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.]
2
TABLE OF CONTENTS
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
SALE AND LEASE AGREEMENT [N621SW]
-i-
3
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
SALE AND LEASE AGREEMENT [N621SW]
-ii-
4
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
SALE AND LEASE AGREEMENT [N621SW]
-iii-
5
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
SALE AND LEASE AGREEMENT [N621SW]
-iv-
6
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
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
SALE AND LEASE AGREEMENT [N621SW]
-v-
7
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 Xxxx 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.
SALE AND LEASE AGREEMENT [N621SW]
-1-
8
"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 Xxxx of Sale, the Warranty Xxxx of Sale,
the Lessee FAA Xxxx of Sale and the Lessee Warranty Xxxx 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.
SALE AND LEASE AGREEMENT [N621SW]
-2-
9
"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]
-3-
10
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]
-4-
11
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 Xxxx of Sale" means a xxxx 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.
SALE AND LEASE AGREEMENT [N621SW]
-5-
12
"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 Xxxx of Sale" means a xxxx 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 Xxxx of Sale" means a full warranty xxxx 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]
-6-
13
(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]
-7-
14
"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]
-8-
15
"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]
-9-
16
"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]
-10-
17
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]
-11-
18
"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 xxxx 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 Xxxx of Sale" means the full warranty xxxx 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]
-12-
19
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 Xxxx X. Xxxxx, Xxxx X. Xxxx
and Xxxxx Xxxxxx, 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]
-13-
20
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]
-14-
21
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 000 Xxxxx Xxxxx
Xxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 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]
-15-
22
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]
-16-
23
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]
-17-
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]
-18-
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]
-19-
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) xxxx 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 xxxx 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]
-20-
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]
-21-
28
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]
-22-
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
SALE AND LEASE AGREEMENT [N621SW]
-23-
30
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
SALE AND LEASE AGREEMENT [N621SW]
-24-
31
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;
SALE AND LEASE AGREEMENT [N621SW]
-25-
32
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
SALE AND LEASE AGREEMENT [N621SW]
-26-
33
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
SALE AND LEASE AGREEMENT [N621SW]
-27-
34
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
SALE AND LEASE AGREEMENT [N621SW]
-28-
35
waiver or consent is evidenced to the reasonable satisfaction of
Lessor, then Lessee shall not be required to furnish such information
to Lessor; and
7.3.3 FINANCIAL INFORMATION. Promptly provide Lessor, the
Owner Participant, the Original Loan Participant and Indenture Trustee
with (i) such financial information concerning Lessee as is provided
from time to time to the public shareholders of Lessee, (ii) within 60
days after the end of each of the first three quarterly periods of
each fiscal year of Lessee, a consolidated balance sheet of Lessee and
its consolidated subsidiaries prepared by it as of the close of such
period, together with the related consolidated statements of income
for such period, (iii) within 120 days after the close of each fiscal
year of Lessee, a consolidated balance sheet of Lessee and its
consolidated subsidiaries as of the close of such fiscal year,
together with the related consolidated statements of income for such
fiscal year, as certified by independent public accountants, (iv)
promptly upon the sending, making available or filing of the same, all
such reports (other than reports on Form 11-K or similar forms) as
Lessee shall file with the Securities and Exchange Commission, and (v)
from time to time such other information as to its financial condition
as Lessor, Indenture Trustee or any Participant may reasonably
request. In addition, Lessee shall promptly notify Lessor, Indenture
Trustee, the Original Loan Participant and the Owner Participant after
a Responsible Company Officer of Lessee shall acquire knowledge of a
Lease Default or Lease Event of Default.
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS; MODIFICATIONS AND ADDITIONS.
8.1 MAINTENANCE.
8.1.1 MAINTENANCE PROGRAM. Lessee shall maintain,
service, repair, overhaul, alter, modify, add to and test (or cause to
be maintained, serviced, repaired, overhauled, altered, modified,
added to and tested) the Aircraft, the Airframe and each Engine, and
each other engine installed from time to time on the Airframe, in
accordance with Lessee's FAA-approved maintenance program for the
Aircraft, Airframe and Engines (the "Maintenance Program"), (i) so as
to keep the Aircraft, the Airframe and each Engine in as good
operating condition as when delivered new to Lessee by the
Manufacturer, ordinary wear and tear excepted, (ii) in the same manner
and with the same care as used by Lessee with similar aircraft owned
or operated by Lessee, without in any way discriminating against the
Aircraft, whether by reason of its leased status or otherwise, and
(iii) so as to keep the Aircraft, the Airframe and each Engine in such
condition as required to enable the FAA certificate of airworthiness
for the Aircraft to be maintained in good standing at all times under
the Act, except when all comparable Boeing Model 737-300 series
aircraft registered in the United States of America have been grounded
by the FAA other than as a result of actions taken or omitted to be
taken by Lessee (or, if a sublease is then in effect, any Permitted
Sublessee).
SALE AND LEASE AGREEMENT [N621SW]
-29-
36
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
SALE AND LEASE AGREEMENT [N621SW]
-30-
37
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,
SALE AND LEASE AGREEMENT [N621SW]
-31-
38
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
SALE AND LEASE AGREEMENT [N621SW]
-32-
39
in full compliance with the terms thereof, and shall duly transfer to Lessor
under a full warranty (as to title) xxxx 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
SALE AND LEASE AGREEMENT [N621SW]
-33-
40
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
SALE AND LEASE AGREEMENT [N621SW]
-34-
41
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
SALE AND LEASE AGREEMENT [N621SW]
-35-
42
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
Xxxxxx & Xxxxxx, 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 xxxx of sale and FAA xxxx 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;
SALE AND LEASE AGREEMENT [N621SW]
-36-
43
(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
SALE AND LEASE AGREEMENT [N621SW]
-37-
44
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.
SALE AND LEASE AGREEMENT [N621SW]
-38-
45
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 Xxxxxxxxx, Xxxxxx & Xxxxxxxx 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) xxxx 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
SALE AND LEASE AGREEMENT [N621SW]
-39-
46
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
SALE AND LEASE AGREEMENT [N621SW]
-40-
47
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 Xxxxxxxxx, Xxxxxx & Xxxxxxxx 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
SALE AND LEASE AGREEMENT [N621SW]
-41-
48
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.
SALE AND LEASE AGREEMENT [N621SW]
-42-
49
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
SALE AND LEASE AGREEMENT [N621SW]
-43-
50
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.
SALE AND LEASE AGREEMENT [N621SW]
-44-
51
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;
SALE AND LEASE AGREEMENT [N621SW]
-45-
52
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
SALE AND LEASE AGREEMENT [N621SW]
-46-
53
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 Xxxxxx Xxxxxxx
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
SALE AND LEASE AGREEMENT [N621SW]
-47-
54
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 Xxxxx'x 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
SALE AND LEASE AGREEMENT [N621SW]
-48-
55
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 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, 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
SALE AND LEASE AGREEMENT [N621SW]
-49-
56
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
SALE AND LEASE AGREEMENT [N621SW]
-50-
57
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
SALE AND LEASE AGREEMENT [N621SW]
-51-
58
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
SALE AND LEASE AGREEMENT [N621SW]
-52-
59
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
SALE AND LEASE AGREEMENT [N621SW]
-53-
60
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 0000 Xxxx Xxxxx Xxxxx, X.X. Xxx 00000, Xxxxxx, Xxxxx
00000-0000 (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 000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxxxx
Xxxxxxxx 00000-0000 (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
SALE AND LEASE AGREEMENT [N621SW]
-54-
61
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
SALE AND LEASE AGREEMENT [N621SW]
-55-
62
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
SALE AND LEASE AGREEMENT [N621SW]
-56-
63
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
SALE AND LEASE AGREEMENT [N621SW]
-57-
64
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
SALE AND LEASE AGREEMENT [N621SW]
-58-
65
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
SALE AND LEASE AGREEMENT [N621SW]
-59-
66
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
SALE AND LEASE AGREEMENT [N621SW]
-60-
67
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 Xxxxx'x Investors Service and A-l
or its equivalent by Standard & Poor's Rating Group, a division of XxXxxx-Xxxx,
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,
SALE AND LEASE AGREEMENT [N621SW]
-61-
68
each of which shall be deemed an original, and all such counterparts shall
constitute one and the same instrument; provided, that no security interest in
Lessor's right, title and interest in and to this Agreement may be created
through the transfer or possession of any counterpart other than the
counterpart identified, for purposes of perfection of a security interest in
chattel paper (as such term is defined in the UCC), as the original counterpart
on the cover hereof.
SECTION 23. PERMITTED FOREIGN AIR CARRIERS. Lessor may, in the
exercise of its reasonable business judgment, by written notice to Lessee,
remove any foreign air carrier from Exhibit D and Lessee may, by written notice
to Lessor, request that any foreign air carrier be added to Exhibit D, subject
to Lessor's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no deletion of an airline from the
list of Permitted Foreign Air Carriers pursuant hereto shall (i) affect any
existing sublease or other agreement providing for transfer of possession of
the Aircraft, Airframe, any Engine or Part which was permitted hereunder at the
time entered into, or (ii) preclude any subsequent renewal or extension of such
sublease or other agreement to which the Permitted Foreign Air Carrier under a
sublease is entitled by the terms thereof as originally in effect.
SALE AND LEASE AGREEMENT [N621SW]
-62-
69
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/ Xxxx X. Xxxx
-----------------
Treasurer
SALE AND LEASE AGREEMENT [N621SW]
-63-
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 Xxxx 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;
X. Xxxxxx 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
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
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
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
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.
X-0-0
00
XXXXXXX X-0 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
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
77
EXHIBIT C TO
LEASE AGREEMENT
PART II
EBO INSTALLMENT PAYMENT SCHEDULE
EBO Installment Percentage of
Payment Date Lessor's Cost
---------------- ---------------
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 %
C-2
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
79
EXHIBIT D TO
LEASE AGREEMENT
PERMITTED FOREIGN AIR CARRIERS
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 Xxxxx VIVA Air
Iberia
D-1
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.]
X-0
00
XXXXXXXX X 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