner Trustee
shall be entitled to receive compensation, reasonable as regards its
responsibilities hereunder, together with reimbursement within three (3) months
of its request for all reasonable expenses incurred or made by it in accordance
with any of the provisions of this Trust Agreement or any other Operative
Agreement (including the reasonable compensation of the expenses of its
counsel, accountants or other skilled persons and of all other persons not
regularly in its employ). If a Lease Event of Default or Indenture Event of
Default shall occur and be continuing, the Owner Trustee shall be entitled to
receive compensation, reasonable as regards its additional responsibilities
hereunder, and payment or reimbursement for its expenses as provided above.
Pursuant to Section 7(c) of the Participation Agreement and subject to Section
16 thereof, Lessee shall be required to pay the reasonable fees and expenses of
the Owner Trustee comprising the compensation and reimbursement of expenses to
which the Owner Trustee is entitled under this Section 6.07. Except as
otherwise expressly provided in Section 5.03 or Section 7.01 of this Trust
Agreement, neither the Owner Participant nor the Trust Estate shall have any
liability for any such fees and expenses; provided, however, the Owner
Participant shall be liable for such additional compensation of the Owner
Trustee if the same is attributable to an Indenture Event of Default which is
caused solely by the actions or inactions of the Owner Participant.
SECTION 6.08 TAX RETURNS. The Owner Trustee shall be
responsible for the keeping of all appropriate books and records relating to
the receipt and disbursement of all monies received by it under this Trust
Agreement or any other Operative Agreement. The Owner Participant shall be
responsible for causing to be prepared and filed all income tax returns
required to be filed by the Owner Participant. The Owner Trustee shall be
responsible for causing to be prepared, at the request of the Owner
Participant, all income tax returns required to be filed with respect to the
trust created hereby and shall execute and, with the approval of the Owner
Participant, file such returns. The Owner Trustee and the Owner Participant,
upon request, will furnish each other with all such information as may be
reasonably required in connection with the preparation of such income tax
returns. The Owner Trustee will give to the Owner Participant, upon request,
such periodic information concerning receipts and disbursements by it with
respect to the Trust Estate as would be helpful to the Owner Participant in
preparing its tax returns.
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
TRUST AGREEMENT [N620SW]
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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 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
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Participant, the Indenture Trustee and Lessee, such resignation to be effective
upon the acceptance of appointment by the successor Owner Trustee under Section
9.01(b) hereof. In addition, the Owner Participant may at any time remove the
Owner Trustee with or without cause by a notice in writing delivered to the
Owner Trustee, the Holders, the Indenture Trustee and Lessee, such removal to
be effective upon the acceptance of appointment by the successor Owner Trustee
under Section 9.01(b) hereof. In the case of the removal or resignation of the
Owner Trustee, the Owner Participant may, after consultation in good faith with
Lessee, appoint a successor Owner Trustee by an instrument signed by the Owner
Participant. If a successor Owner Trustee shall not have been appointed within
30 days after such notice of resignation or removal, the Owner Trustee, the
Owner Participant, Lessee or the Indenture Trustee may apply to any court of
competent jurisdiction to appoint a successor Owner Trustee to act until such
time, if any, as a successor shall have been appointed as above provided. Any
successor Owner Trustee so appointed by such court shall immediately and
without further act be superseded by any successor Owner Trustee appointed as
above provided.
(b) EXECUTION AND DELIVERY OF DOCUMENTS, ETC. Any
successor Owner Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee an instrument accepting such appointment, and
thereupon such successor Owner Trustee, without further act, shall become
vested with all the estates, properties, rights, powers, duties and trusts of
the predecessor Owner Trustee in the trusts hereunder with like effect as if
originally named the Owner Trustee herein; but nevertheless, upon the written
request of such successor Owner Trustee, such predecessor Owner Trustee shall
execute and deliver an instrument transferring to such successor Owner Trustee,
upon the trusts herein expressed, all the estates, properties, rights, powers
and trusts of such predecessor Owner Trustee, and such predecessor Owner
Trustee shall duly assign, transfer, deliver and pay over to such successor
Owner Trustee all monies or other property then held by such predecessor Owner
Trustee upon the trusts herein expressed. Upon the appointment of any
successor Owner Trustee hereunder, the predecessor Owner Trustee will complete,
execute and deliver such 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
TRUST AGREEMENT [N620SW]
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Lease, or in the event that the Owner Trustee shall have been requested to do
so by the Owner Participant or the Owner Trustee being advised by counsel shall
determine that it is so necessary or prudent in the interest of the Owner
Participant or the Owner Trustee, or the Owner Trustee shall have been directed
to do so by the Owner Participant, the Owner Trustee and Owner Participant
shall execute and deliver an agreement supplemental hereto and all other
instruments and agreements necessary or proper to constitute another bank or
trust company or one or more persons (any and all of which shall be a "citizen
of the United States" as defined in 49 U.S.C. Section 40102(a)(15)(C)) approved
by the Owner Trustee and the Owner Participant, either to act as co-trustee,
jointly with the Owner Trustee, or to act as separate trustee hereunder (any
such co-trustee or separate trustee being herein sometimes referred to as an
"additional trustee").
Every additional trustee hereunder shall, to the extent
permitted by law, be appointed and act, and the Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
(A) all powers, duties, obligations and rights conferred
upon the Owner Trustee in respect of the custody, control and
management of monies, the Aircraft or documents authorized to be
delivered hereunder or under the Participation Agreement shall be
exercised solely by the Owner Trustee;
(B) all other rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee and any limitations
thereon shall be conferred or imposed upon and exercised or performed
by the Owner Trustee and such additional trustee jointly, except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (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.
TRUST AGREEMENT [N620SW]
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ARTICLE X
SUPPLEMENTS AND AMENDMENTS
TO TRUST AGREEMENT AND OTHER AGREEMENTS
SECTION 10.01 SUPPLEMENTS AND AMENDMENTS AND DELIVERY
THEREOF.
(a) SUPPLEMENTS AND AMENDMENTS. This Trust Agreement may
not be amended, supplemented or otherwise modified except by an instrument in
writing signed by the Owner Trustee and (except in the case of a Trust
Supplement) the Owner Participant. Subject to Section 10.02 hereof, Section 10
of the Participation Agreement and, until the Trust Indenture shall have been
satisfied and discharged pursuant to Section 10.01 thereof, Section 11.06 of
the Trust Indenture, the Owner Trustee will execute any amendment, supplement
or other modification of this Trust Agreement or of any other Operative
Agreement to which the Owner Trustee is a party which it is requested to
execute by the Owner Participant except that the Owner Trustee shall not
execute any such amendment, supplement or other modification which, by the
express provisions of any of the above documents, requires the consent of any
other party unless such consent shall have been obtained.
(b) DELIVERY OF AMENDMENTS AND SUPPLEMENTS TO CERTAIN
PARTIES. A signed copy of each amendment or supplement referred to in Section
10.01(a) hereof shall be delivered promptly by the Owner Trustee to Lessee and,
until the Trust Indenture shall have been satisfied and discharged pursuant to
Section 10.01 thereof, the Indenture Trustee.
SECTION 10.02 DISCRETION AS TO EXECUTION OF DOCUMENTS.
Prior to executing any document required to be executed by it pursuant to the
terms of Section 10.01 hereof, the Owner Trustee shall be entitled to receive
an opinion of its counsel to the effect that the execution of such document is
authorized hereunder. If in the opinion of the Owner Trustee any document
required to be executed by the Owner Trustee pursuant to the terms of Section
10.01 hereof adversely affects any right, duty, immunity or indemnity in favor
of the Owner Trustee hereunder or under any other Operative Agreement to which
the Owner Trustee is a party, the Owner Trustee may in its discretion decline
to execute such document.
SECTION 10.03 DISTRIBUTION OF DOCUMENTS. Promptly after the
execution by the Owner Trustee of any document entered into pursuant to Section
10.01 hereof, the Owner Trustee shall mail, by certified mail, postage prepaid,
a conformed copy thereof to the Owner Participant, but the failure of the Owner
Trustee to mail such conformed copy shall not impair or affect the validity of
such document.
SECTION 10.04 ABSENCE OF REQUIREMENT AS TO FORM. It shall
not be necessary for any written request furnished pursuant to Section 10.01 to
specify the particular form of the proposed documents to be executed pursuant
to such Section, but it shall be sufficient if such request shall indicate the
substance thereof.
TRUST AGREEMENT [N620SW]
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01 TERMINATION OF TRUST AGREEMENT. This Trust
Agreement and the trusts created hereby shall terminate and this Trust
Agreement shall be of no further force or effect upon the earlier of (a) the
later of (x) the final satisfaction and discharge of the Trust Indenture
pursuant to Section 10.01 thereof and the sale or other final disposition by
the Owner Trustee of all property constituting part of the Trust Estate and the
final distribution by the Owner Trustee of all monies or other property or
proceeds constituting part of the Trust Estate in accordance with Article IV
hereof, provided, that at such time Lessee shall have fully complied with all
of the terms of the Lease and the Participation Agreement and (y) the
expiration or termination of the Lease in accordance with its terms, (b)
twenty-one years less one day after the death of the last survivor of all of
the descendants of Robert E. Lee, late General in Chief of the Armies of the
Confederate States, living on the date of the earliest execution of this Trust
Agreement by any party hereto or (c) the date of revocation of such trusts by
the Owner Participant (in which case the Trust Estate, subject to the Trust
Indenture, shall be distributed in accordance with the terms hereof); otherwise
this Trust Agreement and the trusts created hereby shall continue in full force
and effect in accordance with the term hereof.
SECTION 11.02 OWNER PARTICIPANT HAS NO LEGAL TITLE IN TRUST
ESTATE. The Owner Participant shall not have legal title to any part of the
Trust Estate. No transfer, by operation of law or otherwise, of any right,
title and interest of the Owner Participant in and to the Trust Estate
hereunder shall operate to terminate this Trust Agreement or the trusts
hereunder or entitle any successors or transferees of the Owner Participant to
an accounting or to the transfer of legal title to any part of the Trust
Estate.
SECTION 11.03 ASSIGNMENT, SALE, ETC. OF AIRCRAFT. Any
assignment, sale, transfer or other conveyance of the Aircraft, any Engine or
any interest therein by the Owner Trustee made in accordance with the express
terms hereof or of the Lease or the Participation Agreement shall bind the
Owner Participant and shall be effective to transfer or convey all right, title
and interest of the Owner Trustee and the Owner Participant in and to the
Aircraft, such Engine or interest therein. No purchaser or other grantee shall
be required to inquire as to the authorization, necessity, expediency or
regularity of such assignment, sale, transfer or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.
SECTION 11.04 TRUST AGREEMENT FOR BENEFIT OF CERTAIN
PARTIES ONLY. Except for the terms of Section 8(l) of the Participation
Agreement incorporated in Article VIII hereof and except as otherwise provided
in Articles V and IX and Sections 2.02, 3.01, 4.01, 6.07, 10.01, 10.02 and
11.01 hereof, nothing herein, whether expressed or implied, shall be construed
to give any person other than the Owner Trustee and the Owner Participant any
legal or equitable right, remedy or claim under or in respect of this Trust
Agreement; but this Trust Agreement shall be held to be for the sole and
exclusive benefit of the Owner Trustee and the Owner Participant.
SECTION 11.05 [INTENTIONALLY RESERVED FOR POTENTIAL FUTURE
USE].
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SECTION 11.06 NOTICES. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by telecopier, or by prepaid
courier service, and shall be deemed to be given for purposes of this Trust
Agreement on the day that such writing is delivered or, if sent by registered
or certified mail, three Business Days after being deposited in the mails
addressed to the intended recipient thereof in accordance with the provisions
of this Section 11.06. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section 11.06,
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telecopier numbers) as follows: (A) if to
Lessee, the Owner Trustee, the Indenture Trustee or the Owner Participant, to
the respective addresses set forth on Schedule I to the Participation Agreement
or (B) if to any Holder, addressed to such Holder at its address as set forth
in the Register maintained pursuant to the Trust Indenture.
SECTION 11.07 SEVERABILITY. Subject to Section 11.12
hereof, any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.08 WAIVERS, ETC. No term or provision hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing entered into in compliance with the terms of Article X hereof; and
any waiver of the terms hereof shall be effective only in the specific instance
and for the specific purpose given.
SECTION 11.09 COUNTERPARTS. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10 BINDING EFFECT, ETC. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Owner Trustee and its successors and assigns, and the Owner Participant,
its successors and, to the extent permitted by Article VIII hereof, its
assigns. Any request, notice, direction, consent, waiver or other instrument
or action by an Owner Participant shall bind its successors and permitted
assigns.
SECTION 11.11 HEADINGS; REFERENCES. The headings of the
various Articles and Sections herein are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof. The trust
created hereby, together with the trust created by the Trust Indenture, may for
convenience of reference be referred to, collectively, as "Southwest Airlines
1996 Trust N620SW."
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.
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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.
* * *
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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.
CHRYSLER FINANCIAL CORPORATION
By: [signature illegible]
--------------------------------
Assistant Secretary
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Pablo de la Canal
--------------------------------
Corporate Trust Officer
TRUST AGREEMENT [N620SW]
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TRUST AGREEMENT [N620SW]
TRUST AGREEMENT [N620SW]
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EXHIBIT 4.5
TRUST INDENTURE
AND SECURITY AGREEMENT
dated as of June 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 N620SW
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Southwest Airlines Co.
Series SWA 1996 Trust N620SW-I and N620SW Certificates
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TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.02 Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 2
THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.01. Certificates; Title and Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.02. Execution and Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.04. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.05. Holder Lists; Ownership of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.06. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . 15
Section 2.07. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.08. Payment on Certificates; Defaulted Principal and Interest. . . . . . . . . . . . . . . . 16
Section 2.09. Payment from Indenture Estate Only. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.10. Execution, Delivery and Dating of Certificates upon Issuance. . . . . . . . . . . . . . . 18
ARTICLE 3
RECEIPT, DISTRIBUTION AND APPLICATION OF FUNDS IN THE INDENTURE . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.01. [Reserved for Potential Future Use]. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.02. Payment in Case of Redemption of Certificates. . . . . . . . . . . . . . . . . . . . . . 18
Section 3.03. Application of Rent When No Indenture Event of Default Is Continuing. . . . . . . . . . . 19
Section 3.04. Application of Certain Payments in Case of Requisition or Event of Loss. . . . . . . . . 20
Section 3.05. Payments During Continuance of Indenture Event of Default. . . . . . . . . . . . . . . . 20
Section 3.06. Payments for Which Application Is Provided in Other Documents. . . . . . . . . . . . . . 21
Section 3.07. Payments for Which No Application Is Otherwise Provided. . . . . . . . . . . . . . . . . 21
Section 3.08. Application of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 4
COVENANTS OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.01. Covenants of the Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.02. Covenants of First Union National Bank of North Carolina. . . . . . . . . . . . . . . . . 23
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ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE OF PROPERTY INCLUDED IN
THE INDENTURE ESTATE DURING CONTINUATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.01. Disposition, Substitution and Release of Property Included in the
Indenture Estate During Continuation of Lease. . . . . . . . . . . . . . . . . . . . . . 24
Section 5.02. Certificates in Respect of Replacement Aircraft and Engines. . . . . . . . . . . . . . . 24
ARTICLE 6
REDEMPTION OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.01. Redemption of Certificates upon Certain Events. . . . . . . . . . . . . . . . . . . . . . 25
Section 6.02. Redemption or Purchase of Certificates Upon Certain Indenture Events
of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.03. Notice of Redemption to Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.04. Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.05. Certificates Payable on Redemption Date. . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 7
MATTERS CONCERNING THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.01. Repayment of Monies for Certificate Payments Held by the Indenture Trustee. 27
Section 7.02. [Reserved for Potential Future Use]. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.03. Assumption of Obligations of Owner Trustee by the Company. . . . . . . . . . . . . . . . 28
ARTICLE 8
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.01. Indenture Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.02. Acceleration; Rescission and Annulment. . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.03. Other Remedies Available to Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . 32
Section 8.04. Waiver of Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.05. Waiver of Existing Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.06. Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.07. Limitation on Suits by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.08. Rights of Holders to Receive Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.09. Indenture Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 9
INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.01. Duties of Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.02. Rights of Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.03. Individual Rights of Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 40
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Section 9.04. Funds May Be Held by Indenture Trustee or Paying Agent; Investments. . . . . . . . . . . 40
Section 9.05. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.06. Compensation and Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.07. Replacement of Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.08. Successor Indenture Trustee, Agents by Merger, Etc. . . . . . . . . . . . . . . . . . . . 43
Section 9.09. Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.10. Trustee's Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.11. Withholding Taxes; Information Reporting. . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.12. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.13. Certain Rights of Owner Trustee and Owner Participant. . . . . . . . . . . . . . . . . . 44
ARTICLE 10
SATISFACTION AND DISCHARGE; DEFEASANCE;TERMINATION OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 45
Section 10.01. Satisfaction and Discharge of Agreement; Defeasance; Termination
of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.02. Survival of Certain Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.03. Monies to Be Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.04. Monies to Be Returned to Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 10.05. Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 11
AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.01. Amendments to this Agreement Without Consent of Holders. . . . . . . . . . . . . . . . . 48
Section 11.02. Amendments to this Agreement with Consent of Holders. . . . . . . . . . . . . . . . . . . 49
Section 11.03. Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.04. Notation on or Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.05. Indenture Trustee Protected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.06. Amendments, Waivers, Etc. of Other Operative Agreements. . . . . . . . . . . . . . . . . 50
Section 11.07. Trust Supplement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.01. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.02. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.03. [Reserved for Potential Future Use] . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.04. Rules by Indenture Trustee and Agents. . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.05. Non-Business Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.06. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.07. No Recourse Against Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.08. Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.09. Applicability Only to Original Holder. . . . . . . . . . . . . . . . . . . . . . . . . . 55
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Section 12.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 13.01. Actions to Be Taken upon Termination of Lease. . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 15
ISSUANCE AND APPLICATION OF PROCEEDS OF
SERIES SWA 1996 TRUST N620SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1996 TRUST N620SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1996 TRUST N620SW-I
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 15.01. Conditions Precedent to Issuance of Series SWA 1996 Trust
N620SW Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 15.02. Payment upon Issuance of Series SWA 1996 Trust
N620SW Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 15.03. Special Provision Governing Refinancing of the Series SWA 1996 Trust
N620SW-I Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 15.04. Special Provision for Payments in Respect of the Series SWA 1996 Trust
N620SW-I Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 15.05. Increased Costs, Break Amount, Additional Interest, Taxes, Etc. . . . . . . . . . . . . . 57
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EXHIBITS
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Exhibit A - Form of Series SWA 1996 Trust N620SW-I Certificate
Exhibit A-1 - Form of Series SWA 1996 Trust N620SW Installment Certificates
Exhibit A-2 - Form of Series SWA 1996 Trust N620SW Serial Certificates
Exhibit B - Maturity Dates, Principal Amounts and Interest Rates on Series SWA 1996 Trust N620SW
Certificates
Exhibit B-1 - Installment Payment Dates and Installment Payment Percentages
Exhibit B-2 - Issuance of Series SWA 1996 Trust N620SW Certificates
Exhibit C - [FORM OF] Trust Agreement and Trust Indenture and Security Agreement Supplement
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TRUST INDENTURE AND SECURITY AGREEMENT
This TRUST INDENTURE AND SECURITY AGREEMENT, dated as of June
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 N620SW-I Certificates and for the potential issuance by the Owner
Trustee of the Series SWA 1996 Trust N620SW Certificates in respect of the
refinancing and redemption of the Series SWA 1996 Trust N620SW-I Certificates
and (ii) to provide for the assignment, mortgage and pledge by the Owner
Trustee to the Indenture Trustee, as part of the Indenture Estate hereunder,
among other things, of certain of the Owner Trustee's right, title and interest
in and to the Aircraft and the Operative Agreements and certain payments and
other amounts received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's obligations to
the Indenture Trustee, for the ratable benefit and security of the Holders; and
WHEREAS, all things necessary to make this Agreement the
legal, valid and binding obligation of the Owner Trustee and the Indenture
Trustee, for the uses and purposes herein set forth, in accordance with its
terms, have been done and performed and have happened;
GRANTING CLAUSE
NOW, THEREFORE, THIS TRUST INDENTURE AND SECURITY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal of, Premium, if
any, and interest on, Break Amount, if any, and all other amounts due with
respect to, all Certificates from time to time Outstanding and all other
amounts due to the Holders hereunder and under the Participation Agreement and
the performance and observance by each of the Company and the Owner Trustee of
all the agreements, covenants and provisions contained herein and in the
Operative Agreements to which it is a party, for the benefit of Indenture
Trustee and the Holders, and for the uses and purposes hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Certificates by the Holders, and of the sum of $1 paid to the
Owner Trustee by the Indenture Trustee at or before the delivery hereof, the
receipt whereof is hereby acknowledged, the Owner
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Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its
successors and assigns, for the security and benefit of the Holders from time
to time, a security interest in and mortgage lien on all estate, right, title
and interest of the Owner Trustee in, to and under the following described
property, rights, interests and privileges, other than Excluded Payments (which
collectively, including all property hereafter specifically subjected to the
lien of this Agreement by any instrument supplemental hereto, but excluding the
Excluded Payments, are herein called the "Indenture Estate"):
(1) the Aircraft (including the Airframe and the
Engines originally installed thereon on the Delivery Date), and all
replacements thereof and substitutions therefor in which the Owner
Trustee shall from time to time acquire an interest in accordance with
the Lease, as more particularly described in the Trust Supplement and
the Lease Supplement executed and delivered with respect to the
Aircraft or any such replacements or substitutions therefor, as
provided in this Agreement, and all Records maintained with respect to
the foregoing property;
(2) the Lease and all Rent thereunder, including,
without limitation, all amounts of Basic Rent, Supplemental Rent,
payments of any kind required to be made by the Company thereunder
(including the purchase price for the Aircraft pursuant to Section
18.2 of the Lease) and any sales proceeds of the Aircraft sold
pursuant to Section 9 of the Lease or otherwise; the Purchase
Agreement (to the extent assigned by the Purchase Agreement
Assignment); the Purchase Agreement Assignment; all subleases of the
Airframe and the Engines and all rent thereunder to the extent
assigned to the Owner Trustee by Lessee; the Bills of Sale; the
Participation Agreement; and the Manufacturer's Consent; including,
without limitation, in respect of each of the foregoing documents and
instruments, all rights of the Owner Trustee to receive any payments
or other amounts or to exercise any election or option or to make any
decision or determination or to give or receive any notice, consent,
waiver or approval or to take any other action under or in respect of
any such document or to accept surrender or redelivery of the Aircraft
or any part thereof, as well as all the rights, powers and remedies on
the part of the Owner Trustee, whether acting under any such document
or by statute or at law or in equity, or otherwise, arising out of any
Lease Event of Default;
(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.
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On the Delivery Date the Owner Trustee shall deliver to the
Indenture Trustee an executed chattel paper original counterpart of each of the
Lease and the Lease Supplement covering the Aircraft, together with executed
copies of the Trust Agreement and each of the other Indenture Documents (other
than the Purchase Agreement, the Participation Agreement and the FAA bills of
sale). All property referred to in this Granting Clause, whenever acquired by
the Owner Trustee, shall secure all obligations under and with respect to the
Certificates at any time Outstanding. Any and all properties referred to in
this Granting Clause which are hereafter acquired by the Owner Trustee, shall,
without further conveyance, assignment or act by the Owner Trustee or the
Indenture Trustee thereby become and be subject to the security interest hereby
granted as fully and completely as though specifically described herein.
HABENDUM CLAUSE
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Indenture Trustee and the Holders from time to
time, without any priority of any one Certificate over any other, and for the
uses and purposes and subject to the terms and provisions set forth in this
Agreement.
The Owner Trustee agrees that this Agreement is intended to
and shall create and grant a security interest in the Aircraft to the Indenture
Trustee, which security interest shall attach on the Delivery Date. The
security interest created by this Agreement and granted to the Indenture
Trustee hereunder in the Indenture Estate other than in the Aircraft shall
attach in the case of each other item of property included in the Indenture
Estate upon the delivery thereof or upon the Owner Trustee's acquiring rights
in such property.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Owner Trustee shall remain liable under each of
the Operative Agreements to which it is a party, to perform all of the
obligations assumed by it thereunder, all in accordance with and pursuant to
the terms and provisions thereof, and the Indenture Trustee and the Holders
shall have no obligation or liability under any of the Operative Agreements to
which the Owner Trustee is a party by reason of or arising out of the
assignment hereunder, nor shall the Indenture Trustee or the Holders be
required or obligated in any manner to perform or fulfill any obligations of
the Owner Trustee under any of 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
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make all payments of Rent (other than Excluded Payments) payable to the Owner
Trustee by the Company and all other amounts which are required to be paid to
or deposited with the Owner Trustee pursuant to the Lease directly to the
Indenture Trustee at such address as the Indenture Trustee shall specify, for
application as provided in this Agreement. The Owner Trustee agrees that
promptly on receipt thereof, it will transfer to the Indenture Trustee any and
all moneys from time to time received by it constituting part of the Indenture
Estate, for distribution by the Indenture Trustee pursuant to this Agreement,
except that the Owner Trustee shall accept for distribution pursuant to the
Trust Agreement any amounts distributed to it by the Indenture Trustee as
expressly provided in this Agreement and any Excluded Payments.
The Owner Trustee agrees that at any time and from time to
time, upon the written request of the Indenture Trustee, the Owner Trustee will
promptly and duly execute and deliver or cause to be duly executed and
delivered any and all such further instruments and documents as the Indenture
Trustee may reasonably deem desirable in obtaining the full benefits of the
assignment hereunder and of the rights and powers herein granted.
The Owner Trustee does hereby warrant and represent that it
has not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of its
right, title or interest hereby assigned, to anyone other than the Indenture
Trustee, and that it will not, except as provided in or permitted by this
Agreement, accept any payment from the Company, enter into an agreement
amending or supplementing any of the Operative Agreements, execute any waiver
or modification of, or consent under the terms of any of the Operative
Agreements, settle or compromise any claim (other than claims in respect of
Excluded Payments) against the Company arising under any of the Operative
Agreements, or submit or consent to the submission of any dispute, difference
or other matter arising under or in respect of any of the Operative Agreements,
to arbitration thereunder.
The Owner Trustee does hereby ratify and confirm the Indenture
Documents and does hereby agree that (except as permitted herein) it will not
take or omit to take any action, the taking or omission of which would result
in an alteration or impairment of any of the Indenture Documents or of any of
the rights created by any thereof or the assignment hereunder.
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:
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ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS. (a) For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Article 1 have the
meanings assigned to them in this Article 1, and include the plural as
well as the singular;
(2) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(3) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision; and
(4) unless otherwise specified, all references in
this Agreement to Articles, Sections and Exhibits refer to Articles,
Sections and Exhibits of this Agreement.
(b) For all purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Affiliate" with respect to a specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this
definition, "control" when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Bankruptcy Code" means the United States Bankruptcy Code of
1978, as amended, or any successor statute.
"Basis Point" shall have the meaning specified therefor in
Exhibit A.
"Break Amount" shall have the meaning specified therefor in
Section 15.05(b).
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks are required or authorized to close in the
City of Dallas, Texas; New York, New York; the city and state in which (i) so
long as any Certificates shall be Outstanding, the Indenture Trustee and (ii)
thereafter, the Owner Trustee, has its principal place of business; and the
city and state in which the Indenture Trustee or the Owner Trustee, as the case
may be, receives and disburses funds; provided, however, that so long as the
Series SWA 1996 Trust N620SW-I Certificates are Outstanding,
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such day must also be a day on which dealings are carried on in the applicable
offshore dollar interbank market.
"Certificate" or "Certificates" means any certificate or other
debt instrument issued under this Agreement, including the Series SWA 1996
Trust N620SW-I Certificates and the Series SWA 1996 Trust N620SW Certificates,
if any, issued hereunder.
"Company" means Southwest Airlines Co., a Texas corporation,
and, subject to the provisions of the Participation Agreement, its permitted
successors and assigns.
"Company Request" means a written request of the Company
executed on its behalf by a Responsible Company Officer of the Company.
"Co-Registrar" shall have the meaning specified therefor in
Section 2.03.
"Debt" means any liability for borrowed money, or any
liability for the payment of money in connection with any letter of credit
transaction, or other liabilities evidenced or to be evidenced by bonds,
debentures, notes or other similar instruments.
"Debt Rate" shall have the meaning specified therefor in
Exhibit A.
"Defaulted Installment" shall have the meaning specified
therefor in Section 2.08.
"Defaulted Interest" shall have the meaning specified therefor
in Section 2.08.
"Defeasance Trustee" shall have the meaning specified therefor
in Section 10.05.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System or
any governmental authority which is the successor thereto, as in effect from
time to time.
"Eurocurrency Reserve Percentage" for any day means the
reserve percentage applicable in respect of such day under Regulation D of the
Board of Governors of the Federal Reserve System (or any governmental authority
which is the successor thereto) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for the Original Holder with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities.
"Excluded Payments" means (i) any right, title or interest of
the Owner Trustee in its individual capacity, the Owner Participant or their
respective Affiliates or of their respective, successors, permitted assigns,
directors, officers, employees, servants and agents to any indemnity payment,
including, but not limited to, any payment which by the terms of Section 7(b),
7(c), 7(f), 16, 17 or 18 of the Participation Agreement, Section 5.03 or 7.01
of the Trust Agreement or any section of the Tax Indemnity Agreement or any
corresponding payment under Section 3.5 of the Lease shall be payable to the
Owner Trustee in its individual capacity or to the Owner Participant, 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
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
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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.
"Fixed Period" means the period after the Floating Period.
"Floating Period" means the period any Series SWA 1996 Trust
N620SW-I Certificate is Outstanding.
"Government Obligations" shall have the meaning specified
therefor in Section 10.05.
"Holder" or "Certificate Holder" means a Person in whose name
a Certificate is registered on the Register including, so long as it holds a
Series SWA 1996 Trust N620SW-I Certificate, the Original Holder.
"Indenture Default" means any event which is, or after notice
or passage of time, or both, would be, an Indenture Event of Default.
"Indenture Documents" means each and every document or
instrument referred to in the Granting Clause hereof.
"Indenture Estate" shall have the meaning specified therefor
in the Granting Clause hereof.
"Indenture Event of Default" shall have the meaning specified
therefor in Section 8.01.
"Indenture Trustee" means Wilmington Trust Company, and each
other Person which may from time to time be acting as Indenture Trustee in
accordance with the provisions of this Agreement.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
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"Independent" when used with respect to an engineer, appraiser
or other expert, means an engineer, appraiser or other expert who (i) is in
fact independent, (ii) does not have any direct financial interest or any
material indirect financial interest in the Company or any Affiliate of the
Company and (iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions.
"Independent Investment Banker" means an Independent
investment banking institution of national standing appointed by the Company on
behalf of the Owner Trustee (and reasonably acceptable to the Owner
Participant, which acceptance shall not be unreasonably withheld after notice
to the Owner Participant); provided, that if the Indenture Trustee shall not
have received written notice of such an appointment at least 10 days prior to
the relevant Redemption Date or if a Lease Event of Default shall have occurred
and be continuing, "Independent Investment Banker" shall mean such an
institution appointed by the Indenture Trustee.
"Installment Certificate" means a Certificate, other than a
Series SWA 1996 Trust N620SW-I Certificate, should any such Certificate be
issued hereunder which shall provide for the payments of principal in
installments.
"Installment Payment Amount" means, with respect to each
Installment Certificate, the amount of the installment payment of principal due
and payable on each Installment Payment Date, which amount shall be equal to
the product of the original principal amount of such Certificate and the
Installment Payment Percentage for such Installment Payment Date.
"Installment Payment Date" means each date on which an
installment payment of principal is due and payable on the Certificates, as set
forth in Exhibit B-l as completed in accordance with Article 15.
"Installment Payment Percentage" means, with respect to each
Installment Payment Date, the percentage set forth opposite such Installment
Payment Date in Exhibit B-l as completed in accordance with Article 15.
The term "interest" payable, or to be payable, on any date
during the Floating Period in respect of the Series SWA 1996 Trust N620SW-I
Certificates shall include, without limitation, any and all accrued and unpaid
compounded interest thereon.
"Interest Payment Date" means each July 2 and January 2
commencing on January 2, 1997.
"Interest Period" shall have the meaning specified therefor in
Exhibit A.
"Lease" means the Sale and Lease Agreement, dated as of the
date hereof, between the Owner Trustee, as lessor, and the Company, as lessee,
relating to the Aircraft as such Sale and Lease Agreement may from time to time
be supplemented, amended or modified in accordance with the terms thereof and
this Agreement. The term "Lease" shall also include each Lease Supplement
entered into pursuant to the terms of the Lease.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
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"Lease Loss Payment Date" means the date on which Stipulated
Loss Value is payable pursuant to Section 10.1.4 of the Lease in connection
with an Event of Loss in respect of the Aircraft.
"Lease Termination Date" means the date the Lease terminates
pursuant to Section 9 of the Lease.
"Lending Office" of any Holder of a Series SWA 1996 Trust
N620SW-I Certificate means the office through which such Holder makes and/or
books and maintains the loan evidenced by its Certificate, which, in the case
of the Original Holder, is New York, New York, as of the date hereof.
"LIBO Rate" shall have the meaning specified therefor in
Exhibit A.
"Maturity Date" means, with respect to the Series SWA 1996
Trust N620SW Certificates, each of the dates specified in Exhibit B as a
maturity date of such Certificates and shall have, in respect of the Series SWA
1996 Trust N620SW-I Certificates, the meaning specified therefor in Exhibit A.
"Officers' Certificate" means a certificate signed in the case
of the Company, by (i) the Chairman of the Board of Directors, the President,
or any Executive or Senior Vice President of the Company, signing alone, or
(ii) any Vice President signing together with the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer or the Controller of the
Company or, in the case of the Owner Trustee, a Responsible Officer of the
Owner Trustee.
"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.
"Original Holder" means Royal Bank of Canada, New York Branch,
as the original holder of the loan evidenced by the Series SWA 1996 Trust
N620SW-I Certificate and any branch or agency thereof in the United States to
which the Series SWA 1996 Trust N620SW-I Certificate held by it may be
transferred.
"Outstanding", when used with respect to Certificates, means,
as of the date of determination, all Certificates theretofore executed and
delivered under this Agreement other than:
(i) Certificates theretofore cancelled by the Indenture
Trustee or delivered to the Indenture Trustee for cancellation
pursuant to Section 2.07 or otherwise;
(ii) Certificates for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates; provided, that
if such Certificates are to be redeemed, notice of such redemption has
been duly given pursuant to this Agreement or provision therefor
satisfactory to the Indenture Trustee has been made; and
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(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, and each other Person which
may from time to time be acting as Owner Trustee in accordance with the
provisions of the Operative Agreements.
"Past Due Rate" means, in respect of any Certificate, the rate
of interest applicable pursuant to the provisions of such Certificate to any
amount of principal or interest payable thereunder not paid when due.
"Paying Agent" means any person acting as Paying Agent
hereunder pursuant to Section 2.03.
"Payment Date" means any Installment Payment Date, Interest
Payment Date or Maturity Date.
"Permitted Investment" means any of the investments permitted
by Section 22.1 of the Lease.
"Premium" means, with respect to each Series SWA 1996 Trust
N620SW Certificate to be redeemed, purchased or otherwise prepaid pursuant to
Article 6, an amount determined as of the Business Day next preceding the
applicable Redemption Date which an Independent Investment Banker determines to
be equal to an excess, if any, of (i) the present values of all remaining
scheduled payments of such principal amount or portion thereof and interest
thereon (excluding interest accrued from the immediately preceding Interest
Payment Date to such Redemption Date) to the Maturity Date of such Certificate
in accordance with generally accepted financial practices assuming a 360-day
year consisting of twelve 30-day months at a discount rate equal to the
Treasury Yield, all as determined by the Independent Investment Banker over
(ii) the unpaid principal amount of such Certificate. Premium shall never be
below zero.
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"Premium Termination Date" means, with respect to each Series
SWA 1996 Trust N620SW Certificate, the date set forth as the "Premium
Termination Date" in Exhibit B hereto completed in accordance with Article 15
for Certificates of the Maturity Date of such Certificate.
"Principal Payment Date" shall have the meaning specified
therefor in Exhibit A.
"Record Date" for the interest or Installment Payment Amount
payable on any Interest Payment Date or Installment Payment Date (other than
the Maturity Date of the Certificates), as the case may be, means the calendar
day (whether or not a Business Day) which is 15 calendar days prior to the
related Interest Payment Date or the related Installment Payment Date.
"Redemption Date" means the date on which the Certificates are
to be redeemed or purchased pursuant to Section 6.01 or 6.02.
"Redemption Price" means the price at which any or all of the
Certificates (as the context may require) are to be redeemed or purchased,
determined as of the applicable Redemption Date, pursuant to Section 6.01, 6.02
or 15.03, as the case may be.
"Refinancing Date" means the date designated by the Company as
the date for a refinancing of the Certificates in accordance with Section 17 of
the Participation Agreement.
"Register" shall have the meaning specified therefor in
Section 2.03.
"Registrar" means any person acting as Registrar hereunder
pursuant to Section 2.03.
"Remaining Weighted Average Life" means, for any Installment
Certificate, at the Redemption Date of such Certificate, the number of days
equal to the quotient obtained by dividing (a) the sum of the products obtained
by multiplying (i) the amount of each then remaining scheduled payment of
principal, including the payment due on the Maturity Date of such Certificate,
by (ii) the number of days from and including the Redemption Date to but
excluding the regularly scheduled date of such scheduled payment of principal;
by (b) the then unpaid principal amount of such Certificate.
"Responsible Company Officer" means, with respect to the
Company or Owner Participant, its Chairman of the Board, its President, the
Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (a) working under the direct supervision of such Chairman
of the Board, President, Chief Financial Officer, Vice President or Treasurer
and (b) whose responsibilities include the administration of the transactions
and agreements, including the Lease, contemplated by the Participation
Agreement.
"Responsible Officer", with respect to 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.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
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"SEC" means the Securities and Exchange Commission.
"Section 18 Refinancing Date" means the date specified by the
Company for the refinancing of the Series SWA 1996 Trust N620SW-I Certificates
in accordance with Section 18 of the Participation Agreement.
"Series SWA 1996 Trust N620SW Certificate" means any
certificate of such designation issued by the Owner Trustee under this
Agreement substantially in the form of Exhibit A-1 or A-2, should any of such
certificates be issued hereunder, and any such certificate issued in
replacement or exchange thereof in accordance with the provisions hereof.
"Series SWA 1996 Trust N620SW-I Certificate" means any
certificate issued by the Owner Trustee under this Agreement, substantially in
the form of Exhibit A, and any such certificate issued in replacement or
exchange thereof in accordance with the provisions hereof.
"Treasury Yield" means (i) In the case of a Certificate having
a Maturity Date within one year after the Redemption Date the average yield to
maturity on a government bond equivalent basis of the applicable United States
Treasury Bill due the week of the Maturity of such Certificate and (ii) in the
case of a Certificate having a Maturity Date one year or more after the
Redemption Date, the average yield of the most actively traded United States
Treasury Notes (as reported by Cantor Fitzgerald Securities Corp. on page 5 of
Telerate Systems, Inc., a financial news service, or if such report is not
available, a source deemed comparable by the Independent Investment Banker
selected to determine the Premium and reasonably acceptable to the Company and
the Owner Participant) corresponding in maturity (x) for any Certificate issued
in serial form, the Maturity Date or (y) for any Certificate issued in
installment form, to the Average Life Date, in each case, of such Certificate
(or, if there is no corresponding maturity, an interpolation of maturities by
the Independent Investment Banker), in each case determined by the Independent
Investment Banker selected to determine the Premium based on the average of the
yields to stated maturity determined from the bid prices as of 10:00 A.M. and
2:00 P.M. New York time, on the second Business Day preceding the Redemption
Date. "Average Life Date" means, with respect to the redemption of an
Installment Certificate, the date which follows the Redemption Date by a period
equal to the Remaining Weighted Average Life of such Certificate.
"Trust Estate" shall have the meaning specified therefor in
the Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Indenture and Security Agreement", "this Indenture" or
"this Agreement" means this Trust Indenture and Security Agreement, as the same
may from time to time be supplemented, amended or modified, including by any
Trust Supplement.
"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 INDENTURE AND SECURITY AGREEMENT [N620SW]
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"Trust Supplement" means a supplement to the Trust Agreement
and this Agreement substantially in the form of Exhibit C.
"Trustee's Liens" shall have the meaning specified therefor in
Section 9.10.
SECTION 1.02 OTHER DEFINITIONS. For all purposes of
this Agreement, terms defined in the heading and recitals of this Agreement are
used as so defined and capitalized terms used but not defined herein are used
as defined in the Lease.
ARTICLE 2
THE CERTIFICATES
SECTION 2.01. CERTIFICATES; TITLE AND TERMS. One or more
Series SWA 1996 Trust N620SW-I Certificates in the aggregate face amount equal
to the Original Holder's Commitment under Section 1(b) of the Participation
Agreement shall be issued on the Delivery Date as provided in Section 3(e) of
the Participation Agreement in substantially the form set forth, and shall bear
interest as provided, in Exhibit A. In the event more than one such Certificate
is so issued, all references in this Indenture to a single Series SWA 1996
Trust N620SW-I Certificate shall be deemed to include each other such
Certificate. The Series SWA 1996 Trust N620SW-I Certificate shall be dated the
Delivery Date and the principal thereof shall be payable in installments on
each Principal Payment Date as set forth in Annex A to the Series SWA 1996
Trust N620SW-I Certificate.
In connection with a refinancing of the Series SWA 1996 Trust
N620SW-I Certificate in accordance with Section 18 of the Participation
Agreement and Section 15.01 hereof, an additional series of Certificates may be
issued hereunder. Such additional series of Certificates shall be designated as
Series SWA 1996 Trust N620SW Certificates. The Series SWA 1996 Trust N620SW
Certificates shall be substantially in the form set forth in Exhibit A-l or
A-2. The Series SWA 1996 Trust N620SW Certificates shall be dated the Delivery
Date, shall be issued in the maturities and principal amounts, and shall bear
the interest rates per annum (subject to Section 2.10 hereof), in each case as
specified in Exhibit B to be delivered in connection with such refinancing of
the Series SWA 1996 Trust N620SW-I Certificate in accordance with Section 15.01
of this Agreement. The principal of each Certificate, other than Installment
Certificates, shall be payable in full on the Maturity Date for such
Certificate. The principal of each Installment Certificate shall be payable in
installments, on each Installment Payment Date, in amounts equal to the
Installment Payment Amount for such Installment Payment Date.
The Series SWA 1996 Trust N620SW Certificates shall be issued
in denominations of $1,000 and integral multiples thereof, except that one of
such Certificates may be issued in any denomination. The Series SWA 1996 Trust
N620SW-I Certificates may be issued in any denomination.
The Certificates shall be issued in registered form only. The
Certificates are not redeemable prior to maturity except as provided in this
Agreement. Interest accrued on the Certificates shall be calculated on the
basis set forth therein.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
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The principal of, Break Amount, if any, Premium, if any, and
interest on the Certificates shall be payable at the principal corporate trust
office of the Indenture Trustee or at any office or agency maintained for such
purpose pursuant to Section 2.03, provided, that subject to Section 15.04, all
such amounts (other than those payable on the Maturity Date of the Installment
Certificates) may be payable at the option of the Indenture Trustee or the
Paying Agent by check mailed on or before the due date by the Indenture Trustee
or the Paying Agent to the address of the Holder entitled thereto as such
address shall appear in the Register.
All payments in respect of the Certificates shall be made in
Dollars. Any payment due on any Certificate on a day that is not a Business
Day shall be made on the next succeeding day which is a Business Day and
(provided such payment is made on such next succeeding Business Day) no
interest shall accrue on the amount of such payment from and after such
scheduled date.
SECTION 2.02. EXECUTION AND AUTHENTICATION. (a)
Certificates shall be executed on behalf of the Owner Trustee by the manual or
facsimile signature of its president, a senior vice president, a vice
president, an assistant vice president, its treasurer, its secretary, an
assistant secretary or an assistant treasurer.
(b) If any officer of the Owner Trustee executing the
Certificates by facsimile signature no longer holds that office at the time the
Certificate is executed on behalf of the Owner Trustee, the Certificate shall
be valid nevertheless.
(c) At any time and from time to time after the execution
of the Certificates, the Owner Trustee may deliver such Certificates to the
Indenture Trustee for authentication and, subject to the provisions of Section
2.10, the Indenture Trustee shall authenticate the Certificates by manual
signature upon written orders of the Owner Trustee. Certificates shall be
authenticated on behalf of the Indenture Trustee by any authorized officer or
signatory of the Indenture Trustee.
(d) A Certificate shall not be valid or obligatory for
any purpose or entitled to any security or benefit hereunder until executed on
behalf of the Owner Trustee by the manual or facsimile signature of the officer
of the Owner Trustee specified in the first sentence of Section 2.02(a) and
until authenticated on behalf of the Indenture Trustee by the manual signature
of the officer or signatory of the Indenture Trustee specified in the second
sentence of Section 2.02(c). Such signatures shall be conclusive evidence that
such Certificate has been duly executed, authenticated and issued under this
Agreement.
SECTION 2.03. REGISTRAR AND PAYING AGENT. The
Indenture Trustee shall maintain an office or agency where the Certificates may
be presented for registration of transfer or for exchange (the "Registrar") and
an office or agency where (subject to Sections 2.04 and 2.08) the Certificates
may be presented for payment or for exchange (the "Paying Agent"). The
Registrar shall keep a register (the "Register") with respect to the
Certificates and to their transfer and exchange and the payments of Installment
Payment Amounts thereon, if any. The Indenture Trustee may appoint one or more
co-registrars (the "Co-Registrars") and one or more additional Paying Agents
for the Certificates and the Indenture Trustee may terminate the appointment of
any Co-Registrar or Paying Agent at any time upon written notice. The term
"Registrar" includes any Co-Registrar. The term "Paying Agent" includes any
additional Paying Agent.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
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The Indenture Trustee shall initially act as Registrar and
Paying Agent.
SECTION 2.04. TRANSFER AND EXCHANGE. At the option of
the Holder thereof, Series SWA 1996 Trust N620SW-I Certificates or Series SWA
1996 Trust N620SW Certificates may be exchanged for an equal aggregate initial
principal amount of other Series SWA 1996 Trust N620SW-I Certificates or Series
SWA 1996 Trust N620SW Certificates of the same maturity and type, dated the
Delivery Date, and of any authorized denominations or transferred upon
surrender of the Series SWA 1996 Trust N620SW-I Certificates or Series SWA 1996
Trust N620SW Certificates to be exchanged or transferred at the principal
corporate trust office of the Indenture Trustee, or at any office or agency
maintained for such purpose pursuant to Section 2.03. Whenever any Series SWA
1996 Trust N620SW-I Certificate or Series SWA 1996 Trust N620SW Certificate is
so surrendered for exchange, the Owner Trustee shall execute, and the Indenture
Trustee shall authenticate and deliver, the replacement Series SWA 1996 Trust
N620SW-I Certificate or Series SWA 1996 Trust N620SW Certificate which the
Holder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Owner Trustee,
evidencing the same obligations, and entitled to the same security and benefits
under this Agreement, as the Certificates surrendered upon such registration of
transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Registrar duly executed by, the Holder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Holder or any transferee
for any registration of transfer or exchange of Certificates, but the Registrar
may, as a condition to any transfer or exchange hereunder require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of such transfer or exchange of
Certificates.
The Registrar shall not be required to register the transfer
of or to exchange any Certificate called for redemption or purchase pursuant to
Section 6.01 or 6.02.
SECTION 2.05. HOLDER LISTS; OWNERSHIP OF CERTIFICATES.
(a) The Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders, which list shall be available to the Owner Trustee or its
representative (which may be the Owner Participant) and the Company for
inspection. If the Indenture Trustee is not the Registrar, the Registrar shall
be required to furnish to the Indenture Trustee semiannually on or before each
Interest Payment Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as the Indenture
Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders.
(b) Ownership of the Certificates shall be proved by the
Register kept by the Registrar. Prior to due presentment for registration of
transfer of any Certificate, the Owner Trustee, the Owner Participant, the
Company, the Indenture Trustee, the Paying Agent and the Registrar shall deem
and treat the Person in whose name any Certificate is registered as the
absolute owner of such
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Certificate for the purpose of receiving payment of principal (including,
subject to the provisions herein regarding the applicable record dates,
Installment Payment Amounts) of, Premium, if any, and (subject to the
provisions herein regarding the applicable record dates), interest on such
Certificate and for all other purposes whatsoever, whether or not such
Certificate is overdue, and none of the Owner Trustee, the Owner Participant,
the Company, the Indenture Trustee, the Paying Agent or the Registrar shall be
affected by notice to the contrary.
SECTION 2.06. MUTILATED, DESTROYED, LOST OR STOLEN
CERTIFICATES. If any Certificate shall become mutilated, destroyed,
lost or stolen, the Owner Trustee shall, upon the written request of the Holder
of such Certificate, issue and execute, and the Indenture Trustee shall
authenticate and deliver, in replacement thereof, as applicable, a new Series
SWA 1996 Trust N620SW-I Certificate or a new Series SWA 1996 Trust N620SW
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, the Break Amount, if any, Premium, if
any, and interest on, and any other amounts payable on or in respect of each
Certificate or to the Holder thereof hereunder. Interest, principal and other
amounts payable on or in respect of the Series SWA 1996 Trust N620SW-I
Certificate shall be paid as provided for therein and in Article 15. Payment on
Series SWA 1996 Trust N620SW 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 N620SW 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 N620SW Certificates), as the case may be, to the
Holder thereof at the close of business on the relevant Record Date; provided,
however, that the Paying Agent will, at the request of the Indenture Trustee
and may, at its option, pay such interest and Installment Payment Amounts
(other than those payable on the Maturity Date of the Installment Certificate)
by check mailed on or before the due date to such Holder's address as it
appears on the Register. Otherwise, principal of Series SWA 1996 Trust N620SW
Certificates and Premium, if any, with
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respect thereto, shall be payable only against presentation and surrender
thereof at the principal corporate trust office of the Indenture Trustee or at
the office of the Paying Agent maintained for such purpose pursuant to Section
2.03.
A Holder shall have no further interest in, or other right
with respect to, the Indenture Estate when and if the principal amount of,
Premium, if any, Break Amount, if any, and interest on all Certificates held by
such Holder and all other sums payable to such Holder hereunder, under such
Certificates and under the Participation Agreement shall have been paid in
full.
(b) Any Installment Payment Amount payable on an
Installment Payment Date (other than the Maturity Date with respect to a
Certificate) or any interest payable on an Interest Payment Date on any Series
SWA 1996 Trust N620SW 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
N620SW 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 N620SW 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 N620SW 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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N620SW Certificates may be listed, and upon such notice as may be
required by such exchange, if such payment shall be deemed practicable
by the Indenture Trustee.
Any interest, principal or other amount payable on the Series
SWA 1996 Trust N620SW-I Certificates which is not punctually paid when due
shall be paid as provided in such Certificates.
(c) The Indenture Trustee shall require each Paying Agent
to agree in writing that such Paying Agent will hold in trust, for the benefit
of the Holders and the Indenture Trustee, all money held by such Paying Agent
for the payment of the principal of, Break Amount, if any, Premium, if any, or
interest or any other amounts payable to any Holder hereunder or under the
Participation Agreement and shall give to the Indenture Trustee notice of any
default in the making of any such payment upon the Certificates. The Indenture
Trustee at any time may require a Paying Agent to repay to the Indenture
Trustee all money held by it. Upon so doing the Paying Agent shall have no
further liability for the money so paid.
SECTION 2.09. PAYMENT FROM INDENTURE ESTATE ONLY.
All amounts payable by the Indenture Trustee and the Owner Trustee under the
Certificates and this Agreement shall be made only from the income and proceeds
of the Indenture Estate and from the other amounts specified in Section 3.03.
Each Holder of a Certificate, by its acceptance of such Certificate, agrees
that (a) it will look solely to the income and proceeds of the Indenture Estate
and from the other amounts specified in Section 3.03 for the payment of such
amounts, to the extent available for distribution to it as herein provided, and
(b) none of the Owner Trustee, the Owner Participant or the Indenture Trustee
is or shall be personally liable to any Holder of any Certificate for any
amount payable under such Certificate or this Agreement or, except as expressly
provided in this Agreement in the case of the Owner Trustee and the Indenture
Trustee, for any liability thereunder.
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
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amount of the Series SWA 1996 Trust N620SW-I Certificates to be issued at such
time in the manner contemplated by Section 2 of the Participation Agreement.
Each Certificate issued hereunder shall be dated the Delivery Date, and the
Indenture Trustee shall note thereon, if issued after the Delivery Date, the
date through which has been paid interest thereon. Interest shall accrue on
the Series SWA 1996 Trust N620SW Certificates only from the date of issuance of
such Certificate pursuant to Section 17 or 18 of the Participation Agreement.
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
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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, 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, such other amounts
payable to the Holders, and without any preference or priority of one
Certificate over another, ratably according to the aggregate amount so
due for interest, principal, 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
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to the Owner Trustee to be held or distributed in accordance with the terms of
the Lease and the Trust Agreement. Any portion of any such amount referred to
in the preceding sentence which is not required to be so paid to the Company
pursuant to the Lease, solely because a Lease Default of the type referred to
in Section 14.1 or 14.5 of the Lease or Lease Event of Default shall have
occurred and be continuing, shall, subject to Section 10.04 hereof, be held by
the Indenture Trustee on behalf of the Owner Trustee as security for the
obligations of the Company under the Lease and at such time as there shall not
be continuing any Lease Default of the type referred to in Section 14.1 or 14.5
of the Lease or Lease Event of Default or such earlier time as shall be
provided for in the Lease, or upon satisfaction and discharge of this Indenture
as provided herein, such portion shall be paid to the Owner Trustee to be held
or distributed in accordance with the terms of the Lease, unless the Indenture
Trustee (as assignee from the Owner Trustee of the Lease) shall have
theretofore commenced to exercise remedies pursuant to Section 15 thereof, in
which event such portion shall be distributed in accordance with the provisions
of Section 3.05 hereof.
SECTION 3.05. PAYMENTS DURING CONTINUANCE OF INDENTURE
EVENT OF DEFAULT. All payments (except Excluded Payments) received and amounts
held or realized by the Indenture Trustee after an Indenture Event of Default
shall have occurred and so long as such an Indenture Event of Default shall be
continuing, and after the Indenture Trustee shall foreclose or enforce this
Indenture or after the Certificates shall have become due and payable as
provided in Section 8.02 (including any amounts realized by the Indenture
Trustee from the exercise of any remedies pursuant to Article 8), as well as
all payments or amounts then held or thereafter received by the Indenture
Trustee as part of the Indenture Estate while such Indenture Event of Default
shall be continuing, shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such payments or amounts as shall be
required to pay the Indenture Trustee all amounts then due it pursuant
to Section 9.06 shall be applied to pay the Indenture Trustee such
amounts;
second, so much of such payments or amounts remaining as shall
be required to (i) pay the expenses incurred (including unbilled
expenses in respect of property delivered or contracted for or
services rendered or contracted for if the amount of such expenses is
liquidated) in using, operating, storing, leasing, controlling or
managing the Indenture Estate, and of all maintenance, insurance,
repairs, replacements, alterations, additions and improvements of and
to the Indenture Estate and to make all payments which the Indenture
Trustee may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the Indenture
Estate or any part thereof (including the employment of engineers and
accountants to examine and make reports upon the properties, books and
records of the Owner Trustee and, to the extent permitted under the
Lease, the Company), all in accordance with Section 8.03(c), shall be
applied for such purposes and (ii) reimburse the Holders in full for
payments made pursuant to Section 9.01(c) (to the extent not
previously reimbursed) shall be distributed to such Holders, and if
the aggregate amount remaining shall be insufficient to reimburse all
such payments in full, it shall be distributed ratably, without
priority of any Certificate over any other, in the proportion that the
aggregate amount of the unreimbursed payments made by each such Holder
pursuant to Section 9.01(c) bears to the aggregate amount of the
unreimbursed payments made by all Holders pursuant to Section 9.01(c);
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third, so much of such payments or amounts remaining as shall
be required to pay the principal of, Break Amount, if any, and accrued
interest on all Certificates Outstanding and all other amounts payable
to the Holders hereunder or under the Participation Agreement and then
due and payable, whether by declaration of acceleration pursuant to
Section 8.02 or otherwise, shall be applied to the payment of such
interest, principal, Break Amount, if any, and such other amounts; and
in case such payments or amounts shall be insufficient to pay in full
the whole amount so due and unpaid, then to the payment of such
interest, principal, Break Amount, if any, such other amounts and
interest, without any preference or priority of one Certificate over
another, ratably according to the aggregate amount so due for
interest, principal, Break Amount, if any, and such other amounts at
the date fixed by the Indenture Trustee for the distribution of such
payments or amounts; and
fourth, the balance, if any, of such payments or amounts
remaining thereafter shall be distributed to the Owner Trustee to be
held or distributed in accordance with the terms of the Lease, the
Participation Agreement and the Trust Agreement.
SECTION 3.06. PAYMENTS FOR WHICH APPLICATION IS PROVIDED IN
OTHER DOCUMENTS. Except as otherwise provided in this Agreement, any payment
received by the Indenture Trustee for which provision as to the application
thereof is made in the Lease or the Participation Agreement shall be
distributed to the Person for whose benefit such payments were made in
accordance with, and subject to the terms, thereof and hereof. The Indenture
Trustee shall be obligated to distribute any Excluded Payments received by the
Indenture Trustee promptly upon receipt thereof by the Indenture Trustee to the
Person entitled thereto.
SECTION 3.07. PAYMENTS FOR WHICH NO APPLICATION IS
OTHERWISE PROVIDED. Except as otherwise provided in Section 3.05:
(a) any payment received by the Indenture Trustee for
which no provision as to the application thereof is made elsewhere in
this Agreement, and
(b) any payment received and amounts realized by the
Indenture Trustee with respect to the Aircraft to the extent received
or realized at any time after the conditions set forth in Article 10
for the satisfaction and discharge of this Agreement or for the
defeasance of the Certificates shall have been duly satisfied, as well
as any other amounts remaining as part of the Indenture Estate after
such satisfaction shall be distributed by the Indenture Trustee in the
following order of priority:
first, so much of such aggregate amount as shall be
required to pay the Indenture Trustee all amounts then due it
pursuant to Section 9.06 shall be applied to pay the Indenture
Trustee such amounts; and
second, the balance, if any, of such aggregate amount
remaining thereafter shall be distributed to the Owner Trustee
to be held or distributed in accordance with the terms of the
Trust Agreement.
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SECTION 3.08. APPLICATION OF PAYMENTS. Each payment of
principal and interest or other amounts due hereunder to the Indenture Trustee
or any Holder or in respect of each Certificate shall, except as otherwise
expressly provided herein, be applied, first, to the payment of any amount
(other than the principal of or Premium, Break Amount or interest on such
Certificate) due hereunder or in respect of such Certificate, second, to the
payment of Premium or Break Amount, if any, and interest on such Certificate
(as well as any interest on overdue principal and, to the extent permitted by
law, interest and other amounts payable hereunder and thereunder) due
thereunder, third, to the payment of the principal of such Certificate then due
and fourth, the balance, if any, remaining thereafter, to the payment of the
principal of such Certificate remaining unpaid (provided, that such Certificate
shall not be subject to prepayment or purchase without the consent of the
affected Holder except as expressly permitted hereby). The amounts paid
pursuant to clause fourth above shall be applied to the installments of
principal of such Certificate in inverse order of maturity.
ARTICLE 4
COVENANTS OF OWNER TRUSTEE
SECTION 4.01. COVENANTS OF THE OWNER TRUSTEE. The Owner
Trustee hereby covenants and agrees that:
(i) the Owner Trustee will duly and punctually
perform its obligations under the Lease and will duly and punctually
pay the principal of, Premium, if any, Break Amount, if any, and
interest on and other amounts due hereunder and under the Certificates
and all other amounts payable by it to the Holders under the
Participation Agreement and the other Operative Agreements;
(ii) the Owner Trustee will not directly or
indirectly create, incur, assume or suffer to exist any Lessor Lien
attributable to it with respect to any of the properties or assets of
the Indenture Estate and shall, at its own cost and expense, promptly
take such action as may be necessary to discharge duly any such Lessor
Lien, and the Owner Trustee will cause restitution to be made to the
Indenture Estate in the amount of any diminution of the value thereof
as the result of any Lessor Liens attributable to it;
(iii) in the event a Responsible Officer of the
Owner Trustee shall have actual knowledge of an Indenture Event of
Default or Indenture Default or an Event of Loss, the Owner Trustee
will give prompt written notice of such Indenture Event of Default or
Indenture Default or Event of Loss to the Indenture Trustee, the Owner
Participant, the Company and, so long as the Series SWA 1996 Trust
N620SW-I Certificate shall be Outstanding, the Original Holder;
(iv) except as contemplated by the Operative
Agreements, the Owner Trustee will not contract for, create, incur,
assume or permit to exist any Debt, and will not guarantee (directly
or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so
doing, or otherwise), endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the Debt of any
other Person;
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(v) the Owner Trustee will not enter into any
activity other than owning the Aircraft, the leasing thereof to the
Company and the carrying out of the transactions contemplated hereby
and by the Participation Agreement, the Trust Agreement and the other
Operative Agreements;
(vi) the Owner Trustee will furnish to the
Indenture Trustee, and the Indenture Trustee will furnish to each
Holder at the time outstanding, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and other instruments furnished to
the Owner Trustee under the Lease, including, without limitation, a
copy of each report or notice received pursuant to Section 11 of the
Lease, to the extent that the same shall not 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 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.
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ARTICLE 5
DISPOSITION, SUBSTITUTION AND RELEASE
OF PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING
CONTINUATION OF LEASE
SECTION 5.01. DISPOSITION, SUBSTITUTION AND RELEASE OF
PROPERTY INCLUDED IN THE INDENTURE ESTATE DURING CONTINUATION OF LEASE. So
long as the Lease is in effect:
(a) Parts. Any Parts and alterations, improvements and
modifications in and additions to the Aircraft shall, to the extent
required or specified by the Lease, become subject to the lien of this
Agreement and be leased to the Company under the Lease; provided, that
to the extent permitted by and as provided in the Lease, the Company
shall have the right, at any time and from time to time, without any
release from or consent by the Owner Trustee or the Indenture Trustee,
to remove, replace and pool Parts and to make alterations,
improvements and modifications in, and additions to, the Aircraft. The
Indenture Trustee agrees that, to the extent permitted by and as
provided in the Lease, title to any such Part shall vest in the
Company. The Indenture Trustee shall from time to time execute an
appropriate written instrument or instruments to confirm the release
of the security interest of the Indenture Trustee in any Part as
provided in this Section 5.01, in each case upon receipt by the
Indenture Trustee of a Company Request stating that said action was
duly taken by the Company in conformity with this Section 5.01 and
that the execution of such written instrument or instruments is
appropriate to evidence such release of a security interest under this
Section 5.01.
(b) Substitution Under the Lease upon an Event of Loss
Occurring to Airframe or Engines or upon Voluntary Termination of
Lease with Respect to Engines. Upon (i) the occurrence of an Event of
Loss occurring to the Airframe or an Engine, or (ii) a voluntary
termination of the Lease with respect to an Engine, the Company, in
accordance with the Lease, may, in the case of an Event of Loss which
has occurred to the Airframe, or shall, except as provided in Section
10.2 of the Lease, in the case of an Event of Loss which has occurred
to or termination of the Lease with respect to an Engine, substitute
an airframe or engine, as the case may be, in which case, upon due
satisfaction of all conditions to such substitution specified in
Section 10 of the Lease, the Indenture Trustee shall release all of
its right, interest and lien in and to the Airframe or such Engine in
accordance with the provisions of the following sentence. The
Indenture Trustee shall execute and deliver to the Owner Trustee an
instrument releasing its lien in and to the Airframe or such Engine
and shall execute for recording in public offices, at the expense of
the Owner Trustee (if requested by the Owner 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
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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
plus, in the case of the Series SWA 1996 Trust N620SW-I Certificates, Break
Amount, if any, and all other amounts payable to the Holders hereunder or under
the Participation Agreement. The Redemption Date for Certificates to be
redeemed pursuant to this Section 6.01(a) shall be the Lease Loss Payment Date.
No Premium shall be paid in the case of a redemption pursuant to any provision
of this Section 6.01(a).
(b) The Certificates shall be redeemed on the Lease
Termination Date or upon the purchase of the Aircraft by the Company at its
option on the Special Purchase Option Date pursuant to Section 18.2(b) of the
Lease (unless the Company shall have elected to assume the rights and
obligations of the Owner Trustee hereunder to the extent and as provided for in
Section 7.03). In the case of any Series SWA 1996 Trust N620SW-I Certificate,
the Redemption Price therefor shall be equal to the unpaid principal amount of
such Certificate as at such date plus accrued and unpaid interest thereon to
but excluding the Redemption Date, the Break Amount, if any, and all other
amounts payable to the Holder thereof hereunder or under any other Operative
Agreement, but without any other premium or penalty. In the case of any Series
SWA 1996 Trust N620SW Certificate, such Redemption Price therefor shall be
equal to the unpaid principal amount of such Certificate as at such Redemption
Date together with an amount equal to the accrued but unpaid interest thereon
and, in the case of each Certificate redeemed prior to the Premium Termination
Date applicable to such Certificate, the Premium, if any. The Redemption Date
for Certificates to be redeemed shall be (A) in the case of a termination of
the Lease pursuant to Section 9 thereof, on the Lease Termination Date or (B)
in the case of purchase of the Aircraft by the Company pursuant to Section
18.2(b) of the Lease, on the Special Purchase Option Date.
(c) (i) The Series SWA 1996 Trust N620SW-I
Certificates may be refinanced in accordance with the provisions of Article 15
hereof and Sections 17 and 18 of the Participation Agreement and (ii) the
Series SWA 1996 Trust N620SW Certificates may be refinanced if all the
conditions to such refunding or refinancing set forth in Section 17 of the
Participation Agreement shall
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have been satisfied. In any such event, each Outstanding Certificate may be so
refinanced at a Redemption Price determined in accordance with the procedures
described above in Section 6.01(b); provided, however, that the applicable
Redemption Date for the Series SWA 1996 Trust N620SW-I Certificates to be
refinanced pursuant to clause (i) of this Section 6.01(c) shall be the
applicable Refinancing Date under Section 17 of the Participation Agreement or
the Section 18 Refinancing Date under Section 18 of the Participation
Agreement, as the case may be, and the applicable Redemption Date for
Certificates to be redeemed pursuant to clause (ii) of this Section 6.01(c)
shall be the applicable Refinancing Date under Section 17 of the Participation
Agreement.
SECTION 6.02. REDEMPTION OR PURCHASE OF CERTIFICATES UPON
CERTAIN INDENTURE EVENTS OF DEFAULT. If the Owner Trustee shall have given
notice of redemption or purchase to the Indenture Trustee pursuant to its
rights under Section 8.03(e)(ii), each Outstanding Certificate shall be
redeemed or purchased in whole at a Redemption Price equal to 100% of its
principal amount plus accrued and unpaid interest thereon (including, without
limitation, interest on overdue interest) to but excluding the applicable
Redemption Date as determined below and all other amounts payable to the
Holders hereunder or under the Participation Agreement and, in the case of the
Series SWA 1996 Trust N620SW-I Certificate, the Break Amount, if any, and, in
the case of the Series SWA 1996 Trust N620SW Certificates, if to be purchased
or redeemed pursuant to clause (y) above prior to the one year anniversary of
the first occurrence of the relevant Lease Event of Default, the Premium, if
any. The Redemption Date for Certificates to be redeemed or purchased pursuant
to this Section 6.02 shall be the date specified in the notice given by the
Owner Trustee to the Indenture Trustee pursuant to Section 8.03(e)(ii)
(provided, however, that in the case of the Series SWA 1996 Trust N620SW-I
Certificates, if such date is the last day of the then current Interest Period
therefor, no Break Amount shall be payable). If the Owner Trustee elects to
purchase the Certificates under Section 8.03(e)(ii), nothing herein, including
use of the terms "Redemption Date" and "Redemption Price", shall be deemed to
result in a redemption of the Certificates.
SECTION 6.03. NOTICE OF REDEMPTION TO HOLDERS. (a) Notice
of redemption or purchase with respect to the Series SWA 1996 Trust N620SW
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
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(4) the place or places where such Certificates are to be
surrendered for payment of the Redemption Price.
Notice of redemption or purchase of Certificates to be redeemed or purchased
shall be given by the Indenture Trustee.
(b) Notice of redemption of the Series SWA 1996 Trust
N620SW-I Certificate shall be given by the Owner Trustee (or by the Company on
behalf of the Owner Trustee) not less than three Business Days prior to the
Redemption Date, shall be irrevocable and shall be given by telephone, telex,
telecopy, cable or other customary means of communication by the Owner Trustee
or the Company, as the case may be, to the other and to the Indenture Trustee
and to the Original Holder at each such Person's address designated in Section
12.01(a). Notwithstanding any provision to the contrary contained in this
Article 6, the Series SWA 1996 Trust N620SW-I Certificate shall be redeemable
as set forth in this Article 6 and in Article 15 without any premium,
prepayment penalty or other cost or expense except for the Break Amount, if
any, and the payment of all other amounts payable to the Holders thereof
hereunder and under the Participation Agreement.
SECTION 6.04. DEPOSIT OF REDEMPTION PRICE. On or
before the Redemption Date, the Owner Trustee (or any Person on behalf of the
Owner Trustee) shall, to the extent an amount equal to the Redemption Price for
the Certificates to be redeemed or purchased on the Redemption Date shall not
then be held in the Indenture Estate, deposit or cause to be deposited with the
Indenture Trustee or the Paying Agent by 12:00 Noon in immediately available
funds (i) the Redemption Price of the Certificates to be redeemed, refinanced
or purchased, as the case may be, on the Redemption Date and (ii) all other
amounts due and payable hereunder, including any amounts payable to the
Indenture Trustee pursuant to Section 9.06.
SECTION 6.05. CERTIFICATES PAYABLE ON REDEMPTION DATE.
Notice of redemption, refinancing or purchase having been given as aforesaid
(and not deemed revoked as contemplated in the proviso to Section 6.03(a)), 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.
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ARTICLE 7
MATTERS CONCERNING THE COMPANY
SECTION 7.01. REPAYMENT OF MONIES FOR CERTIFICATE PAYMENTS
HELD BY THE INDENTURE TRUSTEE. Any money held by the Indenture Trustee or any
Paying Agent in trust for any payment of the principal of, Premium, if any, or
interest on any Series SWA 1996 Trust N620SW 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].
SECTION 7.03. ASSUMPTION OF OBLIGATIONS OF OWNER TRUSTEE BY
THE COMPANY. In the event that the Company shall have elected to assume all
of the rights and obligations of the Owner Trustee under this Agreement in
respect of the Certificates pursuant to Section 8(r) of the Participation
Agreement in connection with the purchase by the Company of the Aircraft, and
if on or prior to the Special Purchase Option Date (the "Assumption Date") the
Indenture Trustee shall have received:
(a) an instrument of assumption (the "Assumption
Agreement") pursuant to which the Company irrevocably and unconditionally
assumes and undertakes, with full recourse to the Company, the Owner Trustee's
obligations with respect to principal, interest, Break Amount, Premium and all
other amounts payable to the Holders or the Indenture Trustee under the
Certificates then Outstanding, this Agreement, and the Participation Agreement
and which incorporates therein events of default substantially similar in scope
and effect to those set forth in the Lease and covenants substantially similar
to the covenants of the Company under the Lease and the Participation
Agreement;
(b) a supplement to this Agreement and/or such other
instruments and documents (including, without limitation, Uniform Commercial
Code financing statement(s)) covering all of the security interests created by
or pursuant to this Indenture that are not covered by the recording system
established by the Federal Aviation Act as may be necessary (or reasonably
requested by the Indenture Trustee) for the security interest of the Indenture
Trustee in the Aircraft and in the other rights, property and interests
included in the Indenture Estate (other than those rights, property and
interests that depend on the existence of the Trust Estate and the
participation of the Owner Trustee and Owner Participant in the transactions
contemplated by the Participation Agreement and this Indenture) to continue to
be perfected and duly recorded with the Federal Aviation Administration and in
all other places necessary or, in the reasonable opinion of the Indenture
Trustee, advisable under the Uniform Commercial Code;
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(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 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;
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(h) an opinion of Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City (or other counsel reasonably satisfactory to the
Indenture Trustee), in form and substance reasonably satisfactory to the
Indenture Trustee, addressed to the Indenture Trustee and dated the Assumption
Date, (i) to the effect that all documents executed in connection with the
assumption of the obligations contemplated by this Section 7.03 and required to
be filed with the Federal Aviation Administration are in proper form, and all
steps necessary have been taken, for the Aircraft to be duly registered in the
name of the Company and for the Lien of this Agreement with respect to the
Aircraft and Engines to continue to be duly perfected and of first priority;
and
(i) such other documentation reasonably requested by the
Indenture Trustee (in form and substance reasonably satisfactory to the
Indenture Trustee) to amend the Operative Agreements to give effect to the
foregoing;
then, automatically and without the requirement of further action by any
Person, effective as of the Assumption Date, the Owner Trustee shall be
released from all of its obligations under this Agreement in respect of the
Certificates or otherwise (other than any obligations or liabilities of the
Owner Trustee in its individual capacity incurred on or prior to the Assumption
Date or arising out of or based upon events occurring on or prior to the
Assumption Date, which obligations and liabilities shall remain the sole
responsibility of the Owner Trustee in such capacity). Promptly upon the
filing and recording of the documents referred to in the opinion of counsel
specified in Section (h) above with the FAA, the Company shall cause such
counsel to deliver to the Indenture Trustee an opinion addressed to the
Indenture Trustee, in form and substance reasonably satisfactory to the
Indenture Trustee, as to due recording of said documents with the FAA.
ARTICLE 8
DEFAULTS AND REMEDIES
SECTION 8.01. INDENTURE EVENTS OF DEFAULT. The
following events shall constitute "Indenture Events of Default" under this
Agreement (whether any such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) and each such Indenture Event of
Default shall be deemed to exist so long as, but only so long as, it shall not
be waived or remedied:
(a) the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any payment of principal
of or Premium or Break Amount, if any, or interest on any Certificate
and such failure shall have continued unremedied for seven Business
Days, or the failure (other than by reason of a Lease Event of
Default) of the Owner Trustee to pay when due any other amount due and
payable hereunder, or under any Certificate, and such failure shall
have continued unremedied for 10 Business Days after notice thereof to
the Owner Trustee; or
(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
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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 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
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
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proceedings with respect to, the bankruptcy, insolvency or liquidation
of the Owner Participant referred to in this Section 8.01(g); or
(h) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Trust Estate or the Owner Trustee with respect thereto (and not in its
individual capacity) or the Owner Participant or any Person
guaranteeing or supporting the obligations of the Owner Participant
under the Operative Agreements, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Trust Estate or the
Owner Trustee with respect thereto (and not in its individual
capacity) or the Owner Participant or any Person guaranteeing or
supporting the obligations of the Owner Participant under the
Operative Agreements and any such order or petition is not dismissed
or stayed within 90 days after the earlier of the entering of any such
order or the approval of any such petition; provided, that an event
referred to in this Section 8.01(h) with respect to the Owner
Participant shall not constitute an Event of Default if (A) an order,
judgment or decree shall be entered in a proceeding by a court or a
trustee, custodian, receiver or liquidator which is either final and
non-appealable or has not been stayed pending any appeal, or (B) an
opinion of counsel satisfactory to the Indenture Trustee shall be
provided by the Owner Participant, in each case to the effect that no
part of the Trust Estate created by the Trust Agreement (except for
the Owner Participant's beneficial interest in such Trust Estate) and
no right, title or interest under the Indenture Estate shall be
included in, or be subject to, any declaration or adjudication of, or
proceedings with respect to, the bankruptcy, insolvency or liquidation
of the Owner Participant referred to in this Section 8.01(h).
SECTION 8.02. ACCELERATION; RESCISSION AND ANNULMENT. If
an Indenture Event of Default occurs and is continuing, either the Indenture
Trustee, by notice to the Company and the Owner Trustee, or the Holders of at
least 25% in aggregate principal amount of Outstanding Certificates, by notice
to the Company, the Indenture Trustee and the Owner Trustee may declare the
principal of all the Certificates to be due and payable, whereupon the same
shall be accelerated and be and become due and payable; provided, that if an
Indenture Event of Default referred to in clause (g) or (h) of Section 8.01
shall have occurred or a Lease Event of Default of the type referred to in
clause (g) or (h) of said Section 8.01 shall have occurred with respect to the
Company, then and in every such case the unpaid principal of all Certificates
then Outstanding shall, unless the Indenture Trustee acting upon instructions
of at least 25% in aggregate principal amount of Outstanding Certificates shall
otherwise direct, immediately and without further act become due and payable,
without presentment, demand, protest or notice, all of which are hereby waived.
Upon such declaration (or automatic acceleration, as the case may be), the
principal of all Certificates together with accrued interest thereon from the
date in respect of which interest was last paid hereunder to the date payment
of such principal has been made or duly provided for, plus, in the case of the
Series SWA 1996 Trust N620SW-I Certificates, the Break Amount, if any, and all
other amounts payable to the Holders hereunder as at such date of payment shall
be immediately due and payable (but not including any Premium). At any time
after such declaration and prior to the sale or disposition of the Indenture
Estate, the Holders of a majority in aggregate principal amount of all of the
Outstanding Certificates, by notice to the Indenture Trustee, the Company and
the Owner Trustee, may rescind such a declaration and thereby
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annul its consequences if (i) an amount sufficient to pay all principal of,
and, in the case of the Series SWA 1996 Trust N620SW-I Certificates, the Break
Amount, if any, on any Certificates which have become due otherwise than by
such declaration and any interest thereon and interest due or past due, if any,
and all sums due and payable to the Indenture Trustee have been deposited with
the Indenture Trustee, (ii) the rescission would not conflict with any judgment
or decree and (iii) all existing Indenture Defaults and Indenture Events of
Default under this Agreement have been cured or waived except nonpayment of
principal of, or interest on, the Certificates that has become due solely
because of such acceleration.
SECTION 8.03. OTHER REMEDIES AVAILABLE TO INDENTURE
TRUSTEE. (a) After an Indenture Event of Default shall have occurred and
so long as such Indenture Event of Default shall be continuing, then and in
every such case the Indenture Trustee, as trustee of an express trust and as
assignee hereunder of the Lease or as holder of a security interest in the
Aircraft or Engines or otherwise, may, and when required pursuant to the
provisions of Article 9 shall, exercise, subject to Sections 8.03(b) and
8.03(e), any or all of the rights and powers and pursue any and all of the
remedies accorded to the Owner Trustee pursuant to Section 15 of the Lease and
this Article 8, may recover judgment in its own name as Indenture Trustee
against the Indenture Estate and may take possession of all or any part of the
Indenture Estate and may exclude the Owner Trustee and the Owner Participant
and all Persons claiming under any of them wholly or partly therefrom. The
Indenture Trustee shall have and may exercise all of the rights and remedies of
a secured party under the Uniform Commercial Code as in effect in any
applicable jurisdiction.
(b) After an Indenture Event of Default, subject to
Section 8.03(e), the Indenture Trustee may, if at the time such action may be
lawful and always subject to compliance with any mandatory legal requirements,
either with or without taking possession, and either before or after taking
possession, and without instituting any legal proceedings whatsoever, and
having first given notice of such sale to the Owner Trustee, the Owner
Participant and the Company at least 10 days prior to the date of such sale,
sell and dispose of the Indenture Estate, or any part thereof, or interest
therein, at public or private auction, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as the Indenture
Trustee may determine, and at any place (whether or not it be the location of
the Indenture Estate or any part thereof) and time designated in the notice
above referred to; provided, however, that notwithstanding any provision herein
to the contrary, the Indenture Trustee may not provide the notice provided for
above of its intention to sell any of the Indenture Estate or exercise other
remedies against the Indenture Estate seeking to deprive the Owner Trustee or
the Owner Participant of its rights therein unless a declaration of
acceleration has been made pursuant to Section 8.02 or the Certificates have
otherwise theretofore become due and payable through redemption or otherwise.
Any such sale or sales may be adjourned from time to time by announcement at
the time and place appointed for such sale or sales, or for any such adjourned
sale or sales, without further notice, and the Indenture Trustee and the Holder
or Holders of any Certificates, or any interest therein, may bid and become the
purchaser at any such sale, and each Holder shall be entitled, at any such
sale, to credit against the purchase price bid thereby all or any part of the
unpaid obligations owing to such Holder and secured by the Lien of this
Agreement. The Indenture Trustee may exercise such right without possession or
production of the Certificates or proof of ownership thereof, and as
representative of the Holders may exercise such right without notice to the
Holders or including the Holders as parties to any suit or proceeding relating
to foreclosure of any property in the Indenture Estate. The Owner Trustee
hereby irrevocably constitutes the Indenture Trustee the true and lawful
attorney-in-fact of the Owner Trustee (in the name of the Owner Trustee or
otherwise) for the purpose
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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 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.
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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 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
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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
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
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100% of the Outstanding principal amount of Certificates for all purposes of
this Indenture. If such notice is given, the Owner Trustee further agrees that
it will deposit or cause to be deposited with the Indenture Trustee, on or
prior to the applicable Redemption Date, whether or not an Indenture Event of
Default is then continuing, funds sufficient, when added to the funds already
held by the Indenture Trustee for such purpose, to redeem or purchase at the
applicable Redemption Price (including the Break Amount or Premium (if the
Redemption Price includes Premium) actually payable in respect thereof, if any,
and all other amounts payable to the Holders hereunder or under any other
Operative Agreement on such Redemption Date) all Certificates then Outstanding
and to pay the Indenture Trustee all amounts then due it hereunder.
(iii) Anything in this Agreement to the contrary
notwithstanding, the Indenture Trustee shall not be entitled to exercise any
remedy hereunder as a result of an Indenture Event of Default which arises
solely by reason of one or more events or circumstances which constitute a
Lease Event of Default unless the Indenture Trustee as security assignee of the
Owner Trustee shall have exercised or concurrently be exercising one or more of
the remedies provided for in Section 15 of the Lease with respect to the
Aircraft, provided, that the requirement to exercise such remedies under the
Lease shall not apply in circumstances where the Indenture Trustee is
involuntarily stayed or otherwise prohibited by applicable law or court order
from exercising such remedies under the Lease after the Section 1110 Period.
The "Section 1110 Period" shall mean the period commencing on the date of such
stay or prohibition and ending on the earlier of (x) the 60th day thereafter
(or such longer period (A) as may be specified in Section 1110(a)(1) of the
Bankruptcy Code, (B) equal to the period of an extension with the consent of
the Indenture Trustee of the 60-day period specified therein pursuant to
Section 1110(b) of the Bankruptcy Code, or (C) resulting from the Indenture
Trustee's own failure to give any requisite notice to any Person) and (y) the
date of repossession of the Aircraft. References in this sentence to
particular sections of the Bankruptcy Code as in effect on the date hereof
shall include any substantially similar successor provisions.
(f) Notwithstanding any provision of this Agreement to
the contrary, including, without limitation, Sections 8.03(b), 8.03(c) and
8.03(d), as long as no Lease Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee shall take any
action in violation of the Company's rights under the Lease, including, without
limitation, (x) the right to receive all monies due and payable to it in
accordance with the provisions of the Lease and (y) the Company's rights to
possession and use of, and of quiet enjoyment of, the Aircraft.
(g) Each and every right, power and remedy herein given
to the Indenture Trustee specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may be exercised from time to time and as often in
such order as may be deemed expedient by the Indenture Trustee, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. No delay or omission by the
Indenture Trustee in the exercise of any right, remedy or power or in pursuing
any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of the Owner Trustee or the Company or to be
an acquiescence therein.
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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 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;
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(3) such Holder or Holders offer to the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss,
liability or expense to be, or which may be, incurred by the Indenture
Trustee in pursuing the remedy;
(4) the Indenture Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a majority
in aggregate principal amount of the Outstanding Certificates do not
give the Indenture Trustee a direction inconsistent with the request.
A Holder may not use this Agreement to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 8.08. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Agreement the right of any Holder
to receive payment of principal of, Premium or Break Amount, if any, and
interest on such Holder's Certificate on or after the respective due dates
expressed in such Certificate, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
SECTION 8.09. INDENTURE TRUSTEE MAY FILE PROOFS OF CLAIM.
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Holders allowed in any judicial proceedings
relating to any obligor on the Certificates, its creditors, or its property.
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ARTICLE 9
INDENTURE TRUSTEE
SECTION 9.01. DUTIES OF INDENTURE TRUSTEE.
(a) The Indenture Trustee will furnish to each
Certificate Holder promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and
other instruments furnished to the Indenture Trustee under any Operative
Agreement or received from the Owner Trustee pursuant to Section 4.01(vi) to
the extent the same shall not have been otherwise directly distributed to the
Holders pursuant to the express provision of any other Operative Agreement.
(b) Subject to the terms of Sections 8.03(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
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with, this Indenture or any part of the Indenture Estate, except as expressly
provided by the terms of this Indenture or as expressly provided in written
instructions from Holders as provided in this Indenture; and no implied duties
or obligations shall be read into this Indenture against the Indenture Trustee.
(e) The Owner Trustee and the Indenture Trustee agree
that they will not use, operate, store, lease, control, manage, sell, dispose
of or otherwise deal with the Aircraft or any other part of the Indenture
Estate except (i) in accordance with the terms of the Lease or the
Participation Agreement, or (ii) in accordance with the powers granted or
reserved to, or the authority conferred upon, the Owner Trustee and the
Indenture Trustee pursuant to this Indenture and in accordance with the express
terms hereof.
(f) Subject to the provisions of Section 9.04, the
Indenture Trustee shall not be liable for interest on any money received except
as otherwise provided in any other Operative Agreement. Money held in trust by
the Indenture Trustee need not be segregated from other funds except to be
extent required by law.
SECTION 9.02. RIGHTS OF INDENTURE TRUSTEE. (a) The
Indenture Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may consult with counsel or require an Officer's Certificate or an
Opinion of Counsel from the Company or the Owner Trustee after which it will
take such action or refrain from acting as it deems appropriate. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith and in accordance herewith in reliance on a resolution of the Board of
Directors of the Company, the written advice of counsel acceptable to the Owner
Trustee, the Company and the Indenture Trustee, officer's certificates or
opinions of counsel provided by the Company or the Owner Trustee.
(c) The Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care; provided, that so long as no Indenture Event of
Default shall have occurred and be continuing no such agents shall be appointed
by the Indenture Trustee without the consent of the Company and the Owner
Trustee, which consent shall, in each case, not be unreasonably withheld.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) If an Indenture Event of Default under this Agreement
has occurred and is continuing, the Indenture Trustee shall exercise its rights
and powers under this Agreement, and shall use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
SECTION 9.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE
The Indenture Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates and may otherwise deal with the Owner Trustee,
the Company or an Affiliate of the Owner Trustee or the
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Company or a subsidiary of the Owner Trustee or the Company with the same
rights it would have if it were not the Indenture Trustee. Any Agent may do the
same with like rights.
SECTION 9.04. FUNDS MAY BE HELD BY INDENTURE TRUSTEE OR
PAYING AGENT; INVESTMENTS. Any monies (including without limitation for
purposes of this Section 9.04 Permitted Investments constituting the proceeds
of the maturity, sale or other disposition of any Permitted Investment) held by
the Indenture Trustee or the Paying Agent hereunder as part of the Indenture
Estate, until paid out by the Indenture Trustee or the Paying Agent as herein
provided, (i) subject to clause (ii) below, may be carried by the Indenture
Trustee or the Paying Agent on deposit with itself or on deposit to its account
with any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of the
States thereof having combined capital and surplus and retained earnings of at
least $100,000,000, and neither the Indenture Trustee nor the Paying Agent
shall have any liability for interest upon any such monies except as otherwise
agreed in writing or (ii) at any time and from time to time, so long as no
Lease Default (of the type described in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, at the request
(given directly by the Company to the Indenture Trustee) of the Company acting
as the agent of the Owner Trustee, shall be invested and reinvested in
Permitted Investments as specified in such request (if such investments are
reasonably available for purchase) and sold, in any case at such prices,
including accrued interest or its equivalent, as are set forth in such request,
and such Permitted Investments shall be held by the Indenture Trustee in trust
as part of the Indenture Estate until so sold; provided, that the Company, on
behalf of the Owner Trustee, as agent of the Owner Trustee, shall upon demand
pay to the Indenture Trustee the amount of any loss realized upon maturity,
sale or other disposition of any such Permitted Investment and, so long as no
Lease Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or
Lease Event of Default shall have occurred and be continuing, be entitled to
receive from the Indenture Trustee, and the Indenture Trustee on behalf of the
Owner Trustee, shall promptly pay to the Company pursuant to Section 22.1 of
the Lease, any profit, income, interest, dividend or gain realized upon
maturity, sale or other disposition of any Permitted Investment. If any Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing, any net income, profit,
interest, dividend or gain realized upon maturity, sale or other disposition of
any Permitted Investment shall be held as part of the Indenture Estate and
shall be applied by the Indenture Trustee at the same time, on the same
conditions and in the same manner as the amounts in respect of which such
income, profit, interest, dividend or gain was realized are required to be
distributed in accordance with the provisions hereof or of the Lease pursuant
to which such amounts were required to be held. The Indenture Trustee shall not
be responsible for any losses on any investments or sales of Permitted
Investments made pursuant to the procedure specified in this Section 9.04.
SECTION 9.05. NOTICE OF DEFAULTS. If an Indenture
Event of Default under this Agreement occurs and is continuing and the
Indenture Trustee has actual knowledge of same, the Indenture Trustee shall (i)
promptly send written notice thereof to the Company, the Owner Trustee and the
Owner Participant and, so long as the Series SWA 1996 Trust N620SW-I
Certificates shall be Outstanding, the Holders thereof and (ii) within 90 days
after it occurs, mail to each other Holder notice of all uncured Indenture
Events of Default under this Agreement. Except in the case of a default in the
payment of the principal of, Premium, if any, or interest on any Certificates
or during any period when the Series SWA 1996 Trust N620SW-I Certificate shall
be Outstanding, Break Amount, the Indenture Trustee shall be protected in
withholding the notice required under clause (ii) above if and so long as the
executive committee or trust committee of directors of the Indenture Trustee
and/or
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Responsible Officers thereof in good faith determines that withholding such
notice is in the interest of the Holders. In addition, if an Indenture Default
under this Agreement occurs and is continuing and if the Indenture Trustee has
actual knowledge of same, the Indenture Trustee shall promptly send written
notice thereof to the Company, the Owner Trustee and the Owner Participant and,
so long as the Series SWA 1996 Trust N620SW-I Certificates shall be
Outstanding, the Holders thereof.
SECTION 9.06. COMPENSATION AND INDEMNITY. (a) The
Owner Trustee shall pay to the Indenture Trustee from time to time (i)
reasonable compensation for its services, which compensation shall not be
limited by any law on compensation of a trustee of an express trust, (ii)
reimbursement for all reasonable out-of-pocket expenses incurred by the
Indenture Trustee in connection with the performance of its duties under this
Agreement (including the reasonable compensation and expenses of the Indenture
Trustee's counsel and any agent appointed in accordance with Section 9.02(c)),
and (iii) indemnification against any loss or liability incurred by it arising
out of or in connection with its acceptance or administration of the trust or
trusts hereunder except (A) as such expenses or loss or liability might result
from the gross negligence or willful misconduct of the Indenture Trustee or the
inaccuracy of any representation or warranty of the Indenture Trustee in its
individual capacity in Section 8 of the Participation Agreement or failure by
the Indenture Trustee to perform its payment and investment obligations
hereunder, (B) as otherwise provided in Section 9.10 and (C) as otherwise
excluded by the terms of Sections 7(b) and 7(c) of the Participation Agreement
from the Company's indemnities under said Sections; provided, that the
Indenture Trustee shall not make any claim under this Section 9.06(a) for any
claim or expense indemnified against by the Company under the Participation
Agreement without first making demand on, and pursuing such demand on a
reasonable basis for a reasonable length of time, the Company for payment of
such claim or expense. The Indenture Trustee shall notify the Owner Trustee and
the Company promptly of any claim for which it is entitled to be indemnified
hereunder. Subject to the conditions and procedures equivalent to those set
forth in Sections 7(b) and 7(c) of the Participation Agreement, the Owner
Trustee shall defend the claim and the Indenture Trustee shall cooperate in the
defense. The Indenture Trustee may have separate counsel and the Owner Trustee
shall pay the reasonable fees and expenses of such counsel. The Owner Trustee
need not pay for any settlement made without its and the Company's consent.
(b) To secure the payment obligations of the Owner
Trustee pursuant to this Section 9.06, the Indenture Trustee shall have a lien
prior to that of the Holders of the Certificates on all money or property
constituting a part of the Indenture Estate held or collected by the Indenture
Trustee, except that held in trust to pay the principal of, and interest on,
the Certificates.
SECTION 9.07. REPLACEMENT OF INDENTURE TRUSTEE.
(a) The resignation or removal of the Indenture Trustee and the appointment of
a successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
(b) The Indenture Trustee may resign by giving at least
30 days' prior written notice to the Company, the Owner Trustee and the Holders
of a majority in aggregate principal amount of the Outstanding Certificates.
The Holders of a majority in aggregate principal amount of the Outstanding
Certificates may remove the Indenture Trustee by giving at least 30 days' prior
written notice to the Indenture Trustee, the Owner Trustee and the Company and
may appoint a successor Indenture Trustee with the Owner Trustee's and the
Company's consent. At such time as Series SWA
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1996 Trust N620SW 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 N620SW Certificates are Outstanding, the Owner
Trustee, shall promptly appoint a successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 30 days after the retiring Indenture Trustee resigns or is removed, the
retiring Indenture Trustee, the Company, the Owner Trustee or the Holders of a
majority in aggregate principal amount of the Outstanding Certificates may
petition any court of competent jurisdiction for the appointment of a successor
Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
9.09, any Holder may petition any court of competent jurisdiction for the
removal of such Indenture Trustee and the appointment of a successor Indenture
Trustee.
(f) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Company
and to the Owner Trustee. Thereupon, the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
for which the successor Indenture Trustee is to be acting as Indenture Trustee
under this Agreement. The retiring Indenture Trustee shall promptly transfer
all property and all books and records relating to the administration of the
Indenture Estate held by it as Indenture Trustee to the successor Indenture
Trustee subject to the lien provided for in Section 9.06. The successor
Indenture Trustee shall give notice of each appointment of a successor
Indenture Trustee if there are Certificates Outstanding, by mailing written
notice of such event by first-class mail to the Holders.
(g) All provisions of this Section 9.07 except
subparagraphs (b)(l) and (e) and the words "subject to the lien provided for in
Section 9.06" in subparagraph (f) shall apply also to any Paying Agent.
SECTION 9.08. SUCCESSOR INDENTURE TRUSTEE, AGENTS BY
MERGER, ETC. If the Indenture Trustee or any Agent consolidates with, merges
or converts into, or transfers all or
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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.
SECTION 9.11. WITHHOLDING TAXES; INFORMATION REPORTING.
Without limitation of subsections 15.05(d) and 15.05(e), the Indenture Trustee
shall exclude and withhold from each distribution of principal, Premium, if
any, Break Amount, if any, and interest and other amounts due hereunder or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees to act as such withholding agent
and, in connection therewith, whenever any present or future taxes or similar
charges are required to be withheld with respect to any amounts payable in
respect to the Certificates, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Holders, that
it will file any necessary withholding tax returns or statements when due, and
that, as promptly as possible after the payment thereof, it will deliver to
each Holder appropriate documentation showing the payment thereof, together
with such additional documentary evidence as such Holders may reasonably
request from time to time. The Indenture Trustee agrees to file any other
information reports as it may be required to file under United States law. Such
withholding by the Indenture Trustee shall in no event give rise to an
Indenture Event of Default.
SECTION 9.12. [RESERVED FOR POTENTIAL FUTURE USE]
SECTION 9.13. CERTAIN RIGHTS OF OWNER TRUSTEE AND OWNER
PARTICIPANT. Notwithstanding any other provisions of this Indenture, including
the Granting Clause, the following rights shall be reserved to the Owner
Trustee or the Owner Participant, as the case may be (as separate and
independent rights) to the extent described herein:
(a) at all times the Owner Trustee and the Owner
Participant shall have the right, together with the Indenture Trustee,
to receive from the Lessee all notices, certificates, reports,
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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 Sections 17
and 18 of the Participation Agreement, (ii) to exercise the rights,
elections and options of the Lessor with respect to the termination of
the Lease and solicitations of bids and appraisals pursuant to Section
9 of the Lease, or with respect to renewals or purchase options and
terminations to take effect upon or after the payment in full (or
assumption by the Company) of the obligations secured hereby, (iii) 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, (x) during the Floating Period,
together with the Indenture Trustee (agreement of both being required)
and (y) during the Fixed Period, to the exclusion of the Indenture
Trustee (i) to approve as satisfactory any other accountants,
inspectors, engineers or counsel to render services for or issue
opinions to the Owner Trustee, together with the contents of any
certificates and opinions to be delivered by such Persons, in each
case pursuant to express provisions of the Operative Agreements and
(ii) to grant such consents, approvals and waivers as may be requested
under the Indenture Documents and (3) together with the Indenture
Trustee (each acting separately), to request all certificates and
documents of Lessee, to request assignment of any sublease of the
Aircraft and to exercise inspection rights pursuant to Section 12 of
the Lease;
(c) at all times, the Owner Trustee shall have the
non-exclusive right, as Lessor, to seek specific performance of the
covenants of the Company under the Lease relating to the protection,
insurance, maintenance, possession and use of the Aircraft and to
obtain performance by Lessee under Sections 11(a) and (b) of the
Participation Agreement; and
(d) at all times each of the Owner Trustee (as Owner
Trustee, individually and as Lessor) and the Owner Participant shall
have the right, to the exclusion of the Indenture Trustee, to demand,
collect, sue for or receive the payment of, and waive, modify or
otherwise deal with Excluded Payments due and payable to it, and, in
the case of the Owner Participant, to give the written notice referred
to in the proviso to Section 14.1 of the Lease.
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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 and, in the case of the Series SWA 1996 Trust N620SW-I
Certificate, Break Amount, if any, and all other amounts payable to the
Original Holder hereunder or under any other Operative Agreement; or
(iii) the Certificates shall have been defeased as
provided in Section 10.05; provided, however, that upon the making of the
deposit referred to in subsection A of Section 10.05, the right of the Owner
Trustee or the Company to cause the redemption of Certificates (except a
redemption in respect of which irrevocable notice has theretofore been given)
shall terminate;
(b) all other amounts then due and payable hereunder
have been paid; and
(c) the Company on behalf of the Owner Trustee has
delivered to the Indenture Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for or relating to
the satisfaction and discharge of this Agreement contemplated by this Section
10.01 have been complied with.
SECTION 10.02. SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the provisions of Section 10.01, the obligations of the
Indenture Trustee contained in Sections 2.01 through 2.08,
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2.10, Section 7.01, Section 9.11, Section 10.03 and Section 10.04, and the
rights, duties, immunities and privileges hereunder of the Indenture Trustee
shall survive.
SECTION 10.03. MONIES TO BE HELD IN TRUST. All money
and Government Obligations deposited with the Indenture Trustee pursuant to
Section 10.01 shall be held in trust and applied by it, in accordance with the
provisions of the Certificates and this Agreement, to the payment in the case
of the Series SWA 1996 Trust N620SW-I Certificates, as provided for in Section
15.04 or, in the case of the Series SWA 1996 Trust N620SW Certificates, either
directly or through any Paying Agent as the Indenture Trustee may determine, to
the Holders, of all sums due and to become due thereon for principal, Premium,
if any, interest, and, in the case of the Series SWA 1996 Trust N620SW-I
Certificates, Break Amount, if any, and all other amounts payable to the
Holders hereunder or under any other Operative Agreement, but such money need
not be segregated from other funds except to the extent required by law.
SECTION 10.04. MONIES TO BE RETURNED TO OWNER TRUSTEE.
The Indenture Trustee and any Paying Agent shall promptly pay or return to the
Owner Trustee upon request of the Owner Trustee any money or Government
Obligations held by them at any time that are not required for the payment of
the amounts described above in Section 10.03 on the Certificates for which
money or Government Obligations have been deposited pursuant to Section 10.01.
SECTION 10.05. DEFEASANCE. The Owner Trustee may, at
any time, defease the interest of the Indenture Trustee in the Indenture Estate
in whole, but not in part, through the deposit with the Defeasance Trustee, in
accordance with the provisions of this Section 10.05, of cash and/or Government
Obligations; provided, however, that such defeasance shall not be applicable in
respect of the Series SWA 1996 Trust N620SW-I Certificates. Such deposit shall
be made pursuant to a declaration or other appropriate instrument of trust
satisfactory in form and substance to the Defeasance Trustee and the Indenture
Trustee; such deposit shall be absolute and irrevocable and the instrument of
trust shall expressly provide that the Owner Trustee shall have no further
title to or interest in or power to direct the use or application of the cash
and/or Government Obligations so deposited or any of the proceeds arising
therefrom; such instrument shall state that the trust created thereby and the
cash and/or Government Obligations deposited pursuant thereto are for the sole
and exclusive benefit of the Holders and shall expressly provide that the
Defeasance Trustee shall apply such cash and payments of principal and/or
interest on such Government Obligations to, and only to, the punctual payment
of the principal and interest on the Certificates as and when such payments
become due (such declaration or instrument to contain appropriate provisions
for the recording of transfers of Certificates and the names and addresses of
the Holders); and the Owner Trustee shall agree to pay, as the same shall
become due and payable, all fees, costs and charges of the Defeasance Trustee
under such instrument of trust, including those which may become payable after
the date the conditions hereinbelow specified have been met. Upon compliance
with the following conditions, and provided, that no Indenture Event of Default
or Indenture Default shall have occurred and be continuing on a date 91 days
after the date of the deposit of Government Obligations and/or cash with the
Defeasance Trustee as provided in Subsection A below, the Owner Trustee's
obligations with respect to the Certificates will be discharged and this
Indenture shall terminate as provided in Section 10.01:
A. the Owner Trustee shall have deposited with the
Defeasance Trustee absolutely and irrevocably (irrespective of whether
the conditions in Subsections B, C, D and E of this
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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
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
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Defeasance Trustee and (2) delivered to the Defeasance Trustee, the
Indenture Trustee and to the Holders a certificate of a Responsible
Officer of the Owner Trustee stating that all conditions precedent
herein to the defeasance of the Certificates contemplated by this
Section 10.05 have been satisfied.
The Owner Participant will pay all expenses (including,
without limitation, reasonable legal fees) incident to the implementation of
the transactions contemplated by this Section 10.05.
For the purpose of this Article 10, the following terms have
the following definitions:
"Defeasance Trustee" shall mean an institution authorized to
transact in the State of New York the business of a trust company
selected by the Owner Trustee and approved by the Indenture Trustee;
provided, that at the time of the delivery of cash and/or Government
Obligations pursuant to this Section 10.05, the institution selected
shall have a combined 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 Airframe or Engines in
accordance herewith or with the Lease; provided,
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that Trust Supplements entered into for the purpose of subjecting to
the Lien of this Agreement the Airframe or Engines (or the Replacement
Airframe or any Replacement Engines) in accordance with the Lease need
only be executed by the Owner Trustee;
(5) to add to the covenants of the Owner Trustee,
for the benefit of the Holders, or to surrender any rights or power
herein conferred upon the Owner Trustee or the Owner Participant;
(6) to add to the rights of the Holders;
(7) to provide for the assumption by the Company
of the obligations of the Owner Trustee hereunder in accordance with
the terms and conditions applicable thereto specified in Section 7.03;
(8) to provide for the redemption of the Series
SWA 1996 Trust N620SW-I Certificate and the issuance of the Series SWA
1996 Trust N620SW Certificates in accordance with the terms and
conditions applicable thereto specified in Article 15; or
(9) to include on the Certificates any legend as
may be required by applicable law.
SECTION 11.02. AMENDMENTS TO THIS AGREEMENT WITH CONSENT OF
HOLDERS. (a) With the written consent of the Holders of a majority of
the aggregate principal amount of the Outstanding Certificates, the Owner
Trustee and the Indenture Trustee may enter into such supplemental agreements
to add any provisions to or to change or eliminate any provisions of this
Agreement or of any such supplemental agreements or to modify the rights of the
Holders; provided, however, that without the consent of each Holder affected
thereby, an amendment under this Section 11.02 may not:
(1) reduce the principal amount of, Premium or
Break Amount, if any, or any installment of interest on, any
Certificate; or
(2) change the date on which any principal amount
of, any Installment Payment Amount payable with respect to, Premium or
Break Amount, if any, or interest on any Certificate, is due or
payable; or
(3) create any Lien on the Indenture Estate prior
to or pari passu with the Lien thereon under this Agreement except
such as are permitted by this Agreement, or deprive any Holder of the
benefit of the Lien on the Indenture Estate created by this Agreement;
or
(4) reduce the percentage in principal amount of
the Outstanding Certificates, the consent of whose holders is required
for any such supplemental agreement, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of
this Agreement or of certain defaults hereunder or their consequences)
provided for in this Agreement; or
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(5) make any change in Section 8.05, 8.08, or
(but only for so long as the Series SWA 1996 Trust N620SW-I
Certificates shall be Outstanding) Article 15, or this Section
11.02(a).
(b) It is not necessary under this Section 11.02 for the
Holders to consent to the particular form of any proposed supplemental
agreement, but it is sufficient if they consent to the substance thereof.
(c) Promptly after the execution by the Owner Trustee and
the Indenture Trustee of any supplemental agreement pursuant to the provisions
of this Section 11.02, the Indenture Trustee shall transmit by first-class mail
a notice, setting forth in general terms the substance of such supplemental
agreement, to all Holders, as the names and addresses of such Holders appear on
the Register. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental agreement.
SECTION 11.03. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a Holder is
a continuing consent by the Holder and every subsequent Holder, even if
notation of the consent is not made on any Certificate. However, any such
Holder or subsequent Holder may revoke the consent as to his Certificate if the
Indenture Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Holder affected by such amendment or waiver.
SECTION 11.04. NOTATION ON OR EXCHANGE OF CERTIFICATES.
The Indenture Trustee may place an appropriate notation about an amendment or
waiver on any Certificate thereafter executed. The Indenture Trustee in
exchange for such Certificates may execute new Certificates that reflect the
amendment or waiver.
SECTION 11.05. INDENTURE TRUSTEE PROTECTED. The
Indenture Trustee need not sign any supplemental agreement that adversely
affects its rights.
SECTION 11.06. AMENDMENTS, WAIVERS, ETC. OF OTHER OPERATIVE
AGREEMENTS. (a) Subject to 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
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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 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
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Owner Trustee's, the Owner Participant's or the Company's rights or
obligations with respect to, Excluded Payments;
(2) modify, amend or supplement the Trust
Agreement, or give any consent, waiver, authorization or approval with
respect thereto, in each case only to the extent any such action shall
not adversely affect the interests of the Holders;
(3) modify, amend or supplement the Participation
Agreement, or give any consent, waiver authorization or approval with
respect thereto, except that without compliance with subsection (a) of
this Section 11.06 the parties to the Participation Agreement shall
not modify, amend or supplement, or give any consent, waiver,
authorization or approval for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions thereof
or of modifying in any manner the rights of the respective parties
thereunder, with respect to the following provisions of the
Participation Agreement as originally executed: Sections 1(b), 7
(insofar as such Section 7 relates to the Indenture Trustee and the
Holders), 8, 11, 13, 17, 18 and 19 and (i) any definition of terms
used in the Participation Agreement, to the extent that any
modification of such definition would result in a modification of the
Participation Agreement not permitted pursuant to this subsection (b)
and (ii) any other provision of the Participation Agreement not
hereinabove referred to if the modification, amendment or supplement
thereto, or consent, authorization or approval in respect thereof
would adversely affect the Indenture Trustee's interest in the Trust
Estate or otherwise impair the value of the Trust Estate; and
(4) modify, amend or supplement any of said
agreements in order to cure any ambiguity, to correct or supplement
any provisions thereof which may be defective or inconsistent with any
other provision thereof or of any provision of this Indenture, or to
make any other provision with respect to matters or questions arising
thereunder or under this Agreement which shall not be inconsistent
with the provisions of this Agreement, provided the making of any such
other provision shall not adversely affect the interests of the
Holders.
(c) No modification, amendment, supplement, consent,
waiver, authorization or approval with respect to the Lease or the
Participation Agreement, whether effected pursuant to subsection (a) or
pursuant to subsection (b) of this Section 11.06 and anything in such
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, Break Amount, if any, and interest on the Certificates, as the
case may be, to be made from such installment of any Basic Rent or
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Supplemental Rent, or reduce the aggregate amount of Stipulated Loss
Value, or any other amounts payable under, or as provided in, the
Lease as originally executed upon the occurrence of an Event of Loss
so that the same is less than the accrued interest on and the
principal as of the Lease Loss Payment Date, and Break Amount, if any,
of the Certificates at the time Outstanding or reduce the amount of
Termination Value or Special Purchase Price and any other amounts
payable under, or as provided in, the Lease as originally executed
upon termination of the Lease so that the same is less than the
accrued interest on and principal as of the date of any such
termination and Premium, if any, and Break Amount, if any of
Certificates at the time Outstanding, or
(2) modify, amend or supplement the Lease in such
a way as to, or consent to any assignment of the Lease or give any
consent, waiver, authorization or approval which would, release the
Company from its obligations in respect of payment of Basic Rent or
Supplemental Rent, or Stipulated Loss Value and any other amounts
payable to the Indenture Trustee for its own account or the account of
the Holders (subject in any event to the last paragraph of Section 3.3
of the Lease) upon the occurrence of any Event of Loss, or Termination
Value or Special Purchase Price and any other amounts payable to the
Indenture Trustee for its own account or the account of the Holders
(subject in any event to the last paragraph of Section 3.3 of the
Lease), payable under, or as provided in, the Lease as originally
executed, 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,
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
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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.
(b) The Company, the Owner Trustee, the Indenture
Trustee, the Owner Participant or the Original Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Holders of the Series
SWA 1996 Trust N620SW 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.
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SECTION 12.02. [RESERVED FOR POTENTIAL FUTURE USE]
SECTION 12.03. [RESERVED FOR POTENTIAL FUTURE USE]
SECTION 12.04. RULES BY INDENTURE TRUSTEE AND AGENTS.
The Indenture Trustee may make reasonable rules for action by or a meeting of
the Holders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.05. NON-BUSINESS DAYS. With respect to the
Series SWA 1996 Trust N620SW Certificates only, if a payment date is not a
Business Day at a place of payment, payment may be made at such place on the
next succeeding day that is a Business Day, and no interest shall accrue for
the intervening period.
SECTION 12.06. GOVERNING LAW. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
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. APPLICABILITY ONLY TO ORIGINAL HOLDER.
Notwithstanding any provision to the contrary herein, Sections 15.03 through
15.05 shall only be applicable to the Holders of Series SWA Trust N620SW-I
Certificates.
SECTION 12.10. SEVERABILITY. Any provision of this
Indenture which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
ARTICLE 13
ACTIONS TO BE TAKEN UPON TERMINATION OF LEASE
SECTION 13.01. ACTIONS TO BE TAKEN UPON TERMINATION OF
LEASE. Upon any of:
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(a) the voluntary termination of the Lease by the Company
pursuant to Section 9 thereof on the Lease Termination Date, and upon payment
to the Indenture Trustee of an amount equal to the Redemption Price of all
Outstanding Certificates, or
(b) the purchase of the Aircraft by the Company at its
option pursuant to Section 18.2 of the Lease on the Special Purchase Option
Date (unless the Company shall have elected to assume all of the rights and
obligations of the Owner Trustee hereunder as provided for in Section 8(r) of
the Participation Agreement), and upon payment to the Indenture Trustee of an
amount equal to the Redemption Price as at the applicable Redemption Date of
all Outstanding Certificates, or
(c) the termination of the Lease, on the Lease Loss
Payment Date, following an Event of Loss suffered by the Airframe under
circumstances where the Company does not exercise its option to substitute a
Replacement Airframe therefor pursuant to Section 10.1.2 of the Lease, and upon
payment to the Indenture Trustee of an amount equal to the Redemption Price as
at the Redemption Date of all Outstanding Certificates, or
(d) the satisfaction, discharge, defeasance and
termination of obligations under this Agreement in accordance with Section
10.01, the Lien of this Agreement on the Indenture Estate shall terminate
(except for the Lien on funds held by the Indenture Trustee to pay the
Certificates and the Lien on amounts due from the Company under the Lease
necessary to pay the Certificates or the Indenture Trustee) and the Indenture
Trustee shall execute such instruments as may be requested by the Company or
the Owner Trustee to evidence such termination (at the Company's or the Owner
Trustee's expense).
ARTICLE 14
[RESERVED FOR POTENTIAL FUTURE USE]
ARTICLE 15
ISSUANCE AND APPLICATION OF
PROCEEDS OF SERIES SWA 1996 TRUST N620SW
CERTIFICATES;
SPECIAL PROVISIONS GOVERNING REDEMPTION AND
METHOD OF PAYMENT OF THE
SERIES SWA 1996 TRUST N620SW-I CERTIFICATES;
OTHER SPECIAL PROVISIONS
RELATING TO THE SERIES SWA 1996 TRUST N620SW-I
CERTIFICATES
SECTION 15.01. CONDITIONS PRECEDENT TO ISSUANCE OF SERIES
SWA 1996 TRUST N620SW CERTIFICATES. The issuance of the Series SWA 1996 Trust
N620SW Certificates pursuant to Section 18 of the Participation Agreement is
subject to all conditions specified in such section.
Simultaneously with the satisfaction of such conditions,
Lessee as agent for the Owner Trustee shall deliver to the Indenture Trustee a
completed version of Exhibits B, B-l and B-2 with
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respect to the Series SWA 1996 Trust N620SW Certificates, which completed
Exhibits B, B-l and B-2 shall specify the maturities and principal amounts of
the Series SWA 1996 Trust N620SW Certificates and the applicable interest
rates, together with the reference dates for purposes of determining the Owner
Trustee's rights to redeem such Certificates as provided for in the Operative
Agreements. Such completed Exhibits B, B-l and B-2 shall be deemed upon such
delivery automatically to have been incorporated herein without further action
of the parties hereto.
SECTION 15.02. PAYMENT UPON ISSUANCE OF SERIES SWA 1996
TRUST N620SW CERTIFICATES. Simultaneously with the receipt of the proceeds of
the issuance of the Series SWA 1996 Trust N620SW Certificates, the Indenture
Trustee, on behalf of the Owner Trustee, shall apply an amount equal to the
Redemption Price of the Series SWA 1996 Trust N620SW-I Certificates to the
redemption of the Series SWA 1996 Trust N620SW-I Certificates in accordance
with Section 15.03.
SECTION 15.03. SPECIAL PROVISION GOVERNING REFINANCING OF
THE SERIES SWA 1996 TRUST N620SW-I CERTIFICATE. Notwithstanding any other
provision of this Agreement, as long as any Series SWA 1996 Trust N620SW-I
Certificate is Outstanding, if a refinancing shall be effected pursuant to
Section 17 or 18 of the Participation Agreement and if all the conditions to
such refinancing set forth herein and in such Section 17 or 18 shall have been
satisfied, the Series SWA 1996 Trust N620SW-I Certificates may be refinanced in
whole at a Redemption Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to, but excluding, the applicable
Redemption Date plus the Break Amount, if any, and any other amounts payable to
the Holders thereof hereunder or under the Participation Agreement, but without
any other premium or penalty; provided, however, that the applicable Redemption
Date for the redemption of the Series SWA 1996 Trust N620SW-I Certificates
pursuant to this Section 15.03 shall be the applicable Refinancing Date or
Section 18 Refinancing Date, as the case may be.
SECTION 15.04. SPECIAL PROVISION FOR PAYMENTS IN RESPECT OF
THE SERIES SWA 1996 TRUST N620SW-I CERTIFICATE. Notwithstanding any other
provision of this Agreement, all amounts payable in respect of the Series SWA
1996 Trust N620SW-I Certificates shall be paid by the Indenture Trustee (i) if
to the Original Holder by FedWire transfer in immediately available funds in
Dollars for the for credit to Chase Manhattan Bank, New York, ABA #021000021,
in favor of Royal Bank of Canada, New York Branch, Account No. 920-1-0333-63,
for further credit to Account No. 2185999, ref: Southwest Airlines, or (ii) if
to any other Holder of such Certificates (or as may otherwise be directed by
the Original Holder), to such account maintained by such Holder with any bank
located in the United States and designated by such Holder to the Indenture
Trustee, in any case without presentment or surrender of any Certificate,
except that in the case of any final payment with respect to any Series SWA
1996 Trust N620SW-I Certificate, such Certificate shall be surrendered promptly
thereafter to the Indenture Trustee by the Holder thereof for cancellation.
Such payment shall be made by the Indenture Trustee, in the case of any such
designated account in New York, New York, prior to 2:00 P.M., New York time, on
the due date thereof if such payment is received by the Indenture Trustee by
1:00 P.M., New York time, or by 12:00 Noon, New York time on the next
succeeding Business Day if such payment is received after 1:00 P.M., New York
time. In the event the Indenture Trustee shall fail to make any such payment as
provided in the immediately foregoing sentence after its receipt of funds at
the place and prior to the time specified above, the Indenture Trustee, in its
individual capacity and not as trustee, agrees to compensate the Certificate
Holders for loss of use of funds in a commercially reasonable manner.
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SECTION 15.05. INCREASED COSTS, BREAK AMOUNT, ADDITIONAL
INTEREST, TAXES, ETC. (a) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements which are provided for in subsection (c), below) after the
Delivery Date in any law or regulation or in the interpretation thereof by any
government or central bank or other governmental department, agency, board,
service or governmental body charged with responsibility for the administration
or interpretation thereof or (ii) the compliance with any guideline or request
made after the Delivery Date by any government or central bank or other
governmental department, agency, board, service or other governmental body
(whether or not having the force of law), there shall be any increase in the
cost to, or any reduction of the rate of return on assets or equity of, any
Holder (or any of its Affiliates) of the Series SWA 1996 Trust N620SW-I
Certificate of agreeing to make or making, funding or maintaining the loan
evidenced by its Series SWA 1996 Trust N620SW-I Certificate in respect of (x)
any period as to which the applicable Debt Rate is determined by reference to
the LIBO Rate and (y) capital adequacy requirements, then the Owner Trustee
shall from time to time pay to such Holder such amount as shall be necessary to
reimburse such Holder for such increase in cost within 10 Business Days after
delivery to the Owner Trustee, the Indenture Trustee and the Company of a
certificate of an officer of such Holder setting forth in reasonable detail the
event by reason of which it claims such increase in cost and the basis for the
determination of the amount of such increase in cost; provided, however, that
the Original Holder shall not be entitled to assert any claim under this
subsection 15.05(a) in respect of taxes (including Taxes (as defined in the
Participation Agreement) and the taxes referred to in subsections (d) and (e)
of this Section 15.05). Such certificate shall, in the absence of manifest
error, be binding and conclusive. Such Holder shall notify the Owner Trustee,
the Indenture Trustee and the Company as soon as possible of the occurrence of
any event by reason of which it is entitled to make a claim as described in
this subsection (a), but the failure to give such notice shall not affect the
obligations of the Owner Trustee hereunder.
(b) In the event that any Holder of the Series SWA 1996
Trust N620SW-I Certificate incurs any Break Amount (as defined below) in
connection with any payment, prepayment, acceleration, redemption, refinancing
or purchase, in whole or in part, of the principal of its Series SWA 1996 Trust
N620SW-I Certificate in accordance with the provisions of this Agreement or
otherwise on a date other than the last day of an Interest Period, then the
Owner Trustee shall pay to such Holder such Break Amount on the date of such
payment, prepayment, acceleration, redemption, refinancing or purchase, as the
case may be.
For the purposes hereof, "Break Amount" means an amount equal
to the net funding loss or additional expense which any Holder of a Series SWA
1996 Trust N620SW-I Certificate sustains or incurs or will sustain or incur as
a result of any payment, prepayment, acceleration, redemption, refinancing or
purchase (whether by mandatory or voluntary prepayment, optional purchase,
acceleration or otherwise) of any principal of its Series SWA 1996 Trust
N620SW-I Certificate on a date other than the last day of an Interest Period,
as reasonably determined by such Holder and set forth in a certificate of such
Holder which includes in reasonable detail the basis or the calculations of the
amount being claimed.
(c) The Owner Trustee agrees to pay to any Holder of a
Series SWA 1996 Trust N620SW-I Certificate, to the extent that such Holder
shall require, due to either (i) the introduction of or any change after the
Delivery Date in any law or regulation or in the interpretation thereof by the
Federal Reserve Board (or any governmental authority succeeding thereto) or
(ii) compliance with any guideline or request made after the Delivery Date by
the Federal Reserve Board (whether or not having
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
-61-
<PAGE> 68
the force of law), to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of the loan evidenced by its Series SWA 1996 Trust
N620SW-I Certificate, in respect of any period to which such reserve
maintenance requirement is so applicable and the applicable Debt Rate is
determined by reference to the LIBO Rate, in an amount as to any such period
equal to the amount obtained by applying to the outstanding principal amount of
such loan during such period an interest rate equal at all times to the
remainder obtained by subtracting (A) the applicable LIBO Rate from (B) the
rate obtained by dividing such LIBO Rate by a percentage equal to 100% minus
the Eurocurrency Reserve Percentage, if any, applicable from time to time to
such Holder. Such additional interest shall be paid by the Owner Trustee to any
Holder of a Series SWA 1996 Trust N620SW-I Certificate from time to time as and
when interest is payable under such Holder's Certificate, subject to receipt of
notice of the amount of such additional interest for such Holder.
(d) Should any Holder of a Series SWA 1996 Trust N620SW-I
Certificate fail to qualify for a complete exemption from withholding of United
States Federal income tax because of a change in the provisions of the Code or
other relevant laws from those in effect on the Delivery Date, and the
Indenture Trustee is required by law to deduct or withhold United States
Federal income tax from amounts paid to such Holder, the amounts payable
hereunder and under its Series SWA 1996 Trust N620SW-I Certificate shall be
increased as may be necessary so that, after all required deductions and
withholdings for United States Federal income tax resulting from any such
change in the Code, such Holder receives an amount equal to the excess of (i)
the amount it would have received had no such deduction or withholding been
made over (ii) the additional amount of United States Federal income tax that
would have been payable by it under Section 882 of the Code in the absence of
such change in the Code.
(e) Each Holder of a Series SWA 1996 Trust N620SW-I
Certificate by its acceptance of such Series SWA 1996 Trust N620SW-I
Certificate, agrees that it will, promptly after it becomes aware of any event
or the existence of a condition that would give rise to reimbursement or
payment pursuant to subsection 15.05(a), 15.05(c) or 15.05(d) or to increased
payment hereunder and under the Series SWA 1996 Trust N620SW-I Certificate
pursuant to subsection 15.05(d), to the extent not inconsistent with such
Holder's internal policies, use reasonable efforts to make, fund or maintain
the loan evidenced by the Series SWA 1996 Trust N620SW-I Certificate through a
different Lending Office if, as a result thereof, the amount of such
reimbursement or payment or increased payment, as the case may be, which would
otherwise be required to be made would be materially reduced and if, as
determined by such Holder in its reasonable discretion the making, funding or
maintaining of such loan through such different Lending Office would not
otherwise adversely affect such loan or such Holder. Each Holder agrees that it
will consult with the Owner Trustee in connection with any relocation of its
Lending Office. The Owner Trustee hereby agrees to pay all reasonable expenses
incurred by each such Holder in considering or taking action pursuant to this
subsection (e).
(f) Amounts payable to the Holder of any Series SWA 1996
Trust N620SW-I Certificate pursuant to this Article 15 that are not paid when
due shall bear interest from the due date thereof to, but excluding the date
paid, at the Past Due Rate.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
-62-
<PAGE> 69
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: /s/ Pablo de la Canal
----------------------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as otherwise expressly
provided herein, but solely as Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
----------------------------------------------
Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
-63-
<PAGE> 70
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
Exhibit A
to Trust Indenture
and Security Agreement
Form of Series SWA 1996 Trust N620SW-I Certificate
THIS CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS CERTIFICATE MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
$________________ No. ________________
SERIES SWA 1996 TRUST N620SW-I CERTIFICATE
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Not in its Individual Capacity,
but solely as Owner Trustee under a
Trust Agreement
Dated as of June 1, 1996
Issued in Connection with Aircraft N620SW
Leased to
SOUTHWEST AIRLINES CO.
Date: _________ ___, 1996
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 June 1, 1996 between the Owner Trustee in its
individual capacity and the institution referred to therein as the "Owner
Participant" relating to the Aircraft (such agreement as the same may be
modified, amended or supplemented being referred to herein as the "Trust
Agreement"), for value received hereby promises to pay to ROYAL BANK OF CANADA,
NEW YORK BRANCH (the "Bank"), the principal sum of ________________ Dollars on
or before _____________________ (the "Maturity Date"), together with interest
on such principal amount remaining unpaid from time to time from the date
hereof until such principal amount is paid in full. The principal amount of
this Certificate shall be payable in installments on the dates (each a
"Principal Payment Date") set forth in Annex A hereto equal to the
corresponding percentage of the original principal amount of this Certificate
set forth in
<PAGE> 71
Annex A hereto. To the extent the "Percentage of Original Principal Amount"
column on Annex A hereto shall indicate a negative number on any Principal
Payment Date, the outstanding Principal of this Certificate shall be deemed
correspondingly to be increased on such date by the actual amount of interest
unpaid and accrued to such date (whether or not equal to the amount set forth
on Annex A) and the corresponding amount of accrued but unpaid interest on this
Certificate shall be deemed to be paid by virtue thereof.
Notwithstanding the foregoing, the final payment made on this
Certificate shall be in an amount sufficient to discharge in full the unpaid
principal amount and all accrued and unpaid interest on, and any other amounts
due under this Certificate or as provided for in the Trust Indenture and
Security Agreement, dated as of June 1, 1996 relating to the Aircraft (such
agreement as the same may be modified, amended or supplemented being referred
to herein as the "Indenture"; the defined terms used therein and not otherwise
defined herein being used herein with the same meanings), between the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder.
Interest on the principal amount of this Certificate shall accrue at
the applicable Debt Rate (as defined below). The "Debt Rate" applicable in
respect of any day in any Interest Period (as defined below) or portion
thereof, shall be the LIBO Rate (as defined below) or in the case of an
Interest Period of less than 30 days, the Overnight Rate (as defined below),
applicable to such Interest Period, plus the margin applicable from time to
time determined pursuant to the following table:
<TABLE>
<CAPTION>
Interest Period:
------------------------------------
Ending on or before Margin in Basis
Commencing On or After: And Including: Points Per Annum*
---------------------- ------------- ----------------
<S> <C>
Delivery Date December 2, 1996
December 3, 1996 June 2, 1997
June 3, 1997 December 2, 1997
December 3, 1997 June 2, 1998
Any date subsequent to
June 2, 1998
</TABLE>
*The portion of this text set forth in this column is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.
Interest accrued and unpaid on any Interest Payment Date shall be paid
on such Interest Payment Date; provided, however, that all interest accrued and
unpaid on this Certificate on the date this Certificate shall be paid in full
shall be paid on such date; provided, however, that if any Interest Period Date
(as defined below) is not also an Interest Payment Date, all interest accrued
during the Interest Period relevant thereto (unless the related Interest Period
Date shall also be an Interest Payment Date in which case all accrued and
unpaid interest shall be paid on such date) shall be compounded until the next
succeeding Interest Payment Date and shall bear interest at the Debt Rate
applicable from time to time hereunder during the period from such Interest
Period Date to the next succeeding Interest
A-2
<PAGE> 72
Payment Date and all such compounded interest shall be due and payable on such
next succeeding Interest Payment Date; provided, finally, that any amount of
principal or interest payable hereunder which is not paid when due shall, to
the maximum extent permitted by law, bear interest, payable on demand, from the
due date therefor until the date of payment at an interest rate equal to the
Debt Rate plus 2% per annum. All computations of interest shall be made by the
Original Holder on the basis of a year of 360 days for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest is payable.
Notwithstanding any provision hereof to the contrary, this Certificate
shall not constitute an obligation to pay nor shall the Bank be entitled
hereunder to collect any amount of interest to the extent not permitted by
applicable law.
Notwithstanding anything to the contrary contained herein, if any date
on which a payment under this Certificate becomes due and payable is not a
Business Day, then such payment shall not be made on such scheduled date but
shall be made on the next succeeding Business Day.
For purposes of this Certificate, the following capitalized terms used
herein shall have the following meanings:
"Basis Point" shall mean one one-hundredth of one percent
(1/100 of 1%).
"Interest Payment Date" shall mean each July 2 and January 2
commencing on January 2, 1997.
"Interest Period" shall mean a period of up to 30 consecutive
days, as available, or one, two, three or six months, as selected by
the Owner Trustee or Southwest Airlines Co. (the "Company") (acting on
behalf of the Owner Trustee) as provided for below; provided, however,
that (i) the initial Interest Period shall commence on the Delivery
Date; (ii) each Interest Period immediately succeeding an Interest
Period shall commence on the last day of the preceding Interest Period;
(iii) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, however, that, if such extension
would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day; (iv) whenever the first day
of any Interest Period occurs on a day of an initial calendar month for
which there is no numerically corresponding day in the calendar month
that succeeds such initial calendar month by the number of months equal
to the number of months in such Interest Period, such Interest Period
shall end on the last Business Day of such succeeding calendar month;
and (v) notwithstanding anything to the contrary contained herein, no
Interest Period shall extend beyond a date which is a Principal Payment
Date.
"Interest Period Date" shall mean each Business Day on which
an Interest Period expires.
"LIBO Rate" shall mean, as to any Interest Period, a rate per
annum equal to the London Interbank Offered rate for Dollar deposits
which appears on Telerate Page 3750 (or such other page or service as
may replace Telerate Page 3750) as of 11:00 a.m. (London time) on the
day that is two Business Days prior to the first day of such Interest
Period for a period
A-3
<PAGE> 73
comparable to such Interest Period or if no such rate is available, the
rate (rounded to the nearest 1/100 of 1% or, if there is no nearest
1/100 of 1%, the next higher 1/100 of 1%) at which deposits in United
States dollars approximately equal in principal amount to the sum of
the unpaid Original Amount on the first day of such Interest Period
which will be outstanding during such Interest Period are offered in
immediately available funds to the principal office of Royal Bank of
Canada in London (or if Royal Bank of Canada does not at the time any
such determination is made maintain an office in London, England,
National Westminster Bank plc) by leading banks in the London Interbank
Market for Eurodollars at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period.
"Overnight Rate" shall mean, as to any Interest Period, the
rate at which deposits in U.S. dollars in same day funds would be
offered to Original Holder at 11:00 a.m. New York time.
The selection of the duration of the Interest Period related to the
LIBO Rate shall be made by telephonic notice (followed by telex, telecopy or
other written confirmation) from the Owner Trustee or the Company (acting on
behalf of the Owner Trustee) to the Original Holder or its designee by not
later than 11:00 A.M. (New York time) on the third Business Day preceding the
first day of the relevant Interest Period; provided, however, that if a Lease
Default shall have occurred or be continuing or no such notice shall have been
given, the Debt Rate will be deemed, effective upon the last day of the then
current Interest Period, to be determined by reference to the LIBO Rate for an
Interest Period of one month.
The Bank shall determine each LIBO rate applicable to this Certificate
pursuant to the definition of "LIBO Rate" above. The Bank shall notify the
Company, Indenture Trustee and Owner Trustee of such rates as promptly as
reasonably possible. The Bank's determination thereof shall be conclusive in
the absence of manifest error.
All payments of principal, interest and other amounts, if any, to be
made by the Owner Trustee hereunder and under the Indenture shall be made only
from the income and proceeds from the Indenture Estate and the other amounts
referred to in Section 3.03 of the Indenture and only to the extent that the
Indenture Trustee shall have sufficient income or proceeds from the Indenture
Estate and such other amounts to make such payments in accordance with the
terms of the Indenture, and the Bank, by its acceptance of this Certificate,
agrees that it will look solely to the income and proceeds from the Indenture
Estate and the other amounts referred to in Section 3.03 of the Indenture to
the extent available for distribution to the Holder hereof as above provided
and that none of the Owner Participant, the Owner Trustee or the Indenture
Trustee is personally liable or liable in any manner extending to any assets,
other than the Indenture Estate, to the Bank for any amounts payable under this
Certificate or the Indenture or, except as provided in the Indenture, for any
liability under the Indenture; provided, however, that nothing herein contained
shall limit, restrict or impair the right of the Indenture Trustee, subject
always to the terms and provisions of the Indenture, to accelerate the maturity
of this Certificate upon an Indenture Event of Default, to bring suit and
obtain a judgment against the Owner Trustee on this Certificate for purposes of
realizing upon the Indenture Estate and to exercise all rights and remedies
provided under the Indenture or otherwise realized upon the Indenture Estate.
Both the original amount of principal due hereunder and interest and
other amounts due hereunder shall be payable in United States currency in
immediately available funds pursuant to
A-4
<PAGE> 74
Section 15.04 of the Indenture. Each such payment shall be made on the date
such payment is due and without any presentment or surrender of this
Certificate, except that in the case of any final payment with respect to this
Certificate, the Certificate shall be surrendered promptly thereafter to the
Indenture Trustee by the Bank for cancellation.
The Bank, by its acceptance of this Certificate, agrees that each
payment received by it hereunder shall be applied in the manner provided in
Section 3.08 of the Indenture.
This Certificate is one of the Series SWA 1996 Trust N620SW-I
Certificates referred to in the Indenture which has been or is to be issued by
the Owner Trustee pursuant to the terms of the Indenture. The Indenture Estate
is held by the Indenture Trustee as security for the Certificates. The rights
of the Owner Trustee under the Indenture, as well as the beneficial interest of
the Owner Participant in and to the properties of the Owner Trustee assigned,
pledged or mortgaged as part of the Indenture Estate, are subject and
subordinate to the rights of the Holders of the Certificates to the extent
provided for in the Indenture. Reference is hereby made to the Indenture for a
statement of the rights of the Bank in respect of, and the nature and extent of
the security for, this Certificate, and the rights of the Owner Trustee, as
well as for a statement of the terms and conditions of the trusts created by
the Indenture, to all of which terms and conditions in the Indenture the Bank
agrees by its acceptance of this Certificate.
Any Holder of this Certificate shall be deemed to have made the
following representation by its acquisition of this Certificate: either that
(a) no part of the funds used by it to acquire this Certificate constitutes
"plan assets" of any "employee benefit plan" within the meaning of ERISA or any
"plan" within the meaning of Section 4975(e)(1) of the Code, or (b) its
purchase or acquisition of this Certificate will not result in a non-exempt
prohibited transaction under Section 4975 of the Code or Section 406 of ERISA.
This Certificate is subject to prepayment by redemption or acceleration
as provided in Articles 6 and 15 of the Indenture.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
A-5
<PAGE> 75
IN WITNESS WHEREOF, the Owner Trustee has caused this Certificate to be
executed in its corporate name by its officer thereunto duly authorized on the
date hereof.
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, not in its individual capacity,
but solely as Owner Trustee
By:
--------------------------------------
Title:
-----------------------------------
A-6
<PAGE> 76
[FORM OF INDENTURE TRUSTEE'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred to in the within-mentioned
Indenture.
WILMINGTON TRUST COMPANY, not in its
individual capacity, but
solely as Indenture Trustee
By:
--------------------------------
Title:
-----------------------------
A-7
<PAGE> 77
Annex A to
Equipment Trust
Certificate
<TABLE>
<CAPTION>
Percentage of Original
Principal Payment Date Principal Amount
---------------------- ----------------------
<S> <C>
</TABLE>
A-8
<PAGE> 78
Exhibit A-1 to
Trust Indenture and
Security Agreement
Form of Series SWA 1996 Trust N620SW Installment Certificates
$________________ No. ________________
Dated as of ______________ __, 199_
SERIES SWA 1996 TRUST N620SW 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 June 1, 1996
Issued in connection with Aircraft N620SW
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 June 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 June 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
<PAGE> 79
Trustee is or shall be personally liable to the Holder hereof for any amount
payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
Any amount of interest or principal (including any Installment Payment
Amount) payable hereunder which is not paid when due shall, to the maximum
extent permitted by law, bear interest from the due date thereof until the date
of payment at an interest rate equal to the interest rate specified above plus
2% per annum. Any other amounts payable to the Holder hereof hereunder
(including, without limitation, Premium) or under the Indenture which is not
paid when due shall bear interest from the due date thereof, until the date of
payment at an interest rate equal to the Overdue Rate. All computations of
interest hereunder shall be calculated on the basis of a year of twelve 30-day
months.
The interest or Installment Payment Amount (other than that payable on
the Maturity Date hereof) so payable, and punctually paid or duly provided for,
on the applicable Interest Payment Date or Installment Payment Date, as the
case may be, will, as provided in the Indenture, be paid to the Person in whose
name this Certificate (or one or more predecessor Certificates) is registered
at the close of business on the Record Date for payment of such interest or
Installment Payment Amount, which shall be the fifteenth day (whether or not a
Business Day) next preceding such Interest Payment Date or Installment Payment
Date, as the case may be. Any such interest or Installment Payment Amount not
so punctually paid or duly provided for shall forthwith cease to be payable to
the registered Holder hereof on such Record Date (or to the Person in whose
name this Certificate is registered upon issuance) and may be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on a Special Record Date for the payment
of such Defaulted Installment or Defaulted Interest to be fixed by the
Indenture Trustee, notice whereof shall be given to Holders of Certificates
entitled thereto not less than 10 days prior to such Special Record Date, or
may be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Certificates may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on this
Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payments Amounts
(other than that payable on the Maturity Date hereof) may be made at the option
of the Indenture Trustee or the Paying Agent by check mailed on or before the
due date to the address of the Holder entitled thereto as such address shall
appear on the Register.
This Certificate shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose unless this Certificate has
been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and amendments
thereto (a copy of which is on file with the Indenture Trustee at its principal
corporate trust office) for a more 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
A-1-2
<PAGE> 80
Certificates are, and are to be, executed and delivered, the terms upon which
the Certificates may be redeemed, as well as for a statement of the terms and
conditions of the trust created by the Indenture, to all of which terms and
conditions in the Indenture each Holder hereof agrees by its acceptance of this
Certificate.
On each Installment Payment Date, the Holder hereof will receive a
payment of principal equal to the Installment Payment Percentage for such
Installment Payment Date multiplied by the initial principal amount of this
Certificate which is set forth herein.
<TABLE>
<CAPTION>
Installment Installment
Payment Payment
Date Percentage
----------- -----------
<S> <C> <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
A-1-3
<PAGE> 81
be cured by the payment of money, by making such payment on behalf of the
Company, subject, however, to certain limitations.
The right of the Holder of this Certificate to institute action for
any remedy under the Indenture, including the enforcement of payment of any
amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged from
their respective obligations in respect of the Certificates (except for certain
matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
As provided in the Indenture and subject to certain limitations
therein set forth, this Certificate is transferable, and upon surrender of this
Certificate for registration of transfer at the principal corporate trust
office of the Registrar, or at the office or agency maintained for such
purpose, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Registrar duly executed by, the Holder or his
attorney duly authorized in writing, one or more new Certificates of the same
maturity and type and of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates. The
Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
No service charge shall be made for any such registration of transfer
or exchange, but the Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the Person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
A-1-4
<PAGE> 82
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-1-5
<PAGE> 83
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-1-6
<PAGE> 84
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
Indenture Trustee
By:
-------------------------------------------
Authorized officer or signatory
A-1-7
<PAGE> 85
Exhibit A-2 to
Trust Indenture and
Security Agreement
Form of Series SWA 1996 Trust N620SW Serial Certificates
$________________ No. ________________
Dated as of __________________ __, 199_
SERIES SWA 1996 TRUST N620SW 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 June 1, 1996
Issued in connection with Aircraft N620SW
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 June 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 June 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> 86
Any amount of interest or principal payable hereunder which is
not paid when due shall, to the maximum extent permitted by law, bear interest
from the due date thereof until the date of payment at an interest rate equal
to the interest rate specified above plus 2% per annum. Any other amounts
payable to the Holder hereof hereunder (including, without limitation, Premium)
or under the Indenture which is not paid when due shall bear interest from the
due date thereof, until the date of payment at an interest rate equal to the
Overdue Rate. All computations of interest hereunder shall be calculated on
the basis of a year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided
for, on the applicable Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on the Record
Date for payment of such interest, which shall be the fifteenth day (whether or
not a Business Day) next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holder hereof on the such Record Date (or to the
Person in whose name this Certificate is registered upon issuance) and may be
paid to the Person in whose name this Certificate (or one or more predecessor
Certificates) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Indenture
Trustee, notice whereof shall be given to Holders of Certificates entitled
thereto not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Certificates may be listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Indenture Trustee or the Paying Agent by check mailed on or before the due date
to the address of the Holder entitled thereto as such address shall appear on
the Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of an authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (a copy of which is on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, the terms upon which the Certificates may be
redeemed, as well as for a statement of the terms and conditions of the trust
created by the Indenture, to all of which terms and conditions in the Indenture
each Holder hereof agrees by its acceptance of this Certificate.
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
A-2-2
<PAGE> 87
Indenture, at a Redemption Price equal to the unpaid principal amount thereof,
Premium, if any, plus accrued interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the right
to repossess and use or operate the Aircraft, to sell or relet the Aircraft
free and clear of the Company's rights and retain the proceeds and to require
the Company to pay as liquidated damages (i) any unpaid Basic Rent plus an
amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided, that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling to the effect that the deposit and related defeasance would not cause
the Holders of the Certificates to recognize income, gain or loss for Federal
income tax purposes.
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,
A-2-3
<PAGE> 88
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-2-4
<PAGE> 89
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> 90
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as
Indenture Trustee
By:
--------------------------------------------
Authorized officer or signatory
A-2-6
<PAGE> 91
Exhibit B to
Trust Indenture and
Security Agreement
<TABLE>
<CAPTION>
Maturity Dates, Principal Amounts and
- -------------------------------------
Interest Rates of Series SWA 1996 Trust N620SW Certificates
- -----------------------------------------------------------
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 N620SW
Certificates, if any shall be issued hereunder.]
<PAGE> 92
Exhibit B-1 to
Trust Indenture and
Security Agreement
Installment Payment Dates and Installment Payment Percentages
Installment Certificates shall be those
Certificates with the following Maturity Dates:
Installment Certificate No. 1 - Maturity Date: ________________
<TABLE>
<CAPTION>
Installment Payment Installment Payment Aggregate Installment
------------------- ------------------- ---------------------
Date Percentage Payment Amount
---- ---------- --------------
<S> <C> <C>
</TABLE>
[To be completed at time of issuance of Series SWA 1996 Trust N620SW
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 N620SW
Certificates, if any shall be issued hereunder.]
<TABLE>
<S> <C> <C>
TOTAL 100.00000000 ________________
</TABLE>
<PAGE> 93
Exhibit B-2 to
Trust Indenture and
Security Agreement
Issuance of Series SWA 1996 Trust N620SW Certificates
The Series SWA 1996 Trust N620SW Certificates issued hereunder
shall be issued to and shall be payable to _________ under the __________ with
respect to the [grantor trusts created thereby], in each case as set forth
below:
<PAGE> 94
Exhibit C to
Trust Indenture and
Security Agreement
[FORM OF]
TRUST AGREEMENT AND TRUST INDENTURE AND
SECURITY AGREEMENT SUPPLEMENT
This TRUST AGREEMENT AND TRUST INDENTURE AND SECURITY
AGREEMENT SUPPLEMENT, is dated ____________, 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 June 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 June 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, Break Amount, if any, Premium, if any,
and interest on, and all other amounts due with respect to, all Certificates
from time to time Outstanding and all other amounts due to the Holders under
the Trust Indenture and the Participation Agreement and the performance and
observance by each of the Company and the Owner Trustee of all the agreements,
covenants and provisions in the Trust Indenture and in the other Operative
Agreements for the benefit of the Indenture Trustee and the Holders of the
Certificates and in the Certificates contained, and the prompt payment of all
amounts from time to time owing under the Operative Agreements to the Holders
of the Certificates, and for the uses and purposes of the Trust Indenture, and
in consideration of the premises and of the covenants contained in the Trust
Indenture, and of the acceptance of the Certificates by the Holders thereof,
and of the sum of $1.00 paid to the Owner Trustee by the Indenture Trustee at
or before the delivery hereof, the receipt whereof is hereby acknowledged, the
Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign,
transfer, convey, mortgage, pledge and confirm unto the Indenture Trustee, its
successors and assigns, for the security and benefit of the Holders from time
to time of the Certificates, upon the
<PAGE> 95
trusts created by the Trust Indenture, all right, title and interest of the
Owner Trustee in, to and under the following described property:
AIRFRAME
One Airframe Identified as follows:
<TABLE>
<CAPTION>
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
------------ ----- ------------ ---------------
<S> <C> <C> <C>
The Boeing Company 737-3H4 N620SW 28036
</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 858287
CFM International CFM56-3-B1 858292
</TABLE>
together with all Parts relating to such engines.
Together with all substitutions or replacements of and
additions, improvements, accessories and accumulations to the property above
described for which title vests in the Owner Trustee under the Operative
Agreements and all property which shall hereafter become physically attached to
or incorporated in the property above described, whether the same are now owned
by the Owner Trustee or shall hereafter be acquired by it for which title vests
in the Owner Trustee under the Operative Agreements.
As further security for the obligations referred to above and
secured by the Trust Indenture and hereby, the Owner Trustee has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Indenture Trustee, its successors and
assigns, for the security and benefit of the Holders from time to time of the
Certificates, in the trust created by the Trust Indenture, all of the right,
title and interest of the Owner Trustee in, to and under the Lease Supplement
of even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment
shall constitute security for any of the aforementioned obligations.
C-2
<PAGE> 96
TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Indenture Trustee, its successors and assigns, in trust for the
benefit and security of the Holders from time to time of the Certificates for
the uses and purposes and subject to the terms and provisions set forth in the
Trust Indenture.
This Supplement shall be construed as supplemental to the
Trust Indenture and to the Trust Agreement and shall form a part of each, and
the Trust Agreement and the Trust Indenture are each hereby incorporated by
reference herein and each is hereby ratified, approved and confirmed.
AND, FURTHER, the Owner Trustee hereby acknowledges that the
Aircraft referred to in this Supplement and the aforesaid Lease Supplement has
been delivered to the Owner Trustee and is included in the property of the
Owner Trustee covered by all the terms and conditions of the Trust Agreement,
subject to the pledge and mortgage thereof under the Trust Indenture.
THIS SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
C-3
<PAGE> 97
IN WITNESS WHEREOF, the Owner Trustee has caused this
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
FIRST UNION NATIONAL
BANK OF NORTH CAROLINA,
not in its individual capacity, but solely as
Owner Trustee
By:
-------------------------------------------
Title:
-----------------------------------------
C-4
<PAGE> 1
EXHIBIT 4.6
- --------------------------------------------------------------------------------
FIRST AMENDMENT
TO
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of May 1, 1998
between
FIRST UNION NATIONAL BANK,
in its individual capacity only as
expressly set forth herein and
otherwise solely as Owner Trustee
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee
One Boeing 737-3H4 Aircraft N620SW
Southwest Airlines Co.
Series SWA 1996 Trust N620SW Certificates
(Southwest Airlines 1996 Trust N620SW)
- --------------------------------------------------------------------------------
<PAGE> 2
FIRST AMENDMENT TO
TRUST INDENTURE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO TRUST INDENTURE AND SECURITY AGREEMENT dated
as of May 1, 1998 (this "Amendment") between FIRST UNION NATIONAL BANK, in its
individual capacity only as expressly set forth herein and otherwise solely as
Owner Trustee under that certain Trust Agreement establishing the Southwest
Airlines 1996 Trust N620SW and dated as of June 1, 1996 (in such capacity, the
"Owner Trustee") and WILMINGTON TRUST COMPANY, as Indenture Trustee (the
"Indenture Trustee"), amends that certain related Trust Indenture and Security
Agreement dated as of June 1, 1996 (the "Original Indenture") between the Owner
Trustee and the Indenture Trustee (the Original Indenture, as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement dated
June 3, 1996 by the Owner Trustee, relating to the aircraft having U.S.
registration number N620SW, being referred to herein as the "Indenture"),
W I T N E S S E T H :
WHEREAS, except as otherwise defined in this Amendment, the
capitalized terms used herein shall have the meanings attributed thereto in the
Indenture;
WHEREAS, a counterpart to the Indenture was recorded by the Federal
Aviation Administration on July 17, 1996 and assigned Conveyance No. S098303;
WHEREAS, the Owner Trustee has agreed to refinance the Series SWA 1996
Trust N620SW-1 Certificates with Series SWA 1996 Trust N620SW Certificates; and
WHEREAS, in order to effect such refinancing, the Owner Trustee and
the Indenture Trustee have agreed to amend the Indenture as provided for below;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to the Indenture. The Indenture is, effective
as of the date hereof, hereby amended as follows:
(a) The definitions of "Business Day" and "Holder" in
Section 1.01(b) of the Indenture are amended in their entirety to read
as follows:
"Business Day" means any day other than a Saturday or
Sunday or a day on which commercial banks are required or
authorized to close in the City of Dallas, Texas; New York,
New York; or the city and state in which (i) so long as any
Certificates shall be Outstanding, each of the Indenture
Trustee and the Pass Through Trustee and (ii) thereafter, the
Owner Trustee, has its principal place of business; or the
city and state in which the Indenture Trustee, the Pass
Through Trustee or the Owner Trustee, as the case may be,
receives and disburses funds.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
-1-
<PAGE> 3
"Holder" or "Certificate Holder" means a Person in
whose name a Certificate is registered on the Register
including, so long as it holds a Series SWA 1996 Trust N620SW
Certificate, the Pass Through Trustee.
(b) The following new definitions are inserted in Section
1.01(b) of the Indenture after the definition of "Owner Trustee":
"Pass Through Certificate" means any of the Pass
Through Certificates issued pursuant to the Pass Through Trust
Agreement.
"Pass Through Trust" means each pass through trust
created pursuant to the Pass Through Trust Agreement.
"Pass Through Trust Agreement" means the Pass Through
Trust Agreement dated as of February 1, 1993, between the
Company and the Pass Through Trustee, as supplemented by Trust
Supplement No. 1998-A, dated as of May 1, 1998, 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 the Pass Through Trust
Agreement, and such other Person that may from time to time be
acting as successor trustee under the Pass Through Trust
Agreement.
(c) The first sentence of Section 6.02 of the Indenture
is amended to be and read in its entirety as follows:
"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), each Outstanding
Certificate shall be redeemed or purchased in whole at a
Redemption Price equal to 100% of its principal amount plus
accrued and unpaid interest thereon (including, without
limitation, interest on overdue interest) to but excluding the
applicable Redemption Date as determined below and all other
amounts payable to the Holders hereunder or under the
Participation Agreement and, in the case of the Series SWA
1996 Trust N620SW-I Certificate, the Break Amount, if any,
and, in the case of the Series SWA 1996 Trust N620SW
Certificates, if to be purchased or redeemed pursuant to
Section 8.03(e)(ii)(A) prior to the one year anniversary of
the first occurrence of the relevant Lease Event of Default,
and, if such purchase or redemption is effected prior to the
Premium Termination Date in respect of any Certificate, the
Premium, if any, in respect of such Certificate."
(d) Clause (iii) of Section 9.13(b)(1) of the Indenture
is amended to be and read in its entirety as follows:
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
-2-
<PAGE> 4
"(iii) to effect cures pursuant to Section 20 of the Lease;
provided that this will not be deemed to cure the related
Indenture Event of Default unless permitted by the terms of
Section 8.03(e)(i), and".
(e) Exhibits A-1, B, B-1 and B-2 to the Indenture are
replaced in their entirety by Exhibits A-1, B, B-1 and B-2 hereto.
Said revised Exhibits B, B-1 and B-2 shall, for all purposes, be
deemed to have been, and are, completed in accordance with Article 15
of the Indenture.
Section 2. Lease Amendment. As of the date hereof, the Lessee
and the Owner Trustee are entering into First Amendment to Sale and Lease
Agreement (the "Lease Amendment") to the Sale and Lease Agreement dated as of
June 1, 1996 relating to the Aircraft, which Sale and Lease Agreement (together
with Sale and Lease Agreement Supplement No. One, dated June 3, 1996 thereto)
was recorded with the Federal Aviation Administration on July 17, 1996 and
assigned Conveyance No. S098304. The Lease Amendment is attached hereto and,
without limiting the generality of the Granting Clause of the Indenture, is
covered by the Lien of the Indenture and is made part of the Indenture Estate.
Section 3. Amendment and Incorporation by Reference. This
Amendment is and shall be construed as an amendment and supplement to the
Indenture and shall form a part thereof, and the Indenture is hereby
incorporated herein by reference and is hereby ratified, approved and
confirmed.
Section 4. GOVERNING LAW. THIS AMENDMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 5. Execution in Counterparts. This Amendment may be
executed by the Owner Trustee and the Indenture Trustee in separate
counterparts, each of which when so executed and delivered is an original, but
all such counterparts shall together constitute but one and the same
instrument.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
-3-
<PAGE> 5
IN WITNESS WHEREOF, the Owner Trustee and the Indenture
Trustee have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.
FIRST UNION NATIONAL BANK
in its individual capacity
only as expressly set forth
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:
---------------------------------
Senior Financial Services Officer
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
-4-
<PAGE> 6
Exhibit A-1 to
First Amendment to
Trust Indenture and
Security Agreement
Form of Series SWA 1996 Trust N620SW Installment Certificates
$______________ No._____________
Dated as of June 3, 1996
SERIES SWA 1996 TRUST N620SW CERTIFICATE
FIRST UNION NATIONAL BANK
Not in its Individual Capacity
but Solely as Owner Trustee
Under the Trust Agreement
Dated as of June 1, 1996
Issued in connection with Aircraft N620SW
Leased to
SOUTHWEST AIRLINES CO.
INTEREST RATE MATURITY DATE
_____________ July 2, 2019
FIRST UNION NATIONAL BANK, not in its individual capacity, but
solely as owner trustee (the "Owner Trustee") under that certain Trust
Agreement dated as of June 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
_______________ or from the most recent date to which interest has been paid or
duly provided for, semiannually, on January 2 and July 2 in each year,
commencing July 2, 1998, until the principal hereof is paid or made available
for payment in full. All amounts payable by the Owner Trustee hereunder and
under the related Trust Indenture and Security Agreement dated as of June 1,
1996, as supplemented and amended by Trust Agreement and Trust Indenture and
Security Agreement Supplement dated June 3,
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
A-1-1
<PAGE> 7
1996 and First Amendment to Trust Indenture and Security Agreement dated as of
May 1, 1998 (as further amended or supplemented from time to time referred to
herein as the "Indenture", the defined terms therein not otherwise defined
herein being used herein with the same meanings), by and among the Owner
Trustee and Wilmington Trust Company, as Indenture Trustee thereunder, shall be
made only from the income and proceeds of the Indenture Estate and the other
amounts referred to in Section 3.03 of the Indenture. Each Holder hereof, by
its acceptance of this Certificate, agrees that (a) it will look solely to the
income and proceeds of the Indenture Estate and the other amounts referred to
in Section 3.03 of the Indenture for payment of such amounts, to the extent
available for distribution to the Holder hereof as provided in the Indenture
and (b) neither the Owner Trustee, the Owner Participant nor the Indenture
Trustee is or shall be personally liable to the Holder hereof for any amount
payable hereunder or under the Indenture or, except as provided in the
Indenture, for any liability under the Indenture.
Any amount of interest or principal (including any Installment
Payment Amount) payable hereunder which is not paid when due shall, to the
maximum extent permitted by law, bear interest from the due date thereof until
the date of payment at an interest rate equal to the interest rate specified
above plus 2% per annum. Any other amounts payable to the Holder hereof
hereunder (including, without limitation, Premium) or under the Indenture which
is not paid when due shall bear interest from the due date thereof, until the
date of payment at an interest rate equal to the Overdue Rate. All
computations of interest hereunder shall be calculated on the basis of a year
of twelve 30-day months.
The interest or Installment Payment Amount (other than that
payable on the Maturity Date hereof) so payable, and punctually paid or duly
provided for, on the applicable Interest Payment Date or Installment Payment
Date, as the case may be, will, as provided in the Indenture, be paid to the
Person in whose name this Certificate (or one or more predecessor Certificates)
is registered at the close of business on the Record Date for payment of such
interest or Installment Payment Amount, which shall be the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date or
Installment Payment Date, as the case may be. Any such interest or Installment
Payment Amount not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder hereof on such Record Date (or to
the Person in whose name this Certificate is registered upon issuance) and may
be paid to the Person in whose name this Certificate (or one or more
predecessor Certificates) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Installment or Defaulted Interest
to be fixed by the Indenture Trustee, notice whereof shall be given to Holders
of Certificates entitled thereto not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Certificates may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture.
Payment of the principal of, Premium, if any, and interest on
this Certificate will be made at the principal corporate trust office of the
Indenture Trustee, or the office or agency maintained by the Indenture Trustee
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest and Installment Payment Amounts
(other than that
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
A-1-2
<PAGE> 8
payable on the Maturity Date hereof) may be made at the option of the Indenture
Trustee or the Paying Agent by check mailed on or before the due date to the
address of the Holder entitled thereto as such address shall appear on the
Register.
This Certificate shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless this Certificate
has been executed on behalf of the Owner Trustee by the manual or facsimile
signature of any authorized officer of the Owner Trustee, and authenticated by
the Indenture Trustee by the manual signature of an authorized officer or
signatory of the Indenture Trustee, in each case as specified in Section 2.02
of the Indenture.
Reference is made to the Indenture and all supplements and
amendments thereto (copies of which are on file with the Indenture Trustee at
its principal corporate trust office) for a more complete statement of the
terms and provisions thereof, including a statement of the properties thereby
conveyed, pledged and assigned, the nature and extent of the security, the
respective rights thereunder of the Owner Trustee, the Indenture Trustee and
the Holders of the Certificates, the terms upon which the Certificates are, and
are to be, executed and delivered, and the terms upon which the Certificates
may be redeemed as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
On each Installment Payment Date, the Holder hereof will
receive a payment of principal equal to the Installment Payment Percentage for
such Installment Payment Date multiplied by the initial principal amount of
this Certificate which is set forth herein, all as shown on Exhibit A hereto.
As more fully provided in the Indenture, the Certificates are
subject to redemption on not less than 30 nor more than 60 days' notice by
mail, under the circumstances set forth in the Indenture, at a Redemption Price
equal to the unpaid principal amount thereof, Premium, if any, plus accrued
interest thereon to the Redemption Date.
If an Indenture Event of Default shall occur and be
continuing, the principal of the Certificates may be declared due and payable
in the manner and with the effect provided in the Indenture. If, and only if,
such an Indenture Event of Default constitutes a Lease Event of Default by the
Company under the Lease, the Indenture Trustee may, to the exclusion of the
Owner Trustee, exercise one or more of the remedies of the Owner Trustee
provided in the Lease. Such remedies include (but are not limited to) the
right to repossess and use or operate the Aircraft, to sell or relet the
Aircraft free and clear of the Company's rights and retain the proceeds and to
require the Company to pay as liquidated damages (i) any unpaid Basic Rent plus
an amount equal to the excess of the Stipulated Loss Value of the Aircraft over
the aggregate fair market rental value thereof for the remainder of the term
for the Aircraft, (ii) any unpaid Basic Rent plus the excess of the Stipulated
Loss Value of the Aircraft over the fair market sales value thereof or (iii) if
the Aircraft has been sold, any unpaid Basic Rent plus the excess of the
Stipulated Loss Value thereof over the net sales proceeds.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
A-1-3
<PAGE> 9
By acceptance of this Certificate, the Holder hereof agrees to
be bound by the provisions of the Participation Agreement applicable to
Holders.
The Owner Trustee or the Owner Participant may cure any
default by the Company under the Lease arising from the failure of the Company
to make any payment of Basic Rent under the Lease, provided that such failure
of the Company is not the third consecutive such failure, or the fifth or
subsequent cumulative such failure. The Owner Trustee or the Owner Participant
may (but need not) cure any other default by the Company in the performance of
its obligations under the Lease which can be cured by the payment of money, by
making such payment on behalf of the Company, subject, however, to certain
limitations.
The right of the Holder of this Certificate to institute
action for any remedy under the Indenture, including the enforcement of payment
of any amount due hereon, is subject to certain restrictions specified in the
Indenture.
The Owner Trustee and the Indenture Trustee will be discharged
from their respective obligations in respect of the Certificates (except for
certain matters, including obligations to register the transfer or exchange of
Certificates, replace stolen, lost or mutilated Certificates, maintain paying
agencies and hold money for payment in trust), and the Indenture Trustee may
thereupon cause the release of the Indenture Estate from the lien of the
Indenture, if (a) the Owner Trustee deposits or causes to be deposited
irrevocably with the Indenture Trustee, in trust, money or Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay principal of, Premium, if any, and interest on the
Outstanding Certificates on the dates such payments are due in accordance with
the terms of such Certificates and (b) certain other conditions are satisfied,
including the publication by the United States Internal Revenue Service of a
ruling, or a change in or clarification of the applicable Federal income tax
law, in either case to the effect that the deposit and related defeasance would
not cause the Holders of the Certificates to recognize income, gain or loss for
Federal income tax purposes.
As provided in the Indenture and subject to certain
limitations therein set forth, this Certificate is transferable, and upon
surrender of this Certificate for registration of transfer at the principal
corporate trust office of the Registrar, or at the office or agency maintained
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by, the Holder or
his attorney duly authorized in writing, one or more new Certificates of the
same maturity and type and of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates.
The Certificates are issuable in denominations of $1,000 and integral multiples
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Certificates are exchangeable for a like aggregate principal
amount of Certificates of the same maturity and type and of authorized
denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office
of the Registrar, or at an office or agency maintained for such purpose.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
A-1-4
<PAGE> 10
No service charge shall be made for any such registration or
transfer or exchange, but the Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, the Paying Agent, the
Registrar, the Owner Participant and the Company may deem and treat the person
in whose name this Certificate is registered as the absolute owner hereof for
the purpose of receiving payment of the principal of and interest on this
Certificate and for all other purposes whatsoever whether or not this
Certificate be overdue, and neither the Owner Trustee, the Indenture Trustee,
the Paying Agent, the Registrar, the Owner Participant nor the Company shall be
affected by notice to the contrary.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS
CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
A-1-5
<PAGE> 11
IN WITNESS WHEREOF, the Owner Trustee has caused this
instrument to be duly executed under its corporate seal.
FIRST UNION NATIONAL BANK,
not in its individual capacity but solely
as Owner Trustee
By:
------------------------------------
Corporate Trust Officer
Issue Date:
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
A-1-6
<PAGE> 12
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Indenture.
WILMINGTON TRUST COMPANY, not in
its individual capacity, but solely
as Indenture Trustee
By:
---------------------------------------
Authorized Officer or Signatory
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
A-1-7
<PAGE> 13
Exhibit B to
First Amendment to
Trust Indenture and
Security Agreement
Maturity Dates, Principal Amounts,
Interest Rates, Etc. of Series SWA 1996 Trust N620SW Certificates
<TABLE>
<CAPTION>
Premium
Interest Termination Type of
Series Maturity Date Principal Rate Date Certificate
------ ------------- --------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
1998-A July 2, 2019 $23,882,858.75 6.53% February 26, 2010 Installment
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
B-1
<PAGE> 14
Exhibit B-1 to
First Amendment to
Trust Indenture and
Security Agreement
PAYMENT DATES AND PAYMENT PERCENTAGES AND AMOUNTS
<TABLE>
<CAPTION>
Aggregate
Installment
Payment Date Payment Percentage Payment Amount
------------ ------------------ --------------
<S> <C> <C>
</TABLE>
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
B-1-1
<PAGE> 15
Exhibit B-2 to
First Amendment to
Trust Indenture and
Security Agreement
ISSUANCE OF SERIES SWA 1996 TRUST N620SW CERTIFICATES
The Series SWA 1996 Trust N620SW Certificates issued hereunder
shall be issued to and shall be payable to the Pass Through Trustee under the
Pass Through Trust Agreement with respect to the grantor trust created thereby,
such trust consisting of the 6.53% Certificate due July 2, 2019.
TRUST INDENTURE AND SECURITY AGREEMENT [N620SW]
B-2-1
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 4.8
PARTICIPATION AGREEMENT
dated as of June 1, 1996
among
SOUTHWEST AIRLINES CO.,
Lessee,
CHRYSLER FINANCIAL CORPORATION,
Owner Participant,
ROYAL BANK OF CANADA, NEW YORK BRANCH,
Original Loan Participant,
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 N620SW
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Certain Definitions; Participations in Lessor's Cost of the Aircraft. . . . . . . . . . . . . . 2
SECTION 2. Lessee's Notice of Delivery Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee. . . . . . . . . . . . . . . . . . . . 5
SECTION 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Conditions Precedent to the Participations in the Aircraft . . . . . . . . . . . . . . . 6
(i) Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(ii) No Change in Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(iii) Original Loan Participant's Commitment. . . . . . . . . . . . . . . . . . . . . 6
(iv) Owner Participant's Commitment. . . . . . . . . . . . . . . . . . . . . . . . . 6
(v) Authorization, Execution and Delivery of Documents. . . . . . . . . . . . . . . 6
(vi) UCC-1's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(vii) Proof of Corporate Action, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 7
(viii) Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(ix) Title, Registration, Airworthiness, Etc. . . . . . . . . . . . . . . . . . . . 9
(x) Representations and Warranties Accurate; No Event of Default;
No Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(xi) Opinions of Lessee's Counsel. . . . . . . . . . . . . . . . . . . . . . . . . 10
(xii) Opinion of Owner Trustee's Counsel. . . . . . . . . . . . . . . . . . . . . . 10
(xiii) Opinions of Owner Participant's Counsel. . . . . . . . . . . . . . . . . . . 10
(xiv) Opinion of Oklahoma City Counsel. . . . . . . . . . . . . . . . . . . . . . . 10
(xv) Opinion of Indenture Trustee's Counsel. . . . . . . . . . . . . . . . . . . . 10
(xvi) Lessee's Bringdown Certificate. . . . . . . . . . . . . . . . . . . . . . . . 10
(xvii) Appraisal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xviii) Insurance Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(xix) No Event of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xx) No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Bringdown of Other Parties' Representations and
Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) Opinion of Owner Participant's Tax Counsel. . . . . . . . . . . . . . . . . . 11
(xxiii) No Tax Law Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxiv) Copy of Appraisal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxv) Withholding Tax Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Conditions Precedent to the Obligations of Lessee. . . . . . . . . . . . . . . . . . . 12
SECTION 5. Confidentiality of Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6. Extent of Interest of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 7. Lessee's Representations and Warranties; Indemnities . . . . . . . . . . . . . . . . . . . . 14
(a) In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Organization, Citizenship, Etc. . . . . . . . . . . . . . . . . . . . . . . . 14
(ii) Corporate Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 14
(iii) Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(iv) Valid Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(v) No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(vi) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(vii) Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(viii) Registration and Recordation. . . . . . . . . . . . . . . . . . . . . . . . . 15
(ix) Chief Executive Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(x) Securities Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(xi) No Misstatement or Omission. . . . . . . . . . . . . . . . . . . . . . . . . 16
(xii) Investment Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(xiii) No Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(xiv) Effective Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(xv) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(xvi) Title to Aircraft, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xvii) Condition of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xviii) Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xix) No Federal Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(xx) Section 1110. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) General Tax Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(i) Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(ii) Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(iii) Calculation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(iv) Notice and Contest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(v) Withholdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(i) Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(ii) Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(iii) Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(iv) Right to Defend; Subrogation; Fees and Expenses of
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Owner Participant's Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(e) Payments. . . . 26
(f) Interest on Overdue Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(g) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8. Other Representations, Warranties, Covenants and Indemnities. . . . . . . . . . . . . . . . . 26
(a) Securities Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Citizenship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Chief Executive Office of FUNB. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Securities Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) [Intentionally Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Owner Participant's Representations and Warranties. . . . . . . . . . . . . . . . . . 28
(g) Lessor Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(h) Indenture Trustee Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(i) Termination Instructions to Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . 29
(j) Excess Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(k) Representations and Warranties of Indenture Trustee in Individual
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(l) Transfers of Equity Interests; Rights of Owner Participant and Owner Trustee. . . . . 31
(m) Obligations of Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(n) Compliance with Trust Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
PARTICIPATION AGREEMENT [N620SW]
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<TABLE>
<S> <C> <C>
(o) ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(p) FUNB's Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . 33
(q) Owner Participant's Lease Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 34
(r) Lessee's Assumption of Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(s) [Intentionally Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(t) [Intentionally Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(u) Lease Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(v) Revocation of Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(w) [Intentionally Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(x) Withholding Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(y) Discharge of Trust Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(z) Permitted Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(aa) Special Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(bb) Transfers of Debt Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(cc) [Intentionally Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(dd) [Intentionally Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(ee) Lessee as Pricing Agent for Certificate. . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 9. Payments to Lessee of Trust Indenture Monies. . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 10. Other Documents; Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 11. Certain Covenants of Lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Filing and Recording, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(c) FAA Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(d) Annual Compliance Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(e) Engine Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(f) Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(g) Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(h) Certificate Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(i) No Certificate Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 12. Ownership of Aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 13. Notices; Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 14. Change of Situs of Owner Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 15. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(a) Consents under Lease and Trust Indenture. . . . . . . . . . . . . . . . . . . . . . . 43
(b) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(c) Counterparts; Waivers; Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 43
(d) No Recourse Against Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(e) Duties Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(f) Binding on Parties and Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(g) Enforceability Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(h) Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
PARTICIPATION AGREEMENT [N620SW]
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<TABLE>
<S> <C>
SECTION 16. Transaction Costs; Invoices and Payment of Expenses. . . . . . . . . . . . . . . . . . . . . 45
SECTION 17. Optional Redemption of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 18. Interim Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 19. Section 1110 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SCHEDULE I
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
SCHEDULE II
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
SCHEDULE III
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
EXHIBIT A - Form of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B - Form of Assignment and Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
PARTICIPATION AGREEMENT [N620SW]
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of June 1, 1996 (the
"Agreement") is among (i) SOUTHWEST AIRLINES CO., a Texas corporation
("Lessee"), (ii) CHRYSLER FINANCIAL CORPORATION, a Michigan corporation (the
"Owner Participant"), (iii) ROYAL BANK OF CANADA, a Canadian chartered bank,
acting through its New York Branch, (the "Original Loan Participant"), (iv)
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 (v) WILMINGTON TRUST
COMPANY, a Delaware banking corporation, in its individual capacity and as
Indenture Trustee under the Trust Indenture (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement (such capitalized
term and other capitalized terms used herein without definition being defined
in Section 1 hereof) between Lessee and the Manufacturer, the Manufacturer has
agreed to sell to Lessee, among other things, certain Boeing Model 737-3H4
aircraft, and has sold one such aircraft having U.S. Registration No. N620SW
and Manufacturer's serial number 28036 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
concurrently with the execution and delivery of this Agreement are entering
into the Trust Indenture pursuant to which the Owner Trustee agrees, among
other things, to issue one or more Certificates as evidence of the Owner
Trustee's indebtedness to the Holders, which Certificates are to be secured by
the mortgage and security interest in, among other things, the Aircraft,
created pursuant to the Trust Indenture by the Owner Trustee in favor of the
Indenture Trustee, and the Owner Trustee shall execute and deliver the Trust
Supplement covering the Aircraft, supplementing the Trust Agreement and the
Trust Indenture; and
PARTICIPATION AGREEMENT [N620SW]
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<PAGE> 7
WHEREAS, as described in Section 2 hereof, the Owner Trustee
and Lessee are entering into the Lease whereby, subject to the terms and
conditions set forth therein, the Owner Trustee agrees to purchase the Aircraft
from Lessee and to lease the same back to Lessee, and Lessee agrees to sell the
Aircraft to the Owner Trustee and to lease the same back from the Owner
Trustee;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS; PARTICIPATIONS IN
LESSOR'S COST OF THE AIRCRAFT. (a) The terms "Lessee," "Owner Participant,"
"Original Loan Participant," "Owner Trustee" and "Indenture Trustee" shall have
the further meanings attributed thereto in the Sale and Lease Agreement dated
as of the date hereof (the "Lease") between the Owner Trustee and Lessee
relating to the Aircraft referred to in the first recital herein, and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease or the Trust Indenture.
The term "Trust Supplement" has the meaning attributed to the term "Indenture
and Trust Supplement" in the Lease and to the term "Trust Supplement" in the
Trust Indenture. The terms "Indenture Estate," "Outstanding," "Permitted
Investments," "Register" and "Trust Office" shall have the meanings set forth
in the Trust Indenture, and the term "Trust Estate" shall have the meaning set
forth in the Trust Agreement. Unless the context otherwise requires, any
reference herein to any of the Operative Agreements refers to such document as
it may be amended from time to time in accordance with its terms and the terms
of each other agreement restricting the amendment thereof.
(b) Subject to the terms and conditions of this
Agreement, (i) the Original Loan Participant agrees to finance, in part, the
Owner Trustee's payment of Lessor's Cost for the Aircraft by making a secured
loan to the Owner Trustee (herein called the "Loan") on a date to be designated
pursuant to Section 2 hereof, but in no event later than September 30, 1996, in
the amount in Dollars equal to the percentage of Lessor's Cost set forth
opposite its name on Schedule II hereto and (ii) the Owner Participant hereby
agrees, in connection with its equity investment in the beneficial ownership of
the Aircraft and the sale of the Aircraft by Lessee to the Owner Trustee
pursuant to the Lessee FAA Bill of Sale and Lessee Warranty Bill of Sale, as
contemplated hereby, to make its equity investment in the beneficial ownership
of the Aircraft on a date to be designated pursuant to Section 2 hereof, but in
no event later than September 30, 1996, in an amount in Dollars equal to the
percentage of Lessor's Cost set forth opposite its name on Schedule II hereto.
In the case of the Owner Participant, the amount of its participation to be
made as provided above in the payment of Lessor's Cost and, in the case of the
Original Loan Participant, the aggregate principal amount of the Series SWA
1996 Trust N620SW-I Certificate to be simultaneously issued to it, is
hereinafter called such Participant's "Commitment" for the Aircraft. In case
either Participant shall default in its obligation to make the amount of its
Commitment available pursuant to Section 2 hereof in respect of the Aircraft,
the other Participant shall have no obligation to make any portion of such
amount available or to increase the amount of its Commitment and the obligation
of the nondefaulting Participant shall remain subject to the terms and
conditions set forth in this Agreement.
(c) In the event that either Participant shall for any
reason fail or refuse to make the full amount of its Commitment available to
the Owner Trustee in accordance with the terms of paragraph (b) of this Section
1 (such Participant, for the purpose of this Agreement, being called a
PARTICIPATION AGREEMENT [N620SW]
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<PAGE> 8
"Defaulting Participant"), the Owner Trustee shall give, at the earliest
practicable time (which may be the next Business Day), each party hereto
telephonic notice (to be confirmed promptly in writing) of such failure or
refusal and the funds received by the Owner Trustee in connection with the
Aircraft will be held in accordance with the terms of, and for the period
provided in, paragraph (b) of Section 2. In such event the Defaulting
Participant will have no further right to participate in, or make a loan for,
as the case may be, the payment of Lessor's Cost for the Aircraft. Lessee
shall have the right to designate a financial institution (which term, as used
in this paragraph (c), shall mean any banking or financial institution,
institutional investor or fund which is not affiliated with Lessee or with
Owner Participant) to be substituted for the Defaulting Participant; provided,
however, that (i) such substituted financial institution shall sign and deliver
an amendment to this Agreement, in form and substance satisfactory to the Owner
Trustee, the Indenture Trustee and the remaining Participant, whereby such
financial institution agrees to be a party to this Agreement, to be bound by
all the terms hereof and to undertake all the obligations of the Defaulting
Participant contained herein, other than obligations, if any, arising from the
aforesaid failure or refusal by such Defaulting Participant, (ii) if the
Defaulting Participant is Owner Participant (A) such substituted financial
institution shall have been approved by the Original Loan Participant, (B) each
such substituted financial institution shall be domiciled in the United States
and shall be a citizen of the United States within the meaning of the Act and
shall have the requisite power and authority to enter into and carry out the
transactions contemplated by this Agreement and the Trust Agreement, (C) such
substituted financial institution shall enter into amendments to the Trust
Agreement, in form and substance satisfactory to the Owner Trustee, the
Indenture Trustee and the Original Loan Participants, whereby such substituted
financial institution agrees to be a party to the Trust Agreement, to be bound
by all the terms thereof and to undertake all the obligations of the Defaulting
Participant contained therein, and (D) the substitution of such substituted
financial institution as above provided shall not violate any provisions of the
Act or the regulations promulgated thereunder, or create a relationship which
would be in violation thereof and such substituted financial institution shall
so represent in writing to each other party hereto, and (iii) if the Defaulting
Participant is the Original Loan Participant, such substituted financial
institution shall be approved in writing by Owner Participant. No action by
Lessee in finding a financial institution to be substituted as above provided
shall be deemed to constitute a waiver or release of any right which Lessee may
have against the Defaulting Participant. Each financial institution
substituted for an Original Loan Participant pursuant to this paragraph (c)
shall be deemed the Original Loan Participant for all purposes of this
Agreement; and each financial institution substituted for the Owner Participant
pursuant to this paragraph (c) shall (collectively, if more than one) be deemed
the Owner Participant for all purposes of this Agreement.
SECTION 2. LESSEE'S NOTICE OF DELIVERY DATE. (a)
Lessee agrees to give the Owner Participant, the Owner Trustee, the Original
Loan Participant and the Indenture Trustee at least three (3) Business Days'
written notice of the Delivery Date for the Aircraft, which Delivery Date shall
be a Business Day not later than September 30, 1996, which notice shall specify
(i) the amount of each Participant's Commitment for the Aircraft and (ii) the
model and FAA registration number of the Aircraft and the manufacturer's serial
numbers of the Airframe and each Engine. As to each Participant, the making of
its Commitment for such Aircraft available in the manner required by this
Section 2 shall constitute a waiver of such notice. The Owner Trustee and the
Indenture Trustee shall be deemed to have waived such notice if the Owner
Trustee shall have received from the Owner Participant funds in the full amount
of the Owner Participant's Commitment and the proceeds of the
PARTICIPATION AGREEMENT [N620SW]
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<PAGE> 9
sale of the Series SWA 1996 Trust N620SW-I Certificate in the full amount of
the Original Loan Participant's Commitment.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. The Owner Trustee shall issue and the Indenture Trustee shall
authenticate the Series SWA 1996 Trust N620SW-I Certificate which shall be
delivered simultaneously to the Original Loan Participant. On the Delivery
Date, subject to the terms and conditions of this Agreement, and in
consideration for the transfer of title to the Aircraft to the Owner Trustee,
the Owner Trustee shall pay over the funds made available to it pursuant to the
succeeding paragraph to Lessee in an aggregate amount equal to Lessor's Cost to
Lessee's Account No. 98120109 at Bank One, Dallas, N.A., ABA No. 111000614,
1717 Main Street, Dallas, Texas.
The Original Loan Participant and the Owner Participant each
agree to make its Commitment available to First Union National Bank of North
Carolina, Charlotte, North Carolina, Account No. 465946, ABA No. 053000219,
Reference: Southwest Airlines 1996 Trust N620SW, 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 and, in the case of the
Original Loan Participant, for the Break Amount, if any, applicable to the
Series SWA 1996 Trust N620SW-I Certificate.
"Applicable Rate" shall mean with respect to the Owner
Participant the Federal Funds Effective Rate and, with respect to the Original
Loan Participant, the rate per annum borne by the Series SWA 1996 Trust
N620SW-I Certificate in respect of which such Original Loan Participant's
PARTICIPATION AGREEMENT [N620SW]
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<PAGE> 10
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 Participants,
use reasonable efforts to invest, at the risk, expense and direction of Lessee,
the funds received by it from the Participants in marketable direct obligations
of the United States of America or obligations of any of its agencies that are
guaranteed as to principal and interest by the United States of America, in any
such case having a stated maturity not later than 91 days from the date of
acquisition. Any such investment may be made through a repurchase agreement in
commercially reasonable form with FUNB or a bank or other financial institution
having capital, surplus and undivided profits of at least $100,000,000;
provided, that title to the underlying obligations shall pass to 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 respective Participants. Lessee shall, on the Delayed Delivery Date or the
date the funds furnished by the Participants are required to be returned to the
Participants, as the case may be, reimburse FUNB for the benefit of the
respective Participant, for any losses incurred on such investments.
All income and profits on the investment of such funds not in
excess of the Applicable Rate shall be for the respective accounts of the
Participants (such income and profits to be credited against Lessee's
obligation to reimburse the Participants for the loss of use of funds made
available to 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, upon its receipt in full of the Owner Participant's and the
Original Loan Participant's Commitment for the Aircraft, as provided in Section
2 hereof, together with instructions from such Participant or its special
counsel to release such funds to Lessee, shall transfer such funds to Lessee
and the Owner Trustee shall purchase the Aircraft from Lessee and lease the
Aircraft to Lessee and such action shall constitute, without further act,
authorization and direction by the Owner Participant to the Owner Trustee:
(a) to pay to Lessee (on behalf of the Owner Trustee) the
Lessor's Cost in the manner set forth in Section 2;
PARTICIPATION AGREEMENT [N620SW]
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<PAGE> 11
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of
Lessee designated by Lessee) to accept delivery of the Aircraft on the Delivery
Date;
(c) to accept from Lessee the Lessee Warranty Bill of
Sale and the Lessee FAA Bill of Sale and the invoice with respect to the
Aircraft;
(d) to execute an aircraft registration application, a
Lease Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow the Loan from the Holders to finance a
portion of Lessor's Cost and to issue to the Original Loan Participant a Series
SWA 1996 Trust N620SW-I Certificate in a principal amount equal to the amount
borrowed pursuant to the Trust Indenture; and
(f) to take such other action as may be required to be
taken by the Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
SECTION 4. CONDITIONS. (A) CONDITIONS
PRECEDENT TO THE PARTICIPATIONS IN THE AIRCRAFT. It is agreed that the
respective obligations of the Participants to participate in the payments of
Lessor's Cost are subject to the satisfaction prior to or on the Delivery Date
of the following conditions precedent, except that paragraphs (iii), (xvii),
(xxix) (insofar as it relates to the Original Loan Participant), (xxii) and
(xxiii) shall not be a condition precedent to the obligation of the Original
Loan Participant, and paragraphs (iv), (xiii), (xxi) (insofar as it relates to
the Owner Participant) and (xxiv) shall not be a condition precedent to the
obligation of the Owner Participant:
(i) NOTICE. Each Participant shall have
received due notice with respect to such participation pursuant to
Section 2 hereof (or shall have waived such notice either in writing
or as provided in Section 2).
(ii) NO CHANGE IN LAW. No change shall
have occurred after the date of the execution and delivery of this
Agreement in applicable law or regulations thereunder or
interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the
Original Loan Participant, as the case may be, would make it a
violation of law or regulations for (x) Lessee, the Indenture Trustee,
any Participant or the Owner Trustee to execute, deliver and perform
the Operative Agreements to which any of them is a party or (y) the
Original Loan Participant or the Owner Participant to make its
Commitment available or, in the case of the Original Loan Participant,
to acquire the Series SWA 1996 Trust N620SW-I Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
(iii) ORIGINAL LOAN PARTICIPANT'S COMMITMENT.
In the case of the Owner Participant, the Original Loan Participant
shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
PARTICIPATION AGREEMENT [N620SW]
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(iv) OWNER PARTICIPANT'S COMMITMENT. In
the case of the Original Loan Participant, the Owner Participant shall
have made available the amount of its Commitment for the Aircraft in
accordance with Section 1 hereof.
(v) AUTHORIZATION, EXECUTION AND DELIVERY OF
DOCUMENTS. The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto,
shall each be satisfactory in form and substance to the Participants
and shall be in full force and effect and executed counterparts shall
have been delivered to each Participant and its respective counsel;
provided, that only the Original Loan Participant shall receive an
executed original of the Series SWA 1996 Trust N620SW-I Certificate,
only the Indenture Trustee, acting on behalf of the Holders, shall
receive the original counterpart of the Lease and the initial Lease
Supplement, and only Lessee and the Owner Participant shall receive
copies of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering
the Aircraft and dated the Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering
the Aircraft and dated the Delivery Date;
(6) the Bills of Sale and an
invoice from Lessee specifying the Lessor's Cost and dated the
Delivery Date;
(7) the Purchase Agreement
Assignment;
(8) an acceptance certificate
covering the Aircraft in the form agreed to by the
Participants and Lessee (the "Acceptance Certificate") duly
completed and executed by the Owner Trustee or its agent,
which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
(10) the Series SWA 1996 Trust
N620SW-I Certificate; and
(11) the Manufacturer's Consent.
(vi) UCC-1'S. Uniform Commercial Code
financing statement or statements covering all of the security
interests created by or pursuant to the Granting Clause of the Trust
Indenture and precautionary Uniform Commercial Code financing
statement or statements with respect to the Lease shall have been
executed and delivered, and all such
PARTICIPATION AGREEMENT [N620SW]
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financing statement or statements shall have been duly filed in all
places necessary or advisable, and any additional Uniform Commercial
Code financing statements deemed advisable by the Owner Participant or
the Original Loan Participant shall have been executed and delivered
by Lessee, the Indenture Trustee or the Owner Trustee and duly filed.
(vii) PROOF OF CORPORATE ACTION, ETC. Each
Participant and the Indenture Trustee shall have received the
following, in each case in form and substance satisfactory to it:
(1) a certified copy of the
Restated Articles of Incorporation and Bylaws of Lessee and a
copy of resolutions of the board of directors of Lessee or the
executive committee thereof, certified by the Secretary or an
Assistant Secretary of Lessee, duly authorizing the execution,
delivery and performance by Lessee of this Agreement, the
Lease, the Purchase Agreement Assignment, the Lessee Warranty
Bill of Sale, the Lessee FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with
the provisions hereof and thereof;
(2) such other documents and
evidence with respect to Lessee, the Manufacturer, the Owner
Trustee, the Indenture Trustee and the Participants, as the
Original Loan Participant or the Owner Participant, or their
respective counsel, may reasonably request in order to
establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the
compliance with the conditions herein set forth;
(3) a certificate of Lessee as
to the person or persons authorized to execute and deliver
this Agreement, the other Lessee Documents, and any other
documents to be executed on behalf of Lessee in connection
with the transactions contemplated hereby and as to the
signature of such person or persons;
(4) a copy of the Purchase
Agreement (to the Owner Participant and the Indenture Trustee
only) certified by the Treasurer, the Assistant Treasurer or
an Assistant Secretary of Lessee as being a true and accurate
copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations
or any right in such Agreement assigned by Lessee to the Owner
Trustee pursuant to the Purchase Agreement Assignment; and
(5) a copy of the general
authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of
authorization of the Indenture Trustee (in its individual
capacity), 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
PARTICIPATION AGREEMENT [N620SW]
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such other documents and evidence with respect to the
Indenture Trustee (in its individual capacity), FUNB and the
Owner Participant as either the Original Loan Participant (or
its counsel) or the Owner Participant (or its counsel) may
reasonably request in order to establish the consummation of
the transactions contemplated by this Agreement, the taking of
all corporate proceedings in connection therewith and
compliance with the conditions herein set forth; provided,
this clause shall not be a condition precedent as to any
Participant as to documents to be provided by that
Participant.
(viii) GOVERNMENTAL APPROVALS. All appropriate
action required to have been taken by the Federal Aviation
Administration, or any other governmental or political agency,
subdivision or instrumentality of the United States, prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
orders, permits, waivers, authorizations, exemptions and approvals
shall be in full force and effect on the Delivery Date.
(ix) TITLE, REGISTRATION, AIRWORTHINESS, ETC.
On the Delivery Date, the following statements shall be true, and the
Participants, the Owner Trustee and the Indenture Trustee shall have
received evidence satisfactory to each of them to the effect that:
(1) the Owner Trustee has good
and marketable title (subject to filing and recording of the
Lessee FAA Bill of Sale with the Federal Aviation
Administration in accordance with the Act) to the Aircraft,
free and clear of Liens other than the rights of Lessee under
the Lease and Lease Supplement covering the Aircraft, the
mortgage and security interest created by the Trust Indenture,
the rights of the Owner Participant under the Trust Agreement
and the Trust Supplement and Liens permitted by clause (d)
(solely for taxes not yet due) or (e) of Section 6 of the
Lease;
(2) application for registration
of the Aircraft in the name of the Owner Trustee (together
with any required affidavits), the FAA Bill of Sale and the
Lessee FAA Bill of Sale have been duly filed with the FAA;
(3) the Trust Agreement, the
Trust Indenture and the Trust Supplement and the Lease and the
Lease Supplement have been duly filed with the FAA for
recordation pursuant to the Act;
(4) each of the Owner Trustee,
as lessor under the Lease, and the Indenture Trustee, as
assignee thereof, is entitled to the protection of 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
PARTICIPATION AGREEMENT [N620SW]
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(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.
(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.
The Original Loan Participant shall have received a favorable opinion,
in form and substance satisfactory to it, addressed to the Indenture
Trustee, the Original Loan Participant, the Owner Trustee and Lessee
from (a) Morgan, Lewis & Bockius, 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.
PARTICIPATION AGREEMENT [N620SW]
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(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 III 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.
(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 N620SW-I Certificate issued
on the Delivery Date, and (c) the Owner Trustee shall, by accepting
the Lessee Warranty Bill of Sale and the Lessee FAA Bill of Sale, be
respectively deemed to have reaffirmed as of the Delivery Date the
representations and warranties made by it (individually or in its
trust capacities, as the case may be) in Section 8 of this Agreement.
(xxii) OPINION OF OWNER PARTICIPANT'S TAX
COUNSEL. The Owner Participant shall have received from Morgan,
Lewis & Bockius, special counsel to the Owner
PARTICIPATION AGREEMENT [N620SW]
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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 May 9, 1996, 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 Original Loan
Participant shall have received a copy of the opinion referred to in
paragraph (xvii) above (without any tax-sensitive provisions) in form
and substance reasonably satisfactory to the Original Loan Participant
to the effect that the fair market value of the Aircraft on the
Delivery Date is at least equal to Lessor's Cost, and that the
assumptions made in reaching such conclusion are fair and reasonable,
but otherwise without regard to the form and substance thereof.
(xxv) WITHHOLDING TAX FORMS. If the
Original Loan Participant is required to execute any form or document
in order for payments to it to qualify for exemption from, or
reduction of, withholding tax imposed by the Government, in respect to
such payments, such Original Loan Participant shall have executed such
form or document (including, without limitation, United States
Internal Revenue Forms 1001, W-8 and/or 4224) and delivered it to the
Indenture Trustee in accordance with applicable regulations to qualify
for such exemption or reduction.
Promptly upon the registration of the Aircraft and the
recording of the Lease, the Trust Indenture, the Trust Agreement, the Lease
Supplement and the Trust Supplement covering the Aircraft pursuant to the
Federal Aviation Act, Lessee will request Daugherty, Fowler & Peregrin, special
counsel in Oklahoma City, Oklahoma, to deliver to the Owner Participant, the
Indenture Trustee, the Original Loan Participant, the Owner Trustee and Lessee
an opinion as to the due and valid registration of the Aircraft in the name of
the Owner Trustee, the due recording of the FAA Bill of Sale, the Lessee FAA
Bill of Sale, the Trust Indenture, the Lease Supplement, the Trust Supplement,
the Lease and the Trust Agreement and the lack of filing of any intervening
documents with respect to the Aircraft.
(b) CONDITIONS PRECEDENT TO THE OBLIGATIONS OF LESSEE.
It is agreed that the obligations of Lessee (A) to 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:
PARTICIPATION AGREEMENT [N620SW]
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(i) The conditions specified in Sections
4(a)(iii), 4(a)(iv), 4(a)(viii), 4(a)(xix) and 4(a)(xxv) 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 N620SW-I Certificate) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of the Indenture Trustee (in its individual capacity), 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.
(vii) In the opinion of Lessee and its
counsel, there shall have been, since May 9, 1996, no amendment,
modification, addition or change in or to the Code (including for this
purpose, any non-Code provisions of legislation affecting the Code
such as transition rules or effective date provisions), the
regulations promulgated under the Code (including temporary or
proposed regulations), Internal Revenue Service Revenue Procedures or
Revenue Rulings, or other administrative interpretations, applicable
judicial precedents or
PARTICIPATION AGREEMENT [N620SW]
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Executive Orders of the President of the United States which might
give rise to an indemnity obligation under any of the Operative
Agreements, or as a result of which any adjustments to the Lease
payments are requested by the Owner Participant which would adversely
affect the accuracy of the Tax Assumptions set forth in Section 2 of
the Tax Indemnity Agreement.
SECTION 5. CONFIDENTIALITY OF PURCHASE AGREEMENT.
The Owner Trustee, the Participants and the Indenture Trustee shall keep the
Purchase Agreement confidential and shall not disclose the same to any Person,
except (A) to prospective and permitted transferees of the Owner Trustee's, the
Original Loan Participant's, the Owner Participant's or the Indenture Trustee's
interest who agree to hold such information confidential, in accordance with
this Section 5, (B) to the aforementioned prospective and permitted
transferees', the Owner Trustee's, the Original Loan Participant's, the Owner
Participant's or the Indenture Trustee's counsel or special counsel,
independent insurance brokers or other agents who agree to hold such
information confidential, 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 Original Loan
Participant, the Owner Participant or the Indenture Trustee; provided, however,
that any disclosures of any part of the Purchase Agreement which are permitted
by clause (C) or (D) above shall be made only to the extent necessary to meet
the specific requirements or needs of the Persons to whom such disclosures are
hereby permitted.
SECTION 6. EXTENT OF INTEREST OF HOLDERS. No
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
outstanding principal amount of, Break Amount, if any, Premium, if any, and
interest on all Certificates held by such Holder and all other sums payable to
such Holder hereunder, under the Trust Indenture and under such Certificates
shall have been paid in full. Each Holder, by its acceptance of a Certificate,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to such Holder as
provided in Section 2.09 of the Trust Indenture and that neither the Owner
Participant nor the Owner Trustee shall be personally liable to any Holder for
any amounts payable under the Certificates, the Trust Indenture, hereunder, or
under any other Operative Agreement (including, without limitation, amounts
payable as Premium or Break Amount), except as expressly provided in this
Agreement or (in the case of the Owner Trustee) in the Trust Indenture.
SECTION 7. LESSEE'S REPRESENTATIONS AND WARRANTIES;
INDEMNITIES.
(a) IN GENERAL. Lessee represents warrants, covenants
and agrees that:
(i) ORGANIZATION, CITIZENSHIP, ETC. Lessee
(A) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, (B) is a "citizen of
the United States" (as defined in Section 40102 of Title 49, U.S.C.)
holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to Chapter 447 of Title 49, U.S.C. for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or
more of cargo, (C) has the corporate power and authority to carry on
its business as now conducted, to own or hold under lease its
properties and to enter into and perform its
PARTICIPATION AGREEMENT [N620SW]
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obligations under this Agreement and the other Operative Agreements to
which Lessee is or will be a party, and (D) is duly qualified to do
business as a foreign corporation in good standing in each state in
which the nature of its business makes such qualification necessary or
the failure to be so qualified or so to be in good standing would have
a material adverse effect on its business or operations or would
impair its ability to perform its obligations under the Operative
Agreements.
(ii) CORPORATE AUTHORIZATION, ETC. The
execution, delivery and performance of this Agreement and the other
Operative Agreements to which Lessee is or will be a party (A) have
been duly authorized by all necessary corporate action on the part of
Lessee, (B) do not require any shareholder approval, or approval or
consent of any trustee or holders of indebtedness or obligations of
Lessee or of any lessor under any lease to Lessee except such as have
been duly obtained, and (C) do not and will not (1) contravene any
law, judgment, governmental rule, regulation or order applicable to or
binding on Lessee or any of its subsidiaries or the articles of
incorporation or by-laws of Lessee (each as amended to date), or (2)
contravene or result in any breach of, or constitute any default
under, or result in the creation of any Lien (other than Permitted
Liens) upon any property of Lessee under, its articles of
incorporation or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, note or
bond purchase agreement, license, bank loan, credit agreement or other
agreement to which Lessee is a party or by which it or its properties
may be bound or affected.
(iii) GOVERNMENTAL APPROVALS. Neither the
execution and delivery by Lessee of this Agreement or the other
Operative Agreements to which Lessee is or will be a party, nor the
consummation of any of the transactions by Lessee contemplated hereby
or thereby, requires the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency, except for (A)
routine filings of copies of such Operative Agreements with the SEC,
(B) the certification referred to in Section 4(a)(ix)(5), the
registration referred to in Section 4(a)(ix)(2) and the filings and
recordings referred to in Sections 4(a)(vi), 4(a)(ix)(1), 4(a)(ix)(2)
and 4(a)(ix)(3), and (C) such federal and state securities law
approvals or filings that will be required in connection with the
public offering, if any, of the Certificates.
(iv) VALID AGREEMENTS. This Agreement and
the other Operative Agreements to which Lessee is or will be a party,
as and when entered into, do or will, assuming due authorization,
execution and delivery by the party or parties thereto other than
Lessee, constitute legal, valid and binding obligations of Lessee
enforceable against Lessee in accordance with the respective terms
hereof and thereof.
(v) NO PROCEEDINGS. There are
no pending or, to Lessee's knowledge, threatened actions or
proceedings before any court or administrative agency which, having
regard to both the size of the claim and the possibility of an adverse
determination, are likely to materially adversely affect the
consolidated financial condition of Lessee and its subsidiaries, or
the ability of Lessee to perform its obligations under this Agreement
and the other Operative Agreements to which Lessee is or will be a
party.
PARTICIPATION AGREEMENT [N620SW]
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(vi) TAXES. Lessee and its subsidiaries
have filed or caused to be filed all federal, state, local and foreign
tax returns which are required to be filed and have paid or caused to
be paid all taxes shown to be due and payable on such returns or on
any assessment received by Lessee or any of its subsidiaries to the
extent that such taxes have become due and payable (except to the
extent being contested in good faith and by appropriate proceedings
and for the payment of which adequate provisions have been made).
(vii) FINANCIAL CONDITION. The audited
consolidated financial statements of Lessee and its subsidiaries
contained in Lessee's Annual Report to Shareholders for the year ended
December 31, 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 March 31, 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
any beneficial interest or security relating to the ownership of the
Aircraft or the Lease or any interest in the Trust Estate or the Trust
Indenture Estate, or any of the Certificates or any other interest in
or security under the Trust Indenture, or any similar interest or
security, for sale to, or solicited any offer to acquire any such
interest or security from, or has sold any such interest or security
to, any Person other than the Participants and not more than 21 other
leasing companies or other institutional investors (in
PARTICIPATION AGREEMENT [N620SW]
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the case of such beneficial interest or securities), or 15 other
institutional investors (in the case of the Certificates and other
similar interests and securities) or (assuming the accuracy of the
representations in Sections 8(a), 8(d), 8(k)(vi) and 8(p)(viii)) to
any Person in violation of the Securities Act or applicable state
securities laws, or both, and Lessee will take no action which would
constitute or cause such violation.
(xi) NO MISSTATEMENT OR OMISSION.
Neither the financial statements referred to in Section 7(a)(vii) nor
any other documents furnished by Lessee to Owner Trustee, Indenture
Trustee or any Participant in connection with the transactions
contemplated by this Agreement or the other Operative Agreements
contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained therein (in the case
of statements referred to in Section 7(a)(vii), as of the date made)
not misleading; there is no fact known by Lessee which Lessee has not
disclosed to such parties in writing which materially adversely
affects or, so far as Lessee can now reasonably foresee, will
materially adversely affect the ability of Lessee to carry on its
business and perform its obligations under this Agreement or the other
Operative Agreements to which it is a party.
(xii) INVESTMENT COMPANY. Neither Lessee nor
any subsidiary of Lessee is an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xiii) NO EVENT OF DEFAULT. No Lease
Event of Default or Lease Default has occurred and is continuing under
the Lease.
(xiv) EFFECTIVE SALE. On the Delivery
Date, the Aircraft will be situated in Texas and the sale of the
Aircraft by Lessee to Owner Trustee shall be complete and effective
and not voidable or void.
(xv) ERISA. Lessee has never sponsored,
maintained or made contributions to any defined benefit plan subject
to the provisions of Title IV of the Employee 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
PARTICIPATION AGREEMENT [N620SW]
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accordance with the Act, good and marketable title to the Aircraft
will have been duly conveyed by Lessee to Owner Trustee, free and
clear of all Liens other than the rights of Lessee under the Lease and
the Lease Supplement covering the Aircraft, the Lien of the Trust
Indenture, the beneficial interest of the Owner Participant in the
Aircraft, and the Liens permitted by clause (d) (solely for taxes not
yet due) or (e) of Section 6 of the Lease.
(xvii) CONDITION OF AIRCRAFT. The
Aircraft has been duly certificated by the FAA as to type and
airworthiness, is fully equipped to operate in commercial service and
complies with all material governmental requirements governing such
service; the Aircraft has been continuously operated and maintained by
Lessee (in a manner that would satisfy the provisions of Sections
7.1.3 and 8.1 of the Lease) since its delivery to Lessee by
Manufacturer, Lessee is unaware of any material mechanical or
structural defects in or damage to the Aircraft since its delivery to
Lessee by Manufacturer and there has not occurred any event which
constitutes or would, with the passage of time or the giving of
notice, or both, constitute an Event of Loss.
(xviii) USE OF PROCEEDS. None of the
proceeds from the issuance of the Certificates or from the acquisition
by the Owner Participant of its beneficial interest in the Trust
Estate will be used directly or indirectly by Lessee so as to result
in a violation of Regulation G or U of the Board of Governors of the
Federal Reserve System.
(xix) NO FEDERAL APPROVALS. No
governmental approval in the United States of any kind is required of
the Owner Participant, the Original Loan Participant, the Owner
Trustee or the Indenture Trustee for their respective execution of or
performance under this Agreement or any agreement contemplated hereby
solely by reason of any fact or circumstance peculiar to: (a) Lessee
(as contrasted to other airlines), (b) the nature of the Aircraft, or
(c) Lessee's proposed operations or use of the Aircraft.
(xx) SECTION 1110. Owner Trustee, as
lessor under the Lease, and the Indenture Trustee, as assignee
thereof, are entitled to the protection of Section 1110 of the United
States Bankruptcy Code in connection with their right to take
possession of the Airframe and Engines in the event of a case under
Chapter 11 of the United States Bankruptcy Code in which Lessee is a
debtor. Lessee acquired the Aircraft new from the Manufacturer after
October 22, 1994, and Lessee first placed the Aircraft in service
after such date.
(b) GENERAL TAX INDEMNITY.
(i) INDEMNITY. Lessee hereby agrees to pay,
to indemnify, and, on written demand, reimburse and hold each
Indemnified Party (which, unless otherwise indicated herein, for
purposes of this Section 7(b) shall include any Affiliate of any
Participant, and all entities which are included in a consolidated,
combined or unitary return with such Indemnified Party) harmless from,
any and all license, documentation, recording and registration fees
and any and all taxes (including, without limitation, sales, use,
turnover, value-added, property (tangible and intangible), ad valorem,
consumption, rental, license, excise and stamp taxes), levies,
imposts, duties, charges, assessments or withholdings of any nature
whatsoever together with any and all penalties, fines, additions to
tax or interest thereon
PARTICIPATION AGREEMENT [N620SW]
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or computed with reference thereto (collectively "Taxes"), howsoever
imposed by any federal, state or local government or governmental
subdivision or taxing authority in or of the United States of America
(including any possession or territory of the United States of
America), or by any foreign government, taxing authority or
governmental subdivision of a foreign country, upon, against, or with
respect to any Indemnified Party, Lessee, the Aircraft, Airframe, any
Engine, any other engine installed on the Airframe, Part or any other
part thereof or interest therein or upon or with respect to the
purchase, acquisition, acceptance, rejection, mortgaging, financing,
refinancing, manufacture, sale, transfer of title, ownership,
delivery, nondelivery, insuring, inspection, leasing, possession, use,
registration, reregistration, deregistration, operation, repair,
replacement, abandonment, redelivery, modification, rebuilding,
importation, exportation, return or other disposition thereof, or the
imposition of any Lien (or the occurrence of any liability to refund
or pay over any amount as a result of any Lien) thereon, or upon or
with respect to the rentals, receipts or earnings arising therefrom,
or upon or with respect to this Agreement, the Trust Agreement, the
Trust Indenture, the Lease, a Lease Supplement, the Purchase
Agreement, the Purchase Agreement Assignment, the Certificates or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture, or the
beneficial interests in the Trust Estate or the creation thereof, or
any payment made pursuant to any such agreement or instrument or upon
or with respect to the property, held by Owner Participant or by the
Trust Estate or by Indenture Trustee under the Trust Indenture, or
otherwise with respect to or in connection with the transactions
contemplated by the Operative Agreements.
(ii) EXCEPTIONS. The indemnity set
forth in Section 7(b)(i) shall not extend in the case of any
Indemnified Party to Taxes (1) on, based on, or measured by, the
receipts, gross or net income, capital or net worth of such
Indemnified Party (whether denominated as franchise, excess profits,
conduct of business, capital gains, minimum and/or alternative minimum
taxes) or accumulated earnings, personal holding company, succession
taxes and estate or franchise taxes (other than taxes which are in the
nature of sales or use taxes, value-added taxes, rental taxes, license
taxes, consumption taxes, ad valorem taxes or property taxes) imposed
by (A) the federal government of the United States (including without
limitation any taxes collected by withholding) (but specifically
excluding any excise taxes imposed in connection with the occurrence
of a "prohibited transaction", within the meaning of Section 406 of
ERISA or Section 4975 of the Code, for which an exemption is not
available by statute, regulation or class exemption) or (B) any state
or local government or governmental subdivision or state or local
taxing authority in the United States of America (including any
possession or territory of the United States of America) other than in
the case of (B) any such tax which is a Covered Income Tax, as defined
below; (2) on, based on, or measured by, any fees or compensation
received by Owner Trustee or Indenture Trustee in its individual
capacity for services rendered in connection with the transactions
contemplated hereby; (3) relating to the Aircraft for any period after
the later of (A) the expiration or early termination of the Lease and
the return of the Aircraft in connection therewith in accordance with
the terms thereof and (B) payment in full of Stipulated Loss Value or
Termination Value, as the case may be, and all Rent due and owing in
accordance with the Lease; (4) arising out of or caused by the wilful
misconduct or gross negligence of such Indemnified Party or the
inaccuracy or breach of any representation, warranty or covenant of
such Indemnified Party contained in any Operative Agreement; (5)
imposed on the income of such Indemnified Party by a foreign
government or
PARTICIPATION AGREEMENT [N620SW]
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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 tax benefit realized by such Indemnified Party as the result of
any payment made pursuant to this proviso; provided, however, that
such payment by an Indemnified Party shall not exceed the aggregate
payments by Lessee to such Indemnified Party under Section 7(b)(i)
hereof (but any such excess shall be carried forward
PARTICIPATION AGREEMENT [N620SW]
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and shall reduce Lessee's obligation to make any subsequent payments
to such Indemnified Party pursuant to Section 7(b) or 7(c) hereof).
Each such Indemnified Party shall in good faith use reasonable efforts
in filing its tax returns and in dealing with taxing authorities to
seek and claim any such tax benefit of which it is actually aware or
of which it has been given notice. Any Taxes that are imposed on any
Indemnified Party as a result of the disallowance or reduction of such
tax benefit referred to in the next preceding sentence in a taxable
year subsequent to the year of allowance and utilization by such
Indemnified Party (including the expiration of any tax credit
carryovers or carrybacks of such Indemnified Party that would not
otherwise have expired) shall be indemnifiable pursuant to the
provisions of Section 7(b)(i) without regard to Section 7(b)(ii). In
determining the amount of any net reduction in Taxes which is
attributable to more than one transaction, an Indemnified Party shall
be deemed to have utilized its deductions and credits attributable
first, to all transactions other than leveraged equipment leasing
transactions and then to this transaction and to all such other
leveraged equipment leasing transactions on a pari passu basis.
If as a result of any Advance (as hereinafter
defined) to an Indemnified Party the aggregate taxes paid or accrued
by such Indemnified Party for any taxable year shall be more than the
amount of such taxes which would have been payable by the Indemnified
Party had no such Advance been made, and if such increase in taxes was
not taken into account in determining the amount of the Advance, then
such increase in taxes will be treated as Taxes for which Lessee must
indemnify the Indemnified Party pursuant to this Section 7(b). Upon
the final determination of any contest pursuant to Section 7(b)(iv)
hereof in respect of any Taxes for which Lessee has made an Advance,
the amount of Lessee's obligation shall be determined under this
Section 7(b)(iii) as if such Advance had not been made. Any
obligation of Lessee under this Section 7(b) and the Indemnified
Party's obligation to repay the Advance will be satisfied first by set
off against each other and any difference owing by either party will
be paid within 10 days of such final determination.
(iv) NOTICE AND CONTEST. If written claim is
received by an Indemnified Party for Taxes, which claim, if sustained,
would require the payment of an indemnity by Lessee pursuant to this
Section 7(b), such Indemnified Party shall notify Lessee of such claim
within 15 days after its receipt; provided, that failure to provide
such notice within 15 days will not relieve Lessee of any
indemnification obligation pursuant to this Section 7(b) if such
failure does not preclude Lessee from exercising its contest rights
hereunder. Payments due from Lessee to such Indemnified Party
pursuant to this Section 7(b) shall be made directly to such
Indemnified Party within 30 days of written demand by such Indemnified
Party to Lessee. If requested by Lessee in writing (provided, that
Lessee shall have furnished Indemnified Party with a written opinion
of Vinson & Elkins L.L.P. or other independent counsel selected by
Lessee and reasonably satisfactory to Indemnified Party to the effect
that a reasonable basis in law and fact exists under ABA opinion
85-352), such Indemnified Party shall upon receipt of indemnity
reasonably satisfactory to it and at the expense of Lessee (including,
without limitation, all reasonable costs, expenses, losses, legal and
accountants' fees, and disbursements, penalties, interest incurred in
contesting such claim, and additions to tax) in good faith contest, in
the name of such Indemnified Party or, if requested by Lessee, in the
name of Lessee (or permit Lessee, if desired by Lessee, to contest in
the name of Lessee) if permissible under applicable laws, the
validity, applicability or
PARTICIPATION AGREEMENT [N620SW]
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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
PARTICIPATION AGREEMENT [N620SW]
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to the Indemnified Party in such manner as shall be satisfactory to
such Indemnified Party and Owner Trustee.
Notwithstanding the above provisions of this Section 7(b), any
Indemnified Party in its sole discretion (by written notice to Lessee) may
unconditionally waive its rights to the indemnities provided for in this
Section 7(b) with respect to any Taxes, and refrain from contesting, or
continuing the contest of such Taxes, in which event Lessee shall have no
liability to such Indemnified Party hereunder with respect to such Taxes. In
addition, if an Indemnified Party shall agree to a settlement of any contest
under this Section 7(b) without the prior written consent of Lessee, then the
Indemnified Party shall be deemed to have waived its rights to the indemnities
provided in this Section 7(b) with respect to the subject matter of such
settlement.
(v) WITHHOLDINGS. Notwithstanding the
exceptions in Section 7(b)(ii), Lessee agrees that each payment of Rent and any
amount payable on the Certificates shall be free of all withholdings (other
than a U.S. withholding tax, except to the extent described in Section 15.05(d)
of the Trust Indenture) of any nature whatsoever except to the extent otherwise
required by law, and in the event that any such withholding is so required,
Lessee shall pay an additional amount of Rent such that after the deduction of
all amounts required to be withheld, the net amount actually received by each
Indemnified Party will equal the amount that would be due absent such
withholding. In the event additional Rent is paid by Lessee to provide for
withholdings pursuant to the preceding sentence in respect of Taxes that are
excepted from indemnification hereunder pursuant to Section 7(b)(ii), the
Indemnified Party on whom the Tax is imposed by way of withholding on payments
to such person shall, promptly upon receipt of notice from Lessee, reimburse
Lessee for such additional Rent. As used in this Section 7(b)(v), a "U.S.
withholding tax" shall mean any withholding tax imposed by the United States of
America (A) with respect to interest payments under any 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.
PARTICIPATION AGREEMENT [N620SW]
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(c) GENERAL INDEMNITY.
(i) INDEMNITY. Lessee hereby agrees,
whether or not any of the transactions contemplated hereby shall be
consummated, to pay, assume liability for and indemnify, protect,
defend, save and keep harmless each Indemnified Party from and
against, on a net after-tax basis as provided in Section 7(b)(iii),
any and all liabilities, obligations, losses, damages, settlements,
claims, actions, suits, penalties, costs, expenses and disbursements
(including but not limited to reasonable legal and investigative fees
and expenses and Transaction Costs to the extent not required to be
paid by Owner Participant pursuant to Section 16 hereof, and all costs
and expenses relating to amendments, supplements, waivers and consents
to and under the Operative Agreements, but excluding internal overhead
costs and expenses such as salaries) of whatsoever kind and nature,
including but not limited to negligence, liability of an owner, strict
or absolute liability, liability without fault and liability in tort
(any of the foregoing being called a "Loss") which may from time to
time be imposed on, incurred by or asserted against any Indemnified
Party or the Aircraft, Airframe, any Engine or any Part or any portion
of the Trust Estate or the Trust Indenture Estate (whether or not any
such Loss is also indemnified or insured against by any other Person
or such Indemnified Party has also indemnified any other Person
against such Loss) in any way relating to or arising out of (a) any
Operative Agreement, the enforcement thereof or any of the
transactions contemplated thereby (including, without limitation, the
performance or observance of all obligations and conditions of Lessee
thereunder, or the falsity of any representations or warranties of
Lessee therein or thereunder or in any document or certificate
delivered pursuant thereto), (b) the purchase, acceptance or rejection
of the Aircraft, (c) the Aircraft, the Airframe, any Engine, any
engine or any Part, any data or any other thing delivered or to be
delivered under an Operative Agreement, including without limitation,
the ownership, financing, refinancing, delivery, nondelivery, lease,
sublease, assignment, registration, reregistration, deregistration,
possession, use, non- use, presence, operation, condition, storage,
preparation, installation, testing, manufacture, design, fitness for
use, merchantability, modification, replacement, substitution,
alteration, maintenance, repair, re-lease, sale, return,
transportation, transfer, abandonment or other disposition thereof or
any portion thereof (including, without limitation, latent and other
defects, whether or not discoverable, and any claim for patent,
trademark or copyright infringement, or arising under environmental
control, noise or pollution laws or regulations, and loss of or damage
to any property or the environment or death or injury to any person),
or (d) the offer, sale or delivery of the Certificates, whether before
or after the Delivery Date (the indemnity in this clause (d) to extend
also to any Person who controls an Indemnified Party, its successors,
assigns, employees, servants and agents within the meaning of Section
15 of the Securities Act).
(ii) EXCEPTIONS. The indemnity set
forth in Section 7(c)(i) shall not extend to any Loss with respect to
such Indemnified Party (A) to the extent that such Loss is caused by
acts, omissions or events which occur after full and final compliance
by Lessee with all the terms of the Operative Agreements, (B) to the
extent such Loss is caused by acts, omissions or events which occur
following the earlier of: (I) acceptance of possession of the
Aircraft by Lessor or its designee pursuant to the terms of the Lease
(other than pursuant to Section 15 thereof, in which case Lessee's
liability under this Section 7(c) shall survive for so long as Lessor
shall be entitled to exercise remedies under such Section 15), (II)
the termination
PARTICIPATION AGREEMENT [N620SW]
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of the Term in accordance with Section 9 of the Lease, or (III) the
transfer of title to the Aircraft to Lessee (or its designee) pursuant
to Section 10.1.4 or Section 18.2 of the Lease, (C) to the extent that
such Loss is a Tax or a loss of tax benefits, whether or not Lessee is
required to indemnify therefor pursuant to Section 7(b) hereof, (D) to
the extent that such Loss is caused by the willful misconduct or gross
negligence of such Indemnified Party (other than willful misconduct or
gross negligence imputed to such Indemnified Party solely by reason of
its interest in the Aircraft) or any material misrepresentation or
violation or breach of any obligations of such Indemnified Party
contained in the Operative Agreements then in force unless such
misrepresentation, violation or breach is a result of Lessee's failure
to comply with the terms of any Operative Agreement to which it is a
party, or (E) to the extent such Loss is associated with a sale,
assignment or transfer by such Indemnified Party of its respective
interest in the Aircraft, the Certificates or the transactions
contemplated hereby (other than (1) as required by the Operative
Agreements and (2) during the continuance of a Lease Default (of the
type described in Section 14.1 or 14.5 of the Lease) or a Lease Event
of Default or the exercise of remedies under the Lease). This Section
7(c) does not constitute a guarantee of the useful life or residual
value of the Aircraft or a guarantee that the Certificates will be
paid.
(iii) NOTICE. If any Indemnified Party or
Lessee has knowledge of any Loss for which Lessee is obligated to
indemnify under this Section 7(c), it shall give prompt written notice
thereof to Lessee or such Indemnified Party, as the case may be, but
failure to give such notice shall not relieve Lessee of its
obligations hereunder or from any other obligation that Lessee may
have to such Indemnified Party at law or in equity, and no payment by
Lessee to an Indemnified Party pursuant to this Section 7(c) shall be
deemed to constitute a waiver or release of any right or remedy which
Lessee may have against such Indemnified Party for any actual damages
as a result of the failure by such Indemnified Party to give Lessee
such notice.
(iv) RIGHT TO DEFEND; SUBROGATION; FEES AND
EXPENSES OF TRUSTEES. Lessee shall be entitled (and, at the
Indemnified Party's election, shall be obligated), at its sole cost
and expense, acting through counsel selected by Lessee reasonably
acceptable to the respective Indemnified Party, (A) in any judicial or
administrative proceeding that involves solely a claim for which
payment or indemnity is sought under this Section 7(c), to assume
responsibility for and control thereof, (B) in any judicial or
administrative proceeding involving a claim for which payment or
indemnity is sought under this Section 7(c), and other claims related
or unrelated to the transactions contemplated by the Operative
Agreements, to assume responsibility for and the control of such claim
for which payment or indemnity is sought under this Section 7(c) to
the extent that the same may be and is severed from such other claims
(and such Indemnified Party shall use its reasonable best efforts to
obtain such severance), and (C) in any other case, to be consulted by
such Indemnified Party with respect to judicial proceedings subject to
the control of such Indemnified Party. Notwithstanding any of the
foregoing to the contrary, Lessee shall not be entitled to assume
responsibility for and control of any such judicial or administrative
proceedings (1) while any Lease Default (of the 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
PARTICIPATION AGREEMENT [N620SW]
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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.
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.
PARTICIPATION AGREEMENT [N620SW]
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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.
(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.
PARTICIPATION AGREEMENT [N620SW]
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SECTION 8. OTHER REPRESENTATIONS, WARRANTIES,
COVENANTS AND INDEMNITIES. (a) SECURITIES LAWS. The Owner Participant
represents that it is acquiring its interest in the Trust Estate for investment
purposes only and not with a present intent as to any resale or distribution
thereof except as otherwise permitted by Rule 144A under the Securities Act,
(subject nonetheless to any requirement of law that the disposition of its
properties shall at all times be and remain within its control) and that
neither it nor anyone acting on its behalf has directly or indirectly offered
any interest in the Trust Estate or any Certificates or any similar securities
for sale to, or solicited any offer to acquire any of the same from, anyone in
a manner which would result in a violation of the Securities Act or the
securities laws, rules and regulations of any state.
(b) CITIZENSHIP. Each of the Owner Participant and 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 Original Loan Participant, the Owner
Trustee and the Indenture Trustee agrees, upon the request and at the sole
expense of the Owner Participant, to take all reasonable acts requested by the
Owner Participant in complying with its obligations under clause (A) or (B) of
the second sentence of this Section 8(b). 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.
PARTICIPATION AGREEMENT [N620SW]
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(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 Charlotte, North Carolina, without 10 days'
prior written notice to Lessee, Indenture Trustee and the Owner Participant.
(d) SECURITIES LAWS. The Original Loan
Participant represents and warrants that the Series SWA 1996 Trust N620SW-I
Certificate to be issued to it pursuant to the Trust Indenture is being
acquired by it with no present intent to make any resale or distribution
thereof which would require registration under the Securities Act and it will
not offer or sell any Certificate in violation of the Securities Act; provided,
that the disposition of its property shall at all times be and remain within
its control, and that neither it nor anyone acting on its behalf has offered
any Certificates or any similar securities relating to the Aircraft for sale
to, or solicited any offer to buy any Certificates or any similar securities
relating to the Aircraft from, any person or entity other than in a manner
required by the Securities Act and the rules and regulations thereunder and the
securities laws, rules and regulations of any state.
(e) [INTENTIONALLY RESERVED].
(f) OWNER PARTICIPANT'S REPRESENTATIONS AND WARRANTIES.
The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation
duly organized and validly existing and in good standing under the
laws of the state of Michigan and has the corporate power and
authority to carry on its business as now conducted, to own or hold
under lease its properties and to enter into and perform its
obligations under the Owner Participant Agreements;
(ii) the Owner Participant Agreements have
been duly authorized by all necessary corporate action on the part of
the Owner Participant, do not require any approval not already
obtained of stockholders of the Owner Participant or any approval or
consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been
duly executed and delivered by the Owner Participant, and, subject to
and in reliance upon the representations made by the Original Loan
Participant and Lessee in Sections 8(o) and 7(a)(xv), respectively,
and compliance with the covenants of Section 8(d), neither the
execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions contemplated thereby by the Owner
Participant, nor compliance by the Owner Participant with any of the
terms and provisions thereof will contravene any United States federal
or state law, judgment, governmental rule, regulation or order
applicable to or binding on the Owner Participant (it being understood
that no representation or warranty is made with respect to laws, rules
or regulations relating to aviation or to the nature of the equipment
owned by the Owner Trustee, other than such laws, rules or regulations
relating to the citizenship
PARTICIPATION AGREEMENT [N620SW]
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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 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
PARTICIPATION AGREEMENT [N620SW]
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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 INDENTURE TRUSTEE
IN INDIVIDUAL CAPACITY. The Indenture Trustee represents and warrants, in its
individual capacity, as follows:
(i) it is a "citizen of the United States"
as defined in the Act, that it will notify promptly all parties to
this Agreement if in its reasonable opinion its status as a "citizen
of the United States" is likely to change and that it will resign as
Indenture Trustee as provided in Section 9.07 of the Trust Indenture
if it should cease to be a "citizen of the United States";
(ii) it is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter
into and perform its obligations under the Trust Indenture and this
Agreement and to authenticate the Certificates;
(iii) the Indenture Trustee Agreements, and
the authentication of the Certificates have been duly authorized by
all necessary corporate action on its part, and neither
PARTICIPATION AGREEMENT [N620SW]
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the execution and delivery thereof nor its performance of any of the
terms and provisions thereof will violate any federal or Delaware law
or regulation governing its banking or trust powers or any judgment or
order binding on it or contravene or result in any breach of, or
constitute any default under its charter or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is
a party or by which it or its properties may be bound or affected;
(iv) each of the Indenture Trustee Agreements
has been duly executed and delivered by it and, assuming that each
such agreement is the legal, valid and binding obligation of each
other party thereto, is the legal, valid and binding obligation of the
Indenture Trustee, enforceable against it in accordance with its
terms;
(v) neither the execution and delivery by
it, in its individual capacity or as Indenture Trustee, as the case
may be, of this Agreement or the Trust Indenture nor the consummation
of any of the transactions contemplated hereby or thereby requires the
consent or approval of, the giving of notice to, or the registration
with, any governmental authority or agency pursuant to any law of the
State of Delaware or the United States governing the banking or trust
powers of the Indenture Trustee; and
(vi) neither it nor anyone authorized to act
on its behalf has directly or indirectly offered any beneficial
interest or security relating to the ownership of the Aircraft or the
Lease or any interest in the Trust Estate or the Trust Indenture
Estate, or any of the Certificates or any other interest in or
security under the Trust Indenture, for sale to, or solicited any
offer to acquire any such interest or security from, or has sold any
interest or security to, any Person, and it will not directly or
indirectly make any such offer, solicitation or sale.
(l) TRANSFERS OF EQUITY INTERESTS; RIGHTS OF OWNER
PARTICIPANT AND OWNER TRUSTEE. So long as the Aircraft shall be leased
to Lessee under the Lease and so long as the Certificates are outstanding, the
Owner Participant will not sell, assign, convey or otherwise transfer any of
its right, title or interest in and to this Agreement, the Trust Estate or the
Trust Agreement to any Person unless (i) the proposed transferee is a
"Transferee" (as defined below) and (ii) the Owner Participant shall have
delivered to the Owner Trustee, Lessee and the Indenture Trustee an opinion (in
form, scope and substance reasonably satisfactory to the Indenture Trustee and
Lessee) of counsel reasonably satisfactory to the Indenture Trustee and Lessee
to the effect that the agreement referred to in clause (O) below and any
guaranty required by clause (B) or (C) below, are the legal, valid, binding and
enforceable obligations of the Transferee and the guarantor, if any, as the
case may be. A "Transferee" shall mean either (A) a U.S. bank or other
financial institution with a combined capital, surplus and undivided profits of
at least $75,000,000 or a limited partnership or corporation whose net worth is
at least $75,000,000, (B) any subsidiary of such a bank, financial institution,
limited partnership or corporation; provided, that such bank, financial
institution, limited partnership or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty substantially in the form of
Exhibit A with respect to the Owner Participant's obligations, in the case of
the Owner Trustee, under the Trust Agreement and, in the case of the Indenture
Trustee and Lessee, the Owner Participant's obligations hereunder, or (C) any
other corporation, limited liability company or limited partnership, provided
such obligations are guaranteed (such guaranty to be substantially in the form
PARTICIPATION AGREEMENT [N620SW]
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of Exhibit A) by the transferor Owner Participant; provided, however, that
unless otherwise consented to by Lessee any Transferee shall not be an air
carrier, an air freight forwarder or other similar Person or a corporation
controlling, controlled by or under common control with such an air carrier, an
air freight forwarder or other similar Person. Each such transfer to a
Transferee shall be subject to the conditions that (M) upon giving effect to
such transfer, the Transferee is a "citizen of the United States" within the
meaning of 49 U.S.C. Section 40102(a)(15)(C) or the Transferee, at its sole
cost and expense on an after-tax basis (including any continuing costs of any
voting trust), shall have entered into a voting trust or similar arrangement
which permits the registration of the Aircraft under the Act in the name of the
Owner Trustee without any restriction on the operation of the Aircraft, (N) the
Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
or agreements substantially in the form of Exhibit B, (P) such transfer does
not result in a nonexempt prohibited transaction under Section 4975 of the Code
or Section 406 of ERISA with respect to such Holders about which the Owner
Participant shall have received such information as may be reasonably necessary
in making such determination (and Owner Participant shall request such
information and each of Lessee, the Original Loan Participant and the Indenture
Trustee shall cooperate in providing such information as may be available), (Q)
such transfer does not violate any applicable law including, without
limitation, the Act, or any rules or regulations promulgated thereunder, the
Securities Act or the Trust Indenture Act of 1939, (R) after giving effect to
such transfer, there shall be no more than one Owner Participant of record at
that time and (S) such transfer will not give rise to an Indenture Default or
Indenture Event of Default; and Lessee or the Indenture Trustee may request
such Transferee to provide an opinion of counsel (who shall be reasonably
satisfactory to Lessee and the Indenture Trustee) in form, scope and substance
reasonably satisfactory to Lessee and the Indenture Trustee as to any matter
set forth in clause (Q) and as to such other matters as Lessee or the Indenture
Trustee may reasonably request. Upon any such transfer by the Owner
Participant as above provided, the Transferee shall be deemed the Owner
Participant for all purposes hereof and of the other Operative Agreements and
each reference herein to the transferor Owner Participant shall be deemed for
all purposes, with respect to circumstances existing and requirements arising
thereafter, to be to the Transferee and the transferor Owner Participant shall
be relieved of all obligations of the transferring Owner Participant under the
Owner Participant Agreements arising after the date of such transfer except to
the extent fairly attributable to acts or events occurring prior thereto and
not assumed by the transferee Owner Participant. If the Owner Participant
intends to transfer its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than ten (10) Business
Days prior thereto, to the Indenture Trustee, the Owner Trustee and Lessee,
specifying the name and address of the proposed Transferee and the facts
necessary to determine whether or not the requirements for a Transferee, as set
forth herein, are satisfied. The Owner Participant shall pay, or shall cause
the transferee Owner Participant to pay, all of the reasonable costs and
expenses (including, without limitation, legal fees and expenses) of the other
parties hereto (except the costs and expenses of Lessee if such transfer is
effected during the continuance of a Lease Default (of the type described in
Section 14.1 or 14.5 of the Lease) or a Lease Event of Default or in connection
with the exercise of remedies under the Lease), on a net after-tax basis, of
any such transfer. For purposes of this Agreement, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined
in accordance with generally accepted accounting principles consistently
applied.
(m) OBLIGATIONS OF TRUSTEES. The Indenture Trustee shall
be responsible for the payment, performance and discharge of, and shall fully
and completely pay, perform and
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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. The Original Loan
Participant represents and warrants that no part of the funds used by it to
acquire the Certificates or any interest therein (including any participation
in such Certificates) constitutes "plan assets" of any "employee benefit plan"
within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code.
(p) 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 into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the
other Owner Trustee Documents;
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(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 and Use Tax
Certificate of Resale reflecting Owner Trustee's Texas or North
Carolina sales
PARTICIPATION AGREEMENT [N620SW]
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tax permit number and Owner Trustee's purchase of the Aircraft
pursuant to the Lease for lease to Lessee thereunder, and, if
necessary to permit Owner Trustee to issue such Certificate, Owner
Trustee shall apply for (on a form to be supplied by Lessee) a Texas
sales tax permit.
(q) OWNER PARTICIPANT'S LEASE EXPENSES. The Owner
Participant covenants and agrees to pay or cause the Owner Trustee to pay those
costs and expenses specified to be paid by the Owner Participant pursuant to
the Lease.
(r) LESSEE'S ASSUMPTION OF DEBT. Subject to
compliance by Lessee with all of its obligations under the Operative Agreements
and provided that the Series SWA 1996 Trust N620SW-I Certificate is no longer
outstanding, each of the Owner Trustee, the Indenture Trustee and the Owner
Participant covenants and agrees that, at Lessee's expense on a net after-tax
basis (including, without limitation, reasonable attorneys' fees and expenses
of each of such parties), (i) if Lessee elects to terminate the Lease and to
purchase the Aircraft pursuant to Section 18.2(b) of the Lease, each of such
parties will, subject to due compliance by Lessee with the provisions of said
Section 18.2(b), execute and deliver appropriate documentation to Transfer to
Lessee the Aircraft, and (ii) Lessee, in connection with such purchase, may (if
no Lease Event of Default shall have occurred and be continuing, unless such
Lease Event of Default is waived by the Indenture Trustee) 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
PARTICIPATION AGREEMENT [N620SW]
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of the creation of such new trust, the termination of the trust set forth in
the Trust Agreement or the transactions consummated in connection therewith
will have any adverse impact on any of Lessee's rights or the Indenture
Trustee's rights under the Operative Agreements (including the first priority
lien status of the Lien of the Trust Indenture), (B) Lessee shall have no
responsibility to indemnify any Indemnified Party under any provision of any
Operative Agreement for any Taxes or other consequences that in either case
would not have been incurred but for such termination and transfer, (C) the
Owner Participant shall indemnify Lessee and the Indenture Trustee for any
costs, expenses, taxes or other consequences that in either case would not have
been incurred but for such termination and transfer, (D) the Owner Participant
shall provide Lessee and the Indenture Trustee with an opinion in form and
substance reasonably satisfactory to them as to the effect of such termination
and transfer, and (E) immediately after such transfer, the beneficiary of the
new trust shall be the same as the beneficiary of the trust set forth in the
Trust Agreement. The Owner Participant further agrees (x) promptly to provide
instructions to the Owner Trustee, upon the request of the Owner Trustee and as
otherwise required under the Trust Agreement, so as to enable the Owner Trustee
to perform its duties and obligations under the Operative Agreements in
accordance with the terms and provisions thereof and (y) not to remove the
institution acting as Owner Trustee, and not to replace the institution acting
as Owner Trustee in the event that such institution resigns as Owner Trustee,
unless the Owner Participant shall have consulted in good faith with Lessee
prior to such removal or replacement; provided, that no such consultation shall
be required if a Lease Event of Default shall have occurred and be continuing.
(w) [INTENTIONALLY RESERVED].
(x) WITHHOLDING TAXES. The Original Loan
Participant represents that it is exempt from United States withholding taxes,
and covenants that, if required to obtain or renew such exemption, it will
properly prepare and promptly furnish to each of the Owner Trustee, the
Indenture Trustee and Lessee Internal Revenue Service Form 1001, Form 4224
(with respect to each tax year) or Form W-8, whichever is applicable. The
Original Loan Participant represents, warrants and covenants that it will
promptly notify the Owner Trustee, the Indenture Trustee and Lessee if it
transfers any interest in its Series SWA 1996 Trust N620SW-I Certificate to any
Person, other than pursuant to Section 17 or 18 hereof or Section 8.03(e)(ii)
of the Indenture.
The Original Loan Participant shall indemnify (on an after-tax
basis) and hold harmless the Indenture Trustee, the Owner Trustee, Lessee and
the Owner Participant against any United States withholding taxes (and related
interest and penalties) which the Indenture Trustee fails to withhold on
payments to it as a result of its failure to provide the required certificate
or form or the invalidity of any certificate or form provided by it pursuant to
this Section 8(x) or as a result of any inaccuracy of the representations set
forth in the immediately preceding paragraph. Any amount payable hereunder
shall be paid within 30 days after receipt by the Original Loan Participant of
a written demand therefor and shall include interest at the Overdue Rate from
the date any withholding tax has been paid by such party until the date
indemnified by the Original Loan Participant.
(y) DISCHARGE OF TRUST INDENTURE. The Owner
Participant agrees that, at Lessee's expense (including, without limitation,
reasonable attorneys' fees and other out-of-pocket expenses of the Owner
Trustee and Owner Participant), upon request of Lessee, the Owner Participant
will negotiate promptly in good faith with respect to any arrangements pursuant
to which the Trust
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Indenture may be satisfied and discharged in respect of the Certificates in
accordance with subsection (ii) or (iii) of Section 10.01(a) of the Trust
Indenture, and the Owner Trustee agrees to act upon the instructions of the
Owner Participant in connection therewith; provided, however, that the
determination whether to so satisfy and discharge the Certificates shall be in
the Owner Participant's sole discretion. The Owner Trustee agrees that it will
not, and the Owner Participant agrees that during such time as a Lease Event of
Default has not occurred it will not cause the Owner Trustee to, take any
action to effect such satisfaction and discharge except upon the request of
Lessee made pursuant to this Section 8(y).
(z) PERMITTED INVESTMENTS. The Owner Trustee agrees
that (i) so long as the Trust Indenture has not been duly discharged, any
profit, income, interest, dividend or gain realized upon the maturity, sale or
other disposition of any Permitted Investment made by the Indenture Trustee
pursuant to Section 9.04 of the Trust Indenture, and paid to Lessee on behalf
of the Owner Trustee by the Indenture Trustee in accordance with the terms of
such Section 9.04, shall be entirely for the account of, and the sole property
of, Lessee who, for such purposes, shall not be deemed to be acting as agent of
the Owner Trustee, and Lessee shall have no obligation to pay over such profit,
income, interest, dividend or gain to the Owner Trustee, (ii) any such profit,
income, interest, dividend or gain not theretofore distributed shall, upon
discharge of the Trust Indenture, be paid by the Indenture Trustee to Lessee,
unless instructed by the Owner Participant to distribute such funds to the
Owner Participant or the Owner Trustee to the extent the Owner Participant or
the Owner Trustee is owed any amounts under the Operative Agreements that have
not been paid when due, and (iii) except to the extent the Owner Trustee or
Owner Participant is owed any amounts under the Operative Agreements by Lessee
and such amounts are not paid when due, the Owner Participant may cause the
Indenture Trustee to distribute and apply such profit, income, interest,
dividend or gain realized upon the maturity, sale or other disposition of
investment of funds pursuant to Section 22.1 of the Lease, in satisfaction or
partial satisfaction of the amounts so due.
(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;
PARTICIPATION AGREEMENT [N620SW]
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(y) payment of the Supplemental
Rent under the Lease in respect of the installments specified
in Section 18.2(c) of the Lease, and all other amounts owing
to the Owner Trustee (other than Excluded Payments)
(collectively, "Equity Payments"), shall be fully and
unconditionally subordinated to the payment in full in cash of
principal, interest, Break Amount or Premium, if any, and all
other amounts owing to the Holders or the Indenture Trustee
under or in respect of the Certificates or the Trust Indenture
(collectively, "Debt Payments"), all pursuant to such terms of
subordination as shall be effectively and substantively
equivalent to the manner in which Debt Payments are paid or
payable in priority to the Equity Payments, and such other
customary terms of subordination as shall be reasonably
required by the Indenture Trustee; and
(z) the Owner Trustee shall have
the substantive equivalent of the cure and buy-out rights
specified in clauses (e)(i) and (e)(ii) of Section 8.03 of the
Trust Indenture.
(bb) TRANSFERS OF DEBT INTERESTS. Except in
connection with any transfer pursuant to Section 17 or 18 hereof, or Section
8.03(e)(ii) of the Indenture, the Original Loan Participant covenants that it
will not (i) transfer or (ii) grant participations in, its Certificate to any
Person unless such Person represents, warrants and covenants in writing to the
Original Loan Participant and, in the case of a transfer, to the Owner
Participant and Lessee, (A) to the effect set forth in Section 8(x) hereof and
(B) further represents and warrants to the Original Loan Participant and, in
the case of a transfer, to the Owner Participant and Lessee either that (a) no
part of the funds used by it to acquire its Series SWA 1996 Trust N620SW-I
Certificate or participation constitutes "plan assets" of any "employee benefit
plan" within the meaning of ERISA or any "plan" within the meaning of Section
4975(e)(1) of the Code, or (b) its purchase or acquisition of such Series SWA
1996 Trust N620SW-I Certificate or participation will not result in a nonexempt
prohibited transaction under Section 4975 of the Code or Section 406 of ERISA.
Any such Person shall require any transferee of its interest to make the
representations, warranties and covenants in the preceding sentence.
(cc) [INTENTIONALLY RESERVED].
(dd) [INTENTIONALLY RESERVED].
(ee) LESSEE AS PRICING AGENT FOR CERTIFICATE. The Owner
Trustee hereby appoints Lessee as its agent to select the pricing provisions
and related Interest Periods in respect of the Series SWA 1996 Trust N620SW-I
Certificate, such appointment to be effective so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing.
SECTION 9. PAYMENTS TO LESSEE OF TRUST INDENTURE
MONIES. The Owner Participant hereby agrees to instruct the Owner
Trustee to promptly distribute any money received by it pursuant to Section
7.01 or 10.04 of the Trust Indenture to Lessee to the extent such amounts were
paid by Lessee or on behalf of Lessee and the Owner Trustee or the Owner
Participant is not owed any amounts under any of the Operative Agreements by
Lessee (and if the Owner Trustee or Owner Participant is owed any such amount,
the monies received under Section 7.01 or 10.04 of the Trust Indenture may be
applied in satisfaction or partial satisfaction thereof). Lessee agrees to
hold any
PARTICIPATION AGREEMENT [N620SW]
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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 executed copies of the Trust Agreement and Trust
Indenture and hereby consents in all respects to the execution and delivery of
the Trust Agreement and Trust Indenture and to all the terms thereunder,
including, without limitation, the assignment under the Trust Indenture of
Lessor's rights under the Lease. Each of the Owner Participant and the Owner
Trustee hereby (A) agrees with Lessee and the Indenture Trustee to comply with
all of the terms of the Trust Agreement and, to the extent the same purports or
is stated to bind the Owner Participant, the Trust Indenture (each as the same
may hereafter be amended or supplemented from time to time in accordance with
the terms thereof) applicable to it, to the extent such non-compliance would be
adverse to such party; and (B) subject to Section 8(v), agrees with Lessee and
the Indenture Trustee not to amend, supplement or otherwise modify any
provision of the Trust Agreement in a manner adversely affecting such party
without the prior written consent of such party. In addition, unless a Lease
Default (of the type referred to in Section 14.1 or 14.5 of the Lease) or Lease
Event of Default shall have occurred and be continuing and so long as the Lease
has not been terminated, the Indenture Trustee and the Owner Trustee hereby
agree for the benefit of Lessee that without the consent of Lessee they will
not (and the Owner Participant agrees that it will not cause the Owner Trustee
to) amend, supplement or otherwise modify any provision of the Trust Indenture
in a manner adversely affecting Lessee. The Indenture Trustee and the Owner
Trustee agree to promptly furnish to Lessee copies of any supplement,
amendment, waiver or modification of any of the Operative Agreements to which
Lessee is not a party. Each Holder agrees that it will not take any action in
respect of the Trust Indenture Estate except through the Indenture Trustee
pursuant to the Trust Indenture or as otherwise permitted by the Trust
Indenture.
SECTION 11. CERTAIN COVENANTS OF LESSEE.
Lessee covenants and agrees with the Participants, the Indenture Trustee and
the Owner Trustee, in its capacity as such and in its individual capacity, as
follows:
(a) FURTHER ASSURANCES. Lessee will cause to be
done, executed, acknowledged and delivered all and every such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee or any
Participant shall reasonably require for accomplishing the purposes of this
Agreement and the other Operative Agreements. Lessee, forthwith upon delivery
of the Aircraft under
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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.
(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.
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(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 to be performed or
observed by Lessee;
(iii) immediately after giving effect to such
transaction and as a result of giving effect to such transaction, no
Lease Default or Lease Event of Default shall have occurred and be
continuing;
(iv) Lessee shall have delivered to the Owner
Trustee, the Indenture Trustee and each Participant an Officer's
Certificate and an opinion of counsel to the Successor reasonably
satisfactory to the Owner Trustee, the Indenture Trustee and each
Participant, each stating that such consolidation, merger, conveyance,
transfer or lease and the assumption agreement mentioned in
subparagraph (ii) above comply with this Section 11(f) (except that
such opinion need not refer to subparagraph (iii) above), that the
agreements entered into to effect such consolidation, merger,
conveyance, transfer or lease and such assumption agreement are legal,
valid and binding obligations of the Successor, enforceable against
the Successor in accordance with their respective terms (subject to
applicable bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally and to general principles
of equity), and that all conditions precedent herein provided for
relating to such transaction have been complied with; and
(v) the Successor shall make such filings
and recordings with the FAA pursuant to the Act, as shall be necessary
or desirable to evidence such consolidation, merger, conveyance,
transfer or lease with or to such Successor.
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Upon any such consolidation, merger, conveyance, transfer or
lease, the Successor shall succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the applicable Operative Agreements with
the same effect as if the Successor had been named as Lessee therein. No such
conveyance, transfer or lease of all or substantially all of the assets of
Lessee as an entirety shall have the effect of releasing Lessee or any
successor corporation or Person which shall theretofore have become such in the
manner prescribed in this Section 11(f) from its liability in respect of any
Operative Agreement to which it is a party. Nothing contained herein shall
permit any lease, sublease or other arrangement for the use, operation or
possession of the Aircraft except in compliance with the applicable provisions
of the Lease (or any assignment by Lessee of its rights under the Lease, except
in connection with a transaction in compliance with the express provisions of
this Section 11(f)).
(g) CORPORATE EXISTENCE. Except as permitted by
Section 11(f) hereof, Lessee shall at all times maintain its corporate
existence. Lessee covenants and agrees that it will at all times be a "citizen
of the United States" within the meaning of the Act.
(h) CERTIFICATE SCHEDULE. Lessee will provide on
behalf of the Owner Trustee the amortization schedule for the Certificate to be
issued to the Original Loan Participant at least two days before the Delivery
Date.
(i) NO CERTIFICATE OWNERSHIP. Lessee agrees that
it will not, at any time, hold any Certificates.
SECTION 12. OWNERSHIP OF AIRCRAFT. It is
hereby agreed among Lessee, the Owner Participant and the Owner Trustee that
for all purposes the Owner Trustee will be the owner of the Aircraft (except
that the Owner Participant will be the owner for income tax purposes and except
under the circumstances contemplated by the proviso to Section 18.2(d) of the
Lease) and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes and all other
relevant purposes (subject to the election referred to above).
SECTION 13. NOTICES; CONSENT TO JURISDICTION.
(a) Except as otherwise provided in this Agreement respecting telephone
notices, all notices, demands, instructions and other communications required
or permitted to be given to or made upon any party hereto shall be in writing
and shall be personally delivered or sent by registered or certified mail,
postage prepaid, or by prepaid telex, TWX or telegram (with messenger delivery
specified in the case of a telegram), or by telecopier, or by prepaid courier
service, and shall be deemed to be given for purposes of this Agreement on the
day that such writing is delivered or, if given by certified mail, three (3)
Business Days after being deposited in the mails, in accordance with the
provisions of this Section 13(a). Unless otherwise specified in a notice sent
or delivered in accordance with the foregoing provisions of this Section 13(a),
notices, demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective telex, TWX or telecopier numbers) as follows:
(A) if to Lessee, the Owner Trustee, the Original Loan Participant, the
Indenture Trustee or the Owner Participant, to the respective addresses set
forth on Schedule I hereto (and in the case of Owner Trustee a copy shall be
sent to the Owner Participant) or (B) if to a subsequent Owner Participant,
addressed to such subsequent Owner Participant at such address as such
subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Holder,
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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 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
PARTICIPATION AGREEMENT [N620SW]
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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 and the Original Loan Participant provided for in this
Agreement, and Lessee's, the Owner Trustee's, the Indenture Trustee's, the
Original Loan Participant's and the Owner Participant's obligations under any
and all thereof, shall survive the making available of the respective
Commitments by the Participants, the delivery or return of the Aircraft, the
transfer of any interest of the Owner Participant in the Trust Estate or the
Aircraft or any Engine or the transfer of any interest by any Holder in any
Certificate or the Trust Indenture Estate and the expiration or other
termination of this Agreement or any other Operative Agreement, except as
otherwise expressly provided herein or therein.
(c) COUNTERPARTS; WAIVERS; GOVERNING LAW. This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument. Neither
this Agreement nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified, except by an instrument in writing signed by
the party against which the enforcement of the termination, amendment,
supplement, waiver or modification is sought; and no such termination,
amendment, supplement, waiver or modification shall be effective unless a
signed copy thereof shall have been delivered to Lessee, the Indenture Trustee
and the Owner Trustee. The terms of this Agreement shall be binding upon, and
inure to the benefit of and shall be enforceable by, Lessee, the Participants,
the Indenture Trustee and the Owner Trustee. THIS AGREEMENT SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK. 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
PARTICIPATION AGREEMENT [N620SW]
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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 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.
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SECTION 16. TRANSACTION COSTS; INVOICES AND PAYMENT
OF EXPENSES. (a) The parties hereto agree that the term "Transaction Costs"
shall mean (i) with respect to the closing on the Delivery Date and the
subsequent placement of the permanent debt pursuant to Section 17 or 18 hereof,
the reasonable and actual fees, expenses and disbursements of (1) Potter
Anderson & Corroon, special counsel for the Indenture Trustee, (2) 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 Original Loan Participant and for the underwriters in a
potential refinancing transaction pursuant to Section 18 hereof, 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, (v) the fee
and expenses of Aero Economics, Inc. (or of such other appraiser as shall be
acceptable to Lessee and the Owner Participant) with respect to the appraisal
of the Aircraft required on or before the Delivery Date pursuant to Section
4(a) hereof, (vi) the advisory fees and expenses of Babcock & Brown Financial
Corporation, (vii) the reasonable out-of-pocket disbursements, costs and
expenses of the Original Loan Participant relating to the transactions
contemplated hereby, (viii) the reasonable out-of-pocket expenses of the Owner
Participant relating to the transactions contemplated hereby, excluding the
fees and expenses of Owner Participant's counsel, (ix) the initial fee, if any,
of the Original Loan Participant, (x) the placement or underwriting fees,
commissions and expenses, if any, in placing the permanent debt pursuant to
Section 18 hereof and all costs and expenses associated with a public offering,
if any, pursuant thereto, and (xi) printing and distribution costs.
(b) Each of the Owner Trustee, the Indenture Trustee,
Lessee and the Participants shall promptly submit to the Owner Participant
copies of invoices of the Transaction Costs as they are received. Lessee shall
also be provided with a copy of any bill for legal expenses, with an
opportunity to review and approve it (such approval not to be unreasonably
withheld or delayed). The Owner Participant agrees to pay such amounts
directly or to transfer to the Owner Trustee from time to time promptly upon
receipt of invoices of Transaction Costs such amount as shall be necessary in
order to enable the Owner Trustee to pay such Transaction Costs. To the extent
of funds received by it, the Owner Trustee agrees to pay all invoices of
Transaction Costs that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, Lessee, (x) at its option, may pay directly any
Transaction Costs in excess of (i) 0.327156% of Lessor's Cost incurred in
connection with the closing of this transaction on the Delivery Date and (ii)
0.641933% of Lessor's Cost incurred in connection with the refinancing or
refunding of the Certificates pursuant to Section 18, (y) shall pay the fees of
its special counsel and, (z) in the event that the transactions contemplated
hereby shall not be consummated, Lessee shall pay all Transaction Costs, plus
the fees and expenses of Owner Participant's counsel, except that the fees and
expenses referred to in clause (a) (viii) above, and the fees, expenses and
disbursements of the Owner Participant's counsel, shall be borne by the Owner
Participant if such failure to consummate the transactions results from the
failure of the Owner Participant to close after all conditions precedent to the
Owner Participant's funding (other than those conditions within the control of
the Owner Participant) of its Commitment set forth herein have been satisfied.
In any and all events, Lessee agrees to pay on a net after-tax basis the
reasonable out-of-pocket costs and expenses (including counsel fees) of each
Indemnified Party incurred in connection with the entering into or giving or
withholding of any future waiver, modification, supplement,
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consent, amendment or other action with respect to any Operative Agreement
which (a) is requested by Lessee, (b) results from any adjustment pursuant to
Section 3.7 of the Lease, or (c) is necessary to effectuate the intent of any
Operative Agreement. In addition, upon such failure to consummate, Lessee
shall pay the Original Loan Participant any applicable Break Amount.
SECTION 17. OPTIONAL REDEMPTION OF CERTIFICATES.
(a) Subject to paragraph (d) below, in the event that Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant requesting that there be effected a voluntary redemption of the
Outstanding Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith to conclude an agreement with Lessee as to the terms of such
refunding or refinancing transaction (including the terms of any debt to be
issued in connection with such refunding or refinancing transaction and the
documentation to be executed in connection therewith), and if after such good
faith negotiation Lessee and the Owner Participant shall have concluded an
agreement with respect to such terms:
(1) within ten (10) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Refinancing Certificate") setting forth (i) the
proposed date on which the Outstanding Certificates will be redeemed,
describing the new debt to be issued and the other aspects of such
refunding or refinancing transaction to be consummated (such date, the
"Refinancing Date", which date shall be determined so as to comply
with Section 6.03(a) of the Trust Indenture) and (ii) the following
information: (A) subject to the limitations set forth in this Section
17, the proposed adjusted ratio of debt evidenced by the Certificates
to the Owner Participant's investment in the beneficial ownership of
the Aircraft (such ratio, the "Debt/Equity Ratio"), (B) the principal
amount of debt to be issued by the Owner Trustee on the Refinancing
Date, and (C) the proposed revised debt amortization and schedules of
Basic Rent, Stipulated Loss Value percentages and Termination Value
percentages and the revised Special Purchase Price (including any
installments thereof). The Refinancing Certificate shall not provide
for a Debt/Equity ratio of more than 4:1. Within ten (10) Business
Days of its receipt of the Refinancing Certificate, Lessee may demand
a verification of the information set forth in the Refinancing
Certificate in the manner described in Section 3.7 of the Lease. Upon
the acceptance by Lessee of the accuracy of the information set forth
in the Refinancing Certificate or the determination of such
information pursuant to such verification procedures (such
information, the "Refinancing Information") the appropriate parties
will take the actions specified in subparagraphs (2) through (6)
below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to the Owner Participant, the Owner Trustee and Lessee
(which may involve an underwriting agreement in connection with a
public offering of such debt or the purchase of such debt by a
publicly funded entity (or entities) or the sale of the Owner
Trustee's interest in the Trust Estate and/or the Aircraft and its
simultaneous resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance
and sale by the Owner Trustee to such institution or institutions on
the Refinancing Date of debt securities in an aggregate principal
amount specified in the Refinancing Information, which amount shall be
at least equal to the aggregate principal amount of all Certificates
Outstanding on the Refinancing Date (such debt securities, the "New
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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 N620SW Certificates shall have
been publicly issued, the early termination notice revocation and
payment provisions shall be modified to comport with the applicable
notice and payment requirements of The Depository Trust Company or any
other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the New Debt in
like manner as the Certificates and will enter into such amendments
and supplements to the Trust Indenture (or such new indenture or other
security agreement) as may be necessary to effect such security;
(5) unless otherwise agreed to or required
by the Owner Participant to be paid as a Transaction Cost and whether
or not such refunding or refinancing transaction is consummated,
Lessee shall pay on a net after-tax basis all of the reasonable
out-of-pocket expenses of all parties to such refunding or
refinancing, including, without limitation, the reasonable fees and
expenses of such parties' counsel (including allocated costs of the
Original Loan Participant's in-house counsel) and any related loan or
commitment fees;
(6) subject to compliance by the Owner
Trustee with all applicable terms and conditions for voluntary
redemption under the Trust Indenture and this Agreement, each Holder
of a Certificate being refinanced or refunded will transfer on the
applicable Redemption Date to the Owner Trustee each Certificate held
by it immediately prior to such refunding or refinancing for
cancellation (and the Owner Trustee shall cancel the same), against
simultaneous receipt by such Holder of payment for the then
outstanding principal amount of such Certificate, accrued and unpaid
interest thereon, Premium, if any, plus in the case of the Series SWA
1996 Trust N620SW-I Certificates, Break Amount, if any, together with
payment in full of all other amounts then payable to such Holder and
the Indenture Trustee hereunder or under the Trust Indenture; 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
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approval shall not be unreasonably withheld) any registration statement filed
with the SEC to be employed in connection therewith. Any public offering of
the New Debt shall not, except as required by Lessee, contain any restrictions
on the sale to Holders who may use ERISA funding sources. It is expressly
understood that the Owner Participant shall have no obligation hereunder to
consent to such public refunding or refinancing if, in its good faith judgment,
such refunding or refinancing increases its or any of its Affiliates' exposure
to (i) liabilities under federal or state securities laws, (ii) regulation
under state or federal securities laws, (iii) the need to disclose publicly
information that is not generally available to the public, or (iv) being
adversely affected in its ability to engage in any other financing transaction,
in each case to a level unacceptable to it in its reasonable, good faith
judgment. Any trustee of public debt shall be (i) Wilmington Trust Company or
(ii) a bank or trust company in the United States and having a combined capital
and surplus of at least $100,000,000, if there be such an institution willing,
able and legally qualified to perform the duties of trustee upon reasonable or
customary terms.
(c) Lessee shall give the Indenture Trustee at least
thirty (30) days' irrevocable written notice of the proposed date of the
optional refunding or refinancing.
(d) Anything in this Section 17 to the contrary
notwithstanding, (i) all agreements and instruments to be executed and
delivered by the Owner Participant or the Owner Trustee under this Section 17
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee shall be
required to execute and deliver any such agreement or instrument or to make any
other arrangements which in its opinion would result in any unreimbursed
increased costs or liability, including any adverse tax consequences or risk
thereof (unless indemnified against to its reasonable satisfaction) or would
result in any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional investment in
connection with any such refinancing.
(e) Without the consent of the Owner Participant, there
shall be no more than two optional refundings or refinancings under this
Section 17.
(f) Any refunding or refinancing pursuant to this Section
17 shall be of all Certificates then Outstanding and shall be effected in
accordance with Section 6.03(a) of the Trust Indenture.
(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).
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(h) No refinancing or refunding pursuant to this Section
17 shall be permitted during the continuance of a Lease Default or a Lease
Event of Default.
SECTION 18. INTERIM DEBT. (a) The parties
hereto acknowledge and agree that each Series SWA 1996 Trust N620SW-I
Certificate originally issued to the Original Loan Participant on the Delivery
Date represents interim debt financing and that it is intended that the Series
SWA 1996 Trust N620SW-I Certificates be refinanced by Series SWA 1996 Trust
N620SW Certificates issued to new Holders. In connection therewith, in the
event that Lessee shall have given written notice to the Owner Trustee, the
Indenture Trustee, the Owner Participant and the Original Loan Participant that
Lessee is requesting a voluntary redemption of the Series SWA 1996 Trust
N620SW-I Certificates (in compliance with the provisions of Articles 6 and 15
of the Trust Indenture) by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in
good faith with Lessee in connection therewith (including the terms of any debt
to be issued in connection with such refunding or refinancing transaction, the
documentation to be executed in connection therewith and with respect to such
amendments to the Operative Agreements as may be necessary in order to
facilitate such permanent debt financing), and if after such good faith
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within five (5) Business Days after the
reaching of such agreement, the Owner Participant will deliver to
Lessee a certificate of an authorized representative of the Owner
Participant (the "Section 18 Refinancing Certificate") setting forth
(i) the proposed date on which the Outstanding Series SWA 1996 Trust
N620SW-I Certificates will be redeemed, describing the new debt to be
issued and the other aspects of such refunding or refinancing
transaction to be consummated (such date, to be determined so as to
comply with Section 6.03(a) or 6.03(b) of the Trust Indenture (as
appropriate), the "Section 18 Refinancing Date") and (ii) the
following information: (A) the principal amount of debt to be issued
by the Owner Trustee on the Section 18 Refinancing Date (which may
include interest accrued to the Section 18 Refinancing Date on the
Outstanding Series SWA 1996 Trust N620SW-I Certificate), (B) and, if
such amount is less than the principal amount of the Outstanding
Series SWA 1996 Trust N620SW-I Certificates, then the amount of any
additional contribution to the Trust Estate to be made by the Owner
Participant on the Section 18 Refinancing Date and (C) the proposed
revised debt amortization and schedules of Basic Rent, Stipulated Loss
Value percentages and Termination Value percentages and the revised
Special Purchase Price (including any installments thereof). The
principal amount of debt to be issued by the Owner Trustee on the
Section 18 Refinancing Date shall not equal more than 80.00% of
Lessor's Cost. Within five (5) Business Days of its receipt of the
Section 18 Refinancing Certificate, Lessee may demand a verification
of the information set forth in the Section 18 Refinancing Certificate
in the manner described in Section 3.7 of the Lease. Upon the
acceptance by Lessee of the accuracy of the information set forth in
the Section 18 Refinancing Certificate or the determination of such
information pursuant to such verification procedures (such
information, the "Section 18 Refinancing Information") the appropriate
parties will take the actions specified in paragraphs (2) through (10)
below;
(2) the appropriate parties will enter into
a financing or loan agreement in form and substance reasonably
satisfactory to Lessee, the Owner Participant and the Owner
PARTICIPATION AGREEMENT [N620SW]
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Trustee (which, subject to subsection (d) below, may involve an
underwriting agreement in connection with a public offering of such
debt or the purchase of such debt by a publicly funded entity (or
entities)) with the institution or institutions to be named therein
(A) providing for (i) the issuance and sale by the Owner Trustee to
such institution or institutions on the Section 18 Refinancing Date of
Series SWA 1996 Trust N620SW Certificates in an aggregate principal
amount specified in the Section 18 Refinancing Information (such debt
securities, the "Section 18 New Debt"), (ii) the application of the
proceeds of the sale of the Section 18 New Debt, plus any additional
contribution to the Trust Estate, to the redemption of the Series SWA
1996 Trust N620SW-I Certificates Outstanding on the Section 18
Refinancing Date and the payment of any other amounts payable to the
Holders under the Operative Agreements on the Section 18 Refinancing
Date, all in accordance with Section 6.03(b) of the Trust Indenture,
and (iii) the payment of the excess, if any, of such proceeds over the
amount necessary to effect such redemption to the Owner Trustee for
payment to the Owner Participant and (B) pursuant to which the parties
to the refinancing transaction (including the Owner Participant and
Lessee but excluding any public holders of debt (other than any
representations, warranties and covenants deemed made by such Holders
by virtue of their accepting any Certificate issued to them)) make
such representations, warranties and covenants as the Owner
Participant or Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend
the Lease to provide that (i) Basic Rent payable in respect of the
period from and after the Section 18 Refinancing Date shall be as
provided in the Section 18 Refinancing Information (and shall take
into account any variation of the sum of any interest payment made
pursuant to paragraph (5) of this Section 18(a)), (ii) amounts payable
in respect of Stipulated Loss Value, Termination Value and Special
Purchase Price from and after the Section 18 Refinancing Date shall be
as provided in the Section 18 Refinancing Information, and (iii) in
the event that the Series SWA 1996 Trust N620SW Certificates shall
have been publicly issued, the early termination notice revocation and
payment provisions shall be modified to comport with the applicable
notice and payment requirements of The Depository Trust Company or any
other depository;
(4) the Owner Trustee will enter into an
agreement to provide for the securing thereunder of the Section 18 New
Debt in like manner as the Series SWA 1996 Trust N620SW-I Certificates
and will enter into such amendments and supplements to the Trust
Indenture (or such new indenture or other security agreement) as may
be necessary to effect such security;
(5) Lessee on behalf of the Owner Trustee
shall pay or cause to be paid to the Original Loan Participant as
Supplemental Rent the Break Amount, if any (as indemnification for the
loss resulting from such refunding or refinancing), and all accrued
and unpaid interest on the Certificates (in each case, without
duplication of other amounts, if any, payable pursuant to any other
provision of the Operative Agreements);
(6) except as provided in paragraph (5)
above, the Owner Trustee shall pay all of the costs of any such
refunding or refinancing so consummated, such costs shall be
considered as Transaction Costs and paid in accordance with and
subject to the limitations of Section 16 above and such Transaction
Costs shall be appropriately considered in calculating
PARTICIPATION AGREEMENT [N620SW]
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the proposed revised debt amortization and schedules of Basic Rent,
Stipulated Loss Value percentages and Termination Value percentages;
(7) each Holder of the Series SWA 1996 Trust
N620SW-I Certificates will deliver to the Owner Trustee the Series SWA
1996 Trust N620SW-I Certificate held by it immediately prior to such
refunding or refinancing for cancellation (and the Owner Trustee shall
cancel the same), against simultaneous receipt by such Holder of
payment of the then outstanding principal amount of such Series SWA
1996 Trust N620SW-I Certificate, accrued and unpaid interest thereon
plus Break Amount, if any, together with payment in full of all other
amounts then payable to such Holder hereunder or under the Series SWA
1996 Trust N620SW-I Certificates or the Trust Indenture;
(8) the appropriate parties will amend such
of the Operative Agreements in such respects as shall be necessary to
reflect any amendments agreed upon by the parties thereto; provided,
that (i) all agreements and instruments to be executed and delivered
by the Owner Participant or the Owner Trustee under this Section 18
shall be reasonably satisfactory in form and substance to the Owner
Participant, (ii) neither Owner Participant nor the Owner Trustee
shall be required to execute and deliver any such agreement or
instrument or to make any other arrangements which in its opinion
would result in any unreimbursed increased costs or liability,
including any adverse tax consequences or risk thereof (unless
indemnified against to its reasonable satisfaction) or would result in
any other material detriment or disadvantage to it, and (iii) the
Owner Participant shall have no obligation to make any additional
investment in connection with any such refinancing;
(9) the appropriate parties will execute and
deliver appropriate closing documents, execute and deliver appropriate
closing certificates and deliver appropriate opinions of counsel;
(10) the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 if, in
its opinion, there is a risk that such refinancing would result in any
unindemnified adverse consequences (including tax consequences);
provided, however, that the Owner Participant will be obligated to
proceed with such refinancing if Lessee agrees to indemnify the Owner
Participant for such unindemnified adverse consequences (any such
indemnity to be satisfactory to the Owner Participant).
Notwithstanding the foregoing, the Owner Participant shall not be
obligated to proceed with any refinancing under this Section 18 unless
(i) the Lessee requires in the case of a private refinancing, each
Holder to represent to the Lessee that it is not using ERISA funding
sources, or that an exemption is available with respect to its
purchase and holding of the debt, or (ii) in the case of a public
refinancing, an exemption with respect to pass through certificates
(such as Prohibited Transaction Exemption 89-89 or 90-24 or any other
comparable exemption) is available; and
(11) the Owner Participant's obligations
under this Section 18(a) may be discharged by the appointment of an
investment banker satisfactory to Lessee.
PARTICIPATION AGREEMENT [N620SW]
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(b) Only one optional refinancing or refunding pursuant
to this Section 18 shall be permitted during the Term and such refinancing
shall occur on or prior to the second anniversary of the Delivery Date.
(c) Any refinancing or refunding pursuant to this Section
18 shall be of all Series SWA 1996 Trust N620SW-I Certificates then
Outstanding.
(d) Any public refinancing pursuant to this Section 18
shall comply with all the restrictions, limitations and conditions applicable
in the case of a public refinancing pursuant to Section 17(b) hereof.
(e) No refunding or refinancing pursuant to this Section
18 shall be permitted during the continuance of a Lease Default (of the type
described in Section 14.1 or 14.5 of the Lease) or a Lease Event of Default.
(f) When calculating any of the information required to
be set forth in a Section 18 Refinancing Certificate, the Owner Participant
shall make such calculations in a manner which (A) maintains its Net Economic
Return, (B) minimizes the Net Present Value of Rents to the extent possible
consistent with clause (A), (C) is consistent with Rev. Proc. 75-21 and Rev.
Proc. 75-28 (or any successor thereto) and would not cause the Lease to
constitute a "disqualified leaseback or long term agreement" within the meaning
of Section 467 of the Code (or any successor thereto), and (D) uses the same
methodology and assumptions used by the Owner Participant in determining Basic
Rent, Stipulated Loss Values, Termination Values and Special Purchase Price on
the Delivery Date (except to the extent such assumptions have been altered
since the Delivery Date in connection with an adjustment to Rent pursuant to
Section 3.7 of the Lease).
SECTION 19. SECTION 1110 COMPLIANCE. The
Participants and Lessee agree that the transactions contemplated by this
Agreement and the other Operative Agreements are intended to be, shall be and
should be construed so as to be, entitled to the full benefits of 11 U.S.C.
Section 1110.
PARTICIPATION AGREEMENT [N620SW]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SOUTHWEST AIRLINES CO.,
Lessee
By: /s/ John D. Owen
-----------------------------------
Treasurer
CHRYSLER FINANCIAL CORPORATION,
Owner Participant
By: [SIGNATURE ILLEGIBLE]
-----------------------------------
Assistant Secretary
ROYAL BANK OF CANADA,
acting through its New York Branch
Original Loan Participant
By: /s/ Brian Bolotin
-----------------------------------
Associate
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, in its individual capacity only
as expressly provided herein and
otherwise solely as Owner Trustee,
By: /s/ Pablo de la Canal
-----------------------------------
Corporate Trust Officer
WILMINGTON TRUST COMPANY, not in its
individual capacity, except as otherwise
expressly provided herein, but solely as
Indenture Trustee
By: /s/ David A. Vanaskey, Jr.
-----------------------------------
Senior Financial Services Officer
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PARTICIPATION AGREEMENT [N620SW]
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: N620SW Attn: Bond Administration - Pablo de la Canal
Reference: Southwest Airlines
Owner Participant:
-----------------
Chrysler Financial Corporation Indenture Trustee:
-----------------
225 High Ridge Road Wilmington Trust Company
Stamford, CT 06905 Rodney Square North
Telecopy: (203) 975-3910 1100 North Market Street
Payment Instructions: Wilmington, Delaware 19890-0001
Chase Manhattan Bank Attn: Corporate Trust Administration
ABA No. 021000021 Telecopy: (302) 651-8882
For the account of Payment Instructions:
Chrysler Financial Corporation Wilmington Trust Company
Account No. 036-1-069768 Wilmington, Delaware
Reference: Southwest Airlines ABA No. 031100092
For the account of Southwest Airlines 1996-1
Original Loan Participant: Account No. 30875-0
-------------------------
Royal Bank of Canada, New York Branch Reference: N620SW
Financial Square Attn: David A. Vanaskey
New York, New York 10005-3531 Corporate Trust Administration
Attn: Don Calancie
Telecopy: (212) 428-6459
Payment Instructions:
Chase Manhattan Bank of New York
ABA No. 021000021
For the Account of Royal Bank of Canada,
New York
Account No. 920-1-033363
For further credit to Account No. 2185999
</TABLE>
PARTICIPATION AGREEMENT [N620SW]
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SCHEDULE II
Commitments
<TABLE>
<CAPTION>
Original Percentage of
Loan Participant: Lessor's Cost Dollar Amount
---------------- ------------- -------------
<S> <C> <C>
Royal Bank of Canada,
New York Branch 74.48186621% $24,579,015.85
Owner Participant:
Chrysler Financial Corporation 25.51813379% $ 8,420,984.15
----------- --------------
Total Commitments: 100% $33,000,000.00
=========== ==============
</TABLE>
PARTICIPATION AGREEMENT [N620SW]
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SCHEDULE III
Appraisal
1. The fair market value of the Aircraft on the Delivery Date is equal to
Lessor's Cost.
2. The Aircraft is reasonably estimated to have:
(A) a useful life of at least 30.5 years;
(B) a residual value as of January 2, 2020 of more than 20% of
Lessor's Cost (without taking into account any increase or
decrease for inflation or deflation); and
(C) an estimated fair market value (taking into account expected
inflation or deflation) of not more than the Special Purchase
Price on January 2, 2015.
3. The Aircraft will not be "limited use property" as described in Rev.
Proc. 76-30, 1976-7. CB. 647.
4. Such other matters as may be reasonably requested by the Owner
Participant.
PARTICIPATION AGREEMENT [N620SW]
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EXHIBIT A
TRANSFEREE OP GUARANTY
TRANSFEREE OP GUARANTY, dated as of
________________by___________________________, a ___________ ________
corporation ("Transferee OP Guarantor") to and for the benefit of the Indenture
Trustee, the Owner Trustee, individually and as Owner Trustee, the Lessee and
the Original Loan Participant referred to in the Participation Agreement
described below (collectively, together with their permitted successors and
assigns, "Beneficiaries" and, individually, a "Beneficiary").
WITNESSETH:
WHEREAS, _________________ a _____________
[corporation] ("Transferor"), is Owner Participant under that certain
Participation Agreement, dated as of _______________ among Southwest Airlines
Co., as Lessee, Chrysler Financial Corporation, as Owner Participant [and
Transferor's predecessor in interest], Royal Bank of Canada, New York Branch,
as the Original Loan Participant, 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 June 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,
PARTICIPATION AGREEMENT [N620SW]
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the "Relevant Documents"), strictly in accordance with the terms thereof and
the timely performance of all other obligations of Transferee thereunder (such
payment and other obligations, the "Obligations"), and Transferee OP Guarantor
further agrees to pay all expenses (including, all fees and disbursements of
counsel) that may be paid or incurred by Beneficiaries in enforcing any rights
with respect to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, Transferee OP Guarantor
under this Guaranty.
(b) No payment or payments made by Transferee,
Transferee OP Guarantor, any other guarantor or any other Person or received or
collected by any Beneficiary from Transferee, Transferee OP Guarantor, any
other guarantor or any other person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of Transferee OP Guarantor
hereunder until the Obligations are paid and performed in full.
(c) If for any reason any Obligation (whether
affirmative or negative in character) shall not be observed or performed or
paid promptly when due and payable, Transferee OP Guarantor shall promptly
perform or observe or cause to be performed or observed each such Obligation or
undertaking and shall forthwith pay such amount at the place and to the person
or entity entitled thereto pursuant to the Relevant Documents regardless of
whether or not any Beneficiary or anyone on behalf of any Beneficiary shall
have instituted any suit, action or proceeding or exhausted its remedies or
taken any steps to enforce any rights against Transferee or any other person or
entity to compel any such performance or to collect all or any part of such
amount pursuant to the provisions of the Relevant Documents or at law or in
equity, or otherwise, and regardless of any other condition or contingency.
3. No Subrogation. Notwithstanding any payment or
payments made by Transferee OP Guarantor hereunder or any set-off or
application of funds of Transferee OP Guarantor by any Beneficiary, Transferee
OP Guarantor shall not be entitled to be subrogated to any of the rights of any
Beneficiary against Transferee or any collateral, security or guarantee or
right of set-off held by any Beneficiary for the payment of the Obligations,
nor shall Transferee OP Guarantor seek or be entitled to seek any reimbursement
from Transferee in respect of payments made by Transferee OP Guarantor
hereunder, unless all amounts and performance then owing to Beneficiaries by
Transferee on account of the Obligations shall have been paid and performed in
full.
4. Amendments, etc., with respect to the
Obligations; Waiver of Rights. The Transferee OP Guarantor shall remain fully
obligated hereunder notwithstanding that, without any reservation of rights
against the Transferee OP Guarantor and without notice to or further assent by
the Transferee OP Guarantor, any demand for payment or performance of any of
the Obligations made by any Beneficiary may be rescinded by such party and any
of the Obligations continued, and the Obligations, or the liability of any
other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by any Beneficiary
and any Relevant Document, and/or any collateral security document or other
guarantee or document in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the parties thereto may
deem advisable from time to time, and any
PARTICIPATION AGREEMENT [N620SW]
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collateral security, guarantee or right of offset at any time held by any
Beneficiary for the payment or performance of the Obligations may be sold,
exchanged, waived, surrendered or released. No Beneficiary shall have any
obligation to protect, secure, perfect or insure any lien at any time held by
it as security for the Obligations or for this Guaranty or any property subject
thereto. When making any demand hereunder against the Transferee OP Guarantor,
a Beneficiary may, but shall be under no obligation to, make a similar demand
on the Transferee or any other guarantor, and any failure by a Beneficiary to
make any such demand or to collect any payments from the Transferee or any such
other guarantor or any release of the Transferee or such other guarantor shall
not relieve the Transferee OP Guarantor of its obligations or liabilities
hereunder, and shall not impair or affect the rights and remedies, express or
implied, or as a matter of law, of any Beneficiary against the Transferee OP
Guarantor. For purposes hereof, "demand" shall include the commencement and
continuance of any legal proceedings.
5. Guaranty Absolute and Unconditional. The
Transferee OP Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by any Beneficiary upon this Guaranty or acceptance of this Guaranty;
the Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Guaranty; and all dealings between the Transferee or the
Transferee OP Guarantor and any Beneficiary shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Guaranty. The
Transferee OP Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Transferee or the
Transferee OP Guarantor with respect to the Obligations. The Transferee OP
Guarantor understands and agrees that this Guaranty shall be construed as a
continuing, absolute and unconditional guarantee of payment and performance
(and not merely of collectibility) without regard to (a) the validity,
regularity or enforceability of any Relevant Document, any of the Obligations
or any collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by any Beneficiary, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) that may at any time be available to or be asserted by the
Transferee against any Beneficiary, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Transferee or the Transferee OP
Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of the Transferee for the Obligations, or of the Transferee
OP Guarantor under this Guaranty, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against the Transferee OP Guarantor,
any Beneficiary may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Transferee or any other person or
entity or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by any Beneficiary to
pursue such other rights or remedies or to collect any payments from the
Transferee or any such other person or entity or to realize upon any such
collateral security or guarantee or exercise any such right of offset, or any
release of the Transferee or any such other person or entity or any such
collateral security, guarantee or right of offset, shall not relieve the
Transferee 0P Guarantor of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of any Beneficiary against the Transferee OP Guarantor. This
Guaranty shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Transferee OP Guarantor and the
successors and assigns thereof, and shall inure to the benefit of the
Beneficiaries, and their respective successors, endorsees, transferees and
assigns, until all of the Obligations and the obligations of the Transferee OP
Guarantor under this Agreement shall have been
PARTICIPATION AGREEMENT [N620SW]
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<PAGE> 67
satisfied by payment and performance in full. The Transferee OP Guarantor
further agrees that, without limiting the generality of this Guaranty, if any
Beneficiary (or any assignee thereof) shall be prevented by applicable law from
exercising its remedies (or any of them) against the Transferee under any
Operative Document, such Beneficiary (or any assignee thereof) shall be
entitled to receive hereunder from the Transferee OP Guarantor, upon demand
therefor, the sums that would have otherwise been due from the Transferee had
such remedies been able to be exercised.
6. Reinstatement. This Guaranty shall continue to
be effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, or any of the Obligations is rescinded or must otherwise be
restored or returned by any Beneficiary upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Transferee or the Transferee
OP Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the Transferee
or the Transferee OP Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made. The Transferee OP
Guarantor shall not commence any "case" (as defined in Title 11 of the United
States Code) against the Transferee.
7. Payments. The Transferee OP Guarantor hereby
guarantees that payments hereunder shall be paid without set-off, counterclaim,
deduction or withholding, except as required by applicable law, and shall be
made in Dollars, provided, if any withholding Taxes are so imposed under
applicable law, the Transferee OP Guarantor shall pay an additional amount such
that the net amount actually received by the Person entitled thereto, free of
withholding, will equal the amount then due absent such withholding.
8. Representations and Warranties. The Transferee OP
Guarantor hereby represents and warrants that:
(a) it is a [corporation] duly organized and
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power
and authority to carry on its business as now conducted, to
own or hold under lease its properties and to enter into and
perform its obligations under this Guaranty;
(b) this Guaranty has been duly authorized by all
necessary corporate action on the part of the Transferee OP
Guarantor, does not require any approval not already obtained
of stockholders of the Transferee OP Guarantor or any approval
or consent not already obtained of any trustee or holders of
any indebtedness or obligations of the Transferee OP
Guarantor, and has been duly executed and delivered by the
Transferee OP Guarantor;
(c) this Guaranty constitutes a legal, valid and
binding obligation of the Transferee OP Guarantor enforceable
in accordance with its terms;
(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
PARTICIPATION AGREEMENT [N620SW]
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<PAGE> 68
the Transferee OP Guarantor or the ability of the Transferee
OP Guarantor to perform its obligations under this Guaranty;
(e) its net worth (as defined in Section 8(l) of
the Participation Agreement) is at least $75,000,000; and
(f) there has not occurred any event which
constitutes (or to the best of its knowledge would, with the
passage of time or the giving of notice or both, constitute)
an Indenture Event of Default which has been caused by or
relates to the Transferee OP Guarantor and which is presently
continuing.
9. Severability. Any provision of this Guaranty
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
10. No Waiver; Cumulative Remedies . No
Beneficiary shall by any act (except by a written instrument pursuant to
Section 12 hereof), delay, indulgence, omission or otherwise be deemed to have
waived any right or remedy hereunder or to have acquiesced in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any Beneficiary, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by a Beneficiary of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy that such Beneficiary
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
11. Integration. This Guaranty represents the
entire agreement of Transferee OP Guarantor with respect to the subject matter
hereof and there are no promises or representations by any Beneficiary relative
to the subject matter hereof not reflected herein.
12. Amendments and Waivers. None of the terms or
provisions of this Guaranty may be waived, amended or supplemented or otherwise
modified except by a written instrument executed by Transferee OP Guarantor and
each Beneficiary.
13. Section Headings. The Section headings used
in this Guaranty are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
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.
PARTICIPATION AGREEMENT [N620SW]
A-5
<PAGE> 69
15. GOVERNING LAW. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO ANY CONFLICT OF
LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION.
16. Notices. All notices and other
communications required under the terms and conditions hereof shall be given
and shall be effective in accordance with the provisions of Section 13(a) of
the Participation Agreement; provided that notices to the Transferee OP
Guarantor shall be sent to _______________________.
PARTICIPATION AGREEMENT [N620SW]
A-6
<PAGE> 70
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 [N620SW]
A-7
<PAGE> 71
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 June 1, 1996, among Southwest
Airlines Co., as Lessee, Chrysler Financial Corporation, as Owner Participant,
Royal Bank of Canada, New York Branch, as Original Loan Participant, 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 June 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, Original Loan Participant and
Lessee and their successors and assigns, all of the duties and obligations of
Assignor whenever accrued (other than duties and obligations of Assignor
required to be performed by it on or prior to the date hereof under the
Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement or
any other contract, agreement, document or other instrument relating to the
Trust Estate to which Assignor is a party or by which it is bound) pursuant to
the Participation Agreement, the Trust Agreement, the Tax Indemnity Agreement
or any other
PARTICIPATION AGREEMENT [N620SW]
B-1
<PAGE> 72
contract, agreement, document or other instrument relating to the Trust Estate
to which Assignor is a party or by which it is bound, and hereby confirms that
it shall be deemed a party to the Participation Agreement, the Trust Agreement,
the Tax Indemnity Agreement and each other contract, agreement, document or
other instrument relating to the Trust Estate to which Assignor is a party or
by which it is bound as if therein named as Owner Participant.
4. Release of Assignor. Except for liabilities not assumed as
provided in Section 3 hereof and except to the extent applicable as a condition
to the continued enforcement of any rights thereunder retained by Assignor,
upon the execution of this Assignment and Assumption Agreement, Assignor shall
have no further duty or obligation under the Participation Agreement, the Trust
Agreement, the Tax Indemnity Agreement or under any other contract, agreement,
document or other instrument relating to the Trust Estate to which Assignor is
a party or by which it is bound; provided, however, that Assignor shall in no
event be released from any liability on account of any breach by it of any
representations or warranties, covenants or obligations set forth in the
Participation Agreement or for any fraudulent or willful misconduct engaged in
by it on or prior to the date hereof; provided further, that Assignor shall
remain liable for, and shall indemnify and hold harmless the Original Loan
Participant from and against any reduction in the amount payable out of the
Trust Estate to the Original Loan Participant, and any other losses, costs or
expenses incurred by the Original Loan Participant to the extent that any such
reduction, loss, cost or expense shall result from the imposition or
enforcement of any Lien or any claim against the Trust Estate by a taxing
authority because of the nonpayment by Assignor of taxes imposed on or measured
by its income or gross receipts by such taxing authority arising from the
assignment hereunder.
5. Appointment as Attorney-in-Fact. In furtherance of the within
assignment, Assignor hereby constitutes and appoints Assignee, and its
successors and assigns, the true and lawful attorneys of Assignor, with full
power of substitution, in the name of Assignee or in the name of Assignor but
on behalf of and for the benefit of and at the expense of Assignee, to collect
for the account of Assignee all items sold, transferred or assigned to Assignee
pursuant hereto; to institute and prosecute, in the name of Assignor or
otherwise, but at the expense of Assignee, all proceedings that Assignee may
deem proper in order to collect, assert or enforce any claim, right or title of
any kind in or to the items sold, transferred or assigned; to defend and
compromise at the expense of Assignee any and all actions, suits or proceedings
as to title to or interest in any of the property acquired by Assignee; and to
do all such acts and things in relation thereto at the expense of Assignee as
Assignee shall reasonably deem advisable. Assignor hereby acknowledges that
this appointment is coupled with an interest and is irrevocable by Assignor in
any manner or for any reason.
6. Payments. Assignor hereby covenants and agrees to pay over to
Assignee, if and when received following the date hereof, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of Assignor that, under Section 2 hereof, belong to Assignee, and
Assignee hereby covenants and agrees to pay over to Assignor, if and when
received following the date hereof, any amounts (including any sums payable as
interest in respect thereof) paid to or for the benefit of Assignee that, under
Section 2 hereof, belong to Assignor.
PARTICIPATION AGREEMENT [N620SW]
B-2
<PAGE> 73
7. Representations and Warranties. Assignee represents and warrants
that:
(a) it is a [corporation] duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority to carry on its business as now conducted, to own
or hold under lease its properties and to enter into and perform its
obligations under this Agreement and the Owner Participant Agreements;
(b) this Agreement has been duly authorized by all necessary corporate
action on the part of the Assignee, does not require any approval not already
obtained of stockholders of the Assignee or any approval or consent not already
obtained of any trustee or holders of any indebtedness or obligations of the
Assignee, and has been duly executed and delivered by the Assignee;
(c) assuming that this Agreement and each of the Owner Participant
Agreements is the legal, valid and binding obligation of each other party
thereto, this Agreement and each such Owner Participant Agreement constitute
the legal, valid and binding obligations of the Assignee enforceable in
accordance with their respective terms;
(d) subject to and in reliance upon the representations made by the Original
Loan Participant and Lessee in Sections 8(o) and 7(a)(xv) of the Participation
Agreement, respectively, and compliance with the covenants of Section 8(d) and
8(bb) of the Participation Agreement, neither the execution and delivery by the
Assignee of this Agreement, nor the consummation of the transactions
contemplated hereby or by the Owner Participant Agreements, nor compliance by
the Assignee with any of the terms and provisions hereof or of the Owner
Participant Agreements will contravene any United States federal or state law,
judgment, governmental rule, regulation or order applicable to or binding on
the Assignee (it being understood that no representation or warranty is made
with respect to laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws, rules
or regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Permitted Liens of the type described in clause (a) of the
definition thereof) upon the Trust Estate under any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, corporate charter, by-law or other agreement or instrument to
which the Assignee is a party or by which it or its properties may be bound or
affected;
(e) there are no pending or, to the knowledge of the Assignee, threatened
actions or proceedings against the Assignee before any court or administrative
agency which, if determined adversely to the Assignee, would materially
adversely affect the financial condition of the Assignee or the ability of the
Assignee to perform its obligations under this Agreement or the Owner
Participant Agreements;
(f) on the Delivery Date, there will be no Lessor Liens attributable to the
Assignee;
(g) the Assignee's net worth (as defined in Section 8(l) of the
Participation Agreement) is at least $75,000,000;
(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;
<PAGE> 74
(i) it is a permitted Transferee under Section 8(l)(A) of the Participation
Agreement;
(j) it is a "citizen of the United States" within the meaning of 49 U.S.C.
Section 40102(a)(15)(C) [or it has, at its sole cost and expense on an
after-tax basis (including any continuing costs of any voting trust), entered
into a voting trust or similar arrangement which permits the registration of
the Aircraft under the Act in the name of the Owner Trustee without any
restriction on the operation of the Aircraft]; and
(k) it has the full power and authority to enter into the transactions
contemplated by the Owner Participant Agreements.
8. GOVERNING LAW. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL IN
ALL RESPECTS BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO ANY
CONFLICT OF LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION.
<PAGE> 75
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Assumption Agreement as of the day and year first above written.
[ASSIGNOR]
By
--------------------------------------
Title:
----------------------------------
[ASSIGNEE]
By
--------------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 4.9
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
Dated as of May 1, 1998
among
SOUTHWEST AIRLINES CO.,
as Lessee
CHRYSLER FINANCIAL CORPORATION,
as Owner Participant
FIRST UNION NATIONAL BANK,
in its individual capacity only as expressly provided herein and
otherwise solely as Owner Trustee,
and
WILMINGTON TRUST COMPANY,
in its individual capacity and as Indenture Trustee
and in its capacity as Pass Through Trustee under
the Pass Through Trust Agreement
and as Holder
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1996 Trust N620SW)
<PAGE> 2
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT dated as of May 1,
1998 (this "Amendment") by and among (i) Southwest Airlines Co., a Texas
corporation ("Lessee"), (ii) Chrysler Financial Corporation, a Michigan
corporation ("Owner Participant"), (iii) First Union National Bank, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee under the Trust Agreement ("Owner
Trustee"), and (iv) Wilmington Trust Company, a Delaware banking corporation,
in its individual capacity and as Indenture Trustee under the Trust Indenture
(the "Indenture Trustee") and in its capacity as Pass Through Trustee under the
Pass Through Trust Agreement ("Pass Through Trustee") and as Holder, amends
that certain Participation Agreement respecting the aircraft having U.S.
registration number N620SW and dated as of June 1, 1996 (the "Participation
Agreement"), by and among Lessee, Owner Participant, Royal Bank of Canada, a
Canadian chartered bank, acting through its New York Branch (the "Original Loan
Participant"), Owner Trustee and Indenture Trustee,
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, capitalized
terms used herein shall have the meanings attributed thereto in the
Participation Agreement; and
WHEREAS, the Delivery Date occurred on June 3, 1996; and
WHEREAS, concurrently with the execution of this Amendment, the Series
SWA 1996 Trust N620SW-I Certificate held by the Original Loan Participant is
being refinanced by the issuance of one or more new Certificates issued to Pass
Through Trustee as Holder; and
WHEREAS, as contemplated by Section 18 of the Participation Agreement,
the parties hereto desire to amend the Participation Agreement in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
Section 1. Amendment to Schedule I. Schedule I to the
Participation Agreement is hereby deleted in its entirety and replaced with
Schedule I to this Agreement.
Section 2. Amendments to Section 7(b). Section 7(b) of the
Participation Agreement is hereby amended in the following manner:
(i) Section 7(b) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase is
hereby amended to be and read in its entirety as follows:
"Operative Agreement or Pass Through Trust Agreement" and
"Operative Agreements or Pass Through Trust Agreement"
PARTICIPATION AMENDMENT [N620SW]
-1-
<PAGE> 3
except in the case of Section 7(b)(iii) where the phrase "Operative
Agreements" is hereby amended to be and read, in its entirety, "Operative
Agreements and the Pass Through Trust Agreement."
(ii) Section 7(b)(i) is hereby amended as follows:
(a) the following language is added immediately after the
words "combined or unitary return with such Indemnified
Party)" and before the words "harmless from, any and all":
"except that for purposes of this Section 7(b)(i) an
Indemnified Party shall not include any Holder other than
Original Loan Participant";
(b) unless as otherwise provided in (c) below, wherever the
term "Certificates" is used, such term is hereby amended to be
and read in its entirety as follows:
"Certificates and each Pass Through Certificate"; and
(c) the language immediately after the phrase "or the
issuance, reissuance, acquisition, redemption, expiration or
subsequent transfer thereof under the Trust Indenture" is
hereby amended to be and read in its entirety as follows:
"and the Pass Through Trust Agreement, or the beneficial
interests in the Trust Estate and the 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 Pass Through
Trust Estate, amounts payable with respect to the Certificates
and each Pass Through Certificate, including withholding Taxes
imposed on payments of principal, interest, Premium or Break
Amount on the Certificates or payments of principal of,
interest on or any other amounts payable with respect to each
Pass Through Certificate that are asserted against the Owner
Participant, Owner Trustee or Pass Through Trustee, as
withholding agent, or otherwise with respect to or in
connection with the transactions contemplated by the Operative
Agreements."
Section 3. Amendments to Section 7(c). Section 7(c) of the
Participation Agreement shall be amended in the following manner:
(i) Section 7(c) is hereby amended such that wherever the
phrase "Operative Agreement" or "Operative Agreements" is used, such phrase
includes the Pass Through Trust Agreement.
(ii) Clause (d) of Section 7(c)(i) is hereby amended to be
and read in its entirety as follows:
"(d) the offer, sale or delivery of the Certificates or the
Pass Through Certificates, whether before or after the
Delivery Date (the indemnity in this clause (d) to extend
PARTICIPATION AMENDMENT [N620SW]
-2-
<PAGE> 4
also to any Person who controls an Indemnified Party, its
successors, assigns, employees, servants and agents within the
meaning of Section 15 of the Securities Act)."
(iii) The final paragraph of Section 7(c) is hereby amended
to be and read in its entirety as follows:
"Lessee agrees to pay the reasonable and continuing fees and
expenses of Indenture Trustee (including the reasonable fees
and expenses of its counsel and any agent appointed in
accordance with Section 9.02(c) of the Trust Indenture) and
Pass Through Trustee and, as provided in Section 6.07 of the
Trust Agreement, Owner Trustee (including, but not limited to,
the reasonable fees and expenses of its counsel), without
cost, on a net after-tax basis, to Owner Participant, for
acting as such, other than such fees and expenses which
constitute Transaction Costs and are payable by 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 Lessee."
Section 4. Amendments to Section 8. Section 8 of the
Participation Agreement is hereby amended in the following respects:
(i) Section 8(e) is hereby amended to be and read in its
entirety as follows:
"(e) (i) Pass Through Trustee hereby agrees that, except
as otherwise required by applicable law including, without
limitation, any law which requires Pass Through Trustee to act
within its own discretion, it shall not, without the prior
written consent of Owner Trustee, direct Indenture Trustee to
take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization,
direction or consent of, or notice from, the Holders holding a
specified percentage in principal amount of Outstanding (as
defined in the Trust Indenture) Certificates unless Pass
Through Trustee receives a Direction (as defined in the Pass
Through Trust Agreement) to so direct the Indenture Trustee
from Certificateholders (as defined in the Pass Through Trust
Agreement) holding the same percentage in principal amount of
Outstanding Certificates (as defined in the Pass Through Trust
Agreement) evidencing Fractional Undivided Interests (as
defined in the Pass Through Trust Agreement) in the Trust (as
defined in the Pass Through Trust Agreement) holding the
Certificates.
(ii) Lessee and Pass Through Trustee hereby agree
that Article X of the Pass Through Trust Agreement (to the
extent relating to the Certificates) shall not be amended
without the prior written consent of Owner Participant.
(iii) Pass Through Trustee hereby agrees that,
except as otherwise required by applicable law including,
without limitation, any law which requires Pass Through
PARTICIPATION AMENDMENT [N620SW]
-3-
<PAGE> 5
Trustee to act within its own discretion, if requested to do
so by Owner Trustee or Owner Participant, Pass Through Trustee
shall request a Direction from the relevant Certificateholders
to establish whether Pass Through Trustee, in its capacity as
a Holder, may direct the Indenture Trustee to take or refrain
from taking any action under the Operative Agreements."
(ii) Section 8(l) is hereby amended by deleting the
references therein to the Original Loan Participant.
(iii) Section 8(bb) is hereby amended to be and read in its
entirety as follows:
"(bb) Transfers of Debt Interests. Except in connection
with any transfer pursuant to Section 17 or 18 hereof, or
Section 8.03(e)(ii) of the Indenture, each Holder covenants
that it will not transfer its Certificate to any Person unless
such Person represents and warrants in writing to such Holder,
the Owner Participant and Lessee either that (a) no part of
the funds used by it to acquire its Certificate constitutes
'plan assets' of any 'employee benefit plan' within the
meaning of ERISA or any 'plan' within the meaning of Section
4975(e)(1) of the Code or (b) its purchase or acquisition of
such Certificate will not result in a nonexempt prohibited
transaction under Section 4975 of the Code or Section 406 of
ERISA. Any such Person shall require any transferee of its
interest to make the representations and warranties in the
preceding sentence."
Section 5. Amendments to Section 11(f). Section 11(f) of the
Participation Agreement is hereby amended such that wherever the phrase
"Operative Agreement" or "Operative Agreements" is used, such phrase is hereby
amended to be and read in its entirety as follows:
"Operative Agreement and the Pass Through Trust Agreement" and
"Operative Agreements and the Pass Through Trust Agreement."
Section 6. Amendments to Section 15. Section 15(b) of the
Participation Agreement is hereby amended to be and read in its entirety as
follows:
"(b) Survival. The representations, warranties,
indemnities and agreements of Lessee, Owner Trustee, Indenture
Trustee, Owner Participant, Pass Through Trustee and any
Holder provided for in this Agreement, and Lessee's, Owner
Trustee's, Indenture Trustee's, Owner Participant's, Pass
Through Trustee's and any Holder's obligations under any and
all thereof, shall survive the making available of the Owner
Participant's Commitment, the delivery or return of the
Aircraft, the transfer of any interest of Owner Participant in
the Trust Estate or the Aircraft or any Engine or the transfer
of any interest by any Holder in any Certificate or the Trust
Indenture Estate and the expiration or other termination of
this Agreement, any other Operative Agreement or the Pass
Through Trust Agreement, except as otherwise expressly
provided herein or therein."
PARTICIPATION AMENDMENT [N620SW]
-4-
<PAGE> 6
Section 7. Amendment to Section 16. Section 16(b) of the
Participation Agreement is hereby amended by changing "0.327156%" in clause (i)
thereof to read "0.332897%" and by changing "0.641933%" in clause (ii) thereof
to read "0.643305%."
Section 8. Ratification. Except as amended hereby, the
Participation Agreement continues and shall remain in full force and effect in
all respects.
Section 9. Authorization to Execute Amendments. By execution of
this Amendment, Owner Participant hereby authorizes, directs and instructs
Owner Trustee to execute and deliver this Amendment and any and all other
amendments, agreements and certificates as may be necessary as a result of the
refinancing contemplated hereby and by Section 18 of the Participation
Agreement.
Section 10. Pass Through Trustee a Party. Effective as of the
date hereof, Pass Through Trustee shall be a party to the Participation
Agreement and shall have the rights and obligations of the Holders as set forth
in the Participation Agreement, as amended hereby.
Section 11. Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 12. Governing Law. THIS AMENDMENT SHALL IN ALL RESPECTS
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK. THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
PARTICIPATION AMENDMENT [N620SW]
-5-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Participation Agreement to be duly delivered in the State of New
York and executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SOUTHWEST AIRLINES CO., Lessee
By:
-------------------------------------
Treasurer
CHRYSLER FINANCIAL CORPORATION
Owner Participant
By:
-------------------------------------
Vice President
FIRST UNION NATIONAL BANK,
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:
------------------------------------
Senior Financial Services Officer
WILMINGTON TRUST COMPANY,
in its capacity as Pass Through
Trustee under each of the
separate Pass Through Trust
Agreements and as Holder
By:
---------------------------------------
Senior Financial Services Officer
PARTICIPATION AMENDMENT [N620SW]
-6-
<PAGE> 8
SCHEDULE I
Names and Addresses
<TABLE>
<S> <C>
Lessee: Indenture Trustee and Pass Through
Trustee and Holder:
Southwest Airlines Co.
2702 Love Field Drive Wilmington Trust Company
P.O. Box 36611 Rodney Square North
Dallas, Texas 75235-1611 1100 North Market Street
Attn: Treasurer Wilmington, Delaware 19890-0001
Telecopy: (214) 792-4022
Attn: Corporate Trust
Payment Instructions: Administration
Southwest Airlines Co. Telecopy: (302) 651-8882
Bank One Dallas
ABA No. 11100614 Payment Instructions:
Account No. 98120109 Wilmington Trust Company
Reference: N620SW Wilmington, Delaware
ABA No. 031100092
Owner Participant: For the account of Southwest
Airlines 1996-1
Chrysler Financial Corporation Account No. 30875-0
225 High Ridge Road Reference: N620SW
Stamford, CT 06905 Attn: David A. Vanaskey
Telecopy: (203) 975-3910 Corporate Trust Administration
Payment Instructions:
The Chase Manhattan Bank
ABA No. 021000021
For the account of
Chrysler Financial Corporation
Account No. 036-1-069768
Reference: Southwest Airlines
Owner Trustee:
First Union National Bank
230 South Tryon Street, 9th Floor
Charlotte, NC 28288-1179
Attn: Bond Administration
Telecopy: (704) 383-7316
Payment Instructions:
First Union National Bank
230 South Tryon Street, 9th Floor
Charlotte, NC 28288-1179
ABA No. 053000219
Account No. 465946
Attn: Bond Administration/Pablo de la Canal
Reference: Southwest Airlines
</TABLE>
PARTICIPATION AGREEMENT [N620SW]
I-1
<PAGE> 1
- --------------------------------------------------------------------------------
EXHIBIT 4.10
SALE AND LEASE AGREEMENT
dated as of June 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 N621SW
- --------------------------------------------------------------------------------
All right, title and interest of Lessor in and to this Sale and Lease
Agreement and the Aircraft (including the Engines) has been assigned to and is
subject to a security interest in favor of WILMINGTON TRUST COMPANY, as
Indenture Trustee. This Sale and Lease Agreement has been executed in several
counterparts. No security interest in Lessor's right, title and interest in
and to this Sale and Lease Agreement may be created through the transfer or
possession of any counterpart other than the counterpart identified, for
purposes of perfection of a security interest in chattel paper (as such term is
defined in the UCC), as the original counterpart. [This is not the original
counterpart.]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Sale, Lease and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Term and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Variable Amounts on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Adjustment to Basic Rent, Stipulated Loss Value and Termination Value . . . . . . . . . . . . . . . 16
3.7.1 Adjustments upon Payment by Lessor of Transaction Costs, Etc . . . . . . . . . . . . . . 16
3.7.2 Recalculation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Lessor's Representations and Warranties; DISCLAIMER; Certain Agreements . . . . . . . . . . . . . . 18
4.1 Lessor's Representations and Warranties; DISCLAIMER of Lessee . . . . . . . . . . . . . . . . . . . 18
4.2 Certain Agreements of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5. Return of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 General Condition upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.1 Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.2 Free of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.3 Operating Configuration and Condition . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1.4 Cleanliness and Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1.5 Parts and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Return of Other Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Return at End of Base Lease Term or Renewal Lease Term . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 Manuals; Service Bulletins, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Failure to Return Aircraft or Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 Aid in Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.7 Storage upon Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7. Registration, Operation, Possession, Subleasing and Records . . . . . . . . . . . . . . . . . . . . 23
7.1 Registration and Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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7.1.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1.2 Nameplate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1.4 Insurance Requirements; Government Requisition; Indemnity . . . . . . . . . . . . . . . . 24
7.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.1 Interchange and Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.2 Testing and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.3 Civil Reserve Air Fleet Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.4 Installation of Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.5 Installation of Engines on Other Airframes . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.6 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.7 Wet Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2.8 Sublease to Permitted Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.2 Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3.3 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8. Maintenance; Replacement and Pooling of Parts; Alterations; Modifications
and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.1 Maintenance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1.2 Compliance with Government Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.3 Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4 Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4.1 Mandatory Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.4.2 Voluntary Alterations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9. Voluntary Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Right of Termination upon Obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Sale of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Retention by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Termination As to Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10. Loss, Destruction, Requisition, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Event of Loss with Respect to Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.1 Lessee's Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.2 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.3 Payment of Stipulated Loss Value and Rent . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.4 Stipulated Loss Value Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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10.1.5 Payment of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.6 Conditions to Replacement of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1.6.1 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.6.2 Tax Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.6.3 Lessee's Obligations with Respect to Replacement Aircraft . . . . . . . . . . . 37
10.1.7 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1.8 Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.1 Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.2 Conditions; Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2.3 Recordation and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2.4 Conveyance; Replacement Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2.5 No Reduction of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Application of Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.1 Replacement of Airframe and Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.2 Replacement of Engine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3.3 Nonreplacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Requisition of Aircraft for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 43
10.5 Requisition of an Engine for Use by Governmental Authorities . . . . . . . . . . . . . . . . . . . . 43
10.6 Application of Payments During Existence of Default . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1 Public Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.2 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.1.3 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2 Insurance Against Loss of or Damage to Aircraft and Engines . . . . . . . . . . . . . . . . . . . . 44
11.2.1 Type, Form and Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.2.2 War-Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3 Certain Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.1 Additional Insureds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.2 Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.3.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2.4 Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2.5 Government Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3 General Policy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.1 Primary Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.2 Coverage for Each Insured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.3 Waiver of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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11.3.5 Notice of Termination or Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.6 Nonliability for Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.7 Identity of Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3.8 Fifty-fifty Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4 Application of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5 Certificates; Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.6 Lessor's Right to Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.7 Insurance for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.8 Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 12. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 13. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.2 Security for Lessor's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.1 Failure to Pay Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.2 Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
14.3 General Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.4 Misrepresentation and Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.5 Bankruptcy, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1 Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.1 Return; Repossession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.1.2 Sale; Use Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.1.3 Certain Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
15.1.3.1 Liquidated Damages--Fair Market Rental Value . . . . . . . . . . . . . . . . . 52
15.1.3.2 Liquidated Damages--Fair Market Sales Value . . . . . . . . . . . . . . . . . . 53
15.1.4 Liquidated Damages upon Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
15.1.5 Rescission and Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15.2 Determination of Fair Market Rental Value and Fair Market Sales Value . . . . . . . . . . . . . . . 54
15.3 No Waiver, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 17. Net Lease; Lessee's Obligations; No Setoff, Counterclaim, Etc . . . . . . . . . . . . . . . . . . . 55
Section 18. Renewal and Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.1 Renewal Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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18.2 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 19. Successor Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 20. Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 21. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 22. Investment of Security Funds; Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . 61
22.1 Investment of Security Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
22.2 Miscellaneous; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 23. Permitted Foreign Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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EXHIBIT A Form of Sale and Lease Agreement Supplement
EXHIBIT B-1 Stipulated Loss Value Schedule
EXHIBIT B-2 Termination Value Schedule
EXHIBIT C Rent Payment Schedule, EBO Installment Payment Schedule and Special Purchase Price
EXHIBIT D Permitted Foreign Air Carriers
EXHIBIT E Assumed Interest Amounts
APPENDIX A Certain Return Conditions
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THIS SALE AND LEASE AGREEMENT, dated as of June 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 March 6, 1996, an AC Form 8050-2 Bill of Sale dated January
19, 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 TO51154.
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.
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"Airframe" means (i) the Boeing Model 737-3H4 aircraft (excluding
Engines or engines from time to time installed thereon) specified in the
initial Lease Supplement, manufactured by Manufacturer and sold by Manufacturer
to Lessee pursuant to the Purchase Agreement, sold hereunder by Lessee to
Lessor, and leased back by Lessor to Lessee, all hereunder and under the
initial Lease Supplement, (ii) any Replacement Airframe, (iii) any and all
Parts so long as the same shall be incorporated in such aircraft and title
thereto shall have vested in Lessor pursuant to the terms of Section 8, and any
and all Parts removed from such aircraft so long as title thereto shall remain
vested in Lessor in accordance with the terms of Section 8, and (iv) all
Records at any time maintained with respect to the foregoing property;
provided, however, that at such time as a Replacement Airframe shall be
substituted hereunder and the replaced Airframe shall be released from the Lien
of the Trust Indenture, such replaced Airframe shall cease to be the Airframe
hereunder.
"Assumed Interest Amount" means, with respect to each Rent Payment
Date, the amount set forth on Exhibit E opposite such date.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended
from time to time, or any successor statute.
"Base Lease Term" means the period commencing on the Base Lease Term
Commencement Date and expiring at the end of the day on January 2, 2020.
"Base Lease Term Commencement Date" means July 2, 1996.
"Base Rate" means the interest rate publicly announced in New York
City from time to time by The Chase Manhattan Bank (National Association) as
its prime or base lending rate.
"Basic Rent" means the rent identified as Basic Rent in and payable
pursuant to Section 3.3.
"Bills of Sale" means the FAA Bill of Sale, the Warranty Bill of Sale,
the Lessee FAA Bill of Sale and the Lessee Warranty Bill of Sale.
"Break Amount" is defined in Section 15.05(b) of the Trust Indenture.
"Business Day" shall have the meaning attributed thereto in the Trust
Indenture, so long as the Trust Indenture shall remain in effect, and otherwise
means a day on which banks are not required or authorized to close in any of
the City of New York, New York, Dallas, Texas, and 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.
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"Certificate Rate" means, as of any date of determination thereof, (i)
in respect of amounts owing or distributable pursuant to the Trust Indenture to
the Holders of Certificates issued prior to the Section 18 Refinancing Date,
7.31%, (ii) in respect of amounts owing to the Holders of Certificates issued
on or after the Section 18 Refinancing Date, the interest rate or, if such
Certificates shall have been issued with more than one Maturity Date, the
weighted average of the interest rates (which weighting is to be based on the
Outstanding principal amounts of the Certificates of each Maturity Date), then
in effect with respect to the then Outstanding principal amounts of the
Certificates, (iii) in respect of any portion of Stipulated Loss Value expected
to be distributed to the Owner Participant, an interest rate equal to the yield
utilized in calculating the Owner Participant's Net Economic Return, and (iv)
in respect of any other amount owing to the Owner Participant (and which is not
distributed to the Holders pursuant to the Trust Indenture), 1% in excess of
the Base Rate, but in no event to exceed the maximum rate permitted by
applicable law.
"Certificates" means the Certificates (as defined in the Trust
Indenture) issued under the Trust Indenture.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Debt Payments" is defined in Section 18.2(e)(1)(b).
"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
SALE AND LEASE AGREEMENT [N621SW]
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the substitution is made shall be released from the Lien of the Trust
Indenture, such replaced Engine shall cease to be an Engine hereunder. The
term "Engines" means, as of any date of determination, all Engines then leased
hereunder.
"Engine Manufacturer" means CFM International, Inc., a Delaware
corporation, in its capacity as manufacturer of the Engines.
"Equity Payments" is defined in Section 18.2(e)(1)(b).
"Estate" means the Trust Estate as that term is defined in the Trust
Agreement.
"Event of Loss" means, with respect to the Aircraft, Airframe or any
Engine, any of the following events with respect to such property: (i)
disappearance or theft of such property or the loss of the use thereof for any
reason not covered by any other clause of this definition, including hijacking,
for a period of three consecutive months or for a period continuing through the
last day of the Term, whichever first occurs, or destruction, damage beyond
economic repair or rendition of such property permanently unfit for normal use
for any reason whatsoever; (ii) any damage to such property which results in an
insurance settlement with respect to such property on the basis of a total loss
or a constructive or compromised total loss; (iii) the confiscation,
condemnation or requisition of use of such property by the Government or any
other government or any instrumentality or agency thereof for a period in
excess of six consecutive months or for a period continuing beyond the Term,
whichever first occurs; (iv) as a result of any rule, regulation, order or
other action by the FAA, DOT or other governmental body (including any court)
having jurisdiction, the use of such property in the normal course of
interstate air transportation of persons shall have been prohibited for a
period of more than six consecutive months, unless Lessee, prior to the
expiration of such six-month period, shall have undertaken and shall be
diligently carrying forward all steps which are necessary or desirable to
permit normal use by Lessee, but in any event (a) in any case in which such
prohibition shall apply generally to all similar Boeing Model 737-300 series
aircraft, if such prohibition is continuing on the last day of the Term, or (b)
in all other cases, if such prohibition is continuing on the earlier of the
first anniversary of such prohibition and the last day of the Term; provided,
however, that if such prohibition is continuing on the last day of the Term, no
Event of Loss pursuant to this clause (iv) shall exist if Lessor shall have
delivered to Lessee a written notice not less than two days prior to the end of
the Term that such prohibition on the last day of the Term shall not be deemed
an Event of Loss; (v) the confiscation, condemnation or requisition of title to
such property by the Government or any other government or any instrumentality
or agency thereof; or (vi) respecting any Engine, any divestiture of title
treated as an Event of Loss pursuant to Section 7.2.1 or any other provision of
this Lease. An Event of Loss with respect to the Aircraft shall be deemed to
have occurred if an Event of Loss occurs with respect to the Airframe. An
Event of Loss shall be deemed to occur as of the date of the disappearance,
theft, loss of use, insurance settlement, prohibition, confiscation,
condemnation or requisition of title or of use, as applicable, except that no
Event of Loss shall be deemed to have
SALE AND LEASE AGREEMENT [N621SW]
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occurred pursuant to clause (i), (iii) or (iv) above until the expiration of
the applicable period referred to therein.
"FAA" or "Federal Aviation Administration" means the Federal Aviation
Administration or any governmental person, agency or other authority succeeding
to the functions of the Federal Aviation Administration.
"FAA Bill of Sale" means a bill of sale for the Aircraft on AC Form
8050-2 delivered to Lessee on the date of delivery of the Aircraft to Lessee by
Manufacturer under the Purchase Agreement.
"FAA Regulations" means the Federal Aviation Regulations issued
pursuant to the Act from time to time, or any successor regulations thereto.
"Floating Rate 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.
"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 N621SW-I
Certificate (including without limitation the Original Loan Participant), (v)
the Estate and the Trust Indenture Estate, (vi) the respective Affiliates,
successors and assigns of the foregoing, and (vii) the respective directors,
officers, employees, agents, partners and servants of the foregoing.
"Indenture and Trust Supplement" means a supplement to the Trust
Agreement and the Trust Indenture, substantially in the form of Exhibit C to
the Trust Indenture.
"Indenture Trustee" means Wilmington Trust Company, not in its
individual capacity but solely as Indenture Trustee under the Trust Indenture
and any successor, separate or additional Indenture Trustee thereunder.
"Indenture Trustee Agreements" means the Participation Agreement and
the Trust Indenture.
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"Interim Lease Term" means the period commencing on the Delivery Date
and expiring at the end of the day on the day before the Base Lease Term
Commencement Date.
"Investment Grade" is defined in Section 11.8.
"Lease", "this Lease", "this Agreement", "hereby", "herein", "hereof",
"hereunder" or other words mean this Sale and Lease Agreement, including
without limitation supplementation hereof by one or more Lease Supplements.
"Lease Default" means any event or condition which, with notice or
lapse of time or both, would constitute a Lease Event of Default.
"Lease Event of Default" is defined in Section 14.
"Lease Period" means each of the Interim Lease Term, 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
SALE AND LEASE AGREEMENT [N621SW]
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(and for the payment of which adequate reserves have been provided in
accordance with generally accepted accounting principles) by appropriate
proceedings so long as such proceedings do not involve any material danger of
the sale, forfeiture, loss or loss of use of the Aircraft, the Airframe or any
Engine or any interest therein, or (iv) claims against Lessor, the Person
serving as Owner Trustee, in its individual capacity, or Owner Participant, as
the case may be, arising out of any transfer by any of such Persons in
violation of the express terms of the Operative Agreements.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or
security interest, or any claim or exercise of rights, affecting the title to
or any interest in property.
"Losses" is defined in Section 7(c)(i) of the Participation Agreement.
"Maintenance Program" is defined in Section 8.1.1.
"Manufacturer" means The Boeing Company, a Delaware corporation, or
any Affiliate thereof whose obligations are guaranteed by The Boeing Company,
and their respective successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
Manufacturer to be attached to the Purchase Agreement Assignment and, if
applicable, the Agreement of Subsidiary by Boeing Domestic Sales Corporation of
even date therewith.
"Net Economic Return" means 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.
SALE AND LEASE AGREEMENT [N621SW]
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"Operative Agreements" means this Agreement, each Lease Supplement,
the Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Ingine 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.
"Original Loan Participant" means Royal Bank of Canada, acting through
its New York Branch, and its successors and permitted assigns as holder of the
Series SWA 1996 Trust N621SW-I Certificates.
"Overdue Rate" means (i) in respect of that portion of Basic Rent,
Stipulated Loss Value, Termination Value or Special Purchase Price (or any
installment thereof) expected to be applied to principal of or interest on the
Certificates, the Past Due Rate, or if Certificates shall have been issued
after the Section 18 Refinancing Date with more than one Maturity Date, 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 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 Chrysler Financial Corporation, a Michigan
corporation, and its successors and permitted assigns.
"Owner Participant Agreements" means the Participation Agreement, the
Trust Agreement and the Tax Indemnity Agreement.
"Owner Trustee" means 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 Original Loan Participant
and their respective successors and permitted assigns.
SALE AND LEASE AGREEMENT [N621SW]
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"Participation Agreement" means the Participation Agreement, dated as
of June 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.
"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.
SALE AND LEASE AGREEMENT [N621SW]
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"Refinancing Date" is defined in Section 17(a) of the Participation
Agreement.
"Renewal Rent" means the rent payable in respect of a Renewal Term
determined pursuant to Section 18.1.
"Renewal Term" means any Floating Rate Renewal Term.
"Rent" means Basic Rent, Renewal Rent and Supplemental Rent.
"Rent Differential Amount" is defined in Section 3.3.
"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.
"Section 18 Refinancing Date" is defined in Section 18(a) of the
Participation Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"SLV Determination Date" means any date set forth in Exhibit B-1
hereto.
"Special Purchase Option Date" is defined in Section 18.2(b).
"Special Purchase Price" is defined in Section 18.2(b).
"Special Purchase Price After-Tax Yield" means the net after-tax
economic yield, total aggregate after-tax cash flow and general pattern of book
earnings expected by the Owner Participant
SALE AND LEASE AGREEMENT [N621SW]
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with respect to the Aircraft through the Special Purchase Option Date if the
Special Purchase Option were exercised and the Special Purchase Option Price
paid in installments, utilizing the multiple investment sinking fund method of
analysis and the same assumptions as used by such Owner Participant (including
the Tax Assumptions set forth in Section 2 of the Tax Indemnity Agreement and
the assumption that the amount of interest payable on the Certificates on each
Rent Payment Date occurring prior to or concurrent with the Special Purchase
Option Date will be the Assumed Interest Amount set forth on Exhibit E in
respect of such Rent Payment Date) in its economic analysis of the transaction
as of the Delivery Date.
"Stipulated Loss Value" means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an
SLV Determination Date, by the percentage set forth opposite such SLV
Determination Date), and (ii) interest on such amount described in clause (i)
above calculated at the Certificate Rate from and including such SLV
Determination Date to but excluding the date of such payment (and, to the
extent that the actual amount of interest paid and to be paid on the
Certificates during the Lease Period in which such SLV Determination Date
occurs up to and including such date is greater or less than the amount
included in calculating the percentage set forth in Exhibit B-1 with respect to
such SLV Determination Date on account of such interest, such percentage shall
be adjusted appropriately to compensate for such differential). Stipulated
Loss Value may be subject to adjustment in accordance with Section 3.7 and
Section 18.2(d) of this Agreement.
"Supplemental Rent" means, without duplication, all amounts,
liabilities and obligations (other than Basic Rent or Renewal Rent) which
Lessee assumes or agrees to pay to Lessor or any other Person hereunder, under
the Participation Agreement or any of the other Operative Agreements,
including, without limitation (i) Stipulated Loss Value and Termination Value
payments and Special Purchase Price payments, (ii) all amounts required to be
paid by Lessee under the agreements, covenants and indemnities contained in the
Participation Agreement and the Tax Indemnity Agreement, and (iii) all amounts
required to be paid pursuant to Sections 3.4, 3.5 and 3.8 hereof.
"Tax Indemnity Agreement" means the Tax Indemnity Agreement, dated as
of June 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 Interim
Lease Term, the Base Lease Term and any Renewal Term then in force or committed
to in accordance with Section 18.1.
"Termination Date" is defined in Section 9.1.
SALE AND LEASE AGREEMENT [N621SW]
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"Termination Value" means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined (and, to the extent that the actual amount of interest paid and to
be paid on the Certificates during the Lease Period in which such TV
Determination Date occurs up to and including such date is greater or less than
the amount included in calculating the percentage set forth in Exhibit B-2 with
respect to such TV Determination Date on account of such interest, such
percentage shall be adjusted appropriately to compensate for such
differential). Termination Value may be subject to adjustment in accordance
with Section 3.7 of this Agreement.
"Transfer" means, with respect to any Person, to transfer, by bill of
sale or otherwise, all such Person's right, title and interest in and to the
Aircraft, Airframe or any Engine, as the case may be, to another Person on an
"as is, where is" basis, free and clear of any Lessor Lien 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 June 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 June 1, 1996, between Owner Trustee and Indenture Trustee, relating
to the Aircraft.
"Trust Indenture Estate" has the meaning attributed to the term
"Indenture Estate" in the Trust Indenture.
"TV Determination Date" means any date set forth in Exhibit B-2
hereto.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"U.S. Air Carrier" means any United States air carrier as to which
there is in force a certificate issued pursuant to 49 U.S.C. Section 41102 and
as to which there is in force an air carrier operating certificate issued
pursuant to Part 121 of the FAA Regulations, or which may operate as an air
carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
"Warranty Bill of Sale" means the full warranty bill of sale for the
Aircraft delivered to Lessee on the date of delivery of the Aircraft to Lessee
by the Manufacturer under the Purchase Agreement.
"Wet Lease" means any arrangement whereby Lessee agrees to furnish the
Airframe and Engines or engines installed thereon to a third party pursuant to
which the Airframe and Engines or
SALE AND LEASE AGREEMENT [N621SW]
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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.
(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 Interim Lease Term, the Base Lease Term and
each Renewal Term, if any.
SALE AND LEASE AGREEMENT [N621SW]
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3.3 BASIC RENT. No Basic Rent shall be paid during the
Interim Lease Term. Lessee hereby agrees to pay to Lessor Basic Rent for the
Base Lease Term with respect to the Aircraft on each Rent Payment Date set
forth in 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.
Although the Basic Rent amounts set forth in Exhibit C hereto have
been computed on the assumption that the amount of interest payable on the
Certificates on the Rent Payment Dates throughout the Base Lease Term will be
the Assumed Interest Amounts, Lessor and Lessee recognize that the actual
amount of interest payable on the Certificates may, from time to time during
the Base Lease Term, be different from the Assumed Interest Amounts.
Accordingly, Basic Rent shall be increased or decreased (but not below zero),
as the case may be, by the Rent Differential Amount (as defined herein). Any
increase in Basic Rent shall constitute additional arrears Rent on the date in
question, and any decrease in Basic Rent shall first decrease arrears Rent
before affecting advance Rent on the date in question. For purposes hereof,
"Rent Differential Amount" shall mean, as of any Rent Payment Date, the
absolute value of the difference between (i) the aggregate amount of interest
due and payable on such Rent Payment Date on the Certificates (or due and
payable on the next following or next preceding Business Day, as the case may
be, if such date shall not constitute a Business Day) and (ii) the Assumed
Interest Amount with respect to such Rent Payment Date. If, as of such Rent
Payment Date, the amount determined in accordance with clause (i) of the
immediately preceding sentence shall be greater than the amount determined in
accordance with clause (ii) of such sentence, the amount of Basic Rent payable
on such Rent Payment Date shall be increased by the Rent Differential Amount.
If, as of such Rent Payment Date, the amount determined in accordance with such
clause (ii) shall exceed the amount determined in accordance with such clause
(i), the amount of Basic Rent due on such Rent Payment Date shall be decreased
(but not below zero) by the Rent Differential Amount.
Anything contained in the Participation Agreement or this Lease or any
other Operative Agreement to the contrary notwithstanding, (a) each installment
of Basic Rent payable under this Lease, whether or not adjusted in accordance
with the immediately preceding paragraph or the provisions of Section 3.7,
shall be, under any circumstances and in any event, in an amount at least
sufficient to pay in full, on the Rent Payment Date on which such installment
is due and payable, any scheduled payments then required to be made on account
of the principal of and interest on the Certificates, and (b) Stipulated Loss
Value, Termination Value and, unless Lessee shall have assumed the Certificates
pursuant to Section 18.2(c) hereof, the Special Purchase Price and the initial
installment of the Special Purchase Price if paid in installments, in each case
whether or not adjusted in accordance
SALE AND LEASE AGREEMENT [N621SW]
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with the provisions of Section 3.7, as of any date of determination thereof,
together with any amount of Basic Rent required to be paid on such date and all
other amounts payable on such date, shall equal, under any circumstances and in
any event, an amount at least sufficient to pay in full any payments then
required to be made on account of the principal of and interest (including,
without limitation, any interest on overdue principal and, to the extent
permitted by applicable law, interest), Premium, if any, and Break Amount, if
any, on the Certificates and all amounts which would be payable prior thereto
or on a parity therewith if Section 3.03 of the Trust Indenture were applicable
at the time of such payment.
3.4 VARIABLE AMOUNTS ON CERTIFICATES. Lessee shall pay
(or cause to be paid) to or on behalf of Lessor an amount of Supplemental Rent
equal to the Break Amount (if any) or the Premium (if any) payable on the
Certificates, amounts due pursuant to Section 15.05 of the Trust Indenture and
each other amount required to be paid (other than principal and interest on the
Certificates) by Lessor as Owner Trustee under the Trust Indenture, on the same
date that such amounts are due under the Trust Indenture, and as provided in
Section 3.6.
3.5 SUPPLEMENTAL RENT. In addition to the amounts payable as
Supplemental Rent pursuant to Section 3.4, Lessee also agrees to pay (or cause
to be paid) to Lessor, or to whomsoever shall be entitled thereto, all
Supplemental Rent with respect to Stipulated Loss Value or Termination Value
when and as the same shall become due and owing and all other amounts of
Supplemental Rent (other than as covered by Section 3.4) within five days after
demand or such other relevant period as may be provided in any Operative
Agreement. Lessee will also pay to Lessor, or to whomsoever shall be entitled
thereto, as Supplemental Rent, to the extent permitted by applicable law,
interest at the Overdue Rate on any part of any installment of Basic Rent or
Renewal Rent not paid when due for any period from and including the date on
which the same was due to but excluding the date of payment in full and (to the
extent permitted by applicable law) on any payment of Supplemental Rent not
paid when due to Lessor, or to whomsoever shall be entitled thereto, as the
case may be, for the period from the date on which the same was due to but
excluding the date of payment in full. The expiration or other termination of
Lessee's obligation to pay Basic Rent or Renewal Rent hereunder shall not limit
or modify the obligations of Lessee with respect to Supplemental Rent.
3.6 PAYMENTS. Payments of Rent and any and all other payments
payable to Lessor hereunder shall be paid in funds of the United States of
America which shall be immediately 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 N621SW, 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
SALE AND LEASE AGREEMENT [N621SW]
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of Supplemental Rent owing to Indenture Trustee or to any Holder pursuant to
the Participation Agreement shall be made in immediately available funds prior
to 11:00 A.M. New York City time, on the due date thereof at the office of
Indenture Trustee or at such other office of such other financial institution
located in the continental United States as the party entitled thereto may so
direct at least five Business Days prior to the due date thereof. All payments
of Supplemental Rent payable to Owner Participant, to the extent that such
amounts constitute Excluded Payments (as defined in the Trust Indenture), shall
be made by wire transfer prior to 11:00 A.M., New York City time, on the due
date thereof, to its account set forth in Schedule I to the Participation
Agreement, with sufficient information to identify the source and application
of the funds. Except as otherwise expressly provided herein, whenever any
payment of Rent or other payment to be made hereunder shall be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
day which is a Business Day and (provided such payment is made on such next
succeeding Business Day) no interest shall accrue on the amount of such payment
from and after such scheduled date.
3.7 ADJUSTMENT TO BASIC RENT, STIPULATED LOSS VALUE AND
TERMINATION VALUE.
3.7.1 ADJUSTMENTS UPON PAYMENT BY LESSOR OF TRANSACTION
COSTS, ETC. If (a) the Transaction Costs referred to in Section 16(a)
of the Participation Agreement paid by Owner Participant in connection
with the closing of this transaction on the Delivery Date are equal to
an amount which is other than .327156% of Lessor's Cost, (b) the
Transaction Costs referred to in Section 16(a) of the Participation
Agreement paid by Owner Participant in connection with the initial
refinancing or refunding of the Certificates pursuant to Section 17 or
18 of the Participation Agreement are equal to an amount which is
other than .641933% of Lessor's Cost, (c) the Delivery Date is not
June 3, 1996, (d) a refinancing or refunding of the Certificates
pursuant to Section 17 or 18 of the Participation Agreement occurs, or
(e) any recalculation of Basic Rent, Stipulated Loss Value and
Termination Value is required by the terms of the Tax Indemnity
Agreement (including at Lessee's election pursuant to Section 16
thereof), then in each case, the Basic Rent percentages set forth in
Exhibit C, the Stipulated Loss Value percentages set forth in Exhibit
B-1 and the Termination Value percentages set forth in Exhibit B-2
shall be recalculated by Owner Participant (i) in the case of a
recalculation pursuant to clause (a) or (c), prior to July 1, 1997,
(ii) in the case of a recalculation pursuant to clause (b) on or prior
to the second rent payment date following the relevant Refinancing
Date or Section 18 Refinancing Date, as the case may be, (iii) in the
case of a recalculation pursuant to clause (d), prior to the relevant
Refinancing Date or Section 18 Refinancing Date, as the case may be,
or (iv) in the case of a recalculation pursuant to clause (e), prior
to the Rent Payment Date next following the event described in clause
(e), in each case in order to: (A) maintain Net Economic Return and
(B) minimize the Net Present Value of Rents to the extent possible
consistent with clause (A). In addition, in the event of an
adjustment pursuant to this Section 3.7, the Special Purchase Price
(including any installments thereof) shall be recalculated in
accordance with the terms of Section 18.2(b).
SALE AND LEASE AGREEMENT [N621SW]
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3.7.2 RECALCULATION PROCEDURES. Any recalculation
of Basic Rent, Stipulated Loss Value and Termination Value percentages
and the Special Purchase Price pursuant to this Section 3.7 shall be
determined by Owner Participant, and shall be subject to the
verification of Lessee and its advisors. Such recalculated Basic
Rent, Stipulated Loss Value and Termination Value percentages and
Special Purchase Price (including installments thereof) shall be set
forth in a Lease Supplement and, in the case of Basic Rent, shall
become effective as of the next succeeding Rent Payment Date and, in
the case of Stipulated Loss Value, Termination Value and the Special
Purchase Price, shall be retroactive to the inception of this Lease.
Such recalculated Basic Rent and, if applicable, the Special Purchase
Price shall be determined so as to conform, in the opinion of Owner
Participant's tax counsel, to all applicable tax constraints and
requirements, including the requirements of Section 467 of the Code
and Sections 4.(1)(B), 4.(6) and 5. of Revenue Procedure 75-21, 75-1
Cum. Bull. 715; provided, however, that notwithstanding the foregoing,
all adjustments provided for herein shall be based on the same
calculation methods and assumptions (including tax assumptions set
forth in Section 2 of the Tax Indemnity Agreement) as were used
initially by the Owner Participant in determining Basic Rent,
Stipulated Loss Values, Termination Values and the Special Purchase
Price for the Aircraft (except and only to the extent such assumptions
are required to be changed by virtue of the event giving rise to the
adjustment or any event giving rise to any prior adjustments pursuant
to the terms of this Lease) and shall take into account the amount and
timing of any contribution made by the Owner Participant to the Estate
subsequent to the Delivery Date. If, upon verification of the
percentages determined by Owner Participant pursuant to this Section
3.7, Lessee does not agree with the determination of Owner
Participant, then an independent accounting firm, to be selected by
Owner Participant and reasonably acceptable to Lessee, shall verify
the computations. Such accounting firm shall be requested to make its
determination within 30 days. Owner Participant shall provide to such
accounting firm such information as it may reasonably require,
including a description of the methodology of the calculations used in
computing such adjustments 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.
SALE AND LEASE AGREEMENT [N621SW]
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<PAGE> 24
SECTION 4. LESSOR'S REPRESENTATIONS AND WARRANTIES; DISCLAIMER;
CERTAIN AGREEMENTS OF LESSEE.
4.1 LESSOR'S REPRESENTATIONS AND WARRANTIES; DISCLAIMER.
LESSEE EXPRESSLY AGREES TO TAKE THE AIRCRAFT "AS IS", AND LESSEE HAS SELECTED
THE AIRCRAFT AND THE MANUFACTURER THEREOF (AND EACH PORTION THEREOF) AND ALL
MAINTENANCE FACILITIES REQUIRED FOR THE AIRCRAFT OR HEREUNDER. NEITHER LESSOR
(INDIVIDUALLY OR AS OWNER TRUSTEE) NOR THE INDENTURE TRUSTEE (INDIVIDUALLY OR
AS INDENTURE TRUSTEE) NOR ANY PARTICIPANT MAKES, HAS MADE OR SHALL BE DEEMED TO
HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE AIRCRAFT OR ANY PART
THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that 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.
SALE AND LEASE AGREEMENT [N621SW]
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<PAGE> 25
SECTION 5. RETURN OF AIRCRAFT.
5.1 GENERAL CONDITION UPON RETURN. Unless purchased by Lessee
pursuant to Section 18.2, and subject to Section 10, upon the expiration or
termination of this Lease, Lessee will return the Aircraft to Lessor by
delivering the same at any location in the continental United States at which
Lessee has maintenance facilities (and Section 5.7 shall apply). Lessee shall
give Lessor not less than 15 days prior notice of the return location. All
costs associated with the return flight shall be for the account of Lessee. At
the time of such return, the Airframe and Engines or engines installed thereon:
5.1.1 AIRWORTHINESS. Subject to the exception described
in clause (iii) of Section 8.1.1, shall be duly certificated as an
airworthy aircraft by the FAA under Part 121 of the Federal Aviation
Regulations or any successor provision; provided, that Lessee's
ability to satisfy such return condition shall not preclude the
occurrence of an Event of Loss pursuant to clause (iv) of the
definition thereof;
5.1.2 FREE OF LIENS. Shall be free and clear of all
Liens (except Lessor Liens);
5.1.3 OPERATING CONFIGURATION AND CONDITION. Shall be in
a configuration suitable for operation in regularly scheduled
commercial airline passenger service in the United States and shall be
in as good operating condition as when delivered new to Lessee by
Manufacturer, ordinary wear and tear excepted or, in the case of any
such engines owned by Lessee, shall have a value, utility,
airworthiness and remaining useful life at least equal to, and shall
be in as good operating condition as required by the terms hereof with
respect to, Engines constituting part of the Aircraft but not then
installed on the Airframe. All Lessee or Permitted Sublessee exterior
markings, as the case may be, shall have been painted over in matching
exterior colors. In addition, any appliance, part, instrument,
appurtenance, accessory, furnishing or other equipment leased by
Lessee from a third party (other than Lessor) and incorporated in the
Aircraft shall be removed prior to the date of such return without any
damage to the Aircraft and without diminishing or impairing the value,
utility, remaining useful life or condition which the Aircraft would
have had at such time had such equipment not been installed, and
Lessee shall make all repairs which are required as a result of such
removal;
5.1.4 CLEANLINESS AND OPERABILITY. Shall be clean by
United States commercial airline operating standards with all systems
and components operable; and
5.1.5 PARTS AND EQUIPMENT. Shall have installed thereon
all Engines and Parts installed thereon at the commencement of the
Term therefor or replacements therefor made in accordance with the
terms of this Lease.
SALE AND LEASE AGREEMENT [N621SW]
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<PAGE> 26
5.2 RETURN OF OTHER ENGINES. In the event that any engine not
owned by Lessor shall be installed on the Airframe returned in accordance with
Section 5.1, such engine shall be a CFM International Model CFM56-3-B1 engine
(or an improved model engine manufactured by Engine Manufacturer, or an engine
of another manufacturer of at least equivalent utility, value, airworthiness
and remaining useful life in each case suitable for installation and use on the
Airframe and fully compatible with the other Engine or engine installed on the
Airframe; 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 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.
SALE AND LEASE AGREEMENT [N621SW]
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<PAGE> 27
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of such return, the Airframe shall have remaining until the
next scheduled "C" check (which term, as used in this paragraph, shall include
a "C" check and any other check equivalent thereto) at least 50% of the
allowable hours between "C" checks permitted under the Maintenance Program then
used by Lessee (or such Permitted Sublessee, as the case may be), and the
condition set forth in Appendix A shall have been satisfied. In the event that
Lessee (or any Permitted Sublessee then in possession of the Aircraft) shall
then be using a continuous or "progressive" maintenance program with respect to
the Airframe, then the Airframe shall be current on such program. If the
conditions set forth in the first sentence of this paragraph shall be
applicable to the Airframe but shall not have been met at the time of such
return, Lessee shall perform (or cause to be performed) all maintenance work
necessary to meet such conditions or, if Lessee shall so elect, Lessee shall
pay or cause to be paid to Lessor an amount computed by multiplying (i) the
current market cost of a "C" check by (ii) a fraction of which (x) the
numerator shall be the excess of 50% of hours of operation allowable between
such "C" checks over the actual number of hours of operation remaining on the
Airframe to the next such "C" check, and (y) the denominator shall be the
number of hours of operation allowable between such "C" check in accordance
with such Maintenance Program.
Lessee further agrees that, whether or not the then-current engine
maintenance program is on-condition, the number of hours or cycles of operation
(whichever shall be applicable under the Maintenance Program then in use with
respect to such Engines or engines) on such Engines or engines remaining until
the next scheduled engine refurbishment shall be at least 3,000 allowable hours
or cycles (whichever shall be applicable), in the aggregate for both Engines or
engines; provided, that each life-limited Part within each Engine or engine
shall have a minimum of 1,200 allowable hours or cycles (whichever shall be
applicable) remaining until its next required replacement. If, at the time of
such return, the Engines or engines do not meet the aggregate 3,000 hour
condition specified in the previous sentence, Lessee shall perform (or cause to
be performed) all maintenance work necessary to meet such conditions or, if
Lessee shall so elect, Lessee shall pay or cause to be paid to Lessor an amount
computed by multiplying (i) the current market cost of performing for an engine
of the same model as such Engines or engines the scheduled engine refurbishment
under the Maintenance Program then used by Lessee (or such Permitted Sublessee,
as the case may be) for engines of such model by (ii) a fraction of which (x)
the numerator shall be the excess of 3,000 hours or cycles (whichever is
applicable) over the aggregate number of hours or cycles of operation on such
Engines or engines remaining until the next scheduled engine refurbishment, and
(y) the denominator shall be the number of hours or cycles allowable between
such scheduled engine refurbishments. If, at the time of such return, any
life-limited Part within such Engine or engine does not meet the 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
SALE AND LEASE AGREEMENT [N621SW]
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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 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
SALE AND LEASE AGREEMENT [N621SW]
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<PAGE> 29
the terms of Sections 7.2 and 8.3; (c) Lessor Liens; (d) Liens for taxes,
assessments or other governmental charges either not yet due or being contested
in good faith (and for the payment of which adequate reserves have been
provided in accordance with generally accepted accounting principles) by
appropriate proceedings so long as such proceedings do not involve any material
danger of the sale, forfeiture, loss or loss of use of the Aircraft, the
Airframe or any Engine or any interest therein; (e) materialmen's, mechanics',
workers', repairers', employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet due or
not overdue for a period of more than 60 days or is being contested in good
faith (and for the payment of which adequate reserves have been provided in
accordance with generally accepted accounting principles) by appropriate
proceedings so long as such Liens do not involve any material danger of the
sale, forfeiture, loss or loss of use of the Aircraft, the Airframe or any
Engine or any interest therein; (f) Liens arising out of any judgment or award
against Lessee, unless the judgment secured shall not, within 45 days after
entry thereof, have been discharged or vacated or execution thereof stayed
pending appeal or shall not have been discharged, vacated or reversed within 45
days after the expiration of such stay; and (g) any other Lien with respect to
which Lessee shall have provided a bond or other security adequate in the
reasonable judgment of Lessor. Lessee will promptly take (or cause to be
taken) such action at its own expense as may be necessary duly to discharge any
such Lien not excepted above if the same shall arise at any time.
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND
RECORDS.
7.1 REGISTRATION AND OPERATION.
7.1.1 REGISTRATION. Lessee shall forthwith upon the
delivery of the Aircraft hereunder cause the Aircraft to be duly
registered and at all times thereafter to remain duly registered in
the name of Lessor with the FAA pursuant to and as permitted by the
Act (it being understood that Lessee shall not be required to comply
with this covenant to the extent that 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
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ownership; provided, that nothing herein contained shall prohibit
Lessee (or any Permitted Sublessee) from placing its customary colors
and insignia on the Airframe or any Engine or displaying information
concerning the registration or manufacture of the Aircraft, the
Airframe, any Engine or Part.
7.1.3 COMPLIANCE WITH LAWS. Lessee agrees that it will
not use or operate the Aircraft, the Airframe or any Engine in
violation of any law or any rule, regulation or order of any
government or governmental authority having jurisdiction (domestic or
foreign) or in violation of any airworthiness certificate, license or
registration relating to the Aircraft, the Airframe or any Engine
issued by any such authority, except to the extent Lessee is
contesting in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not
materially adversely affect Lessor's interest in the Aircraft.
7.1.4 INSURANCE REQUIREMENTS; GOVERNMENT REQUISITION;
INDEMNITY. Lessee agrees not to operate, use or locate the
Aircraft, the Airframe or any Engine, or permit any Permitted
Sublessee to operate, use or locate the Aircraft, the Airframe or any
Engine, (i) in any area excluded from coverage by any insurance
required by the terms of Section 11, except in the case of a
requisition by the Government where Lessee obtains indemnity (backed
by the full faith and credit of the United States of America) in lieu
of such insurance from the Government against the risks and in the
amounts required by Section 11 covering such area, or (ii) in any area
where maintenance of war-risk insurance is required by Section 11
unless fully covered by war-risk insurance satisfying the terms of
Section 11, or unless the Aircraft, the Airframe or such Engine is
operated or used under contract with the Government under which
contract the Government assumes liability (backed by the full faith
and credit of the United States of America) in an amount not less than
the amount of insurance otherwise required by Section 11 for any
damage, loss, destruction or failure to return possession of the
Aircraft, the Airframe or such Engine at the end of the term of such
contract or for injury to persons or damage to property of others, or
(iii) in any area referred to in subclause 3(iv) immediately following
Section 7.2.8.
7.2 POSSESSION. Lessee will not, without the prior written
consent of Lessor, sublease or otherwise in any manner deliver, transfer or
relinquish possession of the Aircraft, the Airframe or any Engine or install
any Engine, or permit any Engine to be installed, on any airframe other than
the Airframe; provided, however, that so long as no Lease Default (of the type
described in Section 14.1 or 14.5) or Lease Event of Default shall have
occurred and be continuing, and so long as Lessee shall comply with the
provisions of Section 11, and all FAA approvals required for such purposes have
been obtained, Lessee may, without such prior written consent:
7.2.1 INTERCHANGE AND POOLING. Subject or permit
any Permitted Sublessee to subject (i) the Aircraft, Airframe or any
Engine to normal interchange agreements customary in the airline
industry and entered into by Lessee or such Permitted Sublessee in the
ordinary
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course of its business with, in the case of the Airframe, a U.S. Air
Carrier or a Permitted Foreign Air Carrier, in either case that is not
then subject to bankruptcy or similar proceedings, and (ii) any Engine
to pooling agreements or arrangements customary in the United States
domestic commercial airline industry and entered into by Lessee or
such Permitted Sublessee in the ordinary course of its business; but
in either case (A) no transfer of the registration of the Airframe or
any Engine shall be effected in connection therewith and the terms of
this Lease and the Participation Agreement shall be observed and (B)
no such agreement or arrangement shall contemplate or require the
transfer of title to the Aircraft, Airframe or any Engine and if
Lessor's title to any Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be an
Event of Loss with respect thereto and Lessee shall comply with
Section 10.2 hereof;
7.2.2 TESTING AND SERVICE. Deliver or permit any
Permitted Sublessee to deliver possession of the Aircraft, Airframe or
any Engine or Part, to the manufacturer thereof for testing or other
similar purposes, or to any organization for service, repair,
maintenance or overhaul work on the Aircraft, Airframe or any Engine
or Part, or for alterations or modifications in or additions to the
Aircraft, Airframe or any Engine to the extent required or permitted
by the terms of Section 8.4;
7.2.3 CIVIL RESERVE AIR FLEET PROGRAM. Transfer or
permit any Permitted Sublessee, if required by law to do so, to
transfer possession of the Aircraft, Airframe or any Engine to the
Government pursuant to the Civil Reserve Air Fleet Program or any
similar or substitute programs, so long as such transfer of possession
does not continue beyond the end of the Term and so long as Lessee
shall (A) promptly notify Lessor upon subjecting the Airframe or any
Engine to such program and provide Lessor with the name and address of
the appropriate party to whom notice must be given in connection with
any repossession of the Aircraft under Section 15.1.1, and (B)
promptly notify Lessor upon transferring possession of the Airframe or
any Engine to the Government pursuant to such program;
7.2.4 INSTALLATION OF ENGINES. Install or permit
any Permitted Sublessee to install an Engine on an airframe owned by
Lessee or such Permitted Sublessee, as the case may be, free and clear
of all Liens, except (A) Permitted Liens and those which apply only to
the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other
than Parts) installed on such airframe (but not to the airframe as an
entirety), (B) the rights of air carriers under normal interchange
agreements which are customary in the airline industry and do not
contemplate, permit or require the transfer of title to the airframe
or engines installed thereon, and (C) mortgage liens or other security
interests, provided, that (as regards this clause (C)) such mortgage
liens or other security interests effectively provide 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;
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7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES.
Install or permit any Permitted Sublessee to install an Engine on an
airframe leased to, or purchased by, Lessee or any Permitted Sublessee
subject to a lease, conditional sale, trust indenture or other
security agreement, but only if (A) such airframe is free and clear of
all Liens, except the rights of the parties to the lease, conditional
sale, trust indenture or other security agreement covering such
airframe, or their successors or assigns, and except Liens of the type
permitted by clauses (A) and (B) of Section 7.2.4, and (B) the lease,
conditional sale, trust indenture or other security agreement covering
such airframe effectively provides that such Engine will not become
subject to the Lien thereof at any time while such Engine is subject
to this Lease, notwithstanding the installation thereof on such
airframe;
7.2.6 POOLING OF PARTS. To the extent permitted by
Section 8.3, subject any Parts owned by Lessor and removed from the
Airframe or any Engine to any pooling arrangement referred to in
Section 8.3;
7.2.7 WET LEASE. Enter into a Wet Lease for the
Airframe and Engines or engines then installed thereon with any third
party for a term not to continue beyond the Term;
7.2.8 SUBLEASE TO PERMITTED AIR CARRIERS. So long as
the proposed sublessee is not subject to a proceeding or final order
under applicable bankruptcy, insolvency or reorganization laws on the
date the sublease is entered into, enter into a sublease of the
Aircraft, or the Airframe and Engines or engines then installed on the
Airframe, or any Engine, for use on the sublessee's regularly
scheduled or charter routes, with any U.S. Air Carrier or Permitted
Foreign Air Carrier, in any such case for a term not to continue
beyond the remaining Term.
Provided, further, with respect to this Section 7.2, that:
(1) the rights of any transferee who receives
possession by reason of a transfer permitted by this Section
7.2 (other than the transfer of an Engine which is deemed an
Event of Loss) shall be effectively subject and subordinate
to, and any sublease permitted by this Section 7.2 shall be
made expressly subject and subordinate to, all the terms of
this Lease and the Lien of the Trust Indenture, and to
Lessor's rights, powers and remedies under this Lease,
including the rights to repossession pursuant to Section 15
and to terminate and avoid such sublease upon such
repossession and to require such sublessee to forthwith
deliver the Aircraft, Airframe and Engines subject to such
sublease upon such repossession;
(2) Lessee shall remain primarily liable
hereunder for the performance of all the terms of this Lease
(including, without limitation, the payment of
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Supplemental Rent representing any indemnities payable as a
result of acts or circumstances respecting a sublease or a
sublessee's operation of the Aircraft) to the same extent as
if such sublease, transfer or relinquishment of possession had
not occurred (it being understood that, without limitation of
the foregoing, any standards established under this Lease with
reference to Lessee's practices respecting other aircraft
owned or operated by it shall continue to refer to such
practices of Lessee rather than of any transferee); provided,
that performance of any such terms by any Permitted Sublessee
shall be as effective, for purposes of this Lease, as
performance thereof directly by Lessee;
(3) any such sublease shall (i) be consistent
with the requirements of this Lease and the applicable
requirements of the Participation Agreement, (ii) include
appropriate provisions for the continued maintenance in
accordance with applicable maintenance standards in the
appropriate jurisdiction, operation, insurance (appropriate
certificates as to which shall be furnished to Lessor and
Indenture Trustee prior to Lessee's entry into any such
sublease with any Permitted Foreign Air Carrier or within 10
days thereafter) and return of the subleased property as
required hereunder, (iii) provide that the sublessee may not
assign or further sublease the Aircraft, (iv) provide that the
Aircraft may not be operated into a country with which the
United States does not maintain diplomatic relations or in
which there is open warfare, whether or not declared, (v) not
provide for sublease rentals to be prepaid or assigned to a
third party; provided, however, that (x) up to six months'
rentals may be prepaid to Lessee and (y) this clause (v) shall
not preclude Lessee's establishing and holding appropriate
reserves for any obligations arising under such sublease, and
(vi) not require the sublessee to purchase the Aircraft or
grant the sublessee any purchase options, or any options for
the renewal of such sublease for a term beyond the Base Lease
Term, in each case on dates other than, or at amounts less
than, corresponding options granted to Lessee hereunder;
(4) no interchange agreement, transfer,
sublease or other relinquishment of possession permitted
hereunder shall affect the registration of the Aircraft or
shall permit any action not permitted to Lessee in this Lease;
and
(5) no such interchange agreement, sublease,
transfer or other relinquishment of possession of the
Aircraft, Airframe or any Engine shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder or
under any other Operative Agreement or constitute a waiver of
Lessor's rights or remedies hereunder or under any other
Operative Agreement.
Lessee shall notify Lessor within 10 days after the commencement of
any sublease permitted hereunder and shall deliver to Lessor within such period
a duly executed copy of any sublease or
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interchange or pooling agreement permitted hereunder. Upon request of Lessor,
Lessee shall promptly duly execute and deliver to Lessor an assignment of any
such sublease having a term in excess of 12 months in favor of Lessor in form
and substance reasonably satisfactory to Lessor. Lessor hereby agrees, for the
benefit of Lessee (and any Permitted Sublessee) and for the benefit of each
lessor, conditional seller, indenture trustee or secured party of any airframe
or engine leased to or purchased by Lessee (or any Permitted Sublessee) subject
to a lease, conditional sale, trust indenture or other security agreement, that
Lessor will not acquire or claim, as against such lessor, conditional seller,
indenture trustee or secured party, or any successor or assign thereof, any
right, title or interest in any engine as the result of such engine being
installed on the Airframe at any time while such engine is subject to such
lease, conditional sale, trust indenture or other security agreement and owned
by such lessor or conditional seller or subject to a trust indenture or
security interest in favor of such indenture trustee or secured party;
provided, however, that such agreement of Lessor shall not be for the benefit
of any lessor or secured party of any airframe (other than the Airframe) leased
to Lessee (or any Permitted Sublessee) or purchased by Lessee (or any Permitted
Sublessee) subject to a conditional sale or other security agreement or for the
benefit of any mortgagee of or any other holder of a security interest in an
airframe owned by Lessee (or any Permitted Sublessee), unless such lessor,
conditional vendor, other secured party or mortgagee has expressly agreed
(which agreement may be contained in such lease, conditional sale or other
security agreement or mortgage) that neither it nor its successors or assigns
will acquire, as against Lessor, any right, title or interest in an Engine as a
result of such Engine being installed on such airframe.
A consolidation, merger, conveyance, transfer, or lease permitted by
Section 11(f) of the Participation Agreement shall not be deemed to be a
transaction to which this Section 7.2 shall apply.
7.3 RECORDS AND REPORTS. Lessee shall:
7.3.1 RECORDS. Maintain or cause to be maintained all
records, logs and other materials required by the FAA or any other
governmental authority having jurisdiction to be maintained in respect
of the Aircraft, the Airframe and each Engine;
7.3.2 INFORMATION AND REPORTS. Upon request,
promptly furnish or cause to be furnished to Lessor (in sufficient
number) such information as may be required to enable Lessor or any
Participant to file any reports, including tax returns, required to be
filed by Lessor or such Participant with any governmental authority
because of Lessor's ownership of the Aircraft, Airframe or any Engine
or because of receipt of Rent or because of the interest of any
Participant in the Estate or Trust Indenture Estate; provided,
however, that with respect to any such information (other than with
respect to income taxes) which Lessee deems commercially sensitive or
confidential, if reasonably feasible, Lessor shall afford Lessee a
reasonable opportunity to seek from any such governmental authority a
waiver of Lessor's or such Participant's obligation to file any such
information or consent to the filing of such information directly by
Lessee in lieu of filing by Lessor or such Participant and if any such
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waiver or consent is evidenced to the reasonable satisfaction of
Lessor, then Lessee shall not be required to furnish such information
to Lessor; and
7.3.3 FINANCIAL INFORMATION. Promptly provide Lessor, the
Owner Participant, the Original Loan Participant and Indenture Trustee
with (i) such financial information concerning Lessee as is provided
from time to time to the public shareholders of Lessee, (ii) within 60
days after the end of each of the first three quarterly periods of
each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of such
period, together with the related consolidated statements of income
for such period, (iii) within 120 days after the close of each fiscal
year of Lessee, a consolidated balance sheet of Lessee and its
consolidated subsidiaries as of the close of such fiscal year,
together with the related consolidated statements of income for such
fiscal year, as certified by independent public accountants, (iv)
promptly upon the sending, making available or filing of the same, all
such reports (other than reports on Form 11-K or similar forms) as
Lessee shall file with the Securities and Exchange Commission, and (v)
from time to time such other information as to its financial condition
as Lessor, Indenture Trustee or any Participant may reasonably
request. In addition, Lessee shall promptly notify Lessor, Indenture
Trustee, the Original Loan Participant and the Owner Participant after
a Responsible Company Officer of Lessee shall acquire knowledge of a
Lease Default or Lease Event of Default.
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS; MODIFICATIONS AND ADDITIONS.
8.1 MAINTENANCE.
8.1.1 MAINTENANCE PROGRAM. Lessee shall maintain,
service, repair, overhaul, alter, modify, add to and test (or cause to
be maintained, serviced, repaired, overhauled, altered, modified,
added to and tested) the Aircraft, the Airframe and each Engine, and
each other engine installed from time to time on the Airframe, in
accordance with Lessee's FAA-approved maintenance program for the
Aircraft, Airframe and Engines (the "Maintenance Program"), (i) so as
to keep the Aircraft, the Airframe and each Engine in as good
operating condition as when delivered new to Lessee by the
Manufacturer, ordinary wear and tear excepted, (ii) in the same manner
and with the same care as used by Lessee with similar aircraft owned
or operated by Lessee, without in any way discriminating against the
Aircraft, whether by reason of its leased status or otherwise, and
(iii) so as to keep the Aircraft, the Airframe and each Engine in such
condition as required to enable the FAA certificate of airworthiness
for the Aircraft to be maintained in good standing at all times under
the Act, except when all comparable Boeing Model 737-300 series
aircraft registered in the United States of America have been grounded
by the FAA other than as a result of actions taken or omitted to be
taken by Lessee (or, if a sublease is then in effect, any Permitted
Sublessee).
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8.1.2 COMPLIANCE WITH GOVERNMENT REQUIREMENTS.
Lessee will comply with all service, inspection, maintenance, repair
and overhaul regulations, directives and instructions which are made
mandatory by the FAA or other applicable government authority upon
operators of Boeing Model 737-300 series aircraft and CFM
International Model CFM56-3-B1 engines and which require compliance
during the Term and prior to return of the Aircraft under this Lease.
8.2 REPLACEMENT OF PARTS. Lessee, at its own cost and
expense, will promptly replace (or cause to be replaced) all Parts which may
from time to time be incorporated in the Aircraft, Airframe or any Engine and
which may from time to time become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use for
any reason whatsoever, except as otherwise provided in Section 8.4. In
addition, Lessee may, at its own cost and expense, remove in the ordinary
course of maintenance, service, repair, overhaul or testing any Parts, whether
or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided, however, Lessee, except
as otherwise provided in Section 8.4, at its own cost and expense, will replace
such Parts as promptly as possible. All replacement parts shall be free and
clear of all Liens (except for Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof. All Parts at any
time removed from the Aircraft, Airframe or any Engine shall remain the
property of Lessor, no matter where located, until such time as such Parts
shall be replaced by parts which have been incorporated in the Aircraft,
Airframe or such Engine and which meet the requirements for replacement parts
specified above. Immediately upon any replacement part becoming incorporated
in the Aircraft, Airframe or such Engine as above provided, without further
act, (i) unless the replacement property is temporarily installed on an
emergency basis, title to the replaced Part shall thereupon vest in Lessee free
and clear of all rights of Lessor, and the replaced Part shall no longer be
deemed a Part hereunder, (ii) title to such replacement part shall thereupon
vest in Lessor (subject only to Permitted Liens and except in the case of
replacement property temporarily installed on an emergency basis), and (iii)
such replacement part shall become a Part subject to this Lease and be deemed
part of the Aircraft, Airframe or such Engine for all purposes hereof to the
same extent as the Parts originally incorporated in such Aircraft, Airframe or
Engine.
8.3 POOLING OF PARTS. Any Part removed from the Aircraft,
Airframe or any Engine as provided in Section 8.2 may be subjected by Lessee
(or a Permitted Sublessee) to a normal pooling arrangement customary in the
airline industry entered into in the ordinary course of business of Lessee or
such Permitted Sublessee, so long as a part replacing such removed Part shall
be incorporated in the Aircraft, Airframe or such Engine in accordance with
Section 8.2 as promptly as practicable after the removal of such removed Part.
In addition, any replacement part when incorporated in the Aircraft, Airframe
or any Engine in accordance with Section 8.2 may be owned by any third party
subject to such a normal pooling arrangement, so long as Lessee (or any
Permitted Sublessee), at its own cost
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and expense, as promptly thereafter as practicable either (i) causes title to
such replacement part to vest in Lessor in accordance with Section 8.2 by
Lessee (or any Permitted Sublessee) acquiring title thereto for the benefit of,
and transferring such title to, Lessor free and clear of all Liens (except
Permitted Liens), or (ii) replaces such replacement part by incorporating in
the Aircraft, Airframe or such Engine a further replacement part owned by
Lessee (or any Permitted Sublessee) free and clear of all Liens (except
Permitted Liens) and by causing title to such further replacement part to vest
in Lessor in accordance with Section 8.2.
8.4 ALTERATIONS, MODIFICATIONS AND ADDITIONS.
8.4.1 MANDATORY ALTERATIONS, ETC. Lessee shall make
(or cause to be made) such alterations and modifications in and
additions to the Aircraft, Airframe and each Engine as may be required
from time to time to meet the standards of the FAA or other
governmental authority having jurisdiction and to maintain the FAA
certificate of airworthiness for the Aircraft; provided, however, that
Lessee may contest in good faith the validity or application of any
such law, rule, regulation or order in any reasonable manner which
does not materially adversely affect Lessor's interest in the
Aircraft. All alterations and modifications made pursuant to this
Section 8.4.1 shall be made at the cost and expense of Lessee.
8.4.2 VOLUNTARY ALTERATIONS, ETC. Lessee, at its own
cost and expense, may, from time to time make (or cause to be made),
subject to the standards set forth in Section 8.1.1, such alterations
and modifications in and additions to the Aircraft, Airframe or any
Engine as Lessee may deem desirable in the proper conduct of its
business, including, without limitation, removal of Parts which Lessee
deems obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine; provided, however, that no such
alteration, modification, addition or removal shall diminish the
value, remaining useful life, or utility of the Aircraft, Airframe or
such Engine, or impair the condition or airworthiness thereof, below
the value, remaining useful life, utility, condition and airworthiness
thereof immediately prior to such alteration, modification or addition
assuming the Aircraft, Airframe or such Engine was then of the value
and utility and in the condition and airworthiness required to be
maintained by the terms of this Lease. Title to all parts
incorporated in the Aircraft, Airframe or such Engine as the result of
such alteration, modification or addition shall remain vested in
Lessee and Lessee may, at any time during the Term, remove any such
part if (i) such part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated in the Aircraft,
Airframe or such Engine at the time of delivery thereof hereunder or
any Part in replacement of or substitution for any such Part, (ii)
such part is not required to be incorporated in the Aircraft, Airframe
or such Engine pursuant to the terms of this Section 8, (iii) such
part can be removed from the Aircraft, Airframe or such Engine without
diminishing or impairing the value, remaining useful life, utility,
condition or airworthiness required to be maintained by the terms of
this Lease which the Aircraft, Airframe or such Engine would have had
at such time had such alteration, modification or addition not
occurred,
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and (iv) no Lease Event of Default or Lease Default shall have
occurred and be continuing. Title to all other such parts shall,
without further act, vest in Lessor and shall constitute "Parts" for
all purposes hereunder. Upon the removal of any part title to which
is retained by Lessee, Lessee shall promptly repair any damage to the
Airframe or Engine from which it was removed which resulted from such
removal and such part shall no longer be deemed part of the Airframe
or such Engine from which it was removed. Any part not removed by
Lessee as above provided prior to the return of the Aircraft, Airframe
or such Engine to Lessor hereunder shall, without further act, vest in
Lessor and shall constitute a "Part" for all purposes hereunder.
SECTION 9. VOLUNTARY TERMINATION.
9.1 RIGHT OF TERMINATION UPON OBSOLESCENCE. So long as no
Lease Event of Default or Lease Default shall have occurred and be continuing,
Lessee shall have the right at its option to terminate this Lease with respect
to the Aircraft during the Base Lease Term on the first day of any month (a
"Termination Date") occurring on or after the seventh anniversary of the
Delivery Date on at least three months' prior written notice to Lessor, each
Participant and Indenture Trustee specifying a proposed Termination Date;
provided, that such notice shall also include copies of resolutions of Lessee's
board of directors stating that such board of directors has determined, in good
faith, that the Aircraft either has become economically obsolete or is surplus
to Lessee's requirements. Lessee may revoke any notice of termination referred
to in this Section 9.1 by notice to Lessor, each Participant and the Indenture
Trustee not less than 30 days prior to the proposed Termination Date, if Lessor
shall not have received a bid to purchase the Aircraft for at least the
Termination Value thereof pursuant to Section 9.2 and if Lessor shall not have
furnished to Lessee the notice referred to in Section 9.3, and upon doing so,
shall reimburse Lessor and Owner Participant on an after-tax basis for all
reasonable out-of-pocket expenses incurred by them in contemplation of such
termination; provided, however, that Lessee may so revoke a notice of
termination no more than three times during the Term.
9.2 SALE OF AIRCRAFT. Lessee, as agent for Lessor, shall, from
the date of such notice of termination until no more than 30 days' prior to the
proposed Termination Date specified by Lessee, use its reasonable best efforts
to obtain bids (in the worldwide market) for the cash purchase of the Aircraft
and Lessor may, if it desires to do so, seek to obtain such bids and may itself
bid to retain the Aircraft. In the event Lessee receives any bid, Lessee shall
at least 30 days prior to the proposed Termination Date, certify to Lessor in
writing the amount and terms of such bid, and the name and address of the
Person submitting such bid (who shall not be Lessee, an Affiliate of Lessee or
a Person who shall be a party to any arrangement for the further use of the
Aircraft by Lessee or any of its Affiliates). In the event Lessor receives any
bid, Lessor shall, at least five Business Days prior to the proposed
Termination Date, certify to Lessee in writing the amount and terms of such bid
and the name and address of the Person submitting such bid. Subject to Section
9.3, on the Termination Date, (a) Lessee shall deliver the Airframe and Engines
or engines constituting part of the Aircraft to the bidder, if any, which shall
have submitted the highest cash bid (net of any brokerage commissions) prior to
such date, in the same manner as if delivery were made to Lessor pursuant to
Section 5 and
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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, Break Amount, if any, or 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 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
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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, Break Amount or Premium, if any, as of such TV
Determination Date). If the amounts required to be paid pursuant to this
Section 9.3 shall not be received by the respective payees thereof on the
proposed Termination Date, this Lease shall continue in full force and effect.
9.4 TERMINATION AS TO ENGINES. So long as no Lease Event of
Default or Lease Default shall have occurred and be continuing, Lessee shall
have the right, at its option at any time during the Term, on at least 30 days'
prior written notice to Lessor, Indenture Trustee, the Original Loan
Participant and the Owner Participant, to terminate this Lease with respect to
any Engine not then installed or held for use on the Airframe. In such event,
and prior to the date of such termination, Lessee shall replace such Engine
hereunder by complying with the terms of Section 10.2 to the same extent as if
an Event of Loss had occurred with respect to such Engine, and, upon Indenture
Trustee's release of the replaced Engine from the Lien of the Trust Indenture
Estate, Lessor shall Transfer to Lessee the replaced Engine as provided in
Section 5.2.
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 EVENT OF LOSS WITH RESPECT TO AIRFRAME.
10.1.1 LESSEE'S ELECTION. Upon the occurrence of an
Event of Loss with respect to the Aircraft, Lessee shall forthwith
(and in any event within 15 days after such occurrence) give Lessor,
Indenture Trustee and each Participant written notice of such Event of
Loss and, within 60 days after such occurrence, give Lessor, Indenture
Trustee and each Participant written notice of its election to comply
either with Section 10.1.2 or Section 10.1.3, and if Lessee shall not
have given notice of such election within 60 days after such
occurrence Lessee shall be deemed to have elected to comply with
Section 10.1.3.
10.1.2 REPLACEMENT OF AIRFRAME AND ENGINES. As promptly
as practicable, and in any event on or before the Business Day next
preceding the 180th day following the date of occurrence of such Event
of Loss, Lessee shall, in compliance with Section 10.1.6, convey or
cause to be conveyed to Lessor, to be leased by Lessee hereunder in
replacement thereof, a
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Replacement Airframe (which need not be a new Replacement Airframe but
shall have been placed in service not earlier than October 22, 1994)
together with the same number of Replacement Engines as the Engines,
if any, subject to such Event of Loss, such Replacement Airframe and
Replacement Engines to be free and clear of all Liens (except
Permitted Liens), to have a value, remaining useful life and utility
at least equal to, and to be in as good operating condition as, the
Airframe and Engines, if any, so replaced (for such purpose, it shall
be assumed that the Airframe and such Engines were in the condition
and repair required by the terms of this Lease). If Lessee shall not
effect such replacement hereunder on or before the Business Day next
preceding the 150th day following the date of the occurrence of such
Event of Loss, then Lessee shall immediately deposit with Lessor, in
the manner and in funds of the type specified in Section 3.6, an
amount equal to the excess of the Stipulated Loss Value for the
Aircraft over any funds then being held by Lessor or the Indenture
Trustee with respect to such Event of Loss. If Lessee shall not
perform its obligation to effect such replacement hereunder on or
before the Business Day next preceding the 180th day following the
date of the occurrence of such Event of Loss, then Lessee shall
immediately pay to Lessor, in the manner and in funds of the type
specified in Section 3.6, the aggregate amount specified in clauses
(A), (B) and (C) of Section 10.1.3, net of any amount deposited with
Lessor pursuant to the next preceding sentence of this Section 10.1.2.
10.1.3 PAYMENT OF STIPULATED LOSS VALUE AND RENT. On
or before the Business Day next preceding the earlier of (i) the 180th
day following the date of the occurrence of such Event of Loss, or
(ii) the later of 15 days following the receipt of insurance proceeds
with respect to such occurrence or the date Lessee shall have made or
shall be deemed to have made its election under Section 10.1.1 to
comply with Section 10.1.3, Lessee shall pay to 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
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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 adverse tax
consequences to Lessor or Owner Participant or its Affiliates
(or, in lieu thereof, Lessee shall have agreed to indemnify
for such tax risk), or if Owner Participant and Lessee shall
have agreed upon the amount, if any, payable and upon the
manner of payment thereof with respect to such replacement by
Lessee pursuant to the Tax Indemnity Agreement or Section 7(b)
of the Participation Agreement, then any such amount shall be
paid.
10.1.6.3 LESSEE'S OBLIGATIONS WITH RESPECT TO
REPLACEMENT AIRCRAFT. Lessee will promptly (all writings
referred to below to be reasonably satisfactory in form and
substance to Lessor):
(a) furnish Lessor with (i) a full
warranty bill of sale and FAA bill of sale duly
conveying to Lessor the Replacement Airframe and
Replacement Engines, if any, and (ii) an assignment
of the purchase agreement with respect to the
Replacement Airframe and Replacement Engines, if any
(if Lessee shall have any rights thereunder)
substantially in the form of the Purchase Agreement
Assignment and a consent and agreement of the
manufacturer thereof substantially in the form of
the Manufacturer's Consent;
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(b) cause a Lease Supplement
subjecting such Replacement Airframe and Replacement
Engines, if any, to this Lease, duly executed by
Lessee, to be delivered to Lessor for execution, and
an Indenture and Trust Supplement to be delivered to
Lessor for execution and, in each case upon such
execution, to be filed for recordation with the FAA
pursuant to the Act;
(c) furnish Lessor with such evidence
of compliance with (i) Section 5.01(b) of the Trust
Indenture (if the Trust Indenture shall be in effect
at such time) and (ii) the insurance provisions of
Section 11 hereof with respect to the Replacement
Airframe and Replacement Engines, if any, and the
payment of all premiums then due with respect to all
such insurance, as Lessor may reasonably request;
(d) furnish Lessor with an opinion or
opinions of counsel reasonably satisfactory to
Lessor to the effect that, upon such conveyance,
Lessor will acquire good title to the Replacement
Airframe and Replacement Engines, if any, free and
clear of all Liens other than Permitted Liens, the
Replacement Airframe and Replacement Engines, if
any, will be leased hereunder and subject to the
Lien of the Trust Indenture (if then in effect) to
the same extent as the Airframe and Engines replaced
thereby, Lessor and (assuming the Trust Indenture is
still in effect) the Indenture Trustee shall be
entitled to the benefit of Section 1110 of the
Bankruptcy Code with respect to the Replacement
Aircraft to the same extent as the Aircraft, and to
such further effect as Lessor may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Airframe
which shall be identified by manufacturer,
model, FAA registration number and
manufacturer's serial number;
(ii) a description of the Replacement
Airframe to be received (including the
manufacturer, model, FAA registration
number and manufacturer's serial number)
as consideration for the Airframe to be
released;
(iii) that on the date of the Indenture
and Trust Supplement and the Lease
Supplement relating to the Replacement
Airframe, Lessor will be the legal owner
of such Replacement Airframe free and
clear of all Liens (other than Permitted
Liens), that such Replacement Airframe
will on such date be in good working order
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and condition, and that such Replacement
Airframe has been or, substantially
concurrently with such replacement, will
be duly registered in the name of Lessor
under the Act and that an airworthiness
certificate has been duly issued under the
Act with respect to such Replacement
Airframe, and that such registration and
certificate are in full force and effect,
and that Lessee will have the full right
and authority to use such Replacement
Airframe;
(iv) that the insurance required by
Section 11 is in full force and effect
with respect to such Replacement Airframe
and all premiums then due thereon have
been paid in full;
(v) that the Replacement Airframe is
of the same or an improved model as the
Airframe requested to be released from the
Lien of the Trust Indenture;
(vi) that no Lease Default or Lease
Event of Default has occurred and is
continuing or would result from the making
and granting of the request for release
and the addition of a Replacement
Airframe; and
(vii) if the Trust Indenture has not
theretofore been discharged, the release
of the Airframe so to be released will not
impair the security of the Trust Indenture
or be in contravention of any of the
provisions of the Trust Indenture;
(f) furnish Lessor with a certificate
or certification of qualified independent aircraft
appraisers reasonably satisfactory to Lessor
certifying that the Replacement Airframe and
Replacement Engines, if any, have a value, remaining
useful life and utility at least equal to, and are
in at least as good operating condition as, the
Airframe and Engines, if any, so replaced (assuming
the Airframe and Engines were in the condition and
repair required by the terms hereof immediately
prior to the occurrence of such Event of Loss); and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to
the financing statements filed on or before the
Delivery Date) as Lessor or any Participant may
reasonably request to effect such replacement.
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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 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
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Indenture and Trust Supplement to be delivered to Lessor for
execution and, in each case upon execution, to be filed for
recordation with the FAA pursuant to the Act;
(c) furnish Lessor with such evidence of
compliance with (i) Section 5.01(b) of the Trust Indenture (if
the Trust Indenture shall be in effect at such time) and (ii)
the insurance provisions of Section 11 hereof with respect to
such Replacement Engine and the payment of all premiums then
due with respect to such insurance, as Lessor may reasonably
request;
(d) furnish Lessor with an opinion or opinions
of Lessee's counsel, in form, substance and scope reasonably
satisfactory to Lessor, to the effect that, upon such
conveyance, Lessor will acquire good title to such Replacement
Engine free and clear of all Liens other than Permitted Liens,
and that such Replacement Engine will be leased hereunder and
subject to the Lien of the Trust Indenture (if then in effect)
to the same extent as the Engine replaced thereby and to such
further effect as Lessor or Indenture Trustee may reasonably
request;
(e) furnish Lessor with an Officer's
Certificate stating:
(i) a description of the Engine which
shall be identified by manufacturer's serial number;
(ii) a description of the Replacement
Engine (including the manufacturer's name, model and
serial number) as consideration for the Engine to be
released;
(iii) that on the date of the Lease
Supplement and the Indenture and Trust Supplement
relating to the Replacement Engine, Lessor will be
the legal owner of such Replacement Engine free and
clear of all Liens except Permitted Liens, that such
Replacement Engine will on such date be in good
working order and condition, and that such
Replacement Engine is the same or an improved or
equivalent model as the Engine to be released; and
(iv) if the Trust Indenture has not
theretofore been discharged, that the release of the
Engine so to be released will not impair the
security of the Trust Indenture or be in
contravention of any of the provisions of the Trust
Indenture;
(f) furnish Lessor with a certificate of a
qualified aircraft engineer (who may be an employee of Lessee)
certifying that such Replacement Engine has a value, remaining
useful life and utility at least equal to, and is in at least
as good operating
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condition as, the Engine so replaced assuming such Engine was
in the condition and repair required by the terms hereof
immediately prior to the occurrence of such Event of Loss; and
(g) furnish such other certificates or
documents (including appropriate UCC-3 amendments to the
financing statements filed on or before the Delivery Date) as
Lessor or any Participant may reasonably request to effect
such replacement.
10.2.3 RECORDATION AND OPINIONS. In the case of any
Replacement Engine conveyed to Lessor under this Section 10.2,
promptly upon the recordation of the Lease Supplement and the
Indenture and Trust Supplement covering such Replacement Engine
pursuant to the Act, Lessee will cause to be delivered to Lessor an
opinion of Daugherty, Fowler & Peregrin or other FAA counsel
satisfactory to Lessor as to the due recordation of such Lease
Supplement and Indenture and Trust Supplement.
10.2.4 CONVEYANCE; REPLACEMENT ENGINE. Upon compliance by
Lessee with the terms of this Section 10.2, Lessor will comply with
the provisions of the Trust Indenture applicable thereto and, upon
Indenture Trustee's release of the Engine with respect to which such
Event of Loss occurred from the Lien of the Trust Indenture Estate,
Transfer such Engine to Lessee, and Lessee will be subrogated to all
claims of Lessor, if any, against third parties for damage to or loss
of such Engine to the extent of the insured value thereof.
10.2.5 NO REDUCTION OF RENT. No Event of Loss with
respect to an Engine under the circumstances contemplated by the terms
of this Section 10.2 shall result in any reduction of Basic Rent or
Renewal Rent.
10.3 APPLICATION OF CERTAIN PAYMENTS. Any payments (other than
insurance proceeds, the application of which is provided for in Section 11)
received at any time by Lessor, Lessee or any Permitted Sublessee from any
governmental authority or other Person with respect to any Event of Loss, will
be applied as follows:
10.3.1 REPLACEMENT OF AIRFRAME AND ENGINES. If such
payments are received with respect to the Airframe and the Engines (or
engines) installed on the Airframe that have been or are being
replaced by Lessee pursuant to Section 10.1 (other than Section
10.1.3), such payments shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect,
Lessor, and upon completion of such replacement be paid over to
Lessee, provided Lessee shall have fully performed or, concurrently
therewith will fully perform, the terms of Section 10.1 with respect
to the Event of Loss for which such payments are made.
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
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shall be paid over to, or retained by, Indenture Trustee or, if the
Trust Indenture is no longer in effect, Lessor, and upon completion of
such replacement be paid over to Lessee, provided Lessee shall have
fully performed or, concurrently therewith will fully perform, the
terms of Section 10.2 with respect to the Event of Loss for which such
payments are made.
10.3.3 NONREPLACEMENT. If such payments are received with
respect to the Airframe or the Airframe and the Engines or engines
installed on the Airframe that has not or have not been and will not
be replaced pursuant to Section 10.1 or 10.2, so much of such payments
remaining after reimbursement of Lessor, Indenture Trustee and each
Participant for costs and expenses as shall not exceed the Stipulated
Loss Value and other amounts required to be paid by Lessee hereunder
shall be applied in reduction of Lessee's obligation to pay such
Stipulated Loss Value and other amounts required to be paid by Lessee
hereunder, if not already paid by Lessee, or, if already paid by
Lessee, shall be applied to reimburse Lessee for its payment of such
Stipulated Loss Value and other amounts. The balance, if any, of such
payment remaining thereafter shall be divided between Lessor and
Lessee in proportion to their relative interests in the Aircraft.
10.4 REQUISITION OF AIRCRAFT FOR USE BY GOVERNMENTAL AUTHORITIES.
In the event of the requisition for use of the Airframe and the Engines or
engines installed on such Airframe during the Term by any governmental
authority, Lessee shall notify Lessor promptly of such requisition, and all of
Lessee's obligations under this Lease with respect to the Aircraft shall
continue to the same extent as if such requisition had not occurred. All
payments received by Lessor or Lessee from such governmental authority for the
use of such Airframe and Engines or engines prior to the time such requisition
becomes an Event of Loss shall be paid over to, or retained by, Lessee (or, if
directed by Lessee, any Permitted Sublessee); and all payments received by
Lessor or Lessee from such governmental authority for the use of such Airframe
and Engines or engines after such time shall be paid over to, or retained by,
Indenture Trustee or, if the Trust Indenture is no longer in effect, Lessor,
and upon the performance by Lessee of the terms of Section 10.1 with respect to
such Event of Loss, shall be paid over to Lessee.
10.5 REQUISITION OF AN ENGINE FOR USE BY GOVERNMENTAL AUTHORITIES.
In the event of the requisition for use by any governmental authority (other
than in circumstances contemplated by Section 10.4) of any Engine but not the
Airframe, Lessee will replace such Engine hereunder by complying with the terms
of Section 10.2 to the same extent as if an Event of Loss had occurred with
respect to such Engine, and any payments received from such governmental
authority with respect to such requisition shall be paid over to, or retained
by, Indenture Trustee, or if the Trust Indenture is no longer in effect,
Lessor, and upon the performance by Lessee of the terms of Section 10.2 to the
same extent as if an Event of Loss had occurred with respect to such
requisitioned Engine, shall be paid over to Lessee.
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10.6 APPLICATION OF PAYMENTS DURING EXISTENCE OF DEFAULT.
Any amount referred to in this Section 10 which is payable or creditable to or
retainable by Lessee shall not be paid or credited to or retained by Lessee if,
at the time of such payment, credit or retention, a Lease Event of Default or
Lease Default shall have occurred and be continuing hereunder but shall be paid
to and held by Indenture Trustee and applied by it as provided in the Trust
Indenture, or, if the Trust Indenture is no longer in effect, held by Lessor as
security for the obligations of Lessee under this Lease and applied against
Lessee's obligations hereunder as and when due; at such time as there shall not
be continuing any such Lease Event of Default or Lease Default, or at such
earlier time as Lessee shall have paid in full all Rent and other amounts due
and payable hereunder and under the other Operative Agreements by Lessee, any
remaining balance of such amount shall be paid to Lessee to the extent not
previously applied in accordance with the preceding clause of this sentence.
SECTION 11. INSURANCE.
11.1 PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE. Lessee
shall at all times maintain, or cause to be maintained, at its or any Permitted
Sublessee's expense, public liability (including without limitation contractual
liability, passenger legal liability and property damage, but excluding
manufacturer's product liability coverage) insurance which shall:
11.1.1 TYPE, FORM AND AMOUNT. Be of a type and form
carried by similarly situated United States commercial air carriers
generally, and carried in amounts not less than that carried by Lessee
on similar equipment owned or leased by Lessee and not less than the
minimum amount of $350,000,000 (per occurrence) combined single limit
(or such greater amount as Lessee may carry from time to time on other
737-300 series aircraft in its fleet);
11.1.2 COVERAGE. Include, but not be limited to, public
liability insurance, contractual liability insurance, passenger
liability insurance and property damage liability insurance (including
cargo and baggage liability insurance); and
11.1.3 ADDITIONAL INSUREDS. Name as additional insureds
Lessor (in its individual and trust capacities), Indenture Trustee,
each Participant and each other Indemnified Party, as their interests
may appear.
11.2 INSURANCE AGAINST LOSS OF OR DAMAGE TO AIRCRAFT AND ENGINES.
Lessee shall at all times maintain, or cause to be maintained, at its or any
Permitted Sublessee's expense, insurance against loss of or damage to the
Aircraft, Airframe and Engines as follows:
11.2.1 TYPE, FORM AND AMOUNT. "All-risk" ground and flight
aircraft hull insurance on the Aircraft and "all-risk" coverage on
each Engine and on Parts while removed from the Aircraft or Engines,
which is of the type and form, and in an amount not less than that,
carried by Lessee on similar equipment owned or leased by Lessee and
in an amount not less
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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.
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.
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11.2.3.3 WAIVER OF SUBROGATION. Provide
that the insurers shall waive any rights of subrogation
against Lessor, Indenture Trustee, each Participant and each
other Indemnified Party except for claims arising out of gross
negligence or willful misconduct of such Person; provided,
that the exercise by insurers of rights of subrogation, if
any, permitted by this Section 11.2 shall not, in any way,
delay payment of any claim that would otherwise be payable by
such insurers but for the existence of such rights of
subrogation or entitle such insurers to exercise or to assert
any setoff, recoupment, counterclaim or any other deduction in
respect of any amounts payable under such policies.
11.2.4 DEDUCTIBLES. The insurance required by this
Section 11.2 may, subject to Section 11.8, provide for standard
deductibles which are from time to time in effect in the aviation
insurance industry generally and which are customarily maintained by
similarly situated United States commercial air carriers generally;
provided, however, such deductibles shall not be more than the
deductibles generally maintained by Lessee (and which Lessee is under
no compulsion to maintain pursuant to any indenture, mortgage, lease
or other agreement) with respect to its fleet of Boeing Model 737-300
series aircraft and CFM International Model CFM56-3 engines generally.
11.2.5 GOVERNMENT INDEMNITY. In the case of a contract
with the Government in respect of the Aircraft or Engines, a valid
agreement by the Government to indemnify Lessee, Lessor, each
Participant, Indenture Trustee and each other Indemnified Party
against the same risks which are required hereunder to be insured
against in amounts at least equal to the amounts required hereunder
from time to time (such indemnity to be backed by the full faith and
credit of the United States of America), shall be considered adequate
insurance with respect to the Aircraft, Airframe and any Engine
subject to such contract to the extent of the risks and in the amounts
that are the subject of any such agreement to indemnify.
11.3 GENERAL POLICY PROVISIONS. Each insurance policy to be
procured and maintained hereunder shall:
11.3.1 PRIMARY INSURANCE. Be primary and without right
of contribution from other insurance which may provide coverage to
Lessor, Indenture Trustee, or any Participant or any other Indemnified
Party with respect to its interest in the Aircraft, Airframe or any
Engine or its liabilities with respect to or arising out of the
transactions contemplated by the Operative Agreements;
11.3.2 COVERAGE FOR EACH INSURED. Expressly provide
that all the provisions thereof, except the agreed values and the
limits of the liability of the insurer under such policy, shall
operate in the same manner as if there were a separate policy covering
each insured;
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11.3.3 WAIVER OF CERTAIN RIGHTS. Waive any right of
the insurers to any setoff, recoupment, counterclaim or any other
deduction, whether by attachment or otherwise, in respect of any
liability of Lessee, Lessor, Indenture Trustee, any Participant or any
other Indemnified Party;
11.3.4 BREACH OF WARRANTY. Provide that, in respect of
Lessor, Indenture Trustee, each Participant and each other Indemnified
Party, such insurance shall not be invalidated by any action or
inaction by Lessee, any Indemnified Party or other Person and shall
insure the interests of Lessor, Indenture Trustee, each Participant
and each other Indemnified Party regardless of any breach or violation
by Lessee, any Indemnified Party or other Person of any
representation, warranty, declaration or condition contained in such
policy;
11.3.5 NOTICE OF TERMINATION OR CHANGES. Provide
for not less than 30 days' prior written notice to be received by
Lessor, Indenture Trustee and each Participant before any lapse,
alteration, termination or cancellation of the insurance evidenced
thereby shall be effective as to Lessor, Indenture Trustee, each
Participant and each other Indemnified Party, except that war-risk and
allied perils policies may provide for not less than seven days' prior
written notice or such lesser or greater notice as shall at the time
be customary in the aviation insurance industry generally, and which
are customarily in effect with respect to major United States
commercial air carriers generally from time to time;
11.3.6 NONLIABILITY FOR PREMIUMS. Provide that
neither Lessor, Indenture Trustee, any Participant nor any other
Indemnified Party shall be liable for any insurance premium;
11.3.7 IDENTITY OF INSURERS. Be with insurance companies,
underwriters or funds of recognized responsibility; and
11.3.8 FIFTY-FIFTY CLAUSE. Contain a fifty-fifty clause
per AVS 103 or its equivalent, but only in the event that such clause
is customarily included in such policies maintained by similarly
situated United States commercial air carriers generally.
11.4 APPLICATION OF INSURANCE PROCEEDS. As between Lessor
and Lessee, all insurance proceeds received under policies required to be
maintained (or to be caused to be maintained) by Lessee pursuant to Section
11.2 as a result of the occurrence of an Event of Loss with respect to the
Aircraft, Airframe or any Engine will be applied in accordance with Section
10.3.1, 10.3.2 or 10.3.3, as the case may be (except that the balance referred
to in Section 10.3.3 shall be paid over to, or retained by, Lessee). All
insurance proceeds received under such policies in respect of any property
damage loss not constituting an Event of Loss 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
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Engine) installed on the Airframe, Lessor shall hold any payment to it of any
insurance proceeds in respect of such loss for the account of Lessee or any
other third party that is entitled to receive such proceeds. The provisions of
Section 10.6 shall apply to amounts referred to in this Section 11.4.
11.5 CERTIFICATES; REPORTS, ETC. With respect to any policy
required hereunder, Lessee shall cause to be furnished to Lessor, Indenture
Trustee and each Participant on or prior to the Delivery Date of the Aircraft
and on or prior to expiration of such policy, certificates of the insurer or
insurers (or their authorized representatives) providing insurance pursuant to
the requirements of this Section 11. On or before the Delivery Date of the
Aircraft, and annually thereafter on or before the renewal date of such policy,
Lessee shall cause to be furnished to Lessor, Indenture Trustee, the Original
Loan Participant and Owner Participant a report signed by Willis Corroon
Aerospace (or any other firm of independent aircraft insurance brokers,
appointed by Lessee, reasonably satisfactory to the Original Loan Participant
and Owner Participant) describing in reasonable detail the insurance then
carried and maintained with respect to the Aircraft and stating the opinion of
such firm that the insurance then carried and maintained on the Aircraft
complies with the terms hereof. Lessee agrees that it will cause such firm to
advise Lessor, Indenture Trustee, the Original Loan Participant and Owner
Participant in writing promptly of any default in the payment of any premium or
any other act or omission on the part of Lessee or any Permitted Sublessee of
which they have knowledge and which might invalidate or render unenforceable,
in whole or in part, the insurance on the Aircraft. To the extent such
agreement is reasonably obtainable, Lessee further agrees to cause such firm to
advise Lessor, Indenture Trustee and each Participant in writing at least 30
days (seven days in the case of war-risk and allied perils coverage or such
lesser or greater notice as is customary in the aviation industry generally)
prior to any expiration, lapse, alteration, cancellation or termination date of
any insurance carried and maintained on the Aircraft pursuant to this Section
11.
11.6 LESSOR'S RIGHT TO MAINTAIN INSURANCE. In the event that
Lessee shall fail to maintain or cause to be maintained insurance as herein
provided, Lessor, Indenture Trustee or any Participant may at its option (but
shall not be obligated to) provide such insurance and in such event, Lessee
shall, upon demand, reimburse such Person, as Supplemental Rent, for the cost
thereof. No such payment, performance or compliance shall be deemed to cure
any Lease Default hereunder or otherwise relieve Lessee of its obligations with
respect thereto.
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
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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.
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
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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 or Break Amount due on the Certificates, within
seven Business Days from the due date thereof; or Lessee shall fail to make any
other payments required to be made by it under the Operative Agreements within
ten Business Days after the receipt of written demand therefor delivered to
Lessee by Lessor after such payments were required to have been made (provided,
that any failure to pay any amount owed by Lessee under the Tax Indemnity
Agreement or any failure of Lessee to pay to Lessor or the Owner Participant
when due any Excluded Payments shall not constitute a Lease Event of Default
unless written notice is given by the Owner Participant to Lessee and the
Indenture Trustee that such failure shall constitute a Lease Event of Default);
or
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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.
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
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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 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
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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, 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
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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 remedies. No express or implied waiver by
Lessor of any Lease Event of Default shall
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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 Floating Rate Renewal Term or any prior
Floating Rate 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 Floating Rate Renewal Term hereunder
shall be the fair market rental
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value of the Aircraft (as defined below) calculated as of the commencement of
such Renewal Term. Such fair market rental value shall be determined not later
than three months prior to the commencement of such Renewal Term by mutual
consent of Owner Participant and Lessee or, if they shall be unable so to
agree, by three recognized independent aircraft appraisers, one chosen and paid
for by Owner Participant, one chosen and paid for by Lessee and the third
appraiser chosen by the mutual consent of the first two appraisers and paid for
equally by Owner Participant and Lessee, the appraisals of which three
appraisers shall be averaged and such average shall be deemed to be the fair
market rental value of the Aircraft for all purposes hereof; provided, however,
that if the appraisal of one appraiser is more disparate from the average of
all three appraisals than each of the other two appraisals, then the appraisal
of such appraiser shall be excluded, the remaining appraisals shall be averaged
and such average shall be deemed to be the fair market rental value of the
Aircraft for all purposes hereof. If either Owner Participant or Lessee shall
fail to appoint an appraiser by the date which is two months prior to the
commencement of such Renewal Term or if such two appraisers cannot agree on the
amount of such appraisal and fail to appoint a third appraiser by the date
which is one month before the commencement of such Renewal Term, then either
Owner Participant or Lessee may apply to any court having jurisdiction
(including, without limitation, the courts referred to in Section 13(b) of the
Participation Agreement) to make such appointment. For purposes of this
Section 18.1, fair market rental value shall be the cash rental obtainable in
an arm's-length lease between an informed and willing lessee (under no
compulsion to lease) and an informed and willing lessor (under no compulsion to
lease) and shall be determined on the assumptions that the Aircraft is in the
United States of America, available for use by Lessee, unencumbered by any
renewal or purchase option contained in this Lease, in the return condition
required by Section 5 of this Lease and otherwise in compliance with and
subject to the terms and requirements of this Lease. Stipulated Loss Value
amounts that are payable during any such Renewal Term shall be calculated as of
the date of commencement of such Renewal Term and shall be determined in the
same manner referred to above based on the fair market sales value of the
Aircraft on such date determined in accordance with Section 18.2(a).
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
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which three appraisers shall be averaged and such average shall be deemed to be
the fair market sales value of the Aircraft for all purposes hereof; provided,
however, that if the appraisal of one appraiser is more disparate from the
average of all three appraisals than each of the other two appraisals, then the
appraisal of such appraiser shall be excluded, the remaining appraisals shall
be averaged and such average shall be deemed to be the fair market sales value
of the Aircraft for all purposes hereof. If either Owner Participant or Lessee
shall fail to appoint an appraiser by the date which is two months prior to
such last Business Day or if such two appraisers cannot agree on the amount of
such appraisal and fail to appoint a third appraiser by the date which is one
month before such last Business Day, then either Owner Participant or Lessee
may apply to any court having jurisdiction to make such appointment. For
purposes of this Section 18.2, fair market sales value shall be the cash price
obtainable in an arm's-length sale between an informed and willing buyer (under
no compulsion to buy) and an informed and willing seller (under no compulsion
to sell) and shall be determined on the assumptions that the Aircraft is in the
United States of America, available for use by the buyer, unencumbered by any
renewal or purchase option contained in this Lease, in the return condition
required by Section 5 of this Lease and otherwise in compliance with the
requirements of this Lease. At the time of payment to Lessor, in funds of the
type specified in Section 3.6, of the full amount of the purchase price
pursuant to this Section 18.2(a), Lessee shall also pay to Lessor all unpaid
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, and Break Amount, if any, payable in
respect of the Certificates) which is due and payable through and including the
date of payment; provided, that Lessee may elect on ten days' prior notice to
Lessor to pay the Special Purchase Price in installments as Supplemental Rent,
secured as provided herein, in which case Lessee shall pay to Lessor, on each
EBO Installment Payment Date, the amount
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determined by multiplying Lessor's Cost by the percentage set forth opposite
such EBO Installment Payment Date in Part II of Exhibit C.
(c) In connection with any purchase pursuant to Section 18.2(b),
Lessee may, at its option, as part or all, as the case may be, of the
applicable purchase price, assume all of the rights and obligations of Lessor
under the Trust Indenture in respect of the Certificates (including, without
limitation, any scheduled payment of principal of or accrued interest on the
Certificates due and payable on such date of purchase but only to the extent
that any Basic Rent installment payable by Lessee on any such date of purchase
does not cover such scheduled payment of principal or accrued interest on the
Certificates and excluding any obligations or liabilities of Lessor in its
individual capacity incurred on or prior to such date of purchase, which
obligations and liabilities shall remain the sole responsibility of Lessor in
its individual capacity) in accordance with Section 7.03 of the Trust Indenture
and simultaneously shall pay to Lessor, in funds of the type specified in
Section 3.6, an amount equal to (i) the excess, if any, of the applicable
purchase price over an amount equal to the sum of the principal of, and accrued
and unpaid interest on, the Outstanding Certificates on such date of purchase,
after taking into account any payments of principal and interest made in
respect of the Outstanding Certificates on or before such date of purchase,
plus (ii) all unpaid 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
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provided for above (and shall have paid in full the installment thereof due on
the Special Purchase Option Date), the following provisions shall also be
applicable: (a) this Lease shall continue in full force and effect (except as
hereinafter provided) but shall constitute then and thereafter a lease intended
for security securing the payment of such installments (and any appropriate UCC
financing statements or amendments to UCC financing statements shall be filed
in order to indicate that this Lease is intended for security purposes), (b)
Lessor shall permit re-registration of the Aircraft in the name of Lessee or a
Sublessee on the Special Purchase Option Date (it being understood that in all
other respects the registration provisions of the Operative Agreements shall
remain fully applicable), (c) no Basic Rent shall be payable after the Special
Purchase Option Date, (d) the Stipulated Loss Value of the Aircraft determined
at any time after the Special Purchase Option Date shall be equal to the
aggregate amount of the installments of the Special Purchase Price which have
not been paid at the time of such determination, (e) the reference to Basic
Rent in Section 14.1 shall be deemed to refer to installments of the Special
Purchase Price, (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, Break Amount or
Premium, if any, and all other amounts owing to the Holders or the
Indenture Trustee under or in respect of the Certificates or the Trust
Indenture (collectively, "Debt Payments"), all pursuant to such terms
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of subordination as shall be effectively and substantively equivalent
to the manner in which Debt Payments are paid or payable in priority
to the Equity Payments, and such other customary terms of
subordination as shall be reasonably required by the Indenture
Trustee; and
(c) the Owner Trustee shall have the substantive
equivalent of the cure and buy-out rights specified in clauses (e)(i)
and (e)(ii) of Section 8.03 of the Trust Indenture.
SECTION 19. SUCCESSOR OWNER TRUSTEE. Lessee agrees that
in the case of the appointment of any successor Owner Trustee pursuant to the
terms of the Trust Agreement, such successor Owner Trustee shall, upon written
notice by such successor Owner Trustee to Lessee, succeed to all the rights,
powers and title of Lessor hereunder and shall be deemed to be Lessor and the
owner of the Aircraft for all purposes hereof without the necessity of any
consent or approval by Lessee (but such successor Owner Trustee shall qualify
under the terms of Section 8(b) of the Participation Agreement) and without in
any way altering the terms of this Lease or Lessee's obligations hereunder.
One such appointment and designation of a successor Owner Trustee shall not
exhaust the right to appoint and designate further successor or additional
Owner Trustees pursuant to the Trust Agreement, and such right may be exercised
repeatedly as long as this Lease shall be in effect.
SECTION 20. RIGHT TO PERFORM FOR LESSEE. If Lessee fails to
make any payment of Rent required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor (subject
to the terms of the Trust Indenture) or Indenture Trustee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or
Indenture Trustee incurred in connection with such payment or the performance
of or compliance with such agreement, as the case may be, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand.
SECTION 21. QUIET ENJOYMENT. So long as no Lease Event of
Default shall have occurred, and be continuing, during the Term, Lessor will
not 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
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directed in writing by Lessee and at the expense and risk of Lessee in the
following securities (which shall mature within 91 days of the date of purchase
thereof): (a) direct obligations of the Government; (b) obligations fully
guaranteed by the Government; (c) open market commercial paper of any
corporation incorporated under the laws of the United States of America or any
State thereof rated P-1 or its equivalent by Moody's Investors Service and A-l
or its equivalent by Standard & Poor's Rating Group, a division of McGraw-Hill,
Inc.; or (d) certificates of deposit issued by, or bankers' acceptances of, or
time deposits or a deposit account with (i) the Owner Trustee or Indenture
Trustee (in their individual capacities) or (ii) any bank, trust company or
national banking association incorporated or doing business under the laws of
the United States of America or any state thereof having a combined capital and
surplus of at least $100,000,000. There shall be promptly remitted to Lessee
or its order any gain (including interest received) realized as the result of
any such investment (net of any fees, commissions and other expenses, if any,
incurred in connection with such investment) unless a Lease Event of Default or
a Lease Default (of the type described in Section 14.1 or 14.5) shall have
occurred and be continuing. Lessee will promptly pay to Lessor, on demand, the
amount of any loss realized as the result of any such investment (together with
any fees, commissions and other expenses, including Taxes, if any, incurred in
connection with such investment), such amount to be disposed of in accordance
with the terms of the Trust Indenture or the Trust Agreement.
22.2 MISCELLANEOUS; AMENDMENT. Lessee shall do, execute,
acknowledge and deliver, or shall cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances and assurances as Owner Trustee,
Indenture Trustee or any Participant shall reasonably require for accomplishing
the purposes of this Agreement and the other Operative Agreements. Any
provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect. No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which the enforcement of the change,
waiver, discharge or termination is sought. This Lease shall constitute an
agreement of lease, and nothing herein shall be construed as conveying to
Lessee any right, title or interest in or to the Aircraft, Airframe or Engines
except as a lessee only. The section and paragraph headings in this Lease and
the table of contents are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions hereof and all
references herein to numbered sections, unless otherwise indicated, are to
sections of this Lease. THIS LEASE HAS BEEN, AND EACH LEASE SUPPLEMENT AND
AMENDMENT HERETO IS INTENDED TO BE, DELIVERED IN THE STATE OF NEW YORK AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS 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,
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each of which shall be deemed an original, and all such counterparts shall
constitute one and the same instrument; provided, that no security interest in
Lessor's right, title and interest in and to this Agreement may be created
through the transfer or possession of any counterpart other than the
counterpart identified, for purposes of perfection of a security interest in
chattel paper (as such term is defined in the UCC), as the original counterpart
on the cover hereof.
SECTION 23. PERMITTED FOREIGN AIR CARRIERS. Lessor may, in the
exercise of its reasonable business judgment, by written notice to Lessee,
remove any foreign air carrier from Exhibit D and Lessee may, by written notice
to Lessor, request that any foreign air carrier be added to Exhibit D, subject
to Lessor's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no deletion of an airline from the
list of Permitted Foreign Air Carriers pursuant hereto shall (i) affect any
existing sublease or other agreement providing for transfer of possession of
the Aircraft, Airframe, any Engine or Part which was permitted hereunder at the
time entered into, or (ii) preclude any subsequent renewal or extension of such
sublease or other agreement to which the Permitted Foreign Air Carrier under a
sublease is entitled by the terms thereof as originally in effect.
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IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly executed and delivered as of the day and year first above written.
Lessor:
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: /s/ Pablo de la Canal
----------------------
Corporate Trust Officer
Lessee:
SOUTHWEST AIRLINES CO.
By: /s/ John D. Owen
-----------------
Treasurer
SALE AND LEASE AGREEMENT [N621SW]
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<PAGE> 70
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 June 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 March 6, 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 TO51154;
B. Lessor and Lessee have heretofore entered into that certain
Sale and Lease Agreement dated as of June 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.
A-1
<PAGE> 71
- --------------------------------
All of the right, title and interest of Lessor in and to this Sale and
Lease Agreement Supplement has been assigned to and is subject to a security
interest in favor of Wilmington Trust Company, as Indenture Trustee. This Sale
and Lease Agreement Supplement has been executed in several counterparts. No
security interest in Lessor's right, title and interest in and to this Sale and
Lease Agreement Supplement may be created through the transfer or possession of
any counterpart other than the counterpart identified, for purposes of
perfection of a security interest in chattel paper (as such term is defined in
the UCC), as the original counterpart. [This is not the original counterpart.]
A-2
<PAGE> 72
In consideration of the premises and other good and sufficient
consideration, and pursuant to Section 2 of the Lease Agreement, Lessor and
Lessee hereby agree as follows:
1. Lessee hereby delivers and sells to Lessor and Lessor hereby
accepts and purchases from Lessee and in turn delivers and leases back to
Lessee, and Lessee hereby accepts and leases back from Lessor, under the Lease
Agreement, as herein supplemented, the following-described Boeing Model 737-3H4
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date
hereof consists of the following:
Airframe: U.S Registration Number N621SW and Manufacturer's Serial No. 28037;
and
Engines: Two CFM International Model CFM56-3-B1 Engines installed
thereon bearing Engine Manufacturer's Serial Numbers as follows: 858296 and
858297.
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-3
<PAGE> 73
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered as of the date and year first
above written.
Lessor:
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-4
<PAGE> 74
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> 75
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> 76
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> 77
EXHIBIT C TO
LEASE AGREEMENT
PART II
EBO INSTALLMENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
EBO Installment Percentage of
Payment Date Lessor's Cost
---------------- ---------------
<S> <C>
January 2, 2015 34.43524205%
April 15, 2015 4.86113936
June 15, 2015 4.86113936
September 15, 2015 4.86113936
December 15, 2015 4.86113936
-----------
53.87979949 %
</TABLE>
C-2
<PAGE> 78
EXHIBIT C TO
LEASE AGREEMENT
PART III
SPECIAL PURCHASE PRICE
53.87979949% of Lessor's Cost
PART IV
LESSOR'S COST
Lessor's Cost for the Delivered Aircraft is $33,000,000.00.
C-3
<PAGE> 79
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> 80
EXHIBIT E TO
LEASE AGREEMENT
ASSUMED INTEREST AMOUNTS
Rent Payment Assumed Interest
Date Amount
-------------- ----------------
[The portion of this Exhibit appearing below this text is
intentionally deleted from the FAA filing counterpart as the parties hereto
deem it to contain confidential information.]
E-1
<PAGE> 81
APPENDIX A TO
LEASE AGREEMENT
CERTAIN RETURN CONDITIONS
In the event that Lessee (or any Permitted Sublessee then in
possession of the Aircraft) shall not then be using a continuous or
"progressive" maintenance program with respect to the Airframe, Lessee agrees
that at the time of its return of the Aircraft pursuant to Section 5.3, the
Airframe shall have at least one year remaining until the next scheduled "D"
check (which term, as used in this paragraph, shall refer to a "full D" check
accomplished at ten year intervals, rather than to any "quarter D" or "half D"
check which may be scheduled under the Maintenance Program then used by Lessee
or any Permitted Sublessee, as the case may be).
* * *
APP-1
<PAGE> 1
EXHIBIT 4.11
FIRST AMENDMENT TO
SALE AND LEASE AGREEMENT
dated as of May 1, 1998
between
FIRST UNION NATIONAL BANK,
as Owner Trustee,
Lessor
and
SOUTHWEST AIRLINES CO.,
Lessee
-----------------------
One Boeing Model 737-3H4 Aircraft
(Southwest Airlines 1996 Trust N620SW)
All right, title and interest of Lessor in and to the Sale and Lease
Agreement, as amended, and the Aircraft (including the Engines), has been
assigned to and is subject to a security interest in favor of WILMINGTON TRUST
COMPANY, as Indenture Trustee. This First Amendment to Sale and Lease Agreement
has been executed in several counterparts. No security interest in Lessor's
right, title and interest in and to this First Amendment to Sale and Lease
Agreement may be created through the transfer or possession of any counterpart
other than the counterpart identified, for purposes of perfection of a security
interest in chattel paper (as such term is defined in the UCC), as the original
counterpart. This is not the original counterpart.
<PAGE> 2
THIS FIRST AMENDMENT TO SALE AND LEASE AGREEMENT, dated as of May 1,
1998 (this "Amendment"), between FIRST UNION NATIONAL BANK, a national banking
association, not in its individual capacity but solely as Owner Trustee under
that certain Trust Agreement establishing Southwest Airlines 1996 Trust N620SW
and dated as of June 1, 1996 ("Lessor"), and SOUTHWEST AIRLINES CO., a Texas
corporation ("Lessee"), amends that certain related Sale and Lease Agreement
dated as of June 1, 1996 (the "Original Lease") between Lessee and Lessor (the
Original Lease, as supplemented by Sale and Lease Agreement Supplement No. One
thereto relating to the Aircraft referred to below dated June 3, 1996 ("Lease
Supplement No. 1") between Lessor and Lessee, being referred to herein as the
"Lease"),
WITNESSETH:
WHEREAS, except as otherwise defined in this Amendment, the capitalized
terms used herein shall have the meanings attributed thereto in the Lease; and
WHEREAS, pursuant to the Lease, Lessee has leased from Lessor, the
Aircraft, which consists of the following components: (i) Airframe: One (1)
Boeing 737-3H4, FAA Registration No. N620SW, Manufacturer's serial no. 28036;
and (ii) Engines: Two (2) CFM International Model CFM56-3-B1 Engines bearing,
respectively, Manufacturer's serial numbers 858287 and 858292; and
WHEREAS, a counterpart of the Original Lease, to which was attached and
made a part thereof a counterpart of Lease Supplement No. 1, was recorded by the
Federal Aviation Administration on July 17, 1996 and assigned Conveyance No.
S098304; and
WHEREAS, in connection with the refinancing of the Certificates pursuant
to Section 18 of the Participation Agreement, the parties wish to recalculate
Basic Rent, Stipulated Loss Value percentages, Termination Value percentages and
Special Purchase Price; and
WHEREAS, Lessor and Lessee desire to amend the Lease in certain
respects;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
Section 1. Amendments to Exhibits B-1, B-2, C and E. Exhibits B-1, B-2
and C to the Lease are hereby deleted in their entirety and replaced with
Exhibits B-1, B-2 and C, respectively, to this Amendment. Exhibit E to the Lease
is hereby deleted in its entirety.
Section 2. Amendments to Section 1. Section 1 of the Lease is hereby
amended in the following manner:
(a) The following defined terms are hereby added to Section 1 in
alphabetical order:
SALE AND LEASE AMENDMENT [N620SW]
-1-
<PAGE> 3
"'First Amendment to Sale and Lease Agreement' means that certain First
Amendment to Sale and Lease Agreement dated as of May 1, 1998 by and between
Lessee and Lessor relating to the Aircraft."
"'First Amendment to Participation Agreement' means that certain First
Amendment to Participation Agreement dated as of May 1, 1998 by and among
Lessee, Owner Participant, Owner Trustee, Indenture Trustee and Pass Through
Trustee relating to the Aircraft."
"'First Amendment to Trust Indenture' means that certain First Amendment
to Trust Indenture and Security Agreement, dated as of May 1, 1998 between Owner
Trustee and Indenture Trustee relating to the Aircraft."
"'Pass Through Certificates' is defined in Section 1.01(b) of the Trust
Indenture."
"'Pass Through Trust Agreement' 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 Trust Supplement No. 1998-A dated
as of May 1, 1998 between Lessee and Pass Through Trustee."
"'Refinancing Agreement' means that certain Refinancing Agreement
relating to the Aircraft dated as of May 1, 1998 by and among Lessee, Owner
Participant, Original Loan Participant, Owner Trustee, Indenture Trustee and
Pass Through Trustee."
(b) The definition of "Indemnified Parties" is hereby amended to
be and read in its entirety as follows:
"'Indemnified Parties' means (i) First Union National Bank, 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 N620SW Certificate (including without
limitation the Pass Through Trustee), (v) the Estate and the Trust Indenture
Estate, (vi) the Original Loan Participant, (vii) the respective Affiliates,
successors and assigns of the foregoing and (viii) the respective directors,
officers, employees, agents, partners and servants of the foregoing."
(c) The definition of "Lease", "this Lease", "this Agreement",
"hereby", "herein", "hereof", and "hereunder" is hereby amended to be and read
in its entirety as follows:
"'Lease', 'this Lease', 'this Agreement', 'hereby' 'herein' 'hereof"
'hereunder' or other words mean this Sale and Lease Agreement as amended by the
First Amendment to Sale and Lease Agreement, and as supplemented by one or more
Lease Supplements and as may be further amended from time to time."
SALE AND LEASE AMENDMENT [N620SW]
-2-
<PAGE> 4
(d) The definition of "Operative Agreements" is hereby amended
to be and read in its entirety as follows:
"'Operative Agreements' means this Lease, each Lease Supplement, the
Participation Agreement, the Trust Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the Engine Purchase Agreement Assignment (if
any), the Trust Indenture, the Certificates, each Indenture and Trust
Supplement, the Bills of Sale, the Tax Indemnity Agreement, the Manufacturer's
Consent and the Refinancing Agreement, including any consents included in or
attached to any thereof."
(e) The definition of "Participant" is hereby amended to be and
read in its entirety as follows:
"'Participant' means Owner Participant and its successors and permitted
assigns."
(f) The definition of "Participation Agreement" is hereby amended
to be and read in its entirety as follows:
"'Participation Agreement' means the Participation Agreement relating to
the Aircraft, dated as of June 1, 1996, among Lessee, Owner Participant,
Original Loan Participant, Lessor and Indenture Trustee as amended by the First
Amendment to Participation Agreement and as may be further amended from time to
time."
(g) The definition of "Special Purchase Price After-Tax Yield" is
hereby amended to be and read in its entirety as follows:
"'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 Owner Participant (including the Tax Assumptions set forth in Section 2
of the Tax Indemnity Agreement) in its economic analysis of the transaction as
of the Delivery Date."
(h) The definition of "Stipulated Loss Value" is hereby amended
to be and read in its entirety as follows:
"'Stipulated Loss Value' means the sum of (i) the amount determined by
multiplying the Lessor's Cost of the Aircraft by the percentage set forth in
Exhibit B-1 hereto opposite the SLV Determination Date next preceding the date
on which Stipulated Loss Value is being paid (or, if such payment date is an SLV
Determination Date, by the percentage set forth opposite such SLV Determination
Date), and (ii) interest on such amount described in clause (i) above calculated
at the Certificate Rate from and including such SLV Determination Date to but
excluding the date of such payment. Stipulated Loss Value may be subject to
adjustment in accordance with Section 3.7 and Section 18.2(d) of this
Agreement."
SALE AND LEASE AMENDMENT [N620SW]
-3-
<PAGE> 5
(i) The definition of "Termination Value" is hereby amended to be
and read in its entirety as follows:
"'Termination Value' means the amount determined by multiplying the
Lessor's Cost of the Aircraft by the percentage set forth in Exhibit B-2 hereto
opposite the TV Determination Date as of which Termination Value is being
determined. Termination Value may be subject to adjustment in accordance with
Section 3.7 of this Agreement."
(j) The definition of "Trust Indenture" is hereby amended to be
and read in its entirety as follows:
"'Trust Indenture' means the Trust Indenture and Security Agreement,
dated as of June 1, 1996, between Owner Trustee and Indenture Trustee, relating
to the Aircraft, as supplemented by the Trust Agreement and Trust Indenture and
Security Agreement Supplement, dated June 3, 1996, and as amended by the First
Amendment to Trust Indenture and as may be further amended or supplemented from
time to time."
(k) The definitions of "Assumed Interest Amount" and "Rent
Differential Amount" are hereby deleted in their entirety.
Section 3. Amendments to Section 3. Section 3 of the Lease is hereby
amended in the following manner:
(a) Section 3.3 is hereby amended to be and read in its entirety
as follows:
"3.3 Basic Rent. No Basic Rent shall be paid during the Interim
Lease Term. Lessee hereby agrees to pay to Lessor Basic Rent for the Base Lease
Term with respect to the Aircraft on each Rent Payment Date set forth in Part I
of Exhibit C, in each case in an amount equal to the percentage of Lessor's Cost
of the Aircraft set forth in Part I of Exhibit C opposite such Rent Payment
Date, subject to the terms of the next succeeding paragraph of this Section 3.3
and Section 3.7. Each installment (or portion of an installment) of Basic Rent
under the heading `Advance' in Part I of Exhibit C payable on a Rent Payment
Date shall relate to the respective Lease Period immediately following such Rent
Payment Date, and each installment (or portion of an installment) of Basic Rent
under the heading `Arrears' in Part I of Exhibit C payable on a Rent Payment
Date shall relate to the respective Lease Period immediately preceding such Rent
Payment Date.
"Anything contained in the Participation Agreement or this Lease
or any other Operative Agreement to the contrary notwithstanding, (a) each
installment of Basic Rent payable under this Lease, whether or not adjusted in
accordance with the provisions of Section 3.7 hereof, shall be, under any
circumstances and in any event, in an amount at least sufficient to pay in full,
on such Rent Payment Date, any scheduled payments then required to be made on
account of the principal of and interest on the Certificates, and (b) Stipulated
Loss Value, Termination Value and, unless Lessee shall have assumed the
Certificates pursuant to Section 18.2(c) hereof, the Special Purchase Price and
the initial installment of the Special Purchase Price if paid in installments,
in each case whether or not adjusted in accordance with the provisions of
Section 3.7, as of any date
SALE AND LEASE AMENDMENT [N620SW]
-4-
<PAGE> 6
of determination thereof, together with any amount of Basic Rent required to be
paid on such date and all other amounts payable on such date, shall equal under
any circumstances and in any event, an amount at least sufficient to pay in full
any payments then required to be made on account of the principal of and
interest (including, without limitation any interest on overdue principal and,
to the extent permitted by applicable law, interest), and Premium, if any, on
the Certificates and all amounts which would be payable prior thereto or on a
parity therewith if Section 3.03 of the Trust Indenture were applicable at the
time of such payment."
(b) Section 3.4 of the Lease is hereby amended to be and read in
its entirety as follows:
"3.4 Variable Amounts on Certificates. Lessee shall pay (or cause to be
paid) to or on behalf of Lessor an amount of Supplemental Rent equal to the
Premium (if any) payable on the Certificates, amounts due pursuant to Section
15.05 of the Trust Indenture and each other amount required to be paid (other
than principal and interest on the Certificates) by Lessor as Owner Trustee
under the Trust Indenture, on the same date that such amounts are due under the
Trust Indenture and as provided in Section 3.6."
(c) Section 3.7.1 of the Lease is hereby amended to be and read
in its entirety as follows:
"3.7.1 Adjustments upon Payment by Lessor of Transaction Costs,
Etc. If (a) the Transaction Costs referred to in Section 16(a) of the
Participation Agreement paid by Owner Participant in connection with the closing
of this transaction on the Delivery Date are equal to an amount which is other
than 0.332897% of Lessor's Cost, (b) the Transaction Costs referred to in
Section 16(a) of the Participation Agreement paid by Owner Participant in
connection with the initial refinancing or refunding of the Certificates
pursuant to Section 18 of the Participation Agreement are equal to an amount
which is other than 0.643305% of Lessor's Cost, (c) a refinancing or refunding
of the Certificates pursuant to Section 17 of the Participation Agreement
occurs, or (d) any recalculation of Basic Rent, Stipulated Loss Value,
Termination Value and the Special Purchase Price is required by the terms of the
Tax Indemnity Agreement, then in each case, the Basic Rent percentages set forth
in Exhibit C, the Stipulated Loss Value percentages set forth in Exhibit B-1 and
the Termination Value percentages set forth in Exhibit B-2 shall be recalculated
by Owner Participant (i) in the case of a recalculation pursuant to clause (b),
on or prior to January 2, 1999 (ii) in the case of a recalculation pursuant to
clause (c), prior to the relevant Refinancing Date or (iii) in the case of a
recalculation pursuant to clause (d), prior to the Rent Payment Date next
following the event described in clause (d), in each case in order to: (A)
maintain Net Economic Return and (B) minimize the Net Present Value of Rents to
the extent possible consistent with clause (A). In addition, in the event of an
adjustment pursuant to this Section 3.7, the Special Purchase Price (including
any installments thereof) shall be recalculated in accordance with the terms of
Section 18.2(b)."
Section 4. Amendment to Section 7. Section 7.3.3 of the Lease is hereby
amended to delete all references therein to the Original Loan Participant.
SALE AND LEASE AMENDMENT [N620SW]
-5-
<PAGE> 7
Section 5. Amendment to Section 10. Section 10.1.3 of the Lease is
hereby amended to be and read in its entirety as follows:
"10.1.3 Payment of Stipulated Loss Value and Rent. On any Business Day
designated by Lessee upon 30 days' irrevocable notice to Lessor and the
Indenture Trustee, but in no event later than the earlier of (i) the 180th day
following the date of the occurrence of such Event of Loss or (ii) the later of
15 days following receipt of insurance proceeds with respect to such occurrence
or the date Lessee shall have made or shall have deemed to have made its
election under Section 10.1.1 to comply with Section 10.1.3, Lessee shall pay to
Lessor in the manner and in funds of the type specified in Section 3.6, (A) the
Stipulated Loss Value for the Aircraft, determined as of the date of payment (as
described in the definition of Stipulated Loss Value), (B) all unpaid 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."
Section 6. Amendments to Section 11.
(a) Section 11.5 of the Lease is hereby amended to delete all
references therein to the Original Loan Participant.
(b) Section 11.6 of the Lease is hereby amended to be and read in
its entirety as follows:
"11.6 Lessor's Right to Maintain Insurance. In the event that Lessee
shall fail to maintain or cause to be maintained insurance as herein provided,
Lessor, Indenture Trustee, Owner Participant or, so long as Pass Through Trustee
is a Holder, Pass Through Trustee, may at its option (but shall not be obligated
to) provide such insurance and in such event, Lessee shall, upon demand,
reimburse such Person, as Supplemental Rent, for the cost thereof. No such
payment, performance or compliance shall be deemed to cure any Lease Default
hereunder or otherwise relieve Lessee of its obligations with respect thereto."
Section 7. Ratification. Except as amended hereby, the Lease continues
and shall remain in full force and effect in all respects.
Section 8. Counterparts. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered is
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 9. GOVERNING LAW. THIS AMENDMENT HAS BEEN 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.
SALE AND LEASE AMENDMENT [N620SW]
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<PAGE> 8
IN WITNESS WHEREOF, Lessor and Lessee have each caused this First
Amendment to Sale and Lease Agreement to be duly delivered in the State of New
York and executed as of the day and year first above written.
FIRST UNION NATIONAL BANK
not in its individual capacity, but
solely as Owner Trustee, Lessor
By:
--------------------------------------
Corporate Trust Officer
SOUTHWEST AIRLINES CO., Lessee
By:
--------------------------------------
Treasurer
Approved and Consented to:
WILMINGTON TRUST COMPANY,
not in its individual capacity, but
solely as Indenture Trustee
By:
--------------------------------------
Senior Financial Services Officer
SALE AND LEASE AMENDMENT [N620SW]
-7-
<PAGE> 9
EXHIBIT B-1 TO
SALE AND LEASE AGREEMENT
Stipulated Loss Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N620SW]
B-1
<PAGE> 10
EXHIBIT B-2 TO
SALE AND LEASE AGREEMENT
Termination Value Schedule
[The portion of this Exhibit appearing below this text is intentionally deleted
from the FAA filing counterpart as the parties hereto deem it to contain
confidential information.]
SALE AND LEASE AMENDMENT [N620SW]
B-2
<PAGE> 11
EXHIBIT C TO
SALE AND LEASE AGREEMENT
Part I
Rent Payment Schedule
Part II
EBO Installment Payment Schedule
Part III
Special Purchase Price
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.]
SALE AND LEASE AMENDMENT [N620SW]
C-1
<PAGE> 1
EXHIBIT 4.12
REFINANCING AGREEMENT
(Southwest Airlines 1996 Trust N620SW)
Dated as of May 1, 1998
among
SOUTHWEST AIRLINES CO., as Lessee
CHRYSLER FINANCIAL CORPORATION,
as Owner Participant
ROYAL BANK OF CANADA, NEW YORK BRANCH,
as Original Loan Participant
WILMINGTON TRUST COMPANY, in its individual capacity only
as expressly provided herein and as Indenture Trustee
and Pass Through Trustee
FIRST UNION NATIONAL BANK,
in its individual capacity only as expressly provided herein
and otherwise solely as Owner Trustee
One Boeing 737-3H4 Aircraft
(Southwest Airlines 1996 Trust N620SW)
<PAGE> 2
INDEX TO REFINANCING AGREEMENT
(Southwest Airlines 1996 Trust N620SW)
Section 1. Refinancing of Original Certificate
Section 2. Adjustments to Exhibits to the Lease
Section 3. Conditions Precedent
Section 4. Representations and Warranties
Section 5. Notices
Section 6. Expenses
Section 7. Miscellaneous
EXHIBIT A Maturity Dates, Principal Amounts and Interest Rates, Etc.
of Series SWA 1996 Trust N620SW Certificates
EXHIBIT A-1 Payment Dates and Payment Percentages and Amounts
EXHIBIT A-2 Issuance of Series SWA 1996 Trust N620SW Certificates
EXHIBIT B Form of First Amendment to Trust Indenture
EXHIBIT C Form of First Amendment to Sale and Lease Agreement
EXHIBIT D Form of First Amendment to Participation Agreement
EXHIBIT E Form of First Amendment to Tax Indemnity Agreement
<PAGE> 3
REFINANCING AGREEMENT
This REFINANCING AGREEMENT dated as of May 1, 1998, among (i) SOUTHWEST
AIRLINES CO., a Texas corporation ("Lessee"), (ii) CHRYSLER FINANCIAL
CORPORATION, a Michigan corporation ("Owner Participant"), (iii) FIRST UNION
NATIONAL BANK, a national banking association, not in its individual capacity
except as otherwise expressly provided herein, but solely as Owner Trustee
("Owner Trustee"), under that certain Trust Agreement establishing the Southwest
Airlines 1996 Trust N620SW and dated as of June 1, 1996, between Owner
Participant and Owner Trustee, (iv) WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity except as otherwise provided herein,
but solely as trustee under the Pass Through Trust Agreement, dated as of
February 1, 1993 (the "Basic Agreement"), between Lessee and Wilmington Trust
Company, as supplemented by Trust Supplement No. 1998-A thereto, dated as of May
1, 1998 creating 1998-A Pass Through Trust (such Basic Agreement as so
supplemented, being the "Pass Through Trust Agreement", and Wilmington Trust
Company, in its capacity as trustee under the Pass Through Trust Agreement,
being the "Pass Through Trustee"), (v) WILMINGTON TRUST COMPANY, a Delaware
banking corporation, not in its individual capacity except as otherwise provided
herein, but solely as indenture trustee ("Indenture Trustee") under the related
Trust Indenture and Security Agreement dated as of June 1, 1996, as
supplemented, between Indenture Trustee and Owner Trustee and (vi) ROYAL BANK OF
CANADA, a Canadian chartered bank, acting through its New York Branch ("Original
Loan Participant").
W I T N E S S E T H:
WHEREAS, Lessee, Owner Participant, Owner Trustee, Original Loan
Participant and Indenture Trustee entered into a Participation Agreement, dated
as of June 1, 1996 (the "Original Participation Agreement"; all capitalized
terms used herein without definition shall have the meanings set forth in or by
reference in the Original Participation Agreement; the Original Participation
Agreement as amended by the First Amendment to Participation Agreement (as
defined below) being herein called the "Participation Agreement"), providing for
the sale and lease of one Boeing Model 737-3H4 aircraft, bearing U.S.
registration number N620SW;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Participant entered into a Trust Agreement
establishing the Southwest Airlines 1996 Trust N620SW and dated as of June 1,
1996 (the "Trust Agreement") with Owner Trustee in its individual capacity,
pursuant to which Trust Agreement the Owner Trustee agreed, among other things,
to hold the Trust Estate defined in Section 1.01 of such Trust Agreement for the
benefit of Owner Participant thereunder;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Indenture Trustee entered into a
Trust Indenture and Security Agreement relating to the Aircraft, dated as of
June 1, 1996 (such Trust Indenture and Security Agreement as supplemented by
Trust Agreement and Trust Indenture and Security Agreement Supplement, dated
June 3, 1996 relating to the Aircraft being herein called the "Original
Indenture"; the Original Indenture as amended by the First Amendment to Trust
Indenture (as defined below) being herein called the "Indenture"), for the
benefit of Original Loan Participant (and, upon the
REFINANCING AGREEMENT [N620SW]
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issuance of the Equipment Notes (as defined below), the Holders of the Equipment
Notes issued thereunder), pursuant to which Original Indenture, among other
things, a certificate substantially in the form set forth in Exhibit A thereto
(the "Original Certificate") was issued to Original Loan Participant as evidence
of the loan then being made by Original Loan Participant to Owner Trustee, the
proceeds of which were applied by Owner Trustee to the payment of Lessor's Cost
for the Aircraft;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Trustee and Lessee entered into a Sale and Lease
Agreement, dated as of June 1, 1996 relating to the Aircraft (such Sale and
Lease Agreement as supplemented by Sale and Lease Agreement Supplement No. One
dated June 3, 1996 relating to the Aircraft being herein called the "Original
Lease"; and the Original Lease as amended by the First Amendment to Lease
Agreement (as defined below) being herein called the "Lease"), relating to the
Aircraft whereby, subject to the terms and conditions set forth in the Original
Lease, Owner Trustee agreed to buy from and lease to Lessee, and Lessee agreed
to sell to and lease from Owner Trustee, the Aircraft on the Delivery Date;
WHEREAS, concurrently with the execution and delivery of the Original
Participation Agreement, Owner Participant and Lessee entered into a Tax
Indemnity Agreement, dated as of June 1, 1996 relating to the Aircraft (the
"Original Tax Indemnity Agreement"; and the Original Tax Indemnity Agreement as
amended by the First Amendment to Tax Indemnity Agreement (as defined below)
being herein called the "Tax Indemnity Agreement");
WHEREAS, the parties hereto wish to effect a refinancing of the
Original Certificate as permitted by Section 18 of the Original Participation
Agreement as part of a refinancing transaction;
WHEREAS, Owner Trustee has agreed, in connection with the refinancing
of the Original Certificate, to issue one or more Equipment Notes substantially
in the form set forth in Exhibit A-1 to the Indenture (for the purposes hereof,
"Equipment Notes" shall have the meaning set forth for the term "Series SWA 1996
Trust N620SW Certificates" in the Indenture) to the grantor trust created on the
Closing Date (as defined below) by the Pass Through Trust Agreement, and Pass
Through Trustee will thereafter issue one or more Pass Through Certificates
substantially in the form of Exhibit A to the Pass Through Trust Agreement (the
"Pass Through Certificates");
WHEREAS, to facilitate Owner Trustee's sale of the Equipment Notes to
the Pass Through Trustee and the purchase of such Equipment Notes by Pass
Through Trustee, Lessee has duly authorized the execution and delivery of the
Pass Through Trust Agreement 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
Pass Through Certificates as the "obligor" thereunder, as such term is defined
in and solely for purposes of the Trust Indenture Act of 1939, as amended, and
is undertaking to perform certain administrative and ministerial duties
thereunder and is also undertaking to pay the fees and expenses of the Pass
Through Trustee;
WHEREAS, the proceeds from the sale of the Equipment Notes will be
applied to effect the optional refinancing of the Original Certificate; and
REFINANCING AGREEMENT [N620SW]
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<PAGE> 5
WHEREAS, in connection with the refinancing transaction as contemplated
hereby, Owner Trustee and Lessee have agreed to adjust payments of Basic Rent,
Stipulated Loss Values and Termination Values and to adjust the Special Purchase
Price on the Refinancing Date in accordance with Section 3.7 of the Lease and
Section 18 of the Original Participation Agreement, and to amend Exhibits B-1,
B-2 and C of the Lease so as to reflect such adjustments;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Refinancing of Original Certificate.
(a) Subject to the satisfaction or waiver of the conditions set forth
herein at or prior to 2:00 p.m. Central time on May 29, 1998 or at such other
date and time agreed to by the parties hereto (the "Closing Date"):
(i) Pass Through Trustee shall, in accordance with Section
2.01 of the Pass Through Trust Agreement, execute, authenticate and
deliver Pass Through Certificates, dated the Closing Date and of the
maturities, in the principal amounts, bearing the interest rates and of
the other economic terms specified in the request of Lessee delivered
pursuant to such Section 2.01, and deliver such Pass Through
Certificates to the Underwriters (as defined below) as specified in
such request against payment by the Underwriters of an amount equal to
the aggregate principal amount thereof;
(ii) Owner Trustee shall, in accordance with Section 2.01 of
the Indenture, issue and deliver to Indenture Trustee one or more
Equipment Notes dated the Closing Date and of the maturities, in the
principal amounts, bearing the interest rates and reflecting the other
economic terms specified in Exhibits A, A-1 and A-2 hereto in an
aggregate principal amount of $23,882,858.75 (the "Refinancing
Amount");
(iii) Indenture Trustee shall authenticate such Equipment
Notes pursuant to Section 2.02 of the Indenture, and deliver such
Equipment Notes to Pass Through Trustee as specified in Exhibit A-2
hereto against payment by Pass Through Trustee of an aggregate amount
equal to the Refinancing Amount;
(iv) Owner Trustee shall on the Closing Date pay to Indenture
Trustee, for the account of Owner Participant, an amount equal to
accrued interest and, subject to Lessee's obligations under Section 3.4
of the Original Lease, Break Amount (as defined in the Original
Indenture), if any, owing to the Original Loan Participant on the
Closing Date; and
(v) Indenture Trustee shall disburse to Original Loan
Participant the amount of principal, interest and Break Amount, if any,
owing to Original Loan Participant on the Closing Date with respect to
the Original Certificate in connection with the refinancing of the
Original Certificate in accordance with Sections 2.08 and 15.03 of the
Original Indenture and Section 18 of the Original Participation
Agreement.
REFINANCING AGREEMENT [N620SW]
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<PAGE> 6
Owner Participant, by its execution and delivery hereof, requests and directs
Owner Trustee, in accordance with Section 5.02 of the Trust Agreement, to
execute and deliver this Agreement, the First Amendment to Participation
Agreement, the First Amendment to Lease Agreement and the First Amendment to
Trust Indenture.
(b) On the Closing Date, subject to the receipt by Original Loan
Participant of the aggregate amount payable to it as provided for in Section
18(a) of the Original Participation Agreement, Original Loan Participant shall
deliver the Original Certificate to Owner Trustee for cancellation by Indenture
Trustee. Original Loan Participant hereby authorizes and directs Indenture
Trustee to execute and deliver this Agreement, the First Amendment to
Participation Agreement, the First Amendment to Lease Agreement and the First
Amendment to Trust Indenture and to take all actions contemplated by said
agreements and amendments to effect the issuance of the Equipment Notes and the
refinancing of the Original Certificate.
(c) In case Pass Through Trustee shall fail to make the payment
described in Section 1(a)(iii) hereof, or in case Owner Trustee shall for any
reason fail to issue and deliver to Indenture Trustee the Equipment Notes
pursuant to Section 1(a)(ii) hereof, (i) the written notice given by Lessee
pursuant to Section 18(a) of the Original Participation Agreement and Section
6.03(b) of the Original Indenture with respect to the refinancing contemplated
hereby shall be deemed to have never been given (except, however, as provided in
Section 6(b) hereof), (ii) Indenture Trustee, Owner Trustee, Owner Participant
and Lessee shall have no obligation to pay to Original Loan Participant any
amount in respect of the refinancing of the Original Certificate pursuant
hereto, (iii) none of the First Amendment to Participation Agreement, the First
Amendment to Lease Agreement and the First Amendment to Trust Indenture shall be
deemed to have been delivered and (iv) the Original Certificate shall remain
outstanding and in full force and effect and shall continue to be subject to the
terms of the Original Indenture.
(d) The closing (the "Closing") of the transactions described in this
Agreement shall take place at the offices of Vinson & Elkins L.L.P., Houston,
Texas, or such other place as the parties hereto may agree; the parties hereby
agree that the transactions contemplated hereby shall be deemed to have occurred
simultaneously and that no transaction contemplated hereby shall be deemed to
have occurred except in conjunction with the occurrence of all such other
transactions.
(e) All payments pursuant to this Section 1 shall be made on the
Closing Date in immediately available funds to such accounts and at such banks
as specified in the Operative Agreements, or, if otherwise, as the parties
hereto shall designate in writing not less than one Business Day prior to the
Closing Date.
(f) This Agreement shall apply only to the refinancing of the Original
Certificate as described herein and not to the refinancing, redemption or
refunding of any Equipment Notes or any other Certificate (as defined in the
Indenture) issued under the Indenture.
SECTION 2. Adjustments to Exhibits to the Lease. The parties
hereto agree, by their execution and delivery hereof, that the transactions
contemplated hereby constitute a refinancing transaction as contemplated by
Section 3.7 of the Lease and Section 18 of the Participation Agreement and that
they will take all actions contemplated thereby, including the
REFINANCING AGREEMENT [N620SW]
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<PAGE> 7
revision of Exhibits B-1, B-2 and C of the Lease to reflect the adjustments
contemplated thereby. Subject to the consummation of such refinancing
transaction as described herein, such revised Exhibits B-1, B-2 and C to the
Lease and the deletion of Exhibit E to the Lease shall be effective as of the
Closing Date.
SECTION 3. Conditions Precedent. The obligations of each of the
parties hereto to participate in the transactions contemplated by this Agreement
on the Closing Date are subject to the fulfillment, prior to or on the Closing
Date, of the following conditions precedent; provided, however, that it shall
not be a condition precedent to the obligations of any party hereto that any
document be produced or action taken that is to be produced or taken by such
party or any Person within such party's control; and provided, further, that
only the conditions set forth in clauses (a) and (v) of this Section 3 shall be
conditions precedent to the actions of Original Loan Participant:
(a) Pass Through Trustee shall have received, concurrently with the
payment to Indenture Trustee by Pass Through Trustee of an amount equal to the
aggregate Original Issue Price thereof, the Equipment Notes as required by
Section 1(a)(iii), and Indenture Trustee shall have received any other amounts,
including Break Amount, if any, required to be paid in connection with the
refinancing of the Original Certificate on the Closing Date and the Indenture
Trustee shall have effected a wire transfer of all amounts payable to the
Original Loan Participant as provided herein.
(b) The Equipment Notes referred to in Section 1(a)(ii) shall have been
issued and authenticated in accordance with the Indenture, and there shall have
been transferred to Indenture Trustee in immediately available funds the amounts
referred to above in Section 1(a)(iii)-(iv).
(c) Owner Trustee and Indenture Trustee shall have executed and
delivered the First Amendment to Trust Indenture and Security Agreement in
substantially the form of Exhibit B hereto (the "First Amendment to Trust
Indenture") which shall have been duly filed for recording with the FAA.
(d) Lessee and Owner Trustee shall have executed and delivered an
amendment to the Original Lease in substantially the form of Exhibit C hereto
(the "First Amendment to Lease Agreement") which shall have been duly filed for
recording with the FAA.
(e) Each of Lessee, Owner Participant, Owner Trustee, Pass Through
Trustee and Indenture Trustee shall have executed and delivered an amendment to
the Original Participation Agreement in substantially the form of Exhibit D
hereto (the "First Amendment to Participation Agreement").
(f) (i) Indenture Trustee shall have received on or prior to the
Delivery Date (A) a copy (or other documentation satisfactory to it) of the
acknowledgment copy of a properly completed Uniform Commercial Code financing
statement, reflecting Owner Trustee as debtor and Indenture Trustee as secured
party, as to the Indenture Estate, evidencing its filing with the office of the
Secretary of State of the State of North Carolina and (B) a copy (or other
documentation satisfactory to it) of the acknowledgment copy of a properly
completed Uniform Commercial Code financing statement, reflecting Lessee as
debtor and Owner Trustee as secured party (and reflecting Indenture Trustee as
assignee), as to the Lease and the Aircraft evidencing its filing with the
office of the
REFINANCING AGREEMENT [N620SW]
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<PAGE> 8
Secretary of State of the State of Texas, (ii) no financing statement or similar
filing described above in clause (i) shall have been terminated or amended
subsequent to the date of its filing and (iii) Indenture Trustee shall have
received, on or prior to the Delivery Date, the only chattel-paper original of
the Original Lease and, on or prior to the Closing Date, the only chattel-paper
original of the First Amendment to Lease Agreement and shall have (and shall
have retained without interruption subsequent to its receipt thereof) possession
of each thereof on the Closing Date.
(g) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant shall have received the following documents (each of which
shall be reasonably satisfactory in form and substance to each of them):
(i) revised Exhibits B-1, B-2 and C to the Lease, as provided
for in the First Amendment to Lease Agreement; and
(ii) revised Schedule I to the Participation Agreement, as
provided for in the First Amendment to Participation Agreement.
(h) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing Date,
certifying that:
(i) the representations and warranties contained herein of
Lessee are correct as though made on and as of the Closing Date, except
to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties
shall be certified to have been correct on and as of such earlier
date);
(ii) no event has occurred and is continuing which constitutes
a Lease Event of Default or a Lease Default; and
(iii) no Event of Loss (or event which with the passage of
time or the giving of notice, or both, would constitute an Event of
Loss) has occurred with respect to the Airframe or any Engine.
(i) Each of Indenture Trustee, Owner Participant, Pass Through Trustee
and Lessee shall have received a certificate signed by a Responsible Officer (as
defined in the Indenture) of Owner Trustee, dated the Closing Date, certifying
that the representations and warranties contained herein of Owner Trustee in its
individual and trust capacities are correct as though made on and as of the
Closing Date, except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations and
warranties shall be certified to have been correct on and as of such earlier
date).
(j) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee and
Lessee shall have received a certificate signed by a Responsible Company Officer
(as defined in the Indenture) of Owner Participant, dated the Closing Date,
certifying that the representations and warranties contained herein of Owner
Participant are correct as though made on and as of the Closing Date, except to
the extent that such representations and warranties relate solely to an earlier
date (in which
REFINANCING AGREEMENT [N620SW]
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<PAGE> 9
case such representations and warranties shall be certified to have been correct
on and as of such earlier date).
(k) Each of Pass Through Trustee, Owner Trustee, Owner Participant and
Lessee shall have received a certificate signed by a Responsible Officer (as
defined in the Indenture) of Indenture Trustee, dated the Closing Date,
certifying that the representations and warranties contained herein of Indenture
Trustee are correct as though made on and as of the Closing Date, except to the
extent that such representations and warranties relate solely to an earlier date
(in which case such representations and warranties are correct on and as of such
earlier date).
(l) Each of Indenture Trustee, Owner Trustee, Owner Participant and
Lessee shall have received a certificate signed by an authorized officer of Pass
Through Trustee, dated the Closing Date, certifying that the representations and
warranties contained herein of Pass Through Trustee are correct as though made
on and as of the Closing Date, except to the extent that such representations
and warranties relate solely to an earlier date (in which case such
representations and warranties are correct on and as of such earlier date).
(m) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee and
Owner Participant shall have received the following:
(i) an incumbency certificate of Lessee as to the person or
persons authorized to execute and deliver this Agreement, the First
Amendment to Participation Agreement, the First Amendment to Lease
Agreement, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and specimen
signatures of such person or persons;
(ii) a copy of the resolutions of the board of directors of
Lessee or the executive committee thereof, certified by the Secretary
or an Assistant Secretary of Lessee, duly authorizing the transactions
contemplated hereby and the execution and delivery of each of the
documents required to be executed and delivered on behalf of Lessee in
connection with the transactions contemplated hereby; and
(iii) such other documents and evidence with respect to the
other parties hereto as it may reasonably request in order to establish
the due consummation of the transactions contemplated by this
Agreement, any other Operative Agreements (as defined in the Lease),
the Underwriting Agreement dated May 21, 1998 (the "Underwriting
Agreement") among Salomon Brothers Inc, Chase Securities Inc., Lehman
Brothers Inc., and NationsBanc Montgomery Securities LLC (collectively,
the "Underwriters") and the Lessee, and the Pass Through Trust
Agreement and the taking of all necessary corporate action in
connection therewith and compliance with the conditions herein set
forth.
(n) Each of Pass Through Trustee, Indenture Trustee, Owner Trustee and
Owner Participant shall have received a certificate signed by a Responsible
Company Officer (as defined in the Indenture) of Lessee, dated the Closing Date,
certifying that:
REFINANCING AGREEMENT [N620SW]
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(i) the Aircraft has been duly certificated by the FAA as to
type and airworthiness in accordance with the terms of the Original
Lease;
(ii) Owner Trustee's FAA Bill of Sale, the Original Lease, the
Original Trust Agreement and the Original Indenture have been duly
recorded with the FAA pursuant to the Act (as defined in the Lease);
(iii) the Aircraft has been registered with the FAA in the
name of Owner Trustee and Lessee has authority to operate the Aircraft;
and
(iv) the First Amendment to Lease and the First Amendment to
Trust Indenture have been duly filed for recording with the FAA.
(o) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant shall have received opinions addressed to them from Vinson &
Elkins L.L.P., special counsel to Lessee, substantially to the same effect as
the opinions delivered by Deborah Ackerman, Associate General Counsel of Lessee,
on the Delivery Date pursuant to Section 4(a)(xi) of the Original Participation
Agreement (but reflecting the documents delivered on the Closing Date).
(p) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee,
Owner Participant and Lessee shall have received an opinion addressed to them
from Moore & Van Allen, PLLC, special counsel for Owner Trustee, substantially
to the same effect as the opinion delivered by it on the Delivery Date pursuant
to Section 4(a)(xii) of the Original Participation Agreement (but reflecting the
documents delivered on the Closing Date).
(q) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee,
Owner Participant and Lessee shall have received an opinion addressed to them
from Morris, James, Hitchens & Williams, special counsel for Pass Through
Trustee and Indenture Trustee, substantially to the same effect (but with
respect also to Pass Through Trustee, the Pass Through Trust Agreement and the
other documents delivered on the Closing Date) as the opinion delivered by it on
the Delivery Date pursuant to Section 4(a)(xv) of the Original Participation
Agreement.
(r) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee,
Owner Participant and Lessee shall have received opinions addressed to them from
Morgan, Lewis & Bockius LLP, special counsel for Owner Participant, and in-house
or other counsel to Owner Participant, substantially to the same effect as the
opinions delivered by them on the Delivery Date pursuant to Section 4(a)(xiii)
of the Original Participation Agreement (but reflecting the documents delivered
on the Closing Date).
(s) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee,
Owner Participant and Lessee shall have received an opinion addressed to them
from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma,
substantially to the same effect taking into account the First Amendment to
Trust Indenture and the First Amendment to Lease Agreement, (i) as the opinion
delivered by it pursuant to Section 4(a)(xiv) of the Original Participation
Agreement on the Delivery Date and (ii) as the opinion delivered to them
subsequent to the Delivery Date pursuant to the final paragraph of Section 4(a)
of the Original Participation Agreement.
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(t) Each of Indenture Trustee, Owner Trustee, Pass Through Trustee and
Owner Participant shall have received an independent insurance broker's report,
and certificates of insurance, dated the Closing Date, substantially in the form
of the report and certificates delivered pursuant to Section 4(a)(xviii) of the
Original Participation Agreement on the Delivery Date, as to the due compliance
with the terms of Section 11 of the Lease relating to the insurance with respect
to the Aircraft and with any other agreements of Lessee with respect to such
insurance, and references in such report and certificates to (x) the
"Indenture", the "Participation Agreement", and the "Lease" shall be to such
documents as amended by the First Amendment to Trust Indenture, the First
Amendment to Participation Agreement and the First Amendment to Lease Agreement
and (y) "Additional Insureds" shall be to such term as utilized in the Lease.
(u) Original Loan Participant shall have executed and delivered a
receipt and release of indebtedness as to the Original Certificate issued to it.
(v) Original Loan Participant shall have received the notice required
pursuant to Section 6.03(b) of the Original Indenture in respect of the Closing
Date.
(w) Owner Participant shall have received the opinion of tax counsel
referenced in Section 3.7.2 of the Original Lease.
(x) Lessee and Owner Participant shall have executed and delivered an
amendment to the Original Tax Indemnity Agreement in substantially the form of
Exhibit E hereto (the "First Amendment to Tax Indemnity Agreement").
The opinions described above in clauses (o)-(s) and (w) shall be dated the
Closing Date and references therein corresponding to references in prior
opinions to the "Indenture", the "Participation Agreement", or the "Lease" shall
be to such documents as amended by the First Amendment to Trust Indenture, the
First Amendment to Participation Agreement, and the First Amendment to Lease
Agreement, respectively.
Promptly upon the recording with the FAA of the First Amendment to
Trust Indenture and the First Amendment to Lease Agreement, Lessee will cause
Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to
deliver to the parties hereto an opinion as to the due recording thereof and the
lack of filing of any intervening documents with respect to the Aircraft (other
than the Original Indenture and the Original Lease).
Each of the parties hereto agrees to instruct its counsel to prepare
and deliver the respective opinions described above in clauses (o)-(s) and to
address each such opinion to the Underwriters in addition to the respective
addressees set forth above (and, to the extent such opinions do not restate or
confirm the opinions rendered on the Delivery Date, such counsel shall authorize
the Underwriters to rely on opinions rendered on the Delivery Date).
REFINANCING AGREEMENT [N620SW]
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SECTION 4. Representations and Warranties.
(a) Lessee's Representations and Warranties. Lessee represents and
warrants to Indenture Trustee, Owner Trustee, Pass Through Trustee and Owner
Participant that:
(i) it is a corporation duly organized and validly existing in
good standing pursuant to the laws of the State of Texas, is a "citizen
of the United States" (as defined in Section 40102 of Title 49, U.S.C.)
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, U.S.C. for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of
cargo, has the corporate power and authority to carry on its business
as now conducted, to own or hold under lease its properties, to hold
under lease the Aircraft and to enter into and perform its obligations
under this Agreement, the other Operative Agreements to which it is or
is to be a party (the "Relevant Operative Documents") and the Pass
Through Trust Agreement (together with this Agreement and the Relevant
Operative Documents, collectively, the "Lessee Documents"), is duly
qualified to do business as a foreign corporation in good standing in
each state in which the nature of its business makes such qualification
necessary or the failure to be so qualified or so to be in good
standing would have a material adverse effect on its businesses or
operations or would impair its ability to perform its obligations under
the Lessee Documents, and has its chief executive office (as such term
is defined in Article 9 of the Uniform Commercial Code) at 2702 Love
Field Drive, Dallas, Texas 75235;
(ii) the execution, delivery and performance of the Lessee
Documents (A) have been duly authorized by all necessary corporate
action on the part of Lessee, (B) do not require any shareholder
approval, or approval or consent of any trustee or holder of any
indebtedness or obligations of Lessee, or of any lessor under any lease
to Lessee, except such as have been duly obtained and are in full force
and effect, and (C) do not and will not (1) contravene any law,
judgment, governmental rule, regulation or order binding on Lessee or
any of its subsidiaries or the articles of incorporation or by-laws of
Lessee (each as amended to date) or (2) contravene or result in any
breach of the provisions of, or constitute a default under, or result
in the creation of any Lien (other than as permitted under the Lease)
upon any property of Lessee under, its articles of incorporation or
by-laws, or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, lease, note or bond purchase agreement,
license, bank loan or credit agreement or other agreement to which
Lessee is a party or by which it or any of its properties may be bound
or affected;
(iii) neither the execution and delivery by Lessee of the
Lessee Documents, nor the performance by Lessee of its obligations
thereunder, requires the consent or approval of, the giving of notice
to, or the registration with, or the taking of any other action in
respect of, the FAA, the DOT, the SEC, any court or any other federal,
state or foreign governmental authority or agency except for (t) the
orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of
the Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained and are in full
force and effect, (u) the registration of the issuance and sale of the
Pass Through Certificates to be issued pursuant to the provisions of
the Pass Through Trust Agreement under the Securities Act and under the
securities laws of any state
REFINANCING AGREEMENT [N620SW]
-10-
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-20275, 33-48178, 33-57327, 33-40652, and 33-40653 and Form
S-3 Nos. 333-29257 and 33-59113) and in the related Prospectuses of our report
dated January 23, 1998 with respect to the consolidated financial statements of
Southwest Airlines Co. for the year ended December 31, 1997 included in its
Annual Report on Form 10-K.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Dallas, Texas
March 16, 1998
