EXHIBIT 4.12
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PARTICIPATION AGREEMENT [N700GS]
Dated as of October , 2001
Among
SOUTHWEST AIRLINES CO.,
Owner,
and
WILMINGTON TRUST COMPANY,
Not in its individual capacity
except as expressly provided herein,
but solely as Mortgagee, Subordination Agent
under the Intercreditor Agreement and Pass Through Trustee
under each of the Applicable Pass Through Trust Agreements
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ONE BOEING MODEL 737-74H AIRCRAFT
Bearing Manufacturer's Serial No. 27835
and U.S. Registration No. N700GS
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CONTENTS
Page
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SECTION 1. DEFINITIONS AND CONSTRUCTION....................................................................1
SECTION 2. SECURED LOANS; CLOSING..........................................................................2
2.1 Making of Loans and Issuance of Equipment Notes........................................2
2.2 Closing................................................................................2
SECTION 3. EQUIPMENT NOTES.................................................................................3
SECTION 4. CONDITIONS PRECEDENT............................................................................3
4.1 Conditions Precedent to the Obligations of the Pass Through Trustees...................3
4.2 Conditions Precedent to Obligations of Mortgagee.......................................6
4.3 Conditions Precedent to Obligations of Owner...........................................7
4.4 Post-Registration Opinion..............................................................7
SECTION 5. REPRESENTATIONS AND WARRANTIES..................................................................8
5.1 Owner's Representations and Warranties.................................................8
5.2 WTC's Representations and Warranties..................................................10
SECTION 6. COVENANTS, UNDERTAKINGS AND AGREEMENTS.........................................................13
6.1 Covenants of Owner....................................................................13
6.2 Covenants of WTC......................................................................15
6.3 Covenants of Note Holders.............................................................16
6.4 Agreements............................................................................17
SECTION 7. [Intentionally Omitted]........................................................................19
SECTION 8. INDEMNIFICATION AND EXPENSES...................................................................19
8.1 General Indemnity.....................................................................19
8.2 Expenses..............................................................................24
8.3 General Tax Indemnity.................................................................24
8.4 Payments..............................................................................32
8.5 Interest..............................................................................32
8.6 Benefit of Indemnities................................................................32
SECTION 9. ASSIGNMENT OR TRANSFER OF INTEREST.............................................................32
9.1 Note Holders..........................................................................32
9.2 Effect of Transfer....................................................................32
SECTION 10. SECTION 1110...................................................................................33
SECTION 11. CHANGE OF CITIZENSHIP..........................................................................33
11.1 Generally.............................................................................33
11.2 Mortgagee.............................................................................33
(i)
SECTION 12. MISCELLANEOUS..................................................................................33
12.1 Amendments............................................................................33
12.2 Severability..........................................................................34
12.3 Survival..............................................................................34
12.4 Reproduction of Documents.............................................................34
12.5 Counterparts..........................................................................34
12.6 No Waiver.............................................................................34
12.7 Notices...............................................................................35
12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE......................................35
12.9 Third-Party Beneficiary...............................................................36
12.10 Entire Agreement......................................................................36
12.11 Further Assurances....................................................................36
SCHEDULES AND EXHIBITS
SCHEDULE 1 - Accounts; Addresses
SCHEDULE 2 - Commitments
SCHEDULE 3 - Certain Terms
SCHEDULE 4 - Permitted Countries
EXHIBIT A - Opinion of special counsel to Owner
EXHIBIT B - Opinion of corporate counsel to Owner
EXHIBIT C - Opinion of special counsel to Mortgagee
and to the Applicable Pass Through Trustees
EXHIBIT D - Opinion of special counsel in Oklahoma City, Oklahoma
(ii)
PARTICIPATION AGREEMENT [N700GS]
PARTICIPATION AGREEMENT [N700GS], dated as of October , 2001 (this
"Agreement"), among (a)
SOUTHWEST AIRLINES CO., a Texas corporation ("Owner")
with Charter No. 0023294150, (b) WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity, except as expressly provided
herein, but solely as Mortgagee (in its capacity as Mortgagee, "Mortgagee" and
in its individual capacity, "WTC"), (c) WILMINGTON TRUST COMPANY, not in its
individual capacity, except as expressly provided herein, but solely as Pass
Through Trustee under each of the Applicable Pass Through Trust Agreements
(each, an "Applicable Pass Through Trustee") and (d) WILMINGTON TRUST COMPANY,
not in its individual capacity, except as expressly provided herein, but solely
as Subordination Agent under the Intercreditor Agreement ("Subordination
Agent").
RECITALS
A. Owner is the owner of the Aircraft.
B. Owner and each Applicable Pass Through Trustee, concurrently with
the execution and delivery hereof, have entered into the Pass Through Trust
Agreements and on the Closing Date, the Pass Through Trusts will be created and
the Pass Through Certificates will be issued and sold.
C. Each Applicable Pass Through Trustee will use a portion of the
proceeds from the issuance and sale of the Pass Through Certificates issued by
each Applicable Pass Through Trust to purchase from Owner, on behalf of the
related Applicable Pass Through Trust, the Equipment Note bearing the same
interest rate as the Pass Through Certificates to be issued by such Pass Through
Trust.
D. Owner and Mortgagee, concurrently with the execution and delivery
hereof, have entered into the Trust Indenture for the benefit of the Note
Holders, pursuant to which, among other things, Owner agrees (1) to issue
Equipment Notes, in the amounts and otherwise as provided in the Trust
Indenture, and (2) to mortgage, pledge and assign to Mortgagee all of Owner's
right, title and interest in the Collateral to secure the Secured Obligations,
including, without limitation, Owner's obligations under the Equipment Notes.
E. The parties hereto wish to set forth in this Agreement the terms and
conditions upon and subject to which the aforesaid transactions shall be
effected.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein (including in the initial
paragraph and Recitals above) shall have the respective meanings set forth or
incorporated by reference, and shall be construed and interpreted in the manner
described, in Annex A to the Trust Indenture.
SECTION 2. SECURED LOANS; CLOSING
2.1 MAKING OF LOANS AND ISSUANCE OF EQUIPMENT NOTES
Subject to the terms and conditions of this Agreement, on the date
hereof or on such other date agreed to by the parties hereto (the "Closing
Date"):
(a) Each Applicable Pass Through Trustee listed on Schedule 2
shall make a secured loan to the Owner in the amount in
Dollars opposite such Trustee's name on Schedule 2; and
(b) The Owner shall issue, pursuant to and in accordance with the
provisions of Article II of the Trust Indenture, to the
Subordination Agent as the registered holder on behalf of each
such Applicable Pass Through Trustee, one or more Equipment
Notes, dated the Closing Date, of the Series set forth
opposite such Trustee's name on Schedule 2, in an aggregate
principal amount equal to the secured loan made by each such
Applicable Pass Through Trustee.
In addition, the Owner shall have the option to issue the Series C
Equipment Notes on or after the Closing Date, subject to: (i) a Ratings
Confirmation (as defined in the Intercreditor Agreement) having been obtained,
and (ii) the Owner will cause (x) such Series C Equipment Notes to be subject to
the provisions of the Intercreditor Agreement that allow the "Controlling Party"
(as defined in the Intercreditor Agreement), during the continuance of an
"Indenture Default" (as defined in the Intercreditor Agreement), to direct the
Loan Trustee in taking action under the applicable Indenture and (y) the
Indenture under which such Series C Equipment Notes are issued being amended as
contemplated in Section 10.01(b) of the Indenture. If Series C Equipment Notes
are issued after the Closing Date, the Note Holder of such Equipment Notes shall
be entitled to execute a counterpart to this Agreement and become a party
hereto.
2.2 CLOSING
(a) The Closing of the transactions contemplated hereby shall take
place at the offices of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as the parties shall
agree.
(b) All payments pursuant to this Section 2 shall be made in
immediately available funds to such accounts set forth in Schedule 1 hereto.
(c) Owner may elect to postpone the issuance of a series of Equipment
Notes pursuant to Section 2.02(b) of the Pass Through Trust Agreement.
(d) In order to facilitate the transactions contemplated hereby, the
Owner will, subject to the terms and conditions hereof, enter into each of the
Pass Through Trust Agreements and will undertake to perform certain
administrative and ministerial duties under such Pass Through Trust Agreements.
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SECTION 3. EQUIPMENT NOTES
On the Closing Date, the Owner shall execute, and the Mortgagee shall
authenticate and deliver to the applicable Note Holder, an Equipment Note of
such Series in the principal amount and bearing the interest rate set forth
opposite the name of such Note Holder on Schedule 2 hereto. Subject to the terms
hereof, of the Pass Through Agreements and of the other Operative Agreements,
all such Equipment Notes shall be dated and authenticated as of the Closing Date
(and shall bear interest therefrom), shall be registered in such names as shall
be specified by the Note Holder and shall be paid in the manner and at such
places as are set forth in the Trust Indenture.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PASS THROUGH
TRUSTEES
The obligation of each Applicable Pass Through Trustee listed on
Schedule 2 to make the secured loan described in Section 2.1(a) and to
participate in the transactions contemplated by this Agreement on the Closing
Date is subject to the fulfillment, prior to or on the Closing Date, of the
following conditions precedent:
4.1.1 EQUIPMENT NOTES
The Owner shall have tendered the Equipment Notes to be issued to such
Applicable Pass Through Trustees to the Mortgagee for authentication and the
Mortgagee shall have authenticated such Equipment Notes to be issued to such
Applicable Pass Through Trustees and shall have tendered the Equipment Notes to
the Subordination Agent on behalf of such Pass Through Trustee, against receipt
of the loan proceeds, in accordance with Section 2.1.
4.1.2 DELIVERY OF DOCUMENTS
The Subordination Agent on behalf of each such Applicable Pass Through
Trustee shall have received executed counterparts or conformed copies of the
following documents:
(i) this Agreement;
(ii) the Trust Indenture;
(iii) the initial Trust Indenture Supplement;
(iv) the broker's report and insurance certificates required
by Section 4.06 of the Trust Indenture;
(v) the Consent and Agreement and the Engine Consent and
Agreement;
(vi) true and correct copies of the Bills of Sale;
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(vii) (A) a copy of the articles of incorporation and bylaws
of Owner and resolutions of the board of directors of Owner and/or the
executive committee thereof, in each case certified as of the Closing
Date, by the Secretary or an Assistant Secretary of Owner, duly
authorizing the execution, delivery and performance by Owner of the
Operative Agreements to which it is party required to be executed and
delivered by Owner on or prior to the Closing Date in accordance with
the provisions hereof and thereof; and (B) an incumbency certificate of
Owner as to the person or persons authorized to execute and deliver the
Operative Agreements on behalf of Owner;
(viii) an Officer's Certificate of Owner, dated as of the
Closing Date, stating that its representations and warranties set forth
in this Agreement are true and correct as of the Closing Date (or, to
the extent that any such representation and warranty expressly relates
to an earlier date, true and correct as of such earlier date);
(ix) the Financing Statements;
(x) the following opinions of counsel, in each case dated the
Closing Date:
(A) an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., special
counsel to Owner, substantially in the form of Exhibit A;
(B) an opinion of Owner's Legal Department,
substantially in the form of Exhibit B;
(C) an opinion of Morris, James, Hitchens & ▇▇▇▇▇▇▇▇
LLP, special counsel to Mortgagee and to the Applicable Pass
Through Trustees, substantially in the form of Exhibit C; and
(D) an opinion of DeBee, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, special
counsel in Oklahoma City, Oklahoma, substantially in the form
of Exhibit D; and
(xi) a copy of a current, valid Standard Certificate of
Airworthiness for the Aircraft duly issued by the FAA.
4.1.3 PERFECTED SECURITY INTEREST
On the Closing Date, after giving effect to the filing of the FAA Filed
Documents and the Financing Statements, Mortgagee shall have received a duly
perfected first priority security interest in all of Owner's right, title and
interest in the Aircraft, subject only to Permitted Liens.
4.1.4 VIOLATION OF LAW
No change shall have occurred after the date of this Agreement in any
applicable Law that makes it a violation of Law for (a) Owner, any Applicable
Pass Through Trustee, Subordination Agent or Mortgagee to execute, deliver and
perform the Operative Agreements to which any of them is a party or (b) any
Applicable Pass Through Trustee to make the loan contemplated by Section 2.1, to
acquire an Equipment Note or to realize the benefits of the security afforded by
the Trust Indenture.
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4.1.5 REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties of each other party to this
Agreement made, in each case, in this Agreement and in any other Operative
Agreement to which it is a party, shall be true and accurate in all material
respects as of the Closing Date (unless any such representation and warranty
shall have been made with reference to a specified date, in which case such
representation and warranty shall be true and accurate as of such specified
date) and each other party to this Agreement shall have performed and observed,
in all material respects, all of its covenants, obligations and agreements in
this Agreement and in any other Operative Agreement to which it is a party to be
observed or performed by it as of the Closing Date.
4.1.6 NO EVENT OF DEFAULT
On the Closing Date, no event shall have occurred and be continuing, or
would result from the mortgage of the Aircraft, which constitutes a Default or
an Event of Default.
4.1.7 NO EVENT OF LOSS
No Event of Loss with respect to the Airframe or any Engine shall have
occurred and no circumstance, condition, act or event that, with the giving of
notice or lapse of time or both, would give rise to or constitute an Event of
Loss with respect to the Airframe or any Engine shall have occurred.
4.1.8 TITLE
Owner shall have good title to the Aircraft, free and clear of all
Liens, except Permitted Liens.
4.1.9 CERTIFICATION
The Aircraft shall have been duly certificated by the FAA as to type
and airworthiness in accordance with the terms of the Purchase Agreement.
4.1.10 SECTION 1110
Mortgagee shall be entitled to the benefits of Section 1110 (as
currently in effect) with respect to the right to take possession of the
Airframe and Engines and to enforce any of its other rights or remedies as
provided in the Trust Indenture in the event of a case under Chapter 11 of the
Bankruptcy Code in which Owner is a debtor.
4.1.11 FILING
On the Closing Date:
(a) the FAA Filed Documents shall have been duly filed for recordation
with the FAA in accordance with the Act, and
(b) each Financing Statement shall have been duly filed in the
appropriate jurisdiction.
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4.1.12 NO PROCEEDINGS
No action or proceeding shall have been instituted, nor shall any
action be threatened in writing, before any Government Entity, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Government Entity, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or any other Operative Agreement or the
transactions contemplated hereby or thereby.
4.1.13 GOVERNMENTAL ACTION
All appropriate action required to have been taken prior to the Closing
Date by the FAA, or any governmental or political agency, subdivision or
instrumentality of the United States, in connection with the transactions
contemplated by this Agreement shall have been taken, and all orders, permits,
waivers, authorizations, exemptions and approvals of such entities required to
be in effect on the Closing Date in connection with the transactions
contemplated by this Agreement shall have been issued.
4.1.14 PASS THROUGH AGREEMENTS AND UNDERWRITING AGREEMENT
The Pass Through Trustees shall have received duly authorized and
validly executed counterparts or conformed copies of the Pass Through Agreements
and the Underwriting Agreement in form and substance satisfactory to the Pass
Through Trustees and all such documents shall be in full force and effect and
the conditions precedent to the obligations of the Underwriters and the other
requirements relating to the sale of the Certificates set forth in the
Underwriting Agreement (as defined in the Intercreditor Agreement) shall have
been satisfied or waived in accordance with the terms thereof.
4.1.15 OTHER AIRCRAFT
The conditions precedent to the obligations of the Pass Through
Trustees under each of the other "
Participation Agreements" (as defined in the
Intercreditor Agreement) set forth in such other "
Participation Agreements"
shall have been satisfied or waived in accordance with the terms thereof and the
"Closing" as defined therein shall have occurred contemporaneously with the
Closing hereunder.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF MORTGAGEE
The obligation of Mortgagee to authenticate the Equipment Notes on the
Closing Date is subject to the satisfaction or waiver by Mortgagee, on or prior
to the Closing Date, of the conditions precedent set forth below in this Section
4.2.
4.2.1 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 4.1.2 shall have been received by Mortgagee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Mortgagee.
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4.2.2 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 4.1.4, 4.1.5, 4.1.6 and
4.1.10 shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Mortgagee.
4.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNER
The obligation of Owner to participate in the transaction contemplated
hereby on the Closing Date is subject to the satisfaction or waiver by Owner, on
or prior to the Closing Date, of the conditions precedent set forth below in
this Section 4.3.
4.3.1 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 4.1.2 shall have been received by Owner, except
as specifically provided therein, and shall be satisfactory to Owner, unless the
failure to receive any such agreement, instrument, certificate or document is
the result of any action or inaction by Owner. In addition, the Owner shall have
received the following:
(i) (A) an incumbency certificate of WTC as to the person or
persons authorized to execute and deliver the Operative Agreements on
behalf of WTC and (B) a copy of the Certificate of Incorporation and
By-Laws and general authorizing resolution of the board of directors
(or executive committee) or other satisfactory evidence of
authorization of WTC, certified as of the Closing Date by the Secretary
or Assistant or Attesting Secretary of WTC, which authorize the
execution, delivery and performance by WTC of the Operative Agreements
to which it is a party; and
(ii) an Officer's Certificate of WTC, dated as of the Closing
Date, stating that its representations and warranties in its individual
capacity or as Mortgagee, an Applicable Pass Through Trustee or
Subordination Agent, as the case may be, set forth in this Agreement
are true and correct as of the Closing Date (or, to the extent that any
such representation and warranty expressly relates to an earlier date,
true and correct as of such earlier date);
4.3.2 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 4.1.4, 4.1.5, 4.1.6,
4.1.7, 4.1.8, 4.1.9, 4.1.10, 4.1.11, 4.1.12 and 4.1.13 shall have been satisfied
or waived by Owner, unless the failure of any such condition to be satisfied is
the result of any action or inaction by Owner.
4.4 POST-REGISTRATION OPINION
Promptly upon the recordation of the FAA Filed Documents pursuant to
the Act, Owner will request DeBee, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, special counsel in
Oklahoma City, Oklahoma, to deliver to Owner, each Pass Through Trustee and
Mortgagee a favorable opinion or opinions addressed to each of them with respect
to such registration and recordation.
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SECTION 5. REPRESENTATIONS AND WARRANTIES
5.1 OWNER'S REPRESENTATIONS AND WARRANTIES
Owner represents and warrants to each Pass Through Trustee,
Subordination Agent and Mortgagee that:
5.1.1 ORGANIZATION; QUALIFICATION
Owner is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Texas and has the corporate power and
authority to conduct the business in which it is currently engaged and to own or
hold under lease its properties and to enter into and perform its obligations
under the Operative Agreements to which it is party. Owner is duly qualified to
do business as a foreign corporation in good standing in each jurisdiction in
which the nature and extent of the business conducted by it, or the ownership of
its properties, requires such qualification, except where the failure to be so
qualified would not give rise to a Material Adverse Change to Owner.
5.1.2 CORPORATE AUTHORIZATION
Owner has taken, or has caused to be taken, all necessary corporate
action (including, without limitation, the obtaining of any consent or approval
of stockholders required by its articles of incorporation or bylaws) to
authorize the execution and delivery of each of the Operative Agreements to
which it is party, and the performance of its obligations thereunder.
5.1.3 NO VIOLATION
The execution and delivery by Owner of the Operative Agreements to
which it is party, the performance by Owner of its obligations thereunder and
the consummation by Owner on the Closing Date of the transactions contemplated
thereby, do not and will not (a) violate any provision of the articles of
incorporation or bylaws of Owner, (b) violate any Law applicable to or binding
on Owner or (c) violate or constitute any default under (other than any
violation or default that would not result in a Material Adverse Change to
Owner), or result in the creation of any Lien (other than as permitted under the
Trust Indenture) upon the Aircraft under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, loan or other
material agreement, instrument or document to which Owner is a party or by which
Owner or any of its properties is bound.
5.1.4 APPROVALS
The execution and delivery by Owner of the Operative Agreements to
which Owner is a party, the performance by Owner of its obligations thereunder
and the consummation by Owner on the Closing Date of the transactions
contemplated thereby do not and will not require the consent or approval of, or
the giving of notice to, or the registration with, or the recording or filing of
any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of Owner and (b) any Government Entity,
other than the filing of (x) the FAA Filed Documents and the Financing
Statements (and continuation statements
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periodically) and (y) filings, recordings, notices or other ministerial actions
pursuant to any routine recording, contractual or regulatory requirements
applicable to it.
5.1.5 VALID AND BINDING AGREEMENTS
The Operative Agreements to which Owner is a party have been duly
authorized, executed and delivered by Owner and, assuming the due authorization,
execution and delivery thereof by the other party or parties thereto, constitute
the legal, valid and binding obligations of Owner and are enforceable against
Owner in accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
5.1.6 REGISTRATION AND RECORDATION
Except for (a) the filing for recordation (and recordation) of the FAA
Filed Documents, (b) the filing of the Financing Statements (and continuation
statements relating thereto at periodic intervals), and (c) the affixation of
the nameplates referred to in Section 4.02(f) of the Trust Indenture, no further
action, including any filing or recording of any document (including any
financing statement in respect thereof under Article 9 of the UCC) is necessary
in order to establish and perfect Mortgagee's security interest in the Aircraft
as against Owner and any other Person, in each case, in any applicable
jurisdictions in the United States.
5.1.7 NAMES, ETC.
(i) The full and correct legal name, type of organization,
jurisdiction of organization, organizational ID number (if applicable)
and mailing address of the Owner as of the date hereof are correctly
set forth in the paragraph describing the parties to this Agreement on
page 1 hereof and, in the case of the mailing address, in Schedule 1
hereto.
(ii) Schedule 1 correctly specifies the place of business of
the Owner, or if the Owner has more than one place of business, the
location of the chief executive office of the Owner.
(iii) The Owner has not (i) within the period of four months
prior to the date hereof, changed its location (as defined in Section
9-307 of the UCC), (ii) except as specified in Schedule 1, heretofore
changed its name since 1971, or (iii) except as specified in Schedule
1, heretofore become a "new debtor" (as defined in Section 9-102(a)(56)
of the UCC) with respect to a currently effective security agreement
previously entered into by any other Person.
5.1.8 NO EVENT OF LOSS
No Event of Loss has occurred with respect to the Airframe or any
Engine, and, to the Actual Knowledge of Owner, no circumstance, condition, act
or event has occurred that, with the giving of notice or lapse of time or both
gives rise to or constitutes an Event of Loss with respect to the Airframe or
any Engine.
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5.1.9 COMPLIANCE WITH LAWS
(a) Owner is a Citizen of the United States and a U.S. Air Carrier.
(b) Owner holds all licenses, permits and franchises from the
appropriate Government Entities necessary to authorize Owner to lawfully engage
in air transportation and to carry on scheduled commercial passenger service as
currently conducted, except where the failure to so hold any such license,
permit or franchise would not give rise to a Material Adverse Change to Owner.
(c) Owner is not an "investment company" or a company controlled by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
5.1.10 SECURITIES LAWS
Neither Owner nor any person authorized to act on its behalf has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft, or any of the Equipment Notes or any other
interest in or security under the Trust Indenture, for sale to, or solicited any
offer to acquire any such interest or security from, or has sold any such
interest or security to, any person in violation of the Securities Act.
5.1.11 BROKER'S FEES
No Person acting on behalf of Owner is or will be entitled to any
broker's fee, commission or finder's fee in connection with the Transactions,
other than the fees and expenses payable by Owner in connection with the sale of
the Pass Through Certificates.
5.1.12 SECTION 1110
Mortgagee is entitled to the benefits of Section 1110 (as currently in
effect) with respect to the right to take possession of the Airframe and Engines
and to enforce any of its other rights or remedies as provided in the Trust
Indenture in the event of a case under Chapter 11 of the Bankruptcy Code in
which Owner is a debtor.
5.2 WTC'S REPRESENTATIONS AND WARRANTIES
WTC represents and warrants (with respect to Section 5.2.10, solely in
its capacity as Subordination Agent) to Owner that:
5.2.1 ORGANIZATION, ETC.
WTC is a Delaware banking corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware, holding a valid
certificate to do business as a Delaware banking corporation with banking
authority to execute and deliver, and perform its obligations under, the
Applicable Pass Through Trustee Agreements and the Operative Agreements to which
it is a party.
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5.2.2 CORPORATE AUTHORIZATION
WTC has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by Law or by its Certificate of Incorporation or By-Laws)
to authorize the execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Pass Through Trustee Agreements and the Operative Agreements to which it is
a party and the performance of its obligations thereunder.
5.2.3 NO VIOLATION
The execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Pass Through Trustee Agreements and the Operative Agreements to which it is
a party, the performance by WTC, in its individual capacity or as Mortgagee, a
Pass Through Trustee or Subordination Agent, as the case may be, of its
obligations thereunder and the consummation on the Closing Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the Certificate of Incorporation or By-Laws of WTC, (b) violate any Law
applicable to or binding on WTC, in its individual capacity or (except in the
case of any Law relating to any Plan) as Mortgagee, a Pass Through Trustee or
Subordination Agent, or (c) violate or constitute any default under (other than
any violation or default that would not result in a Material Adverse Change to
WTC, in its individual capacity or Mortgagee, a Pass Through Trustee or
Subordination Agent), or result in the creation of any Lien (other than the Lien
of the Trust Indenture) upon any property of WTC, in its individual capacity or
as Mortgagee, a Pass Through Trustee or Subordination Agent, or any of WTC's
subsidiaries under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, lease, loan or other agreement, instrument or
document to which WTC, in its individual capacity or as Mortgagee, a Pass
Through Trustee or Subordination Agent, is a party or by which WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, or any of their respective properties is bound.
5.2.4 APPROVALS
The execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Pass Through Trustee Agreements and the Operative Agreements to which it is
a party, the performance by WTC, in its individual capacity or as Mortgagee, a
Pass Through Trustee or Subordination Agent, as the case may be, of its
obligations thereunder and the consummation on the Closing Date by WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, of the transactions contemplated thereby do not and
will not require the consent, approval or authorization of, or the giving of
notice to, or the registration with, or the recording or filing of any documents
with, or the taking of any other action in respect of, (a) any trustee or other
holder of any Debt of WTC or (b) any Government Entity, other than the filing of
the FAA Filed Documents and the Financing Statements.
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5.2.5 VALID AND BINDING AGREEMENTS
The Pass Through Trustee Agreements and the Operative Agreements to
which it is a party have been duly authorized, executed and delivered by WTC
and, assuming the due authorization, execution and delivery by the other party
or parties thereto, constitute the legal, valid and binding obligations of WTC,
in its individual capacity or as Mortgagee, a Pass Through Trustee or
Subordination Agent, as the case may be, and are enforceable against WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
5.2.6 CITIZENSHIP
WTC is a Citizen of the United States.
5.2.7 NO LIENS
On the Closing Date, there are no Liens attributable to WTC in respect
of all or any part of the Collateral.
5.2.8 LITIGATION
There are no pending or, to the Actual Knowledge of WTC, threatened
actions or proceedings against WTC, in its individual capacity or as Mortgagee,
a Pass Through Trustee or Subordination Agent, before any court, administrative
agency or tribunal which, if determined adversely to WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, would materially adversely affect the ability of WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, to perform its obligations under any of the Mortgagee
Agreements, the Pass Through Trustee Agreements or the Subordination Agent
Agreements.
5.2.9 SECURITIES LAWS
Neither WTC nor any person authorized to act on its behalf has directly
or indirectly offered any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in the Collateral or any of the
Equipment Notes or any other interest in or security under the Collateral for
sale to, or solicited any offer to acquire any such interest or security from,
or has sold any such interest or security to, any Person other than the
Subordination Agent and the Pass Through Trustees, except for the offering and
sale of the Pass Through Certificates.
5.2.10 INVESTMENT
The Equipment Notes to be acquired by the Subordination Agent are being
acquired by it for the account of the Applicable Pass Through Trustees, for
investment and not with a view to any resale or distribution thereof, except
that, subject to the restrictions on transfer set forth in Section 9, the
disposition by it of its Equipment Notes shall at all times be within its
control.
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5.2.11 TAXES
There are no Taxes payable by any Applicable Pass Through Trustee or
WTC, as the case may be, imposed by the State of Delaware or any political
subdivision or taxing authority thereof in connection with the execution,
delivery and performance by such Pass Through Trustee or WTC, as the case may
be, of this Agreement or any of the Pass Through Trustee Agreements (other than
franchise or other taxes based on or measured by any fees or compensation
received by any such Pass Through Trustee or WTC, as the case may be, for
services rendered in connection with the transactions contemplated by any of the
Pass Through Trust Agreements), and there are no Taxes payable by any Applicable
Pass Through Trustee or WTC, as the case may be, imposed by the State of
Delaware or any political subdivision thereof in connection with the
acquisition, possession or ownership by any such Pass Through Trustee of any of
the Equipment Notes (other than franchise or other taxes based on or measured by
any fees or compensation received by any such Pass Through Trustee or WTC, as
the case may be, for services rendered in connection with the transactions
contemplated by any of the Pass Through Trust Agreements), and, assuming that
the trusts created by the Pass Through Trust Agreements will not be taxable as
corporations, but, rather, each will be characterized as a grantor trust under
subpart E, Part I of Subchapter J of the Code or as a partnership under
Subchapter K of the Code, such trusts will not be subject to any Taxes imposed
by the State of Delaware or any political subdivision thereof.
5.2.12 BROKER'S FEES
No Person acting on behalf of WTC, in its individual capacity or as
Mortgagee, any Applicable Pass Through Trustee or Subordination Agent, is or
will be entitled to any broker's fee, commission or finder's fee in connection
with the Transactions.
SECTION 6. COVENANTS, UNDERTAKINGS AND AGREEMENTS
6.1 COVENANTS OF OWNER
Owner covenants and agrees, at its own cost and expense, with Note
Holder and Mortgagee as follows:
6.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER
Except as permitted by Section 4.07 of the Trust Indenture, Owner shall
at all times (i) maintain its corporate existence, and (ii) remain a U.S. Air
Carrier.
6.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
Owner will give Mortgagee timely written notice (but in any event
within 30 days prior to the expiration of the period of time specified under
applicable Law to prevent lapse of perfection) of any change in its name, change
of its jurisdiction of organization or relocation of its chief executive office
(as such term is defined in Article 9 of the UCC) from its then present location
and will promptly take any action required by Section 6.1.3(c) as a result of
such change or relocation.
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6.1.3 CERTAIN ASSURANCES
(a) Owner shall duly execute, acknowledge and deliver, or shall cause
to be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
further acts and things, in any case, as Mortgagee shall reasonably request for
accomplishing the purposes of this Agreement and the other Operative Agreements,
provided that any instrument or other document so executed by Owner will not
expand any obligations or limit any rights of Owner in respect of the
transactions contemplated by any Operative Agreement.
(b) Owner shall promptly take such action with respect to the
recording, filing, re-recording and refiling of the Trust Indenture and any
supplements thereto, including, without limitation, the initial Trust Indenture
Supplement, as shall be necessary to continue the perfection and priority of the
Lien created by the Trust Indenture.
(c) Owner, at its sole cost and expense, will cause the FAA Filed
Documents, the Financing Statements and all continuation statements (and any
amendments necessitated by any combination, consolidation or merger of the
Owner, change in its name, change in its jurisdiction of organization or
organization ID number or any relocation of its chief executive office) in
respect of the Financing Statements to be prepared and, subject only to, if
required, the execution and delivery thereof by Mortgagee, duly and timely filed
and recorded, or filed for recordation, to the extent permitted under the Act
(with respect to the FAA Filed Documents) or the UCC or similar law of any other
applicable jurisdiction (with respect to such other documents).
(d) If the Aircraft has been registered in a country other than the
United States pursuant to Section 4.02(e) of the Trust Indenture, Owner will
furnish to Mortgagee annually after such registration, commencing with the
calendar year after such registration is effected, an opinion of special counsel
reasonably satisfactory to Mortgagee stating that, in the opinion of such
counsel, either that (i) such action has been taken with respect to the
recording, filing, rerecording and refiling of the Operative Agreements and any
supplements and amendments thereto as is necessary to establish, perfect and
protect the Lien created by the Trust Indenture, reciting the details of such
actions, or (ii) no such action is necessary to maintain the perfection of such
Lien.
6.1.4 SECURITIES LAWS
Neither Owner nor any person authorized to act on its behalf will
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in any of the Equipment Notes or any
other interest in or security under the Trust Indenture, for sale to, or solicit
any offer to acquire any such interest or security from, or sell any such
interest or security to, any person in violation of the Securities Act or
applicable state or foreign securities Laws.
6.1.5. NOTICE OF LEASE
Owner shall give to Standard & Poor's Ratings Services, a division of
The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., a copy of any notice regarding a lease of the
Aircraft required to be given to the
14
Mortgagee pursuant to clause (w) of the first sentence of the penultimate
paragraph of Section 4.02(b) of the Mortgage, at the time such notice is given
to Mortgagee, if at such time Standard & Poor's is then rating the Pass Through
Certificates.
6.2 COVENANTS OF WTC
WTC in its individual capacity or as Mortgagee, each Applicable Pass
Through Trustee or Subordination Agent, as the case may be, covenants and agrees
with Owner as follows:
6.2.1 LIENS
WTC (a) will not directly or indirectly create, incur, assume or suffer
to exist any Lien attributable to it on or with respect to all or any part of
the Collateral or the Aircraft, (b) will, at its own cost and expense, promptly
take such action as may be necessary to discharge any Lien attributable to WTC
on all or any part of the Collateral or the Aircraft and (c) will personally
hold harmless and indemnify Owner, each Note Holder, each of their respective
Affiliates, successors and permitted assigns, and the Collateral from and
against (i) any and all Expenses, and (ii) any interference with the possession,
operation or other use of all or any part of the Aircraft, imposed on, incurred
by or asserted against any of the foregoing as a consequence of any such Lien.
6.2.2 SECURITIES ACT
WTC in its individual capacity or as Mortgagee, an Applicable Pass
Through Trustee or Subordination Agent, will not offer any beneficial interest
or Security relating to the ownership of the Aircraft or any interest in the
Collateral, or any of the Equipment Notes or any other interest in or security
under the Trust Indenture for sale to, or solicit any offer to acquire any such
interest or security from, or sell any such interest or security to, any Person
in violation of the Securities Act or applicable state or foreign securities
Laws, provided that the foregoing shall not be deemed to impose on WTC any
responsibility with respect to any such offer, sale or solicitation by any other
party hereto.
6.2.3 PERFORMANCE OF AGREEMENTS
WTC, in its individual capacity and as Mortgagee, an Applicable Pass
Through Trustee or Subordination Agent, as the case may be, shall perform its
obligations under the Pass Through Trust Agreements and the Operative Agreements
in accordance with the terms thereof.
6.2.4 WITHHOLDING TAXES
WTC shall indemnify (on an after-tax basis) and hold harmless Owner
against any United States withholding taxes (and related interest, penalties and
additions to tax) as a result of the failure by WTC to withhold on payments to
any Note Holder if such Note Holder failed to provide to Mortgagee necessary
certificates or forms to substantiate the right to exemption from such
withholding tax.
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6.3 COVENANTS OF NOTE HOLDERS
Each Note Holder (including Subordination Agent) as to itself only
covenants and agrees with Owner and Mortgagee as follows:
6.3.1 WITHHOLDING TAXES
Such Note Holder (if it is a Non-U.S. Person) agrees to indemnify (on
an after-tax basis) and hold harmless Owner and Mortgagee against any United
States withholding taxes (and related interest, penalties and additions to tax)
as a result of the inaccuracy or invalidity of any certificate or form provided
by such Note Holder to Mortgagee in connection with such withholding taxes. Any
amount payable hereunder shall be paid within 30 days after receipt by a Note
Holder of a written demand therefor.
6.3.2 TRANSFER; COMPLIANCE
(a) Such Note Holder will (i) not transfer any Equipment Note or
interest therein in violation of the Securities Act or applicable state or
foreign securities Law; provided, that the foregoing provisions of this section
shall not be deemed to impose on such Note Holder any responsibility with
respect to any such offer, sale or solicitation by any other party hereto, and
(ii) perform and comply with the obligations specified to be imposed on it (as a
Note Holder) under each of the Trust Indenture and the form of Equipment Note
set forth in the Trust Indenture.
(b) Except for the transfer of the interests of each Applicable Pass
Through Trustee in the Equipment Notes to the trustee of the Related Trust (as
defined in each Applicable Pass Through Trust Agreement) in accordance with the
related Applicable Pass Through Trust Agreement, each Note Holder will not sell,
assign, convey, exchange or otherwise transfer any Equipment Note or any
interest in, or represented by, any Equipment Note (it being understood that
this provision is not applicable to the Pass Through Certificates) unless the
proposed transferee thereof first provides Owner with both of the following:
(i) a written representation and covenant that either (a) no
portion of the funds it uses to purchase, acquire and hold such
Equipment Note or interest directly or indirectly constitutes, or may
be deemed under the Code or ERISA or any rulings, regulations or court
decisions thereunder to constitute, the assets of any Plan or (b) the
transfer, and subsequent holding, of such Equipment Note or interest
shall not involve or give rise to a transaction that constitutes a
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Code involving Owner, a Pass Through Trustee,
the Subordination Agent or the proposed transferee (other than a
transaction that is exempted from the prohibitions of such sections by
applicable provisions of ERISA or the Code or administrative exemptions
or regulations issued thereunder); and
(ii) a written covenant that it will not transfer any
Equipment Note or any interest in, or represented by, any Equipment
Note unless the subsequent transferee also
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makes the representation described in clause (i) above and agrees to
comply with this clause (ii).
6.4 AGREEMENTS
6.4.1 QUIET ENJOYMENT
Each Applicable Pass Through Trustee, Subordination Agent, each Note
Holder and Mortgagee agrees as to itself with Owner that, so long as no Event of
Default shall have occurred and be continuing, such Person shall not (and shall
not permit any Affiliate or other Person claiming by, through or under it to)
interfere with Owner's rights in accordance with the Indenture to the quiet
enjoyment, possession and use of the Aircraft.
6.4.2 CONSENTS
Each Pass Through Trustee, Subordination Agent and Mortgagee covenants
and agrees, for the benefit of Owner, that it shall not unreasonably withhold
its consent to any consent or approval requested of it under the terms of any of
the Operative Agreements which by its terms is not to be unreasonably withheld.
6.4.3 INSURANCE
Each Pass Through Trustee, Subordination Agent, Mortgagee and each Note
Holder agrees not to obtain or maintain insurance for its own account as
permitted by Section 4.06 of the Trust Indenture if such insurance would limit
or otherwise adversely affect the coverage of any insurance required to be
obtained or maintained by Owner pursuant to Section 4.06 of the Trust Indenture.
6.4.4 EXTENT OF INTEREST OF NOTE HOLDERS
A Note Holder shall not, as such, have any further interest in, or
other right with respect to, the Collateral when and if the principal and
Make-Whole Amount, if any, of and interest on the Equipment Note held by such
Holder, and all other sums, then due and payable to such Holder hereunder and
under any other Operative Agreement, shall have been paid in full.
6.4.5 FOREIGN REGISTRATION
Each Note Holder and Mortgagee hereby agree, for the benefit of Owner
but subject to the provisions of Section 4.02(b) of the Trust Indenture:
(a) that Owner shall be entitled to register the Aircraft or cause the
Aircraft to be registered in a country other than the United States subject to
compliance with the following:
(i) each of the following requirements is satisfied:
(A) no Special Default or Event of Default shall have
occurred and be continuing at the time of such
registration;
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(B) such proposed change of registration is made in
connection with a Permitted Lease to a Permitted Air
Carrier;
(C) such country is a country with which the United
States then maintains normal diplomatic relations or,
if Taiwan, the United States then maintains
diplomatic relations at least as good as those in
effect on the Closing Date;
(ii) the Mortgagee shall have received an opinion of counsel
(subject to customary exceptions) reasonably satisfactory to the
Mortgagee addressed to Mortgagee as to the effect that:
(A) such country would recognize the Owner's
ownership interest in the Aircraft;
(B) after giving effect to such change in
registration, the Lien of the Trust Indenture on the Owner's
right, title and interest in and to the Aircraft shall
continue as a valid and duly perfected first priority security
interest and all filing, recording or other action necessary
to protect the same shall have been accomplished (or, if such
opinion cannot be given at the time of such proposed change in
registration because such change in registration is not yet
effective, (1) the opinion shall detail what filing, recording
or other action is necessary and (2) the Mortgagee shall have
received a certificate from Owner that all possible
preparations to accomplish such filing, recording and other
action shall have been done, and such filing, recording and
other action shall be accomplished and a supplemental opinion
to that effect shall be delivered to the Mortgagee on or prior
to the effective date of such change in registration;
(C) unless Owner or the Permitted Air Carrier shall
have agreed to provide insurance covering the risk of
requisition of use of the Aircraft by the government of such
country (so long as the Aircraft is registered under the laws
of such country), the laws of such country require fair
compensation by the government of such country payable in
currency freely convertible into Dollars and freely removable
from such country (without license or permit, unless Owner
prior to such proposed reregistration has obtained such
license or permit) for the taking or requisition by such
government of such use; and
(D) it is not necessary, solely as a consequence of
such change in registration and without giving effect to any
other activity of the Mortgagee (or any Affiliate of the
Mortgagee), for the Mortgagee to qualify to do business in
such jurisdiction as a result of such reregistration in order
to exercise any rights or remedies with respect to the
Aircraft.
(b) In addition, as a condition precedent to any change in registration
Owner shall have given to Mortgagee assurances reasonably satisfactory to
Mortgagee:
(i) to the effect that the provisions of Section 4.06 of
the Trust Indenture have been complied with after
giving effect to such change of registration;
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(ii) of the payment by Owner of all reasonable
out-of-pocket expenses of each Note Holder and
Mortgagee in connection with such change of registry,
including, without limitation (1) the reasonable fees
and disbursements of counsel to Mortgagee, (2) any
filing or recording fees, Taxes or similar payments
incurred in connection with the change of
registration of the Aircraft and the creation and
perfection of the security interest therein in favor
of Mortgagee for the benefit of Note Holders, and (3)
all costs and expenses incurred in connection with
any filings necessary to continue in the United
States the perfection of the security interest in the
Aircraft in favor of Mortgagee for the benefit of
Note Holders; and
(iii) to the effect that the tax and other indemnities in
favor of each person named as an indemnitee under any
other Operative Agreement afford each such person
substantially the same protection as provided prior
to such change of registration (or Owner shall have
agreed upon additional indemnities that, together
with such original indemnities, in the reasonable
judgment of Mortgagee, afford such protection).
6.4.6 INTEREST IN CERTAIN ENGINES
Each Note Holder and Mortgagee agree, for the benefit of each of the
lessor, conditional seller, mortgagee or secured party of any airframe or engine
leased to, or purchased by, Owner or any Permitted Lessee subject to a lease,
conditional sale, trust indenture or other security agreement that it will not
acquire or claim, as against such lessor, conditional seller, mortgagee or
secured party, 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 mortgagee or secured party.
SECTION 7. [INTENTIONALLY OMITTED]
SECTION 8. INDEMNIFICATION AND EXPENSES
8.1 GENERAL INDEMNITY
8.1.1 INDEMNITY
Whether or not any of the transactions contemplated hereby are
consummated, Owner shall indemnify, protect, defend and hold harmless each
Indemnitee from, against and in respect of, and shall pay on a net after-tax
basis, any and all Expenses of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against any Indemnitee, relating to, resulting from,
or arising out of or in connection with, any one or more of the following:
(a) The Operative Agreements, the Pass Through Agreements, or the
enforcement of any of the terms of any of the Operative Agreements or the Pass
Through Agreements;
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(b) The Aircraft, the Airframe, any Engine or any Part, including,
without limitation, with respect thereto, (i) the manufacture, design, purchase,
acceptance, nonacceptance or rejection, ownership, registration, reregistration,
deregistration, delivery, nondelivery, lease, sublease, assignment, possession,
use or non-use, operation, maintenance, testing, repair, overhaul, condition,
alteration, modification, addition, improvement, storage, airworthiness,
replacement, repair, sale, substitution, return, abandonment, redelivery or
other disposition of the Aircraft, any Engine or any Part, (ii) any claim or
penalty arising out of violations of applicable Laws by Owner (or any Permitted
Lessee), (iii) tort liability, whether or not arising out of the negligence of
any Indemnitee (whether active, passive or imputed), (iv) death or property
damage of passengers, shippers or others, (v) environmental control, noise or
pollution and (vi) any Liens in respect of the Aircraft, any Engine or any Part;
(c) The offer, sale, or delivery of any Equipment Notes, Pass Through
Certificates or any interest therein or represented thereby; and
(d) Any breach of or failure to perform or observe, or any other
noncompliance with, any covenant or agreement or other obligation to be
performed by Owner under any Operative Agreement to which it is party or any
Pass Through Agreement or the falsity of any representation or warranty of Owner
in any Operative Agreement to which it is party or any Pass Through Agreement.
8.1.2 EXCEPTIONS
Notwithstanding anything contained in Section 8.1.1, Owner shall not be
required to indemnify, protect, defend and hold harmless any Indemnitee pursuant
to Section 8.1.1 in respect of any Expense of such Indemnitee:
(a) For any Taxes or a loss of Tax benefit, whether or not Owner is
required to indemnify therefor pursuant to Section 8.3;
(b) Except to the extent attributable to acts or events occurring prior
thereto, acts or events (other than acts or events related to the performance by
Owner of its obligations pursuant to the terms of the Operative Agreements) that
occur after the Trust Indenture is required to be terminated in accordance with
Section 11.01 of the Trust Indenture; provided, that nothing in this clause (b)
shall be deemed to exclude or limit any claim that any Indemnitee may have under
applicable Law by reason of an Event of Default or for damages from Owner for
breach of Owner's covenants contained in the Operative Agreements or to release
Owner from any of its obligations under the Operative Agreements that expressly
provide for performance after termination of the Trust Indenture;
(c) To the extent attributable to any Transfer (voluntary or
involuntary) by or on behalf of such Indemnitee of any Equipment Note or
interest therein, except for out-of-pocket costs and expenses incurred as a
result of any such Transfer pursuant to the exercise of remedies under any
Operative Agreement;
(d) To the extent attributable to the gross negligence or willful
misconduct of such Indemnitee or any related Indemnitee (as defined below)
(other than gross negligence or willful
20
misconduct imputed to such person by reason of its interest in the Aircraft or
any Operative Agreement);
(e) To the extent attributable to the incorrectness or breach of any
representation or warranty of such Indemnitee or any related Indemnitee
contained in or made pursuant to any Operative Agreement or any Pass Through
Agreement;
(f) To the extent attributable to the failure by such Indemnitee or any
related Indemnitee to perform or observe any agreement, covenant or condition on
its part to be performed or observed in any Operative Agreement or any Pass
Through Agreement;
(g) To the extent attributable to the offer or sale by such Indemnitee
or any related Indemnitee of any interest in the Aircraft, the Equipment Notes,
the Pass Through Certificates, or any similar interest, in violation of the
Securities Act or other applicable federal, state or foreign securities Laws
(other than any thereof caused by acts or omissions of Owner);
(h) (i) With respect to any Indemnitee (other than Mortgagee), to the
extent attributable to the failure of the Mortgagee to distribute funds received
and distributable by it in accordance with the Trust Indenture, (ii) with
respect to any Indemnitee (other than the Subordination Agent), to the extent
attributable to the failure of the Subordination Agent to distribute funds
received and distributable by it in accordance with the Intercreditor Agreement,
(iii) with respect to any Indemnitee (other than the Pass Through Trustees), to
the extent attributable to the failure of a Pass Through Trustee to distribute
funds received and distributable by it in accordance with the Pass Through Trust
Agreements, (iv) with respect to Mortgagee, to the extent attributable to the
negligence or willful misconduct of Mortgagee in the distribution of funds
received and distributable by it in accordance with the Trust Indenture, (v)
with respect to the Subordination Agent, to the extent attributable to the
negligence or willful misconduct of the Subordination Agent in the distribution
of funds received and distributable by it in accordance with the Intercreditor
Agreement, and (vi) with respect to the Pass Through Trustees, to the extent
attributable to the negligence or willful misconduct of a Pass Through Trustee
in the distribution of funds received and distributable by it in accordance with
the Pass Through Trust Agreements;
(i) Other than during the continuation of an Event of Default, to the
extent attributable to the authorization or giving or withholding of any future
amendments, supplements, waivers or consents with respect to any Operative
Agreement or Pass Through Agreement other than such as have been requested by
Owner or as are required by or made pursuant to the terms of the Operative
Agreements or Pass Through Agreements (unless such requirement results from the
actions of an Indemnitee not required by or made pursuant to the Operative
Agreements or the Pass Through Agreements);
(j) To the extent attributable to any amount which any Indemnitee
expressly agrees to pay or such Indemnitee expressly agrees shall not be paid by
or be reimbursed by Owner;
(k) To the extent that it is an ordinary and usual operating or
overhead expense;
(l) For any Lien attributable to such Indemnitee or any related
Indemnitee;
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(m) If another provision of an Operative Agreement or a Pass Through
Agreement specifies the extent of Owner's responsibility or obligation with
respect to such Expense, to the extent arising from other than failure of Owner
to comply with such specified responsibility or obligation; or
(n) To the extent incurred by or asserted against an Indemnitee as a
result of any "prohibited transaction", within the meaning of Section 406 of
ERISA or Section 4975(c)(1) of the Code.
For purposes of this Section 8.1, a Person shall be considered a
"related" Indemnitee with respect to an Indemnitee if such Person is an
Affiliate or employer of such Indemnitee, a director, officer, employee, agent,
or servant of such Indemnitee or any such Affiliate or a successor or permitted
assignee of any of the foregoing.
8.1.3 SEPARATE AGREEMENT
This Agreement constitutes a separate agreement with respect to each
Indemnitee and is enforceable directly by each such Indemnitee.
8.1.4 NOTICE
If a claim for any Expense that an Indemnitee shall be indemnified
against under this Section 8.1 is made, such Indemnitee shall give prompt
written notice thereof to Owner. Notwithstanding the foregoing, the failure of
any Indemnitee to notify Owner as provided in this Section 8.1.4, or in Section
8.1.5, shall not release Owner from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure results in an
additional Expense to Owner (in which event Owner shall not be responsible for
such additional expense) or materially impairs Owner's ability to contest such
claim.
8.1.5 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS
(a) In case any action, suit or proceeding shall be brought against any
Indemnitee for which Owner is responsible under this Section 8.1, such
Indemnitee shall notify Owner of the commencement thereof and Owner may, at its
expense, participate in and to the extent that it shall wish (subject to the
provisions of the following paragraph), assume and control the defense thereof
and, subject to Section 8.1.5(c), settle or compromise the same without the
consent of the Indemnitee.
(b) Owner or its insurer(s) shall have the right, at its or their
expense, to investigate or, if Owner or its insurer(s) shall agree not to
dispute liability to the Indemnitee giving notice of such action, suit or
proceeding under this Section 8.1.5 for indemnification hereunder or under any
insurance policies pursuant to which coverage is sought, control the defense of,
any action, suit or proceeding, relating to any Expense for which
indemnification is sought pursuant to this Section 8.1, and each Indemnitee
shall cooperate with Owner or its insurer(s) with respect thereto; provided,
that Owner shall not be entitled to control the defense of any such action,
suit, proceeding or compromise any such Expense during the continuance of any
Event of Default. In
22
connection with any such action, suit or proceeding being controlled by Owner,
such Indemnitee shall have the right to participate therein, at its sole cost
and expense, with counsel reasonably satisfactory to Owner; provided, that such
Indemnitee's participation does not, in the reasonable opinion of the
independent counsel appointed by the Owner or its insurers to conduct such
proceedings, interfere with the defense of such case.
(c) In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense without the prior written consent of
Owner, which consent shall not be unreasonably withheld or delayed, unless such
Indemnitee waives its right to be indemnified with respect to such Expense under
this Section 8.1.
(d) In the case of any Expense indemnified by the Owner hereunder which
is covered by a policy of insurance maintained by Owner pursuant to Section 4.06
of the Indenture, at Owner's expense, each Indemnitee agrees to cooperate with
the insurers in the exercise of their rights to investigate, defend or
compromise such Expense as may be required to retain the benefits of such
insurance with respect to such Expense.
(e) If an Indemnitee is not a party to this Agreement, Owner may
require such Indemnitee to agree in writing to the terms of this Section 8 and
Section 12.8 prior to making any payment to such Indemnitee under this Section
8.
(f) Nothing contained in this Section 8.1.5 shall be deemed to require
an Indemnitee to contest any Expense or to assume responsibility for or control
of any judicial proceeding with respect thereto.
8.1.6 INFORMATION
Owner will provide the relevant Indemnitee with such information not
within the control of such Indemnitee, as is in Owner's control or is reasonably
available to Owner, which such Indemnitee may reasonably request and will
otherwise cooperate with such Indemnitee so as to enable such Indemnitee to
fulfill its obligations under Section 8.1.5. The Indemnitee shall supply Owner
with such information not within the control of Owner, as is in such
Indemnitee's control or is reasonably available to such Indemnitee, which Owner
may reasonably request to control or participate in any proceeding to the extent
permitted by Section 8.1.5.
8.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER
ASSURANCES
Upon the payment in full by Owner of any indemnity provided for under
this Agreement, Owner, without any further action and to the full extent
permitted by Law, will be subrogated to all rights and remedies of the person
indemnified (other than with respect to any of such Indemnitee's insurance
policies or in connection with any indemnity claim such Indemnitee may have
under Section 6.03 or 8.01 of the Trust Indenture) in respect of the matter as
to which such indemnity was paid. Each Indemnitee will give such further
assurances or agreements and cooperate with Owner to permit Owner to pursue such
claims, if any, to the extent reasonably requested by Owner and at Owner's
expense.
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8.1.8 REFUNDS
If an Indemnitee receives any refund, in whole or in part, with respect
to any Expense paid by Owner hereunder, it will promptly pay the amount refunded
(but not an amount in excess of the amount Owner or any of its insurers has paid
in respect of such Expense) over to Owner unless an Event of Default shall have
occurred and be continuing, in which case such amounts shall be paid over to
Mortgagee to hold as security for Owner's obligations under the Operative
Agreements or, if requested by Owner, applied to satisfy such obligations.
8.2 EXPENSES
8.2.1 INVOICES AND PAYMENT
The Mortgagee, the Applicable Pass Through Trustees and the
Subordination Agent shall promptly submit to Owner for its prompt approval
(which shall not be unreasonably withheld) copies of invoices in reasonable
detail of the Transaction Expenses for which it is responsible for providing
information as they are received (but in no event later than the 90th day after
the Closing Date). If so submitted and approved, the Owner agrees promptly, but
in any event no later than the 105th day after the Closing Date, to pay
Transaction Expenses.
8.2.2 PAYMENT OF OTHER EXPENSES
Owner shall pay (i) the ongoing fees and expenses of Mortgagee, and
(ii) all reasonable out-of-pocket costs and expenses (including the reasonable
fees and disbursements of counsel) incurred by Mortgagee or any Note Holder
attributable to any waiver, amendment or modification of any Operative Agreement
to the extent requested by Owner.
8.3 GENERAL TAX INDEMNITY
8.3.1 GENERAL
Except as provided in Section 8.3.2, Owner agrees that each payment
paid by Owner under the Equipment Notes, and any other payment or indemnity paid
by Owner to a Tax Indemnitee under any Operative Agreement, shall be free of all
withholdings or deductions with respect to Taxes of any nature (other than U.S.
federal, state or local withholding taxes on, based on or measured by gross or
net income), and in the event that Owner shall be required by applicable law to
make any such withholding or deduction for any such payment (x) Owner shall make
all such withholdings or deductions, (y) the amount payable by Owner shall be
increased so that after making all required withholdings or deductions such Tax
Indemnitee receives the same amount that it would have received had no such
withholdings or deductions been made, and (z) Owner shall pay the full amount
withheld or deducted to the relevant Taxing Authority in accordance with
applicable law. Except as provided in Section 8.3.2 and whether or not any of
the transactions contemplated hereby are consummated, Owner shall pay,
indemnify, protect, defend and hold each Tax Indemnitee harmless from all Taxes
imposed by any Taxing Authority that may from time to time be imposed on or
asserted against any Tax Indemnitee or the Aircraft, the Airframe, any Engine or
any Part or any interest in any of the foregoing (whether or not indemnified
against by any other Person), upon or with respect to the Operative Agreements
or
24
the transactions or payments contemplated thereby, including but not limited to
any Tax imposed upon or with respect to (x) the Aircraft, the Airframe, any
Engine, any Part, any Operative Agreement (including without limitation any
Equipment Notes) or any data or any other thing delivered or to be delivered
under an Operative Agreement, (y) the purchase, manufacture, acceptance,
rejection, sale, transfer of title, return, ownership, mortgaging, delivery,
transport, charter, rental, lease, re-lease, sublease, assignment, possession,
repossession, presence, use, condition, storage, preparation, maintenance,
modification, alteration, improvement, operation, registration, transfer or
change of registration, reregistration, repair, replacement, overhaul, location,
control, the imposition of any Lien, financing, refinancing requested by the
Owner, abandonment or other disposition of the Aircraft, the Airframe, any
Engine, any Part, any data or any other thing delivered or to be delivered under
an Operative Agreement or (z) interest, fees or any other income, proceeds,
receipts or earnings, whether actual or deemed, arising upon, in connection
with, or in respect of, any of the Operative Agreements (including the property
or income or other proceeds with respect to property held as part of the
Collateral) or the transactions contemplated thereby.
8.3.2 CERTAIN EXCEPTIONS
The provisions of Section 8.3.1 shall not apply to, and Owner shall
have no liability hereunder for, Taxes:
(a) imposed on a Tax Indemnitee by the federal government of the United
States or any Taxing Authority or governmental subdivision of the United States
or therein (including any state or local Taxing Authority) (i) on, based on, or
measured by, gross or net income or gross or net receipts, including capital
gains taxes, excess profits taxes, minimum taxes from tax preferences,
alternative minimum taxes, branch profits taxes, accumulated earnings taxes,
personal holding company taxes, succession taxes and estate taxes, and any
withholding taxes on, based on or measured by gross or net income or receipts or
(ii) on, or with respect to, or measured by, capital or net worth or in the
nature of a franchise tax or a tax for the privilege of doing business (other
than, in the case of clause (i) or (ii), sales, use, license or property Taxes);
(b) imposed on a Tax Indemnitee by any Taxing Authority or governmental
subdivision thereof or therein outside of the United States (including any
Taxing Authority in or of a territory, possession or commonwealth of the United
States) (i) on, based on, or measured by, gross or net income or gross or net
receipts, including capital gains taxes, excess profits taxes, minimum taxes
from tax preferences, alternative minimum taxes, branch profits taxes,
accumulated earnings taxes, personal holding company taxes, succession taxes and
estate taxes, and any withholding taxes on, based on or measured by gross or net
income or receipts or (ii) on, or with respect to, or measured by, capital or
net worth or in the nature of a franchise tax or a tax for the privilege of
doing business (other than, in the case of clause (i) or (ii), (A) sales, use,
license or property Taxes, or (B) any Taxes imposed by any Taxing Authority
(other than a Taxing Authority within whose jurisdiction such Tax Indemnitee is
incorporated or organized or maintains its principal place of business) if such
Tax Indemnitee would not have been subject to Taxes of such type by such
jurisdiction but for (I) the location, use or operation of the Aircraft, the
Airframe, any Engine or any Part thereof by an Owner Person within the
jurisdiction of the Taxing Authority imposing such Tax, or (II) the activities
of any Owner Person in such jurisdiction, including, but not limited to, use of
any other aircraft by Owner in such jurisdiction,
25
(III) the status of any Owner Person as a foreign entity or as an entity owned
in whole or in part by foreign persons, (IV) Owner having made (or having been
deemed to have made) payments to such Tax Indemnitee from the relevant
jurisdiction or (V) in the case of the Pass Through Trustees, the Note Holders
or any related Tax Indemnitee, the Owner being incorporated or organized or
maintaining a place of business or conducting activities in such jurisdiction);
(c) on, or with respect to, or measured by, any trustee fees,
commissions or compensation received by the Pass Through Trustee, Subordination
Agent or Mortgagee;
(d) that are being contested as provided in Section 8.3.4 hereof;
(e) imposed on any Tax Indemnitee to the extent that such Taxes result
from the gross negligence or willful misconduct of such Tax Indemnitee or any
Affiliate thereof;
(f) imposed on or with respect to a Tax Indemnitee (including the
transferee in those cases in which the Tax on transfer is imposed on, or is
collected from, the transferee) as a result of a transfer or other disposition
(including a deemed transfer or disposition) by such Tax Indemnitee or a related
Tax Indemnitee of any interest in the Aircraft, the Airframe, any Engine or any
Part, any interest arising under the Operative Agreements or any Equipment Note
or as a result of a transfer or disposition (including a deemed transfer or
disposition) of any interest in a Tax Indemnitee (other than (A) a substitution
or replacement of the Aircraft, the Airframe, any Engine or any Part by an Owner
Person that is treated for Tax purposes as a transfer or disposition, or (B) a
transfer pursuant to an exercise of remedies upon an Event of Default that shall
have occurred and have been continuing);
(g) Taxes in excess of those that would have been imposed had there not
been a transfer or other disposition by or to such Tax Indemnitee or a related
Tax Indemnitee described in paragraph (f) above;
(h) consisting of any interest, penalties or additions to tax imposed
on a Tax Indemnitee as a result of (in whole or in part) failure of such Tax
Indemnitee or a related Tax Indemnitee to file any return properly and timely,
unless such failure shall be caused by the failure of Owner to fulfill its
obligations, if any, under Section 8.3.6 with respect to such return;
(i) resulting from, or that would not have been imposed but for, any
Liens arising as a result of claims against, or acts or omissions of, or
otherwise attributable to such Tax Indemnitee or a related Tax Indemnitee that
the Owner is not obligated to discharge under the Operative Agreements;
(j) imposed on any Tax Indemnitee as a result of the breach by such Tax
Indemnitee or a related Tax Indemnitee of any covenant of such Tax Indemnitee or
any Affiliate thereof contained in any Operative Agreement or the inaccuracy of
any representation or warranty by such Tax Indemnitee or any Affiliate thereof
in any Operative Agreement;
(k) in the nature of an intangible or similar Tax (i) upon or with
respect to the value or principal amount of the interest of any Note Holder in
any Equipment Note or the loan evidenced thereby but only if such Taxes are in
the nature of franchise Taxes or result from the Tax Indemnitee doing business
in the taxing jurisdiction and are imposed because of the place of
26
incorporation or the activities unrelated to the transactions contemplated by
the Operative Agreements in the taxing jurisdiction of such Tax Indemnitee;
(l) imposed on a Tax Indemnitee by a Taxing Authority of a jurisdiction
outside the United States to the extent that such Taxes would not have been
imposed but for a connection between the Tax Indemnitee or a related Tax
Indemnitee and such jurisdiction imposing such Tax unrelated to the transactions
contemplated by the Operative Agreements; or
(m) Taxes relating to ERISA or Section 4975 of the Code.
For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees
that are successors, assigns, agents, servants or Affiliates of such Tax
Indemnitee shall be related Tax Indemnitees.
8.3.3 PAYMENT
(a) Owner's indemnity obligation to a Tax Indemnitee under this Section
8.3 shall equal the amount which, after taking into account any Tax imposed upon
the receipt or accrual of the amounts payable under this Section 8.3 and any tax
benefits actually recognized by such Tax Indemnitee as a result of the
indemnifiable Tax (including, without limitation, any benefits recognized as a
result of an indemnifiable Tax being utilized by such Tax Indemnitee as a credit
against Taxes not indemnifiable under this Section 8.3), shall equal the amount
of the Tax indemnifiable under this Section 8.3.
(b) At Owner's request, the computation of the amount of any indemnity
payment owed by Owner or any amount owed by a Tax Indemnitee to Owner pursuant
to this Section 8.3 shall be verified and certified by an independent public
accounting firm selected by such Tax Indemnitee and reasonably satisfactory to
Owner. Such verification shall be binding. The costs of such verification
(including the fee of such public accounting firm) shall be borne by Owner
unless such verification shall result in an adjustment in Owner's favor of 5% or
more of the net present value of the payment as computed by such Tax Indemnitee,
in which case the costs shall be paid by such Tax Indemnitee.
(c) Each Tax Indemnitee shall provide Owner with such certifications,
information and documentation as shall be in such Tax Indemnitee's possession
and as shall be reasonably requested by Owner to minimize any indemnity payment
pursuant to this Section 8.3; provided, that notwithstanding anything to the
contrary contained herein, no Tax Indemnitee shall be required to provide Owner
with any Tax returns.
(d) Each Tax Indemnitee shall promptly forward to Owner any written
notice, ▇▇▇▇ or advice received by it from any Taxing Authority concerning any
Tax for which it seeks indemnification under this Section 8.3. Owner shall pay
any amount for which it is liable pursuant to this Section 8.3 directly to the
appropriate Taxing Authority if legally permissible or upon demand of a Tax
Indemnitee, to such Tax Indemnitee within 30 days of such demand (or, if a
contest occurs in accordance with Section 8.3.4, within 30 days after a Final
Determination (as defined below)), but in no event more than one Business Day
prior to the date the Tax to which such amount payable hereunder relates is due.
If requested by a Tax Indemnitee in writing,
27
Owner shall furnish to the appropriate Tax Indemnitee the original or a
certified copy of a receipt for Owner's payment of any Tax paid by Owner or such
other evidence of payment of such Tax as is acceptable to such Tax Indemnitee.
Owner shall also furnish promptly upon written request such data as any Tax
Indemnitee may reasonably require to enable such Tax Indemnitee to comply with
the requirements of any taxing jurisdiction unless such data is not reasonably
available to Owner or, unless such data is specifically requested by a Taxing
Authority, is not customarily furnished by domestic air carriers under similar
circumstances. For purposes of this Section 8.3, a "Final Determination" shall
mean (i) a decision, judgment, decree or other order by any court of competent
jurisdiction that occurs pursuant to the provisions of Section 8.3.4, which
decision, judgment, decree or other order has become final and unappealable,
(ii) a closing agreement or settlement agreement entered into in accordance with
Section 8.3.4 that has become binding and is not subject to further review or
appeal (absent fraud, misrepresentation, etc.), or (iii) the termination of
administrative proceedings and the expiration of the time for instituting a
claim in a court proceeding.
(e) If any Tax Indemnitee shall actually realize a tax savings by
reason of any Tax paid or indemnified by Owner pursuant to this Section 8.3
(whether such tax savings shall be by means of a foreign tax credit,
depreciation or cost recovery deduction or otherwise) and such savings is not
otherwise taken into account in computing such payment or indemnity such Tax
Indemnitee shall pay to Owner an amount equal to the lesser of (i) the amount of
such tax savings, plus any additional tax savings recognized as the result of
any payment made pursuant to this sentence, when, as, if, and to the extent,
realized or (ii) the amount of all payments pursuant to this Section 8.3 by
Owner to such Tax Indemnitee (less any payments previously made by such Tax
Indemnitee to Owner pursuant to this Section 8.3.3 (e)) (and the excess, if any,
of the amount described in clause (i) over the amount described in clause (ii)
shall be carried forward and applied to reduce pro tanto any subsequent
obligations of Owner to make payments to such Tax Indemnitee pursuant to this
Section 8.3); provided, that such Tax Indemnitee shall not be required to make
any payment pursuant to this sentence so long as a Lease Event of Default of a
monetary nature has occurred and is continuing. If a tax benefit is later
disallowed or denied, the disallowance or denial shall be treated as a Tax
indemnifiable under Section 8.3.1 without regard to the provisions of Section
8.3.2 (other than Section 8.3.2 (f)). Each such Tax Indemnitee shall in good
faith use reasonable efforts in filing its tax returns and in dealing with
Taxing Authorities to seek and claim any such tax benefit.
8.3.4 CONTEST
(a) If a written claim is made against a Tax Indemnitee for Taxes with
respect to which Owner could be liable for payment or indemnity hereunder, or if
a Tax Indemnitee makes a determination that a Tax is due for which Owner could
have an indemnity obligation hereunder, such Tax Indemnitee shall promptly give
Owner notice in writing of such claim (provided, that failure to so notify Owner
shall not relieve Owner of its indemnity obligations hereunder unless such
failure to notify effectively forecloses Owner's rights to require a contest of
such claim) and shall take no action with respect to such claim without the
prior written consent of Owner for 30 days following the receipt of such notice
by Owner; provided, that, in the case of a claim made against a Tax Indemnitee,
if such Tax Indemnitee shall be required by law to take action prior to the end
of such 30-day period, such Tax Indemnitee shall, in such notice to Owner, so
inform Owner, and such Tax Indemnitee shall take no action for as long as it
28
is legally able to do so (it being understood that a Tax Indemnitee shall be
entitled to pay the Tax claimed and ▇▇▇ for a refund prior to the end of such
30-day period if (i)(A) the failure to so pay the Tax would result in
substantial penalties (unless immediately reimbursed by Owner) and the act of
paying the Tax would not materially prejudice the right to contest or (B) the
failure to so pay would result in criminal penalties and (ii) such Tax
Indemnitee shall take any action so required in connection with so paying the
Tax in a manner that is the least prejudicial to the pursuit of the contest). In
addition, such Tax Indemnitee shall (provided, that Owner shall have agreed to
keep such information confidential other than to the extent necessary in order
to contest the claim) furnish Owner with copies of any requests for information
from any Taxing Authority relating to such Taxes with respect to which Owner may
be required to indemnify hereunder. If requested by Owner in writing within 30
days after its receipt of such notice, such Tax Indemnitee shall, at the expense
of Owner (including, without limitation, all reasonable costs, expenses and
reasonable attorneys' and accountants' fees and disbursements), in good faith
contest (or, if permitted by applicable law, allow Owner to contest) through
appropriate administrative and judicial proceedings the validity, applicability
or amount of such Taxes by (I) resisting payment thereof, (II) not paying the
same except under protest if protest is necessary and proper or (III) if the
payment is made, using reasonable efforts to obtain a refund thereof in an
appropriate administrative and/or judicial proceeding. If requested to do so by
Owner, the Tax Indemnitee shall appeal any adverse administrative or judicial
decision, except that the Tax Indemnitee shall not be required to pursue any
appeals to the United States Supreme Court. If and to the extent the Tax
Indemnitee is able to separate the contested issue or issues from other issues
arising in the same administrative or judicial proceeding that are unrelated to
the transactions contemplated by the Operative Agreements without, in the good
faith judgment of such Tax Indemnitee, adversely affecting such Tax Indemnitee,
such Tax Indemnitee shall permit Owner to control the conduct of any such
proceeding and shall provide to Owner (at Owner's cost and expense) with such
information or data that is in such Tax Indemnitee's control or possession that
is reasonably necessary to conduct such contest. In the case of a contest
controlled by a Tax Indemnitee, such Tax Indemnitee shall consult with Owner in
good faith regarding the manner of contesting such claim and shall keep Owner
reasonably informed regarding the progress of such contest. A Tax Indemnitee
shall not fail to take any action expressly required by this Section 8.3.4
(including, without limitation, any action regarding any appeal of an adverse
determination with respect to any claim) or settle or compromise any claim
without the prior written consent of the Owner (except as contemplated by
Section 8.3.4(b) or (c)).
(b) Notwithstanding the foregoing, in no event shall a Tax Indemnitee
be required to pursue any contest (or to permit Owner to pursue any contest)
unless (i) Owner shall have agreed to pay such Tax Indemnitee on demand all
reasonable costs and expenses incurred by such Tax Indemnitee in connection with
contesting such Taxes, including, without limitation, all reasonable out of
pocket costs and expenses and reasonable attorneys' and accountants' fees and
disbursements, (ii) if such contest shall involve the payment of the claim,
Owner shall advance the amount thereof (to the extent indemnified hereunder)
plus interest, penalties and additions to tax with respect thereto that are
required to be paid prior to the commencement of such contest on an
interest-free after-Tax basis to such Tax Indemnitee (and such Tax Indemnitee
shall promptly pay to the Owner any net realized tax benefits resulting from
such advance including any tax benefits resulting from making such payment),
(iii) such Tax Indemnitee shall have reasonably determined that the action to be
taken will not result in any material risk of forfeiture,
29
sale or loss of the Aircraft (unless Owner shall have made provisions to protect
the interests of any such Tax Indemnitee in a manner reasonably satisfactory to
such Tax Indemnitee) (provided, that such Tax Indemnitee agrees to notify Owner
in writing promptly after it becomes aware of any such risk), (iv) no Lease
Event of Default shall have occurred and be continuing unless Owner has provided
security for its obligations hereunder by advancing to such Tax Indemnitee
before proceeding or continuing with such contest, the amount of the Tax being
contested, plus any interest and penalties and an amount estimated in good faith
by such Tax Indemnitee for expenses, and (v) prior to commencing any judicial
action controlled by Owner, Owner shall have acknowledged its liability for such
claim hereunder, provided that Owner shall not be bound by its acknowledgment if
the Final Determination articulates conclusions of law and fact that demonstrate
that Owner has no liability for the contested amounts hereunder. Notwithstanding
the foregoing, if any Tax Indemnitee shall release, waive, compromise or settle
any claim which may be indemnifiable by Owner pursuant to this Section 8.3
without the written permission of Owner, Owner's obligation to indemnify such
Tax Indemnitee with respect to such claim (and all directly related claims and
claims based on the outcome of such claim) shall terminate, subject to Section
8.3.4(c), and subject to Section 8.3.4(c), such Tax Indemnitee shall repay to
Owner any amount previously paid or advanced to such Tax Indemnitee with respect
to such claim, plus interest at the rate that would have been payable by the
relevant Taxing Authority with respect to a refund of such Tax.
(c) Notwithstanding anything contained in this Section 8.3, a Tax
Indemnitee will not be required to contest the imposition of any Tax and shall
be permitted to settle or compromise any claim without Owner's consent if such
Tax Indemnitee (i) shall waive its right to indemnity under this Section 8.3
with respect to such Tax (and any directly related claim and any claim the
outcome of which is determined based upon the outcome of such claim), (ii) shall
pay to Owner any amount previously paid or advanced by Owner pursuant to this
Section 8.3 with respect to such Tax, plus interest at the rate that would have
been payable by the relevant Taxing Authority with respect to a refund of such
Tax, and (iii) shall agree to discuss with Owner the views or positions of any
relevant Taxing Authority with respect to the imposition of such Tax.
8.3.5 REFUND
If any Tax Indemnitee shall receive a refund of, or be entitled to a
credit against other liability for, all or any part of any Taxes paid,
reimbursed or advanced by Owner, such Tax Indemnitee shall pay to Owner within
30 days of such receipt an amount equal to the lesser of (a) the amount of such
refund or credit plus any net tax benefit (taking into account any Taxes
incurred by such Tax Indemnitee by reason of the receipt of such refund or
realization of such credit) actually realized by such Tax Indemnitee as a result
of any payment by such Tax Indemnitee made pursuant to this sentence (including
this clause (a)) and (b) such tax payment, reimbursement or advance by Owner to
such Tax Indemnitee theretofore made pursuant to this Section 8.3 (and the
excess, if any, of the amount described in clause (a) over the amount described
in clause (b) shall be carried forward and applied to reduce pro tanto any
subsequent obligation of Owner to make payments to such Tax Indemnitee pursuant
to this Section 8.3). If, in addition to such refund or credit, such Tax
Indemnitee shall receive (or be credited with) an amount representing interest
on the amount of such refund or credit, such Tax Indemnitee shall pay to Owner
within 30 days of such receipt or realization of such credit that proportion of
such
30
interest that shall be fairly attributable to Taxes paid, reimbursed or advanced
by Owner prior to the receipt of such refund or realization of such credit.
8.3.6 TAX FILING
If any report, return or statement is required to be filed with respect
to any Tax which is subject to indemnification under this Section 8.3, Owner
shall timely file the same (except for any such report, return or statement
which a Tax Indemnitee has timely notified the Owner in writing that such Tax
Indemnitee intends to file, or for which such Tax Indemnitee is required by law
to file, in its own name); provided, that the relevant Tax Indemnitee shall
furnish Owner with any information in such Tax Indemnitee's possession or
control that is reasonably necessary to file any such return, report or
statement and is reasonably requested in writing by Owner (it being understood
that the Tax Indemnitee shall not be required to furnish copies of its actual
tax returns, although it may be required to furnish relevant information
contained therein). Owner shall either file such report, return or statement and
send a copy of such report, return or statement to such Tax Indemnitee, or,
where Owner is not permitted to file such report, return or statement, it shall
notify such Tax Indemnitee of such requirement and prepare and deliver such
report, return or statement to such Tax Indemnitee in a manner satisfactory to
such Tax Indemnitee within a reasonable time prior to the time such report,
return or statement is to be filed.
8.3.7 FORMS
Each Tax Indemnitee agrees to furnish from time to time to Owner or
Mortgagee or to such other person as Owner or Mortgagee may designate, at
Owner's or Mortgagee's request, such duly executed and properly completed forms
as may be necessary or appropriate in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any Taxing Authority, if
(x) such reduction or exemption is available to such Tax Indemnitee and (y)
Owner has provided such Tax Indemnitee with any information necessary to
complete such form not otherwise reasonably available to such Tax Indemnitee.
8.3.8 NON-PARTIES
If a Tax Indemnitee is not a party to this Agreement, Owner may require
the Tax Indemnitee to agree in writing, in a form reasonably acceptable to
Owner, to the terms of this Section 8.3 and Section 15.8 prior to making any
payment to such Tax Indemnitee under this Section 8.3.
8.3.9 SUBROGATION
Upon payment of any Tax by Owner pursuant to this Section 8.3 to or on
behalf of a Tax Indemnitee, Owner, without any further action, shall be
subrogated to any claims that such Tax Indemnitee may have relating thereto.
Such Tax Indemnitee shall cooperate with Owner (to the extent such cooperation
does not result in any unreimbursed cost, expense or liability to such Tax
Indemnitee) to permit Owner to pursue such claims.
31
8.4 PAYMENTS
Any payments made pursuant to Section 8.1 or 8.3 shall be due on the
60th day after demand therefor and shall be made directly to the relevant
Indemnitee or Tax Indemnitee or to Owner, in immediately available funds at such
bank or to such account as specified by such Indemnitee or Tax Indemnitee or
Owner, as the case may be, in written directives to the payor, or, if no such
direction shall have been given, by check of the payor payable to the order of,
and mailed to, such Indemnitee or Tax Indemnitee or Owner, as the case may be,
by certified mail, postage prepaid, at its address as set forth in this
Agreement.
8.5 INTEREST
If any amount, payable by Owner, any Indemnitee or any Tax Indemnitee
under Section 8.1 or 8.3 is not paid when due, the person obligated to make such
payment shall pay on demand, to the extent permitted by Law, to the person
entitled thereto, interest on any such amount for the period from and including
the due date for such amount to but excluding the date the same is paid, at the
Payment Due Rate. Such interest shall be paid in the same manner as the unpaid
amount in respect of which such interest is due.
8.6 BENEFIT OF INDEMNITIES
The obligations of Owner in respect of all indemnities, obligations,
adjustments and payments in Section 8.1 or 8.3 are expressly made for the
benefit of, and shall be enforceable by, the Indemnitee or Tax Indemnitee
entitled thereto, notwithstanding any provision of the Trust Indenture.
SECTION 9. ASSIGNMENT OR TRANSFER OF INTEREST
9.1 NOTE HOLDERS
Subject to Section 6.3.2 hereof and Section 2.07 of the Trust
Indenture, any Note Holder may, at any time and from time to time, Transfer or
grant participations in all or any portion of the Equipment Notes and/or all or
any portion of its beneficial interest in its Equipment Notes to any person (it
being understood that the sale or issuance of Pass Through Certificates by a
Pass Through Trustee shall not be considered a Transfer or participation);
provided, that any participant in any such participations shall not have any
direct rights under the Operative Agreements or any Lien on all or any part of
the Aircraft or the Collateral and Owner shall not have any increased liability
or obligations as a result of any such participation. In the case of any such
Transfer, the Transferee, by acceptance of Equipment Notes in connection with
such Transfer, shall be deemed to be bound by all of the covenants of Note
Holders contained in the Operative Agreements.
9.2 EFFECT OF TRANSFER
Upon any Transfer in accordance with Section 9.1 (other than any
Transfer by any Note Holder, to the extent it only grants participations in
Equipment Notes or in its beneficial interest therein), Transferee shall be
deemed a "Note Holder," for all purposes of this Agreement and
32
the other Operative Agreements, and the transferring Note Holder shall be
released from all of its liabilities and obligations under this Agreement and
any other Operative Agreements to the extent such liabilities and obligations
arise after such Transfer and, in each case, to the extent such liabilities and
obligations are assumed by the Transferee; provided, that such transferring Note
Holder (and its respective Affiliates, successors, assigns, agents, servants,
representatives, directors and officers) will continue to have the benefit of
any rights or indemnities under any Operative Agreement vested or relating to
circumstances, conditions, acts or events prior to such Transfer.
SECTION 10. SECTION 1110
It is the intention of each of the Owner, the Note Holders (such
intention being evidenced by each of their acceptance of an Equipment Note), and
Mortgagee that Mortgagee shall be entitled to the benefits of Section 1110 in
the event of a case under Chapter 11 of the Bankruptcy Code in which Owner is a
debtor.
SECTION 11. CHANGE OF CITIZENSHIP
11.1 GENERALLY
Without prejudice to the representations, warranties or covenants
regarding the status of any party hereto as a Citizen of the United States, each
of Owner, WTC and Mortgagee agrees that it will, immediately upon obtaining
knowledge of any facts that would cast doubt upon its continuing status as a
Citizen of the United States and promptly upon public disclosure of negotiations
in respect of any transaction which would or might adversely affect such status,
notify in writing all parties hereto of all relevant matters in connection
therewith.
11.2 MORTGAGEE
Upon WTC giving any notice in accordance with Section 11.1, Mortgagee
shall (if and so long as such citizenship is necessary under the Act as in
effect at such time or, if it is not necessary, if and so long as Mortgagee's
citizenship could have any adverse effect on Owner, or any Note Holder), subject
to Section 9.02 of the Trust Indenture, resign as Mortgagee promptly upon its
ceasing to be such a citizen.
SECTION 12. MISCELLANEOUS
12.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by the party against which the
enforcement of the amendment, supplement, waiver, modification, discharge,
termination or variance is sought. Each such amendment, supplement, waiver,
modification, discharge, termination or variance shall be effective only in the
specific instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by
33
oral communication, course of dealing or performance or other manner not set
forth in an agreement, document or instrument in writing and signed by the party
against which enforcement of the same is sought.
12.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or unenforceable
in any respect in any jurisdiction, then, to the extent permitted by Law, (a)
all other provisions hereof shall remain in full force and effect in such
jurisdiction and (b) such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction. If, however, any Law pursuant to which such provisions are held
invalid, illegal or unenforceable may be waived, such Law is hereby waived by
the parties hereto to the full extent permitted, to the end that this Agreement
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.
12.3 SURVIVAL
The indemnities set forth herein shall survive the delivery or return
of the Aircraft, the Transfer of any interest by any Note Holder of its
Equipment Note and the expiration or other termination of this Agreement or any
other Operative Agreement.
12.4 REPRODUCTION OF DOCUMENTS
This Agreement, all schedules and exhibits hereto and all agreements,
instruments and documents relating hereto, including, without limitation, (a)
consents, waivers and modifications that may hereafter be executed and (b)
financial statements, certificates and other information previously or hereafter
furnished to any party hereto, may be reproduced by such party by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process, and such party may destroy any original documents so
reproduced. Any such reproduction shall be as admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by such
party in the regular course of business) and any enlargement, facsimile or
further reproduction of such reproduction likewise is admissible in evidence.
12.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each of which when so
executed shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
12.6 NO WAIVER
No failure on the part of any party hereto to exercise, and no delay by
any party hereto in exercising, any of its respective rights, powers, remedies
or privileges under this Agreement or provided at Law, in equity or otherwise
shall impair, prejudice or constitute a waiver of any such right, power, remedy
or privilege or be construed as a waiver of any breach hereof or default
hereunder or as an acquiescence therein nor shall any single or partial exercise
of any such right,
34
power, remedy or privilege preclude any other or further exercise thereof by it
or the exercise of any other right, power, remedy or privilege by it. No notice
to or demand on any party hereto in any case shall, unless otherwise required
under this Agreement, entitle such party to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
any party hereto to any other or further action in any circumstances without
notice or demand.
12.7 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers and other
communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement or other applicable Operative Agreement, and shall be personally
delivered, sent by facsimile or telecommunication transmission (which in either
case provides written confirmation to the sender of its delivery), sent by
registered mail or certified mail, return receipt requested, postage prepaid, or
sent by overnight courier service, in each case to the respective address, or
facsimile number set forth for such party in Schedule 1, or to such other
address, facsimile or other number as each party hereto may hereafter specify by
notice to the other parties hereto. Each such notice, request, demand,
authorization, direction, consent, waiver or other communication shall be
effective when received or, if made, given, furnished or filed (a) by facsimile
or telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING
WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESS SET FORTH PURSUANT TO SECTION 12.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS,
35
IN EACH CASE IN ACCORDANCE WITH THIS SECTION 12.8(c), SHALL CONSTITUTE VALID AND
EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY, AND EACH PARTY HERETO HEREBY AGREES
THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY
SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN ANY WAY THE VALIDITY OF SUCH SERVICE ON
SUCH PARTY OR ANY JUDGMENT RENDERED IN ANY ACTION OR PROCEEDING BASED THEREON.
(d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
(e) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED
UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.
12.9 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any person
not a party hereto (other than the Indenture Indemnitees, each of which is an
intended third party beneficiary with respect to the provisions of Section 8.1
and the persons referred to in Section 6.4.6, which are intended third party
beneficiaries with respect to such Section) with any rights of any nature
whatsoever against any of the parties hereto and no person not a party hereto
(other than the Indenture Indemnitees, with respect to the provisions of Section
8.1, and the persons referred to in Section 6.4.6 with respect to the provisions
of such Section) shall have any right, power or privilege in respect of any
party hereto, or have any benefit or interest, arising out of this Agreement.
12.10 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and as
of the date hereof, constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, among any of the parties
hereto with respect to such subject matter are hereby superseded in their
entireties.
12.11 FURTHER ASSURANCES
Each party hereto shall execute, acknowledge and deliver or shall cause
to be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents,
36
and shall do and cause to be done such further acts and things, in any case, as
any other party hereto shall reasonably request in connection with the
administration of, or to carry out more effectually the purposes of, or to
better assure and confirm into such other party the rights and benefits to be
provided under this Agreement and the other Operative Agreements.
[This space intentionally left blank]
37
IN WITNESS WHEREOF, each of the parties has caused this
Participation
Agreement to be duly executed and delivered as of the day and year first above
written.
SOUTHWEST AIRLINES CO.,
Owner
By
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President - Finance
and Treasurer
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as expressly provided herein,
but solely as Mortgagee
By
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as expressly provided herein,
but solely as Pass Through Trustee
under the Pass Through Trust
Agreement for the Southwest Airlines
Pass Through Trust, 2001-1A-1
By
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as expressly provided herein,
but solely as Pass Through Trustee
under the Pass Through Trust
Agreement for the Southwest Airlines
Pass Through Trust, 2001-1A-2
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as expressly provided herein,
but solely as Pass Through Trustee
under the Pass Through Trust
Agreement for the Southwest Airlines
Pass Through Trust, 2001-1B
By
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as expressly provided herein,
but solely as Subordination Agent
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE
-----------------------
SCHEDULE 1
TO
PARTICIPATION AGREEMENT
-----------------------
ACCOUNTS; ADDRESSES
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
-------------------- -------------------
SOUTHWEST AIRLINES CO. Bank One Dallas Southwest Airlines Co.
Account No.: ▇▇▇▇▇▇▇▇ 2702 Love Field Drive
ABA#: 11100614 ▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Voice: ▇▇▇-▇▇▇-▇▇▇▇ Attention: Treasurer
Reference: Southwest [N700GS] Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
MORTGAGEE ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Account No.: ▇▇▇-▇-▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
ABA#: 021-000021 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Southwest [N700GS] Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS SUBORDINATION AGENT ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Account No.: ▇▇▇-▇-▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
ABA#: 021-000021 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Southwest [N700GS] Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS PASS THROUGH TRUSTEE FOR New York, New York 10081 ▇▇▇▇▇▇ Square North
THE 2001-1A-1 PASS THROUGH Account No.: ▇▇▇-▇-▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
TRUST ABA#: 021-000021 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Southwest [N700GS] Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS PASS THROUGH TRUSTEE FOR New York, New York 10081 ▇▇▇▇▇▇ Square North
THE 2001-1A-2 PASS THROUGH Account No.: ▇▇▇-▇-▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
TRUST ABA#: 021-000021 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Southwest [N700GS] Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
-------------------- -------------------
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS PASS THROUGH TRUSTEE FOR New York, New York 10081 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇-▇▇ ▇▇▇▇ THROUGH Account No.: ▇▇▇-▇-▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
TRUST ABA#: 021-000021 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Southwest [N700GS] Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
ii
------------------------
SCHEDULE 2 - COMMITMENTS
PARTICIPATION AGREEMENT
------------------------
COMMITMENTS
PASS THROUGH SERIES OF DOLLAR AMOUNT
TRUSTEE EQUIPMENT NOTES OF LOAN
------------ --------------- -------------
CLASS A-1 SERIES A-1 $ 1,744,144.44
CLASS A-2 SERIES A-2 $12,424,597.58
CLASS B SERIES B $ 2,880,097.46
--------------------------
SCHEDULE 3 - CERTAIN TERMS
PARTICIPATION AGREEMENT
--------------------------
CERTAIN TERMS
DEFINED TERM DEFINITION
------------ ----------
Minimum Liability Insurance Amount $200,000,000
Threshold Amount $ 5,500,000
--------------------------------
SCHEDULE 4 - PERMITTED COUNTRIES
PARTICIPATION AGREEMENT
--------------------------------
PERMITTED COUNTRIES
Argentina Malaysia
Australia Malta
Austria Mexico
Bahamas Morocco
Belgium Netherlands
Brazil New Zealand
Canada Norway
Chile Paraguay
Denmark People's Republic of China
Egypt Philippines
Ecuador Portugal
Finland Republic of China (Taiwan)
France Singapore
Germany South Africa
Greece South Korea
Hungary Spain
Iceland Sweden
India Switzerland
Indonesia Thailand
Ireland Trinidad and Tobago
Italy United Kingdom
Japan Uruguay
Luxembourg Venezuela
EXHIBIT A
[Form of Opinion of Special Counsel to Owner]
October __, 2001
To the Persons Listed on Schedule I
Attached Hereto
Re: Mortgage of Boeing Model 737-700 Aircraft with
Manufacturer's Serial Number 27835 and U.S.
Registration Number N700GS
Ladies and Gentlemen:
We have been requested by
Southwest Airlines Co., a Texas
corporation (the "Company"), to act as special counsel with respect to, and to
render this opinion letter in connection with, the transactions contemplated by
the Participation Agreement N700GS, dated as of October __, 2001 (the
"Participation Agreement"), among the Company, as Owner, and Wilmington Trust
Company, a Delaware banking corporation ("WTC"), in its capacity as Mortgagee
(the "Mortgagee"), as Subordination Agent under the Intercreditor Agreement (as
defined in the Participation Agreement) and as Pass Through Trustee under the
Applicable Pass Through Trust Agreements (as defined in the Participation
Agreement). Capitalized terms used herein and not otherwise defined herein have
the respective meanings given to those terms in the Participation Agreement.
In connection with this opinion letter we have examined, among
other things, originals or copies certified or otherwise identified to our
satisfaction of the following documents:
(i) Participation Agreement;
(ii) Trust Indenture;
(iii) Trust Indenture Supplement No. 1;
(iv) Airframe Manufacturer Consent and Agreement; and
(v) Forms of the Equipment Notes.
We have also examined and relied upon such other documents and
such other corporate records, certificates and other statements of governmental
officials and corporate officers and other representatives of the Company as we
have deemed necessary or appropriate for the purposes of this opinion. As to
certain facts material to the opinions expressed herein, we have relied upon
representations and warranties contained in the Operative Agreements. The
opinions expressed herein are subject to the following exceptions, assumptions,
qualifications and limitations:
A. The opinions set forth below are limited to the laws of the
State of Texas, the laws of the State of New York and the federal laws of the
United States of America, except that we express no opinion with respect to (i)
the laws, regulations or ordinances of any county, town or municipality or
governmental subdivision or agency thereof, (ii) state securities or blue sky
laws or federal securities laws, including the Securities Act and the Investment
Company Act of 1940, as amended, (iii) any federal or state tax, antitrust or
fraudulent transfer or conveyance laws, (iv) the Employee Retirement Income
Security Act of 1974, as amended, or (v) the Act (except as expressly provided
in paragraph 5 below), or any other laws, rules or regulations governing,
regulating or relating to the acquisition, ownership, registration, use or sale
of an aircraft, airframe or aircraft engine or to the particular nature of the
equipment owned by the Company. In addition, our opinions are based upon a
review of those laws, statutes, rules and regulations which, in our experience,
are normally applicable to transactions of the type contemplated by the
Participation Agreement.
B. The opinions set forth in paragraphs 3 and 6 below are
subject to (i) limitations on enforceability arising from applicable bankruptcy,
insolvency, reorganization, moratorium, receivership, fraudulent conveyance,
fraudulent transfer, preferential transfer and similar laws relating to or
affecting the rights and remedies of creditors generally and the effect of
general principles of equity, including, without limitation, laches and estoppel
as equitable defenses and concepts of materiality, reasonableness, good faith
and fair dealing (regardless of whether such enforceability is considered or
applied in a proceeding in equity or at law) and considerations of
impracticability or impossibility of performance, and defenses based upon
unconscionability of otherwise enforceable obligations in the context of the
factual circumstances under which enforcement thereof is sought and (ii) the
qualification that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought. In
addition, certain remedial and procedural provisions of the Company Documents
(as defined in paragraph 2 below) are or may be unenforceable in whole or in
part, but the inclusion of such provisions does not affect the validity of those
agreements and does not, in our opinion, make the remedies provided in those
agreements, or otherwise available under applicable law, inadequate for the
practical realization of the substantive benefits purported to be provided
thereby, except for the economic consequences resulting from any delay imposed
by, or any procedure required by, applicable laws, rules, regulations and by
constitutional requirements. We express no opinion as to (i) any provision
contained in any Operative Agreement (a) providing for indemnification or
exculpation of any Person for such Person's gross negligence, willful
misconduct, recklessness or unlawful conduct or in respect of liabilities under
the Securities Act, (b) providing for late payment charges or an increase in
interest rate upon delinquency in payment or the occurrence of a default or
other specified event but only to the extent such provision is deemed to
constitute a penalty or liquidated damages provision, (c) as
such provision relates to the subject matter jurisdiction of federal courts or
the waiver of inconvenient forum with respect to proceedings in federal courts,
(d) that purports to establish (or may be construed to establish) evidentiary
standards or (e) providing for the waiver of any statutory right or any broadly
or vaguely stated rights or unknown future rights, or any waiver which is
against public policy considerations or (ii) Section 12.8(c) of the
Participation Agreement or any comparable provision of any other Operative
Agreement. Under certain circumstances the requirement that the provisions of an
Operative Agreement may be modified or waived only in writing or only in a
specific instance and provisions to the effect that failure or delay in
exercising any right, remedy, power and/or privilege will not impair or waive
such right, remedy, power and/or privilege may be unenforceable to the extent
that an oral agreement has been effected or a course of dealing has occurred
modifying such provisions. A court may modify or limit contractual agreements
regarding attorneys' fees.
C. To the extent that our opinions expressed herein involve
conclusions as to the matters set forth in the opinions dated the date hereof of
Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP or DeBee, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ being
delivered to you on the date hereof, we have assumed, without independent
investigation, the correctness of the matters set forth in such opinions.
D. We have assumed the due authorization, execution and
delivery of the Operative Agreements by each of the parties thereto, that each
of such parties (other than the Company) has the power and authority to execute,
deliver and perform each such Operative Agreement and has obtained or made all
necessary consents, approvals, filings and registrations in connection therewith
(except any required under Texas law by the Company), that such execution,
delivery and performance does not violate its charter, by-laws or similar
instrument, that value has been given by each Applicable Pass Through Trustee to
the Company under the Trust Indenture, that the Company has rights in the
Collateral and that WTC is duly organized, validly existing and in good standing
in its jurisdiction of organization and qualified to transact business in each
other jurisdiction where such qualification is necessary to perform its duties
and obligations under the Operative Agreements and the Pass Through Trust
Agreement.
E. We have assumed the due authentication of the Equipment
Notes by the Mortgagee and the delivery thereof against payment therefor, all in
accordance with the Participation Agreement and the Trust Indenture, and that
the Equipment Notes conform to the forms thereof examined by us. We have assumed
that the Company holds an air carrier operating certificate issued pursuant to
Chapter 447 of Title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo.
F. We have assumed that all signatures on documents examined
by us are genuine, that all persons signing such documents have legal capacity,
that all documents submitted to us as originals are authentic and that all
documents submitted to us as copies or specimens conform with the originals,
which facts we have not independently verified.
G. We express no opinion as to any provision in any Operative
Agreement that is contrary to Section 9-311, or Part V of Article 9, of the UCC.
H. We have not made any examination of, and express no opinion
with respect to (and to the extent relevant have assumed the accuracy and
sufficiency of),
(i) descriptions of, the legal or beneficial ownership of, or the title or
condition of title to, the Collateral or any other property covered by any of
the Operative Agreements, (ii) except as expressly set forth in paragraphs 5 and
7 below, the existence, creation, validity or attachment of any Lien thereon,
(iii) except as expressly set forth in paragraph 5 below, the perfection of any
Lien thereon and (iv) the priority or enforcement of any Lien thereon.
I. In giving an opinion regarding the valid existence and good
standing of the Company, we have relied solely upon certificates of public
officials.
J. The opinions expressed herein are given as of the date
hereof. We assume no obligation to advise you of any facts or circumstance that
may come to our attention, or any changes in law that may occur after the date
hereof, which may affect the opinion expressed herein.
Based on and subject to the foregoing, we are of the opinion
that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Texas.
2. The Company has all necessary corporate power to execute,
deliver and perform its obligations under the Participation Agreement, the Trust
Indenture, the Trust Indenture Supplement No. 1 and the Equipment Notes
(collectively, the "Company Documents"). Neither the execution nor delivery of
the Company Documents by the Company nor the consummation of the transactions
contemplated thereby, will result in any violation of (a) its articles of
incorporation or bylaws or (b) any law, governmental rule or regulation known to
us to be applicable to, or binding on, the Company, or requires the approval of
the shareholders of the Company.
3. Each Company Document constitutes the valid and binding
obligation of the Company and is enforceable against the Company in accordance
with its terms.
4. Except for the matters referred to in clauses (i) through
(iii) of paragraph 5 below, no approval, authorization or other action by or
filing with any governmental authority is required for the execution and
delivery by the Company of the Company Documents or the consummation of the
transactions contemplated thereby to occur at the Closing.
5. Except for (i) the registration of the Aircraft with the
FAA pursuant to the Act, (ii) the filing and recordation in accordance with the
Act of the FAA Filed Documents, and assuming that at the time of such filing no
other unrecorded document relating to the Aircraft has been filed pursuant to
the Act, (iii) the filing of Financing Statements referred to in Section 4.1.11
of the Participation Agreement, and the filing of periodic continuation
statements with respect thereto, (a) no further filing or recording of any
document is necessary (x) to establish the Company's title to the Airframe and
Engines, and (y) to create a valid security interest in the Company's interest
as owner of the Airframe and Engines or in the Purchase Agreement (to the extent
a security interest therein is created by the Trust Indenture) in favor of the
Mortgagee pursuant to the Trust Indenture and (b) no further filing or recording
of any document in the State of Texas or New York or under the Act is required
to perfect a security interest in the Company's interest as owner of the
Airframe and Engines or in the Purchase
Agreement (to the extent a security interest therein is created by the Trust
Indenture) in favor of the Mortgagee pursuant to the Trust Indenture.
6. The Mortgagee will be entitled to the benefits of Section
1110 of Title 11 of the United States Code with respect to the Airframe and
Engines delivered on the date hereof in connection with any case commenced by or
against the Company under Chapter 11 of Title 11 of the United States Code.
7. Upon issuance, execution, authentication and delivery of
the Equipment Notes at the Closing, the Trust Indenture creates the security
interest in favor of the Mortgagee, as trustee for the benefit of the holders of
the Equipment Notes, in the Collateral it purports to create to the extent that
the UCC applies to a security interest in such property.
This opinion is being delivered pursuant to Section
4.1.2(x)(A) of the Participation Agreement. This opinion may be relied upon by
you (and any permitted Transferee under Section 9.1 of the Participation
Agreement) in connection with the matters set forth herein and, without our
prior written consent, may not be relied upon for any other purpose and may not
be furnished to any other Person for any purpose.
Very truly yours,
SCHEDULE I
Wilmington Trust Company, individually, as Mortgagee, as Subordination Agent and
as each Applicable Pass Through Trustee
Westdeutsche Landesbank Girozentrale, New York branch, as Liquidity Provider
▇▇▇▇▇'▇ Investors Service, Inc.
Standard & Poor's Ratings Services
EXHIBIT B
[Form of Opinion of Corporate Counsel to Owner]
October __, 2001
To the Persons Listed on Schedule I
Attached Hereto
Re: Mortgage of Boeing Model 737-700 Aircraft with
Manufacturer's Serial Number 27835 and U.S.
Registration Number N700GS
Ladies and Gentlemen:
This opinion letter is being delivered by
Southwest Airlines
Co., a Texas corporation ("Southwest"), through its Legal Department in
connection with the transactions contemplated by the Participation Agreement
[N700GS] dated as of October 30, 2001, among Wilmington Trust Company, a
Delaware banking corporation, as Mortgagee, Subordination Agent under the
Intercreditor Agreement (as defined in the Participation Agreement) and as Pass
Through Trustee under the Applicable Pass Through Trust Agreements (as defined
in the Participation Agreement), and Southwest, as Owner (the "Participation
Agreement"). All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings given those terms in the Participation
Agreement. This opinion letter is being furnished to you pursuant to Section
4.1.2 (x)(B) of the Participation Agreement.
In giving the following opinions, members of Southwest's Legal
Department or lawyers retained by Southwest's Legal Department have reviewed the
Participation Agreement and the other Operative Agreements to which Southwest is
a party and have relied upon originals, or copies certified or otherwise
identified to our satisfaction, of such records, documents, certificates and
other instruments as in our judgment are necessary or appropriate to enable us
to render the opinions expressed below. In addition, Southwest's Legal
Department has assumed and has not verified the accuracy as to factual matters
of each document reviewed. As used herein, the phrase "to our knowledge" or
words of similar import shall mean actual knowledge of Southwest's Legal
Department after reasonable investigation, but shall not be interpreted to
impute to any member of Southwest's Legal Department knowledge of others.
Based on the foregoing, and subject to the assumptions and
limitations contained herein, Southwest's Legal Department is of the opinion
that:
(a) Southwest is an "air carrier" within the meaning of
Section 40102 of the Act, holds an air carrier operating certificate issued
pursuant to Chapter 447 of Title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo, is
a "citizen of the United States" as such term is defined in Section 40102 of
such Act and holds all authority, necessary licenses and certificates under such
Act and the rules and regulations promulgated thereunder necessary for the
conduct of its business and to perform its obligations under the Participation
Agreement, the Trust Indenture, the Trust Indenture Supplement No. 1 and the
Equipment Notes (collectively, the "Agreements").
(b) The execution, delivery and performance by Southwest of
each of the Agreements do not, to our knowledge, constitute a breach or result
in a default under any indenture, mortgage, deed of trust, credit agreement,
conditional sale contract or other loan agreement to which Southwest is a party
or by which Southwest or its property may be bound.
(c) The execution, delivery and performance of each of the
Agreements has been duly authorized by all necessary corporate action on the
part of Southwest, and each of the Agreements has been duly executed and
delivered by Southwest.
(d) There are no pending or, to our knowledge, threatened
actions, suits or proceedings before any court or administrative agency or
arbitrator that question the validity of any of the Agreements or that would
have been required to be disclosed in Southwest's Annual Report on Form 10-K
filed for the year ended 2000, on any subsequent Quarterly Report on Form 10-Q
or Current Report on Form 8-K, except such as are therein disclosed.
The foregoing opinions are limited to the federal law of the
United States of America (other than (i) the Federal Aviation Act (except as
expressly provided in paragraph (a) above) or any other laws, rules or
regulations governing, regulating or relating to the acquisition, ownership,
registration, use or sale of an aircraft, airframe or aircraft engine or to the
particular nature of the equipment to be acquired by Southwest, (ii) federal
securities laws, (iii) federal tax, antitrust or fraudulent transfer or
conveyance laws, as to which we express no opinion), and the law of the State of
Texas (other than state securities or blue sky laws, or state tax, antitrust or
fraudulent transfer or conveyance laws, as to which we express no opinion).
This opinion letter is furnished to you for the purpose
indicated above, and may not be relied upon by any other Person (except any
permitted Transferee under Section 9.1 of the Participation Agreement) or for
any other purpose without our written consent.
Very truly yours,
Southwest Airlines Co.,
Legal Department
SCHEDULE I
Wilmington Trust Company, individually and as Mortgagee, as Subordination Agent
and as each Applicable Pass Through Trustee
Westdeutsche Landesbank Girozentrale, as Liquidity Provider
▇▇▇▇▇'▇ Investors Service, Inc.
Standard & Poor's Ratings Services
EXHIBIT C
[Form of Opinion of Special Counsel to Mortgagee
and to the Applicable Pass Through Trustees]
[date]
To Each of the Persons
Listed on Schedule A
Attached Hereto
Re:
Southwest Airlines Co. Financing of One Boeing
737-700 Aircraft Bearing Manufacturer's Serial
Number [____]
Ladies and Gentlemen:
We have acted as special counsel to Wilmington Trust Company,
a Delaware banking corporation (in its individual capacity,
"Wilmington Trust"), in connection with the Trust Indenture
and Mortgage [N_______], dated as of ________ __, 2001 (the
"Trust Indenture"), between Wilmington Trust, not in its
individual capacity, except as expressly stated therein, but
solely as Mortgagee (the "Mortgagee"), and
Southwest Airlines
Co. (the "Owner"). Pursuant to the Participation Agreement
[N_______], dated as of ________ __, 2001 (the "Participation
Agreement"), among Southwest Airlines Co., as Owner, and
Wilmington Trust, not in its individual capacity except as
expressly provided therein, but solely as Mortgagee,
Subordination Agent under the Intercreditor Agreement, and
Pass Through Trustee under each of the Pass Through
Agreements, financing is being provided for the acquisition of
one Boeing 737-700 Aircraft bearing Manufacturer's Serial
No.________. This opinion is furnished pursuant to Section
4.1.2(x)(C) of the Participation Agreement. Capitalized terms
used herein and not otherwise defined are used as defined in
the Participation Agreement or, if not defined therein, as
defined in the Trust Indenture, except that reference herein
to any instrument shall mean such instrument as in effect on
the date hereof.
We have examined executed counterparts, forms or copies otherwise
identified to our satisfaction of the following documents:
(a) the Participation Agreement;
(b) the Trust Indenture and the Trust Indenture Supplement
(the documents in paragraphs (a) and (b) above being
collectively referred to as the "Mortgagee Documents");
(c) the Equipment Notes being issued today and authenticated
by the Mortgagee (the "Equipment Notes");
(d) a Certificate of Good Standing for Wilmington Trust,
obtained as of a recent date from the Secretary of State of
the State of Delaware;
(e) one or more certificates of an officer of Wilmington
Trust, dated the Delivery Date (the "Officer's Certificate"),
certifying as to the truth of its representations and
warranties set forth in the Participation Agreement; and
(f) one or more certificates and/or affidavits of an officer
of Wilmington Trust, dated the Delivery Date (collectively,
the "Secretary's Certificate"), certifying as to, among other
things, the amended charter of Wilmington Trust attached
thereto (the "Charter"), the amended bylaws of Wilmington
Trust attached thereto (the "Bylaws"), and the citizenship of
Wilmington Trust.
For purposes of this letter, we have not reviewed any documents other
than the documents referenced in paragraphs (a) through (f) above. In
particular, we have not reviewed and express no opinion as to any other document
that is referred to in, incorporated by reference into, or attached to any of
the documents reviewed by us. The opinions in this letter relate only to the
documents specified in such opinions, and not to any exhibit, schedule, or other
attachment to, or any other document referred to in or incorporated by reference
into, any of such documents. We have assumed that there exists no provision in
any document that we have not reviewed that bears upon or is inconsistent with
or contrary to the opinions in this letter. We have conducted no factual
investigation of our own, and have relied solely upon the documents reviewed by
us, the statements and information set forth in such documents, certain
statements of governmental authorities and others (as applicable), and the
additional matters recited or assumed in this letter, all of which we assume to
be true, complete, and accurate in all respects and none of which we have
independently investigated or verified.
Based upon and subject to the foregoing and subject to the assumptions,
exceptions, qualifications, and limitations in this letter, it is our opinion
that:
1. Wilmington Trust has been duly incorporated and is validly
existing as a Delaware banking corporation in good standing under the laws
of the State of Delaware, and has the corporate power and authority to
execute, deliver and perform, in its individual capacity, or as Mortgagee,
Pass Through Trustee, or Subordination Agent, as the case may be, the
Mortgagee Documents, and to authenticate the Equipment Notes. Wilmington
Trust is a "citizen of the United States" as defined in Section
40103(a)(15) of Title 49, U.S.C., as amended.
2. Each of the Mortgagee Documents has been duly authorized,
executed and delivered by Wilmington Trust in its individual capacity, or
as Mortgagee, the Pass Through Trustee, or Subordination Agent, as the case
may be, and constitutes the legal, valid and binding obligation of
Wilmington Trust in its individual capacity, or as the Mortgagee, the Pass
Through Trustee or Subordination Agent, as the case may be, enforceable
against Wilmington Trust, the Mortgagee, the Pass Through Trustee or the
Subordination Agent, as the case may be, in accordance with its terms.
3. The execution, delivery and performance by Wilmington Trust,
the Mortgagee, the Pass Through Trustee or the Subordination Agent, as the
case may be, of the Mortgagee Documents to which each is a party, the
authentication by the Mortgagee of the Equipment Notes and the consummation
by Wilmington Trust, the Mortgagee, the Pass Through Trustee or the
Subordination Agent, as the case may be, of any of the transactions
contemplated thereby are not in violation of the Charter or Bylaws of
Wilmington Trust or of any law, governmental rule, or regulation of the
State of Delaware or of any law, governmental rule, or regulation of the
United States of America governing the banking and trust powers of
Wilmington Trust or, to our knowledge, of any indenture, mortgage, bank
credit agreement, note or bond purchase agreement, long-term lease, license
or other agreement or instrument to which it is a party or by which it is
bound or, to our knowledge, of any judgment or order of the State of
Delaware or the United States of America relating to the banking and trust
powers of Wilmington Trust.
4. Neither the execution and delivery by Wilmington Trust, the
Mortgagee, the Pass Through Trustee or the Subordination Agent, as the case
may be, of the Mortgagee Documents to which each is a party, the
authentication of the Equipment Notes, nor the consummation of any of the
transactions by Wilmington Trust, the Mortgagee, the Pass Through Trustee
or the Subordination Agent, as the case may be, contemplated thereby
requires the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in respect of, any
governmental authority or agency of the State of
Delaware or the United States of America governing the banking or trust
powers of Wilmington Trust or under any Delaware law.
5. There are no taxes, fees or other charges (other than taxes
payable by Wilmington Trust on or measured by any compensation received by
Wilmington Trust for its services as Mortgagee, Subordination Agent or Pass
Through Trustee) payable under the laws of the State of Delaware or any
political subdivision thereof in respect of the execution, delivery and
performance by Wilmington Trust (in its individual capacity, as Mortgagee,
Pass Through Trustee or Subordination Agent, as the case may be) of the
Mortgagee Documents and the Equipment Notes, which taxes, fees or other
charges would not have been imposed if Wilmington Trust were not a Delaware
banking corporation and did not perform its obligations as Mortgagee under
the Trust Indenture in the State of Delaware.
6. The Equipment Notes have been duly and validly authenticated by
the Mortgagee in accordance with the Trust Indenture.
7. To our knowledge, there are no proceedings pending or
threatened against or affecting Wilmington Trust, the Mortgagee in any
court or before any governmental authority, agency, arbitration board or
tribunal which, if adversely determined, individually or in the aggregate,
would materially and adversely affect the Mortgaged Property or the right,
power and authority of Wilmington Trust in its individual capacity, or as
Mortgagee, Pass Through Trustee, or Subordination Agent, as the case may
be, to enter into or perform its obligations under the Mortgagee Documents
or which would call into question or challenge the validity of any of the
Mortgage Documents or the enforceability thereof.
The foregoing opinions are subject to the following assumptions,
exceptions and qualifications:
A. The opinions in this letter are limited to the laws of the State of
Delaware as enacted and currently in effect and the federal laws of the United
States of America governing the banking and trust powers of Wilmington Trust as
enacted and currently in effect (other than (i) federal securities laws,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the Trust Indenture Act of 1939, as
amended, the Investment Company Act of 1940, as amended, and rules, regulations,
orders, and decisions relating thereto, (ii) Part A of Subtitle VII of Title 49
of the United States Code, as amended, and rules, regulations, orders, and
decisions relating thereto (except as stated in the second sentence in numbered
paragraph 1 above, which opinion is based solely on the Officer's Certificate),
(iii) the Federal Communications Act of 1934, as amended, and rules,
regulations, orders, and decisions relating thereto, (iv) the Employee
Retirement Income Security Act of 1974, as amended, and rules, regulations,
orders, and decisions relating thereto, (v) securities laws of the
State of Delaware, and rules, regulations, orders, and decisions relating
thereto, (vi) laws, rules, regulations, orders, ordinances, and decisions of any
county, town, municipality, or special political subdivision of the State of
Delaware, and (vii) laws, rules, regulations, orders, and decisions applicable
to the particular nature of the property or activities of the Trusts) and we
have considered and express no opinion on the effect of, concerning matters
involving, or otherwise with respect to any other laws of any jurisdiction, or
rules, regulations, orders, or decisions relating thereto. Insofar as the
foregoing opinions relate to the validity and enforceability of the Transaction
Documents expressed to be governed by the laws of the State of New York, we have
assumed that each such document is legal, valid, binding and enforceable in
accordance with its terms under such laws (as to which we express no opinion).
B. The foregoing opinions relating to enforceability are subject to (i)
bankruptcy, insolvency, moratorium, reorganization, receivership, fraudulent
conveyance, preferential transfer, liquidation, and similar laws relating to or
affecting rights and remedies of creditors generally, (ii) principles of equity,
including, without limitation, applicable law relating to fiduciary duties
(regardless of whether considered and applied in a proceeding in equity or at
law), (iii) standards of good faith, fair dealing, course of dealing, course of
performance, materiality, and reasonableness that may be applied by a court,
considerations of public policy, and the exercise of judicial discretion, and
(iv) federal or state securities law and public policy considerations relating
to indemnification or contribution.
C. We have assumed: (i) except as stated in numbered paragraph 1 above,
the due incorporation or due formation, as the case may be, due organization,
and valid existence in good standing of each of the parties (other than natural
persons) to the documents reviewed by us under the laws of all relevant
jurisdictions; (ii) the legal capacity of all relevant natural persons, (iii)
except as stated in numbered paragraph 2 above, the due authorization,
execution, and delivery of each of the documents reviewed by us by each of the
parties thereto; and (iv) except as stated in numbered paragraph 1 above, that
each of such parties had and has the power and authority to execute, deliver,
and perform such documents.
D. We have assumed that (i) all signatures (other than signatures by
officers of Wilmington Trust, in its individual capacity, or as Mortgagee, the
Pass Through Trustee, or Subordination Agent, as the case may be, on the
Mortgage Documents, as the case may be, on the Transaction Documents and the
Certificates) on all documents reviewed by us are genuine, (ii) all documents
furnished to us as originals are authentic, (iii) all documents furnished to us
as copies or specimens conform to the originals thereof, (iv) all documents
furnished to us in final draft or final or execution form conform to the final,
executed originals of such documents, (v) each document reviewed by us
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, and (vi) except as stated in numbered paragraph 2 above,
each document reviewed by us constitutes a legal, valid and binding obligation
of each of the parties thereto, enforceable against each of such parties in
accordance with its terms.
E. We express no opinion concerning (i) ownership of, title to, or any
similar interest in any property, (ii) creation or attachment of any lien,
pledge, mortgage, or security interest, (iii) perfection of any lien, pledge,
mortgage, or security interest, or (iv) priority of any lien, pledge, mortgage,
or security interest.
F. For purposes of this letter, an opinion that is limited "to our
knowledge" means that, in the course of our representation of Wilmington Trust
as described above, attorneys in this firm who have worked substantively on this
letter and the transactions contemplated by the Mortgagee Documents have not,
without undertaking any investigation or verification of the subject matter of
such opinion, obtained actual knowledge that such opinion is incorrect.
G. The opinion set forth in paragraph 1 above concerning the
citizenship of Wilmington Trust is based upon an affidavit of Wilmington Trust,
made by an authorized representative, the facts set forth in which we have not
independently verified.
This letter speaks only as of the date hereof, and we assume no
obligation to advise anyone of any changes in the foregoing subsequent to the
delivery of this letter. We consent to your relying on this letter on the date
hereof in connection with the matters set forth herein. Without our prior
written consent, this letter may not be furnished or quoted to, or relied upon
by, any other person or entity, or any governmental authority, or relied upon
for any other purpose.
In addition, the opinions in this letter are limited to the opinions
expressly stated in numbered paragraphs 1 through 7 of this letter, and no other
opinions may be inferred beyond such matters expressly stated.
Very truly yours,
SCHEDULE A
WESTDEUTSCHE LANDESBANK GIROZENTRALE, AS LIQUIDITY PROVIDER
SOUTHWEST AIRLINES CO.
▇▇▇▇▇'▇ INVESTORS SERVICE, INC.
STANDARD & POOR'S RATINGS SERVICE
EXHIBIT D
[Form of Opinion of Special Counsel in Oklahoma City, Oklahoma]
October ___, 2001
To the Addressees on
Schedule I Attached Hereto:
Re: Southwest Airlines Co.;
Our File Number: 5003.0250
Ladies & Gentlemen:
This opinion is rendered in connection with Section 4.1.2(x)(D), of the
Participation Agreement [N_____], dated as of _________ ___, 2001 (the
"Participation Agreement"), among Southwest Airlines Co. (the "Owner"), as
owner, Wilmington Trust Company, not in its individual capacity except as
expressly provided in the Participation Agreement, but solely as Mortgagee (the
"Mortgagee"), as Subordination Agent under the Intercreditor Agreement and as
Pass Through Trustee under each of the Applicable Pass Through Trust Agreements,
as the Participation Agreement relates to the following described aircraft and
engines:
AIRCRAFT
Serial U.S. Registration
Manufacturer Model Number Number
------------ ----- ------ -----------------
The Boeing Company 737-7H4 _____ N_____
hereinafter referred to as the "Aircraft"; and
ENGINES
Serial
Manufacturer Model Number
------------ ----- ------
CFM International CFM56-7B22 ______
CFM International CFM56-7B22 ______
hereinafter referred to as the "Engines".
As contemplated by the Participation Agreement, title to the Aircraft
was conveyed by The Boeing Company to the Owner by Aircraft ▇▇▇▇ of Sale (FAA
Form AC 8050-2), dated _______ ___, ____, which ▇▇▇▇ of Sale was recorded by the
Federal Aviation Administration (the "FAA") on ________ ___, ____, and assigned
conveyance number __________; the Owner holds legal title to the Aircraft and
the Aircraft has been duly registered with the FAA under the Act (as defined
below) in the name of the Owner pursuant to that Aircraft Registration
Application (FAA AC Form 8050-1), dated _________ ___, ____ (the "Aircraft
Registration Application"); the creation of security interests in the Aircraft
and the Engines is pursuant to the Trust Indenture and Mortgage [N_____], dated
as of October ___, 2001, between the Owner and the Mortgagee, not in its
individual capacity except as expressly stated in the Mortgage, but solely as
Mortgagee, as supplemented by the Trust Indenture and Mortgage Supplement No. 1,
dated October ___, 2001 (hereinafter collectively, the "Trust Indenture").
This opinion is rendered with respect to matters arising under that
portion of Section 40102 and Section 44101 through Section 44112 of Title 49,
United States Code, "Transportation" (the "Act"), relating to the recordation of
instruments and the registration of the Aircraft pursuant to the Act.
Except as otherwise defined herein, terms are used in this opinion as
they are defined in the Act.
This letter confirms that the Trust Indenture was filed with the FAA on
October ___, 2001, at ___:___ __.m., Central _______ Time.
Based upon examination of the Trust Indenture and the records
maintained by the FAA under the Act (the "Records") as deemed necessary to
render this opinion and as were made available, the undersigned is of the
opinion that as of the time of filing noted above:
(a) The Trust Indenture is in due form for recording pursuant to
the Act and has been duly filed for recordation with the FAA
pursuant to the Act;
(b) The Aircraft is duly registered in the name of the Owner
pursuant to and in accordance with the Act;
(c) The Owner is the owner of valid legal title to the Aircraft,
and the Aircraft and the Engines are free of all liens and
encumbrances except those created by the Trust Indenture;
(d) The filing of the Trust Indenture for recordation will, upon
recordation, accord validity to the Trust Indenture, from the
time of filing thereof, as to all persons with respect to the
Aircraft and the Engines, thus resulting in the establishment
in favor of the Mortgagee of a first priority security
interest in and mortgage lien on all right, title and interest
of the Owner in, to and under the Aircraft and the Engines,
under the terms of the Trust Indenture;
(e) Except for the filing of the Trust Indenture for recordation,
no further filing or recording, including any filing or
recording of any other document in any other place within the
United States, is necessary in order to perfect the first
priority security interests of the Mortgagee in the Aircraft
and the Engines, under the terms of the Trust Indenture; and
(f) Neither the execution, delivery and performance of the Trust
Indenture by the parties thereto, nor the consummation of any
of the transactions contemplated thereby, requires the consent
or approval of, or the giving of notice to, or the
registration of, or the taking of any other action in respect
of the FAA under the Act and the regulations adopted
thereunder, except the filings specified elsewhere in this
opinion.
The opinions expressed herein are as to federal laws of the United
States only. Pursuant to Section 44108 of the Act, the validity of any
instrument, the recording of which is provided for by Section 44107 of the Act,
is subject to the laws of the State, the District of Columbia, or the territory
or possession of the United States at which the conveyance, lease or instrument
is delivered (the "Governing Laws"). The undersigned expresses no opinions as to
such Governing Laws and assumes the Trust Indenture and the documents in the
Records are legally sufficient under such Governing Laws to create valid and
enforceable interests of the type they purport to create and to release or
terminate those interests which they purport to release or terminate. No opinion
is expressed as to times when the Aircraft and the Engines are outside the
United States.
Since the examination was limited to the Records, the opinion does not
cover liens which are perfected without the filing of notice thereof with the
FAA, such as federal tax liens or
artisans' liens. The opinion is subject to the accuracy of FAA personnel and
contractors in the filing, indexing and recording of the Records and in
searching for encumbrance cross-reference index cards for the Engines. The
opinion does not cover documents, if any, which may have been filed for
recordation but not listed upon the indices of Records available for examination
immediately prior to our examination for the purpose of this opinion.
The opinions as to title of the Aircraft and the liens upon the
Aircraft and the Engines relate only to the time beginning with United States
registration, and not to times when the Aircraft may have been upon a foreign
aircraft registry.
The opinion relating to registration of the Aircraft is only as to its
current eligibility for registration and not with respect to events which may
occur in the future which may affect continued eligibility for registration. As
to matters of citizenship, the undersigned has relied upon representations made
by the Owner in the Aircraft Registration Application as maintained by the FAA
in the Records relating to the Aircraft. It is assumed the Aircraft is not
registered under the laws of any other country.
The undersigned has assumed that all documents are authentic and all
signatures are genuine and properly authorized.
This opinion is supplied to and may be relied upon by the entities to
whom it is addressed, solely for the purposes described herein.
Very truly yours,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
SCHEDULE I
to Opinion of October ___, 2001
Re: Southwest Airlines Co.;
One (1) Boeing 737-7H4 Aircraft, Serial
Number _____, U.S. Registration Number
N_____; and Two (2) CFM International
CFM56-7B22 Engines, Serial Numbers
______ and ______;
Our File Number: 5003.0250
ADDRESSEES
Southwest Airlines Co.
Wilmington Trust Company, as Mortgagee
Wilmington Trust Company, as Subordination Agent under the Intercreditor
Agreement
Wilmington Trust Company, as Pass Through Trustee under each of the Applicable
Pass Through Trust Agreements
Westdeutsche Landesbank Girozentrale, New York Branch, as Liquidity Provider
▇▇▇▇▇'▇ Investors Service, Inc.
Standard & Poor's Ratings Services
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
